Vodafone says Verizon in talks to buy Alltel

LONDON Thu Jun 5, 2008 3:13am EDT

Traffic passes Verizon Communications Inc. headquarters in New York, February 14, 2005. REUTERS/Peter Morgan

Traffic passes Verizon Communications Inc. headquarters in New York, February 14, 2005.

Credit: Reuters/Peter Morgan

LONDON (Reuters) - Britain's Vodafone confirmed on Thursday that Verizon Wireless, in which it has a 45 percent stake, is in advanced talks about buying U.S. rural mobile service provider Alltel Corp.

Verizon Wireless is close to buying Alltel for around $27 billion, including around $23 billion of its debts, a source familiar with the talks told Reuters on Wednesday.

The deal would mean Verizon Wireless -- which is 55 percent owned by Verizon Communications -- would overtake AT&T as the top U.S. wireless service.

Vodafone and Verizon Comms proportional ownership of Verizon Wireless will not change under an Alltel deal, the source said.

A 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 source said.

Some analysts said Verizon could be in a good position to refinance Alltel's debt at a lower interest rate; others said that a deal could also help Verizon create savings from a network and handset perspective.

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.

The leveraged buyout saddled Alltel with the debt.

That $27.5 billion deal in November 2007 was the largest ever private equity investment in the U.S. wireless industry, but it closed amid a mounting credit crisis that has curtailed the leveraged buyout boom.

(Reporting by Chris Wills,; Editing by Erica Billingham)