Alltel Plans to Buy Western Wireless

Alltel Corp., the nation’s sixth-largest wireless company, said Monday that it would buy Western Wireless Corp. for $4.32 billion in cash and stock to add sales in 19 states, including California, and to narrow a gap with bigger carriers that are expanding through acquisitions.

Alltel, based in Little Rock, Ark., will pay 0.535 of its shares and $9.25 for each share of Bellevue, Wash.-based Western Wireless. The offer values Western Wireless, owner of the Cellular One brand, 24% higher than its closing price Wednesday, the day before the stock surged on reports that a purchase by Alltel was in the works.

The deal will close in midyear and lift earnings in 2006, Alltel said.

Together the companies have 9.8 million wireless customers and sales of about $10 billion. Alltel Chief Executive Scott Ford will get a toehold in states such as California and Nevada and a larger slice of rural parts of the Midwest. Alltel follows bigger operators Cingular Wireless and Sprint Corp. in pursuing growth through acquisitions.

“It’s a good opportunity for the company,” said Rick Black, an analyst at Blaylock & Partners Co. in New York.

Alltel will assume debt of $1.5 billion. Ford told analysts and investors during a conference call that the non-U.S. business was an “important asset” and that he didn’t expect regulators to require the sale or spinoff of any units. Western Wireless’ overseas operations serve 1.6 million customers in six countries including Austria and Ireland.

Western Wireless shares climbed 85 cents to $37.37 on Nasdaq. That’s 30% higher than the average for the 30 days that ended Wednesday. Alltel fell $1.37 to $54.75 on the New York Stock Exchange. The stock rose 26% in 2004.

The new company would have about 6% of U.S. mobile phone users and would be a bigger competitor to Deutsche Telekom’s T-Mobile USA Inc., which has 16.3 million subscribers. Cingular Wireless became the largest U.S. wireless operator, with 46 million customers, when it purchased AT&T; Wireless Services Inc. for $41.3 billion in October.

Combining with Western Wireless may make Alltel a more attractive acquisition target for companies such as Verizon Wireless, the second-biggest U.S. operator, or Sprint, which agreed in December to buy Nextel Communications Inc., said Merrill Lynch & Co. analyst David Janazzo in a note Friday.

The Alltel-Western Wireless deal will result in savings of as much as $230 million over three years, Ford said.

Western Wireless’ territory covers about 25% of the continental U.S. in 88 rural areas and 19 metropolitan ones. Roaming made up 13% of third-quarter sales. Western Wireless had $2.24 billion in debt at the end of September.

Western Wireless Chief Executive John Stanton will become a director of Alltel.