Alltel Corp.’s proposed $24.7 billion acquisition by private-equity firms may lead to the sale of other mobile-phone providers that serve rural areas.
It could also raise speculation about a leveraged buyout of Denver-based Qwest, which was mentioned along with Alltel and other telecommunications companies as potential targets in a recent JP Morgan report.
“We watch industry developments with interest, but would not comment on any speculation,” Qwest spokesman Bob Toevs said.
Qwest stock rose 17 cents Monday to close at $10.01, the first time it has closed above $10 since January 2002.
Goldman Sachs Group Inc. and TPG Inc. announced an agreement Sunday to acquire Alltel, which offers wireless service in southern Colorado, in the largest leveraged buyout of a telecommunications company. Alltel, with 12 million customers, had been evaluating a sale since February.
The JP Morgan report speculated that a deal to take Qwest private could be worth $33.7 billion, assuming a transaction price of $10.26 a share, which was a 15 percent premium over Qwest’s close of $8.92 on April 16.
The Alltel takeover, by spotlighting the amount of cash that mobile-phone companies can generate, may provide a model for other acquisitions.
Dobson Communications Corp., Centennial Communications Corp., Rural Cellular Corp. and United States Cellular Corp. are among the candidates for a buyout, said Christopher Larsen, an analyst at Credit Suisse First Boston in New York. An acquisition of Sprint Nextel Corp., the third-largest U.S. wireless company, is less likely, he said.
A leveraged buyout also could be possible in the telecommunications-equipment industry, Merrill Lynch & Co. analyst Tal Liani said Monday in a research note. He sees networking company Avaya Inc. as a potential target.
An offer for Sprint, based on Alltel’s price and the premium, would need to be more than $90 billion, Larsen said. “It redefines large” and could be too big for private-equity firms, he said.
Sprint has lost monthly subscribers for three straight quarters. Chief executive Gary Forsee has invested in the company’s wireless networks and has vowed to add customers this quarter.
