With the FCC poised to vote on Verizon Wireless' acquisition of Alltel on Nov. 4, the Department of Justice improved the chances for a positive vote by giving the green light to the $28.1 billion deal Thursday.
The Justice Department, however, said that it approves the merger with the provision that the new combined company divested itself of 100 markets in 22 states. The divestiture would bring about the loss of a few million subscribers, but the total subscriber count for the merged company would still total more than 80 million, making it the largest U.S. wireless company. With nearly 75 million customers, AT&T currently is the largest U.S. cell phone service provider.
"The divestitures required are necessary to protect wireless customers and are among the most extensive required by the department in a wireless case," Assistant Attorney General Thomas E. Barnett said in a statement. Previously, Verizon had proposed divesting 85 markets where its service overlaps with Alltel service. In addition, the FCC could require more divestitures if it decides to approve the merger.
Verizon Wireless, which is jointly owned by Verizon Communications and minority owner Vodafone Group, has seen the worldwide economic crisis challenge the financial terms of the deal. Asked whether the financial meltdown would jeopardize the acquisition, Verizon Communications chief executive Ivan Seidenberg said the company remained steadfast in its commitment to acquire Alltel. However, he indicated Verizon's dividend payout could be negatively impacted.
Verizon Wireless and Alltel share the same CDMA network infrastructure, which should make the merger of facilities relatively easy. CDMA's EV-DO features score high in consumer satisfaction polls, although the companies are committed to moving to LTE infrastructure in future years. In addition, Verizon purchased nearly $10 billion worth of 700-MHz spectrum earlier this year in an FCC auction, making the company well-positioned to deliver robust calling and data services to its subscribers.
Public-interest groups have protested the proposed acquisition of Alltel, claiming the deal will dampen competition, particularly for roaming agreements.
The Justice Department has stipulated that Verizon must sell assets in the entire states of North and South Dakota, as well as big chunks of Colorado, Georgia, Kansas, Montana, South Carolina, Utah, and Wyoming. Smaller assets are earmarked for divestiture in Alabama, Arizona, California, Idaho, Illinois, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Carolina, Ohio, and Virginia.