DOJ greenlights VZW-Alltel deal

Verizon Wireless’s proposed acquisition of Alltel has survived the U.S. Department of Justice’s scrutiny, clearing away all hurdles to the deal except one: the FCC’s approval. The Commission is scheduled to take up the issue next Tuesday along with a host of other hot-button issues. If Verizon-Alltel gets a yea vote, though, Verizon will be free to swallow the privately owned regional operator, surpassing AT&T as North America’s largest mobile operator.

As expected, the Justice Department anti-trust division has accepted Verizon’s proposal to divest Alltel or Rural Cellular networks in 100 smaller markets. Verizon at first proposed dropping 85 markets, but later upped its ante after encountering resistance from regulators. Those divestitures cover the entirety of North and South Dakota; sizable chunks of Colorado, Georgia, Kansas, Montana, South Carolina, Utah and Wyoming and a few markets in 13 other states from California to Virginia. In all, Verizon has estimated the divestitures will force Verizon to shed 2.3 million of Alltel’s customers, about 18% of its customer base. While not a small amount, those loses will do little to effect the enormity of the merger. Verizon will add roughly 11 million customers, giving it more than 80 million subscribers, 5 million more than its nearest competitor AT&T.

While the vote could come as soon as next Tuesday, the FCC has a lot on its plate on election day. It is scheduled to vote on intercarrier compensation in the universal service fund (USF) reform that day, which has drawn a storm of protest from rural operators and lawmakers claiming it will remove the subsidies Tier II and Tier III operators need to build their networks. The FCC is also taking up the issue of white spaces, the empty bands between broadcast television channels, for public broadband use.The Verizon-Alltel merger has been controversial in its own right as several regional operators that depend on Alltel for roaming have claimed Verizon will use its new roaming leverage against them. They’ve asked the FCC to implement a nationwide roaming policy if the commission allows the merger to go through. Depending on what order the FCC takes up these agenda items, one or several items could be postponed.