With markets drying up further, more consolidation is being seen in the global mobile industry. Latest in the series is Verizon Wireless’s move to buy US rural mobile service provider Alltel Corp. Britain’s Vodafone has 45 percent stake in the Verizon Wireless. It is learnt that Verizon Wireless is close to clinching a deal with Alltel for gaining ownership for around US$27 billion.

This amount includes US$23 billion for clearing company’s debt. Verizon Wireless is owned by Verizon communications, which has 55 percent stake in the company. With the new acquisition Verizon communications could overtake AT&T as the top U.S. wireless service provider. It is believed that propositional ownership of Vodafone and Verizon Comms in Verizon Wireless will not change under an Alltel deal. The Verizon deal would value Alltel at eight times its earnings before interest, tax, depreciation and amortization, compared with its November sale to private equity firms for about nine times EBITDA.

The global telecom sector has been going through a crucial situations with revenue dwindling and competition hotting up. Companies are looking for all options to reduce cost and improve technological prowess over others with more investment. This has compelled large number of acquisitions and takeovers to increase size and competitiveness. It is believed that Verizon could be in a good position to refinance Alltel’s debt at a lower interest rate. The thinking in the industry is that the association with behemoth player like Vodafone would be an additional advantage for Verizon in the US market. The Vodafone has been on an aggressive acquisition drive globally. Last year it had acquired one of the leading mobile service providers in India Hutchison Essar.

Verizon’s move was a surprise to many analysts as it came only seven months after Alltel was taken private by TPG Capital and Goldman Sachs’ GS Capital Partners. Another Indian company Reliance communication is now in talks with African cellular major MTN for a possible acquisition. Earlier India’s largest cellular private company Bharati Airtel had also started merger talks with MTN. But they dropped proposal due to valuation problems.

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