Providence Equity might buy wireless giant

Alltel Corp., a Little Rock, Ark.-based wireless service provider with nearly 12 million customers in 35 states, is in talks with three competing buyout groups, including one that pairs the Carlyle Group with Kohlberg Kravis Roberts & Co., people with knowledge of the discussions said.
Blackstone Group and Providence Equity Partners combined to form another team, while TPG Capital joined with the leveraged- buyout unit of Goldman Sachs Group Inc. for a possible bid, the people said.
Private equity firms may bid almost $70 a share for the company, said Michael Nelson, an analyst at Stanford Group Co. Alltel said in February that it was exploring “a broad spectrum of options.”
“If they think that they could maximize shareholder value by selling the asset to private equity, I think they’re willing to do whatever it takes,” said Nelson, who is based in New York and rates Alltel shares “buy.” He said the company may be just as likely to sell to a strategic buyer for a higher price.
Alltel wouldn’t comment on its strategic options, nor would any of the equity firms.
AT&T Inc. or New York-based Verizon Communications, the two biggest U.S. phone carriers, may be willing to pay more than private equity firms because of cost savings, Stifel Nicolaus & Co. analyst Christopher King said.
He estimated Verizon could lower expenses by as much as $1 billion a year by eliminating roaming charges and duplicate transmitters. San Antonio-based AT&T would save less because it pays fewer fees and uses different network technology, King said.
Alltel, which operates the largest geographic network in the United States, carries calls for customers of AT&T and Verizon Wireless in areas where they lack coverage. Those companies may bid as much as $79 a share for Alltel, Stanford Group’s Nelson said.
“Private equity is only half the equation,” Nelson said. “The real opportunity for Alltel and Alltel shareholders is the opportunity for the asset to be acquired by a strategic buyer.”
Verizon spokesman Robert Varettoni and AT&T spokesman Fletcher Cook declined to comment.
J.P. Morgan Securities analyst Thomas Lee put the chances of Alltel being acquired at 90 percent in a note to investors Wednesday, saying the company’s network coverage and experienced management makes it attractive.
Alltel last month reported a 23 percent drop in first- quarter profit following the spinoff of its local phone business last year. Excluding year-earlier revenue from that unit, sales rose 13 percent to $2.08 billion.