Wireless first: Alltel leads by air

A property swap announced last week by several wireless players easily could have been dismissed as another mundane, transaction. For one of the beneficiaries, however, the deal represents a strategic development that potentially spans far beyond wireless.

The asset exchange involving Bell Atlantic, GTE and Alltel was sparked by Bell Atlantic's efforts to expand its wireless network by linking with the U.S. holdings of Vodafone AirTouch. As a condition of the merger, the Justice Department mandated that Bell Atlantic shed overlapping wireless properties.

Alltel, which will pick up 27 properties in the transaction, gains a significantly expanded wireless footprint and dumps properties trapped in the middle of Bell Atlantic territory. But the company also gains real estate it can use to expand its growing multiservice empire.

"What we hope to do to tap future revenue is to bring in the model we've brought into other markets: long-distance, Internet access and local service," said Scott Ford, president and chief operating officer of Alltel. "The wireless business is a good business, but where we've had the best success is leveraging off that base and adding a full bundle of services."

Ford characterized this particular deal as being "mostly wireless," but Alltel has a history of leading with wireless and following with extensions of its long-haul fiber network, establishing competitive local exchange carrier status and gradually transforming itself into an integrated communications provider in a given region. That strategy is based around Alltel's theory that ancillary services do not make economic sense unless they are supported by a more solid network foundation.

"If you're going to be in the add-on service business, you need to have the access base first, be it wireless or wireline," Ford said. Alltel's 2000 timeline is full, and the markets gained in the deal probably will not be upgraded until next year at the earliest, he added.

The property exchange certainly has significant wireless implications as well, not the least of which is a roaming agreement with Bell Atlantic and GTE that allows customers from all three companies' networks to roam onto each other's networks at significantly reduced rates. All of the carriers have banked on CDMA technology as their digital standard.

One analyst speculated that the deal could have even further-reaching implications for Alltel. The company eventually will turn its wireless/wireline combination strategy into a mobile Internet opportunity, he said.

"The issue here is portal development," said Andrew Cole, senior manager for Renaissance Worldwide. "I'd be less concerned about the overall bundling. It's the Internet and wireless part that's important."