Alltel Corp., the No. 5 U.S. mobile-telephone provider, may sell or spin off its local-phone unit, which some analysts say is worth as much as $10 billion.
After beginning a review of the operation in January, Little Rock, Ark.-based Alltel said Thursday it began a more “formal” process to test “market appetite” for the unit.
The traditional land-line and wireless businesses “are really changing and are at dramatically different points of maturation,” chief executive Scott Ford said Thursday in New York. The wireless business is more likely to increase sales, while the land-line business is not, he added.
Alltel, which sells local phone service to 2.95 million rural customers in 15 states, last month bought Western Wireless Corp. for $4.5 billion, shifting its focus to faster-growing businesses. With more than 15 million customers in 36 states, Alltel is among peers – including Sprint Nextel Corp. – that may shed land-line units as consumers switch to mobile services.
“They want to test the waters with investors,” said Donna Jaegers, an analyst with Janco Partners who rates the shares “buy” and doesn’t own any. “They would more likely spin it off because if they sell, they’ll pay huge taxes on it.”
CenturyTel is a likely bidder for Alltel’s local lines because the company already has said it is interested in consolidating rural lines, UBS AG analyst John Hodulik wrote in a research note Thursday.
Alltel’s Ford also said CenturyTel may benefit from buying the lines. It would “give them considerable scale,” he told analysts and investors.
Private-equity firms also have been buyers of phone lines.
