Alltel Meets With Private Equity Groups -- WSJ

The Wall Street Journal reports at least three private-equity groups are pursuing a purchase of wireless carrier Alltel Corp. Each group has met with management, which has indicated it is interested in 'pursuing strategic alternatives,' people familiar with the matter say. The $22.4 billion company carries about $2.7 billion in debt, about equal to its cash flow. Competitor Sprint Nextel's debt is twice its cash flow. Sources say Alltel has asked potential buyers to keep its debt levels below seven times cash flow, meaning buyers could take on a maximum $20 billion in debt; the rest would have to come from within. Two of the sources said the chances of a deal going through were about "50-50." Shares are up 7.8% this year on strong earnings and buyout speculation. Alltel reported a surprise 237,000 net subscriber increase in Q1, its best ever churn rate, and boosted average revenue per customer -- a key wireless metric. It now has 12 million customers, mostly in small Midwest, West and South markets. Large competitors include AT&T, Verizon Wireless (a Verizon/Vodafone JV), and Sprint Nextel. Smaller rivals include Leap Wireless and MetroPCS. Private-equity groups named include Blackstone Group with Providence Equity Partners; TPG Capital LLC (formerly Texas Pacific) with the private-equity arm of Goldman Sachs; and Carlyle Group with KKR. Shares jumped as much as 3% Tuesday after president of operations Kevin Beebe cancelled an investment conference appearance, spurning speculation that a deal is in the making.

Sources: Wall Street Journal
Commentary: Alltel Courting Potential Buyers • Alltel Still A Pricey Buy • Verizon CEO: Buy Out Vodafone, Forget About Alltel
Stocks/ETFs to watch: Alltel Corp. (AT), Goldman Sachs Group Inc. (GS). Competitors: AT&T Inc. (T), Verizon Communications Inc. (VZ), Vodafone Group plc (VOD), Sprint Nextel Corp. (S), Leap Wireless International Inc. (LEAP), MetroPCS Communications Inc. (PCS). ETFs: PowerShares Dynamic Telecom & Wireless ETF (PTE), iShares Dow Jones U.S. Telecom Sector Index ETF (IYZ), Vanguard Telecom Services ETF (VOX), Telecom HOLDRS ETF (TTH)
Conference call transcript: Alltel Q1 2007 Earnings Call Transcript

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.