U.S., Seven States Tell Verizon to Sell Assets Before Buying Alltel

The Department of Justice and seven states will require Verizon Communications Corp. to sell off assets in 22 states before the company can move forward with its proposed $28.1 billion acquisition of regional cell phone operator Alltel Corp.

In a complaint filed in the U.S. District Court for the District of Columbia the government said the deal as originally proposed would restrain competition and lead to higher cell phone rates for subscribers.

According to the Justice Department, the merger will make Verizon Wireless the largest cell phone company in the United States, giving it nearly 80 million subscribers in 49 states. AT&T, the current leader, has about 71.4 million customers.

The government is ordering Verizon to divest assets in 100 cellular market areas in 22 states before it can complete the merger.

"The divestitures required are necessary to protect wireless customers and are among the most extensive required by the [Justice Department] in a wireless case," Assistant Attorney General Thomas O. Barnett said in a statement.

The Justice Department and the attorneys general of Alabama, California, Iowa, Kansas, Minnesota, North Dakota and South Dakota filed the complaint challenging the merger.

They contended that Verizon and Alltel are "significant competitors" in 94 cellular marketing areas.

In addition, the complaint said, without the divestments the merger would increase prices, reduce competition for customers, decrease the quality of service and lower investments in the communications network.

The divestitures cover all of North Dakota and South Dakota; large portions of Colorado, Georgia, Kansas, Montana, South Carolina, Utah and Wyoming; and portions of Alabama, Arizona, California, Idaho, Illinois, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Carolina, Ohio and Virginia.

Verizon earned nearly $43 billion in revenues from mobile wireless services in 2007, according to Barnett. Alltel earned about $8.8 billion.

The Federal Communications Commission also has approved the $28.1 billion deal.

To comment, ask questions or contribute articles, contact West.Andrews.Editor@ThomsonReuters.com.