Thursday, October 30, 2008

DOJ Requires Divestitures In Verizon-Alltel Buyout

The Justice Department will require Verizon Communications to divest assets in 100 areas in 22 states in order to proceed with its $28 billion buyout of Alltel Corp., the agency announced Thursday. The department said the transaction as originally proposed would have substantially lessened competition to the detriment of consumers of mobile wireless telecommunications services in those areas, and likely would result in higher prices, lower quality and reduced network investments.

The divestitures cover the entire states of North Dakota and South Dakota; swaths of the states of Colorado, Georgia, Kansas, Montana, South Carolina, Utah and Wyoming; and portions of the states of Alabama, Arizona, California, Idaho, Illinois, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Carolina, Ohio and Virginia, a DOJ press release said. The agency's antitrust division, along with attorneys general for several states filed a civil suit in a Washington, D.C. federal court to block the deal and offered a proposed settlement that, if approved by the court, would resolve competitive concerns.

According to the complaint, Verizon and Alltel are rivals and each is the other’s closest competitor for a significant set of customers in 94 cellular marketing areas, as defined by the FCC. The complaint alleges that the proposed transaction would substantially reduce competition for wireless services in each of those areas. The proposed settlement requires divestitures in these 94 areas to eliminate the competitive concerns. Proposed modifications to two existing consent decrees would require Verizon to divest businesses in six additional areas, officials said.

Verizon is the second largest mobile wireless telecommunications services provider in the United States as measured by subscribers, serving more than 70 million subscribers in 49 states. In 2007, Verizon earned mobile wireless revenues of about $43 billion. Alltel is the fifth largest provider as measured by subscribers, and provides service to roughly 13 million subscribers in 35 states. In 2007, Alltel earned approximately $8.8 billion in revenues, DOJ said. The companies' transaction is also subject to FCC review.