The U.S. Department of Justice will require Verizon to sell some wireless telecommunications assets in 22 states in order to wrap up its US$28 billion acquisition of wireless carrier Alltel, the DOJ said Thursday.
Without the sale, the acquisition would result in less competition, with higher prices and lower quality likely, the DOJ said. Verizon announced it would buy Alltel in June.
The divestitures cover the entire states of North Dakota and South Dakota; large portions 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.
The DOJ’s Antitrust Division, along with the attorneys general of seven states, filed a civil lawsuit Thursday in the U.S. District Court for the District of Columbia to block the proposed acquisition of Alltel by Verizon, unless Verizon agrees to a proposed settlement.
“The divestitures required are necessary to protect wireless customers and are among the most extensive required by the Department in a wireless case,” Thomas Barnett, assistant attorney general in charge of the DOJ’s Antitrust Division, said in a statement.
Verizon and Alltel are significant competitors in 94 so-called Cellular Marketing Areas (or CMAs), as defined by the U.S. Federal Communications Commission, the DOJ said. The settlement would require Verizon to sell wireless assets in those 94 areas and six additional ones.
The deal also would involve Verizon actually reacquiring some markets that it divested as part of earlier mergers. In 1999, the DOJ challenged the proposed acquisition of GTE by Bell Atlantic, which now does business as Verizon, and Bell Atlantic’s agreement with Vodafone to create a partnership. A settlement in that matter required Verizon to divest wireless business in many areas, including 25 CMAs that Alltel purchased.
The DOJ, along with the parties to the Bell Atlantic/GTE consent decree, on Thursday filed a request to modify the agreement to allow Verizon, as part of its acquisition of Alltel, to reacquire and retain the divested mobile wireless businesses in 22 CMAs, where competition is now “sufficiently robust,” and to redivest the mobile wireless businesses in three CMAs, where competitive concerns would remain, the DOJ said in a press release.
The DOJ proposal would also include a modification of a deal surrounding Alltel’s 2006 acquisition of Midwest Holdings, which included some divestitures of markets to Rural Cellular Corporation, which was later acquired by Verizon.
Verizon is the second-largest mobile carrier in the U.S., with 70 million subscribers in 49 states. Alltel is the fifth-largest mobile carrier in the U.S., with about 13 million subscribers in 35 states.