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Managing Editor

How will Verizon respond to AT&T/BellSouth deal?

Mar 14, 20062 mins

* Industry awaits Verizon's response to AT&T/BellSouth deal

All eyes are on Verizon now that AT&T has made public its long anticipated intention to acquire BellSouth.

How will Verizon respond?

Verizon has a history of countering strategic moves by SBC, the RBOC that acquired AT&T last year. Indeed, when SBC announced its intentions to acquire AT&T a year ago, Verizon quickly announced plans to buy AT&T’s IXC rival, MCI.

So analysts are expecting more of the same now that AT&T is plunking down $67 billion for BellSouth, and are considering several possible scenarios.

One obvious scenario is Verizon’s publicly stated intentions to acquire Vodafone’s 45% stake in Verizon Wireless. The impetus for the AT&T/BellSouth deal was to gain full control over the co-owned Cingular Wireless, a major growth engine for both AT&T and BellSouth.

Verizon, which is currently negotiating with Vodafone for that 45%, would gain similar synergies, control and cost efficiencies as AT&T seeks with sole ownership of Cingular, analysts say.

Another possibility is acquiring Alltel, which is currently spinning off its wireline operations in an effort to focus solely on wireless. Alltel has roughly 11 million wireless customers in 34 states, making it the nation’s fifth largest wireless carrier.

A third possibility is Qwest. Qwest’s region in the West could help fill out Verizon’s local access footprint.

But Qwest’s territory is heavily rural, and the carrier is still saddled with $14 billion in debt, which is greater than its market cap of $12 billion.

That amount of debt would effectively double the price anyone would pay for Qwest.

Moreover, the wounds inflicted during the Verizon/Qwest joust for MCI last year are still fresh, making managerial and cultural synergies sticky, analysts note.

So another option would be for Verizon to play Qwest in this case and counter AT&T’s offer for BellSouth. Verizon would gain valuable local access facilities in some major metros in the Southeast, pad its broadband penetration numbers and, at the very least, stick it to AT&T by driving up the price for the RBOC.

Managing Editor

Jim Duffy has been covering technology for over 28 years, 23 at Network World. He covers enterprise networking infrastructure, including routers and switches. He also writes The Cisco Connection blog and can be reached on Twitter @Jim_Duffy and at

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