Equity Firms to Court Alltel, but Don’t Count Out Verizon and Sprint

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Equity Firms to Court Alltel, but Don’t Count Out Verizon and Sprint

6:05 am on May 10, 2007 | Category: Business, Wireless, Corporate

Analysts are offering various opinions on the future of Alltel Corp., after the Wall Street Journal reported that a group of private equity firms hoped to purchase the regional U.S. wireless provider.

Alltel has been seen as a prime acquisition target since the company’s CEO, Scott Ford, announced a “strategic review” in February. A rival CDMA cell phone carrier, such as Sprint or Verizon, would seem the most likely suitor for Alltel, which serves about 12 million customers, mostly in rural parts of the Southern, Western, and Midwestern United States.

But Prudential Equity Group analyst, Richard Klugman, challenged this assumption in a recent research note, explaining that a takeover by another telecommunications company would be costly.

“We continue to view the odds … as less than 50-50 due to Alltel’s substantial valuation as well as the capital intensity and competitive dynamics of the wireless industry,” Klugman’s note said.

Citigroup analyst, Michael Rollins, meanwhile, says there is an 85% probability of Alltel being bought out or recapitalized, and continues to see Verizon and Sprint as potential buyers.