In its second wireless deal in two days (after buy WiFi company Wayport), AT&T announced Friday evening that it would buy Centennial Communications, a regional wireless phone company, for $944 million in cash, a price that is more than double Centennial’s stock market value. It will also expand its wireless network in Puerto Rico and other regions of the United States, reports Reuters.
Centennial has 1.1 million wireless subscribers, of which about 40 percent are in Puerto Rico, where it has a market penetration of about 11 percent. It also has about 596,700 access lines for business customers in Puerto Rico.
“The transaction will enhance AT&T’s wireless coverage for customers in largely rural areas of the Midwest and Southeast United States and in Puerto Rico and the U.S. Virgin Islands,” AT&T said in a statement.
AT&T has nearly 75 million wireless subscribers and aims to obtain approval for the deal from Centennial shareholders and regulators by the second quarter of 2009.
Analysts have said that rural phone companies need to consolidate to cut costs, as more consumers cancel home phones to go completely wireless or switch to all-in-one phone, television and Internet packages offered by cable companies or national phone companies.
Verizon Communications is buying rural wireless service provider Alltel for $28.1 billion, which will help it overtake AT&T as the largest U.S. wireless service provider. Meanwhile, CenturyTel announced a deal last month to buy rival rural phone company Embarq for $5.8 billion in stock.
“The big continue to get bigger,” said Michael Nelson, a wireless analyst at Stanford Group. “It’s becoming increasingly difficult for the smaller carriers to compete against the large national carriers.”
An AT&T spokesman said there was some overlap in their markets, primarily in the southeastern United States and Puerto Rico, but there was “robust competition” in these areas. In the Midwest, he said Centennial’s network primarily covered rural areas and complemented AT&T’s network.
“I don’t think it’s the last of AT&T’s acquisitions. Nor Verizon’s,” said Comack. “They’re going to use their mass to do tuck-in acquisitions like this.”
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In other news, MetroPCS Communications and Leap Wireless will offer free roaming onto each other’s networks, reports RCR Wireless News.
Leap’s markets (Cricket) will be free to MetroPCS customers signed up for the carrier’s $45- and $50-per-month service plans, and can be added to other plans for $5 per month, with similar offers by MetroPCS.