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November 27, 2005

Alltel nears fixed-line disposal

In a sign of the declining importance of fixed-line networks, US rural mobile and fixed-line service provider Alltel Corp is in negotiations with at least three telecoms operators in the US over a possible disposal of part of its local telephone access lines.

By CBR Staff Writer

According to the Financial Times, the disposal could be worth as much as $10bn as the Little Rock, Arkansas-based carrier looks to move away from its fixed-line heritage and concentrate on the fast-growing and more lucrative wireless sector.

The FT quotes people familiar with the company that name the three potential bidders as being Citizens Communications of Connecticut, CenturyTel of Louisiana, and Valor Communications of Texas. It is thought that Alltel will first spin off the lines and then have them acquired by its preferred bidder in all-stock transaction. This will allow Alltel shareholders to retain a stake in the sold business. The local lines concerned serve about 3 million customers in the US midwest.

It was back in September that Alltel announced that it had begun a formal process to review its local phone business, a move that many believed would lead to a sale or spin-off of the unit. It said at the time it had begun the assessment in January, but was testing market appetite for its plans.

Alltel is not alone in considering shedding phone lines. Sprint Nextel Corp, the third largest mobile provider in the US, is also considering shedding its fixed-line operation. One of the reasons for selling fixed-line assets is that the move would gain the carriers a higher valuation from Wall Street.

Little Rock, Arkansas-based Alltel has more than 15 million customers in 36 states, with nearly $10bn in annual revenue. It is currently ranked as the fifth largest US mobile operator, and derives most of its revenue from wireless because like many other carriers, its local telephone business is declining as consumers use mobile phones more often than their home telephones.

It has been a busy time for Alltel. In January it paid $4.3bn for fellow rural mobile carrier Western Wireless Corp. Then in August, Western Wireless (Alltel) sold off the fourth-biggest mobile phone operation in Austria, Tele.ring Telekom Services GmbH, to Deutsche Telekom AG for 1.3bn euros ($1.58bn). In early September, Western Wireless (Alltel) sold off Meteor Mobile Communications Ltd, the third largest mobile operator in Ireland, for 423m euros ($520m) to the Irish telecoms carrier Eircom Group Plc.

Alltel also recently paid $1.07bn in cash for mobile operator Midwest Wireless Holdings, which has 400,000 wireless customers in southern Minnesota, northern and eastern Iowa, and western Wisconsin.

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