Verizon, Old $28.1 Billion Acquisition Of Alltel

A day after Verizon Wireless surprised everyone by quickly scooping up Alltel ( NYSE: AT) for $28.1 billion, reactions are mixed on what it will mean for Alltel customers, what it means for Verizon's debt load going forward, how government regulators will react, and how it will affect the rest of the industry. Here's a round-up of the thoughts and opinions:

-- Verizon Emphasizes Wireless: UBS analyst John Hodulik told clients in a note that wireless will now represent 55 percent of revenues for Verizon Communcations, reported Forbes. "In any acquisition, one of the biggest risks facing Verizon is that Alltel's growth may not be sustainable," he cautioned." Maintaining the growth through the integration of its assets into the Verizon fold will be one of the main challenges."

-- Heavy In Debt: By taking on $6 billion in new debt to finance the deal and assuming $22.2 billion of outstanding Alltel debt, Verizon brings its total debt load to $63 billion, Fortune notes. "That's a substantial sum, and not without its risks." Fortune quoted Citi Bond analyst David Hamburger as saying in a note: "While we recognize the benefits of increased scale at a time when wireless industry growth is slowing, we think this transaction will increase Verizon's financial risk significantly." He cut his opinion on Verizon debt to deteriorating from stable." Fitch Ratings said it may downgrade Verizon Communications following the announcement, according to MarketWatch. Moody's also said it may cut Verizon Communications' debt ratings, Reuters reported.

-- Stock prices: In afternoon trading, Verizon Communications' stock fell 55 cents, or 1.41 percent today to trade at $38.42. Vodaone, which owns about half of Verizon Wireless, saw its stock trade up today 37 cents, or 1.17 percent, to $31.88 a share.

-- Government regulation: There is always concern that there is not strong enough competition in wireless in the U.S., and this merger will probably increase those concerns. BusinessWeek reports this could be particularly true in Alltel's largely rural markets, which already have fewer wireless providers than major cities. Chris Murray, senior counsel with Consumers Union. And Rep. Edward Markey (D-Mass.), chairman of the House Subcommittee on Telecommunications & the Internet, issued a statement saying the proposed merger "merits the utmost scrutiny by antitrust officials and telecommunications policymakers to ensure that competition and consumers are fully protected." AP reported that a Justice department spokesperson will be interested in looking at the proposed transaction, and that analyst are already thinking a likely outcome will include a condition that Verizon Wireless sells off spectrum licenses in areas where its coverage overlaps Alltel's.

-- Alltel Customers: Alltel CEO Scott Ford said customers will not see their rates or plans immediately change, and there's no word on what will happen with Alltel's popular My Circles option that provides unlimited calls to 5, 10 or 20 numbers for a monthly fee. Verizon Wireless doesn't have that option, but AP points out that Verizon customers actually pay slightly less on average: $51.40 a month versus Alltel customers that pay $53.64 a month on average. But of course, the big concern is competition. Dan Yahro in Bishop, Calif., close to the border with Nevada, has two options for wireless service: Alltel and Verizon Wireless ( NYSE: VZ). Now that one is buying the other, he wonders what will happen, AP reports.

-- Impact on Sprint: There's not much here, but a lot of stories written yesterday, asked the question how does the merger affect Sprint ( NYSE: S), and what should the struggling carrier do now? The WSJ wrote: "For once, Sprint should consider doing nothing. Or rather, taking care of its current business." There's rumors surfacing that it could merge with T-Mobile, or spin-off Nextel to SK Telecom ( NYSE: SKM), and possibly with the Verizon-Alltel match-up, those will be considered seriously, however, WSJ notes: "Sprint?never a talented multitasker?has too much on its plate right now to take on a merger."