Thursday, December 8, 2005

Alltel Spins Off Wireline Business and Merges It with VALOR

Alltel will spin off its wireline business and merge it with VALOR Communications Group, creating a major wireline operator focused on the rural U.S. market. The deal was valued at about $9.1 billion. The following are the highlights for the combined wireline business:

  • Revenues and operating income before depreciation and amortization (pre-synergy) for the last 12 months ending Sept. 30, 2005, were $3.4 billion and $1.7 billion, respectively. The company will have about 3.4 million customers in 16 states.


  • The company expects to gain $40 million in net annual synergies from the combination.


  • The company expects to pay an annual dividend of $1 per share of common stock, which equals $1.05 per equivalent Alltel share.


  • The combined company will have net debt of about $5.4 billion.


  • Alltel's wireline business will keep the majority of communications support services, including publishing, IT outsourcing services, retail long distance and the wireline sales portion of communications products.


Alltel will reposition itself as a pure-play wireless service provider with roughly 11 million customers in 34 states. Here are the highlights for the wireless business:

  • Alltel will remain the nation's fifth-largest wireless carrier. Revenue and operating income before depreciation and amortization for the last 12 months ending Sept. 30, 2005, were $7.5 billion and $2.6 billion, respectively, pro forma to include Western Wireless and Midwest Wireless.


  • Alltel will own and operate the nation's largest wireless network covering a population of 75 million with its 850 MHz business. Alltel also will remain the largest independent roaming partner to the top four wireless carriers.


  • Alltel expects to receive cash proceeds and debt reduction totaling about $4.2 billion resulting from the spin-off.


  • Alltel plans an open market $3 billion share repurchase program for the two years following the spin-off. The company also plans to implement a $1 billion debt-reduction program.


  • The wireless business expects to pay an annual dividend of 50 cents per share of common stock.


  • After the spin-off, Alltel will have net debt of about $1.2 billion and be levered at about 0.5 times net debt to operating income before depreciation and amortization, prior to the planned repurchase program.
http://www.alltel.com

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