Update: Verizon buys Alltel in $28.1 billion blockbuster

Apparently tired of being the second-largest U.S. wireless carrier, Verizon Wireless has finalized a deal that will vault it past AT&T  and net it millions of new wireless subscribers.

Verizon announced today that it has reached an agreement to purchase the nation's fifth-largest wireless carrier, Alltel Wireless, for a total of $28.1 billion. After adding Alltel's 13 million customers to its ranks, Verizon will have the most subscribers in the United States, with around 80 million.AT&T, which has mostly held the lead for total wireless subscribers since merging with Cingular back in 2004, currently has an estimated 71 million subscribers.

"This move will create an enhanced platform of network coverage, spectrum and customer care to better serve the growing needs of both Alltel and Verizon Wireless customers for reliable basic and advanced broadband wireless services," says Verizon CEO Lowell McAdam.

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A wireless carrier based in Little Rock, Ark., Alltel has a network footprint in 34 different states, with most of its coverage concentrated in southeastern, Midwestern and southwestern states. The carrier has received consistently high grades for its call quality, and a recent J.D. Power survey listed Alltel and Verizon as the carriers with the best call quality in the southeastern region of the United States.

Verizon says it hopes to complete its Alltel acquisition by year-end, although the company notes that any final deal will still be subject to obtaining regulatory approvals.

Telecom analyst Jeff Kagan says the deal makes sense for Verizon because Alltel's network will give it access to customers in more rural areas where it previously had lacked solid coverage. "We have seen Verizon do similar deals in the past including the acquisition of MCI, and one thing we have learned is they don't like to overpay," he says. "Not that it matters much anymore because they are all so big, but this deal would give Verizon Wireless the No. 1 spot in the rankings."

Technologically, the two companies are a good fit for one another since Verizon and Alltel both currently use the Code Division Multiple Access (CDMA) standard to deliver their 3G wireless services, and both plan to eventually switch over to the GSM-based Long Term Evolution (LTE) for their 4G networks.

Click to see: Map of area a combined Verizon and Alltel would cover

Alltel has only been a privately held company since last November when the carrier completed its $27.5 billion sale to an affiliate of TPG Capital and GS Capital Partners. The merger agreement had been adopted by Alltel’s shareholders in August, with each shareholder receiving $71.50 per share in cash in compensation.