With recent consolidation in the wireless business into four major carriers, Alltel Corp. is one of the smaller regional carriers poised to become a national player. It had 10.7 million subscribers at year-end 2005, fewer than half of the 21.7 million of T-Mobile, the next largest company.
There are other mid-pack cellular carriers that compete with Alltel. One of these, U.S. Cellular, has not been content to sit back and watch as this competitor grows larger.
Until recently, U.S. Cellular was involved in a legal dispute with Alltel over the latter's proposed $1.075 billion acquisition of another company, Midwest Wireless Holdings, which operates in certain wireless markets in Minnesota, Iowa and Wisconsin.
The FCC approved Alltel's acquisition of Midwest Wireless on Oct. 2, 2006, although the company is required to sell off holdings in four cellular markets in Minnesota — from a separate acquisition in 2005 — as well as 10 mHz of broadband personal communications service (PCS) spectrum in one of those four markets.
Alltel said in a statement announcing the approved deal that it will add about 450,000 wireless customers — and pick up new PCS spectrum covering about 2 million potential customers.
U.S. Cellular has owned about 11 percent of Midwest Wireless. The Alltel deal will take U.S. Cellular out of Midwest holdings in exchange for a cash payment.
Alltel started out in 1943 as a rural telephone company, Allied Telephone, headquartered in Little Rock, Ark. The company is now the fifth-largest wireless carrier. Through most of those years, Alltel held onto its landline phone business. It wasn't until 2006 that the company spun off its landline business in a "spin-merge" deal with Valor Communications Group Inc. Alltel shareholders got a bit more than one share in the newly-created company for each share of stock in Alltel owned. The new company is named Windstream Corp. and trades on the New York Stock Exchange.
Alltel's growth and expansion have been enormous over the last 10 years. In 1996, Alltel's revenues were $3.2 billion. Those revenues have more than tripled, to an expected $9.8 billion in 2006 — due in large part to the company's own growth-through-acquisition philosophy.
In 1983, Allied Telephone merged with a group of Midwestern phone companies called Mid-Continent to form Alltel. L. Weldon Case, who had been head of Mid-Continent, was CEO of Alltel from the 1983 merger until 1991. He was succeeded by Allied Telephone veteran Joe T. Ford, who was chairman and CEO of Alltel until 2002, when he turned over the CEO reins to his son, Scott T. Ford.
Although it launched its first wireless system in 1983, Alltel became the large and diversified company it is today primarily under the senior Ford's leadership. In 1993, the company purchased GTE Corp.'s telephone operations in Georgia, as well as its telephone directory publishing contracts. In 1996, the company began offering long-distance service.
In 1997, Alltel bought licenses for wireless personal communications services in 73 markets in 12 states. That same year, it combined its wire-line and wireless businesses into a single unit, which began to offer a full suite of telecommunications services to customers.
In 1998, Alltel merged with troubled wireless company 360° Communications in a deal valued at more than $6 billion. In 1999, Alltel and Aliant Communications completed a $1.8 billion merger, adding Nebraska to Alltel's service area. It also completed a $600 million merger with Liberty Cellular, a privately held communications company that offered wireless, paging, long-distance and Internet services in Kansas.
In 2000, Alltel completed a wireless exchange with Verizon Communications, setting up a roaming agreement covering 95 percent of the country. Later that year, the company introduced a nationwide wireless calling plan that eliminated roaming and long-distance charges nationwide. In 2002, the company acquired local telephone lines from Verizon in Kentucky and bought CenturyTel's wireless operations for $1.59 billion in cash.
In early 2003, Alltel sold the financial services arm of its Alltel Information Services subsidiary to Fidelity National Financial in a cash and stock deal valued at $1.05 billion.
In late 2004, the company announced the completion of its purchases of wireless assets from U.S. Cellular and TDS Telecom. That next year, Alltel completed the $6.5 billion acquisition of Western Wireless, extending its presence to nine more states.
Following a trend, Alltel has entered into partnerships with other providers to utilize emerging technologies such as Voice-over Internet Protocol, or VoIP.
The company has recently formed a partnership with XM Satellite Radio to offer 20 of the satellite broadcasters' music channels to Alltel cell-phone customers. The move — a direct example of converging interests of disparate industries — echoes similar arrangements among other wireless carriers and the two competing satellite-radio services.
— Tony Sanders
October 2006
Sources: Company Web site, Fortune Magazine, Hoover's online, Securities and Exchange Commission filings, Wall Street Journal Online, Yahoo! Finance
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