Rural Market Worth $2.67B to Verizon Wireless

Think AT&T’s bid earlier this month to buy rural wireless provider Dobson Communications for $2.8 billion got the attention of AT&T’s rivals? How about Sprint’s  recent pact with Clearwire  to bring WiMAX to 300 million customers?

Deals to fortify wireless services abound, motivating Verizon Wireless to buy Rural Cellular  for $2.67 billion in cash and assumed debt.

The deal will give Verizon Wireless, a joint venture between Verizon  and Vodafone , 4.7 million licensed points of presence (POPs) and will increase its customer base by more than 700,000.

The agreement will help Verizon Wireless sop up more customers in 15 rural markets before Sprint or AT&T Wireless can get to them. Rural Cellular’s networks are located in Maine, Vermont, New Hampshire, New York, Massachusetts, Alabama, Mississippi, Minnesota, North Dakota, South Dakota, Wisconsin, Kansas, Idaho, Washington and Oregon.

“The addition of Rural Cellular’s markets will enable us to expand our services into areas where previously we had little or no presence and will give Rural Cellular’s Unicel customers access to the nation’s most reliable network and a broader range of voice and data services,” said Lowell McAdam, president and CEO of Verizon Wireless, in a statement.

Coverage area and service quality are everything in the market for wireless technologies; wireless carriers live and die by offering broad coverage areas because too many dropped calls can send customers flocking to competitors.

By adding more wireless networks, Verizon Wireless is reinforcing its position versus Sprint and especially market leader AT&T, which have their own nuanced strategies for delivering voice and data services to their customers.

With Dobson, AT&T will stake its claim to areas un Alaska, Arizona, Illinois, Kansas, Kentucky, Maryland, Michigan, Minnesota, Missouri, New York, Ohio, Oklahoma, Pennsylvania, Texas, Virginia, West Virginia and Wisconsin.

Rural Cellular uses CDMA and GSM technology separately across its five regional markets. Verizon Wireless said in a statement it plans to roll out CDMA service in Rural Cellular’s existing GSM markets and convert the GSM customers to CDMA service.

Verizon Wireless also said it expects to keep Rural Cellular’s existing GSM networks to continue serving the roaming needs of other GSM carriers’ customers.

Rural Cellular common stock holders will receive $45 per share in cash for a total of $757 million. That price reflects a 16 percent premium to the average closing price over the last 10 trading days and a 41 percent premium to the last closing price of $31.88 last Friday. Verizon Wireless will also assume $1.9 billion in debt.

Verizon Wireless, the No. 2 phone network with 62.1 million customers, hopes to close the purchase in the first half of 2008.

In other news, Verizon Communications said second-quarter profit rose 4.5 percent to $1.68 billion, or 58 cents a share, from $1.61 billion, or 55 cents, in the year-ago period. Verizon’s sales rose 6.3 percent to $23.27 billion from $21.89 billion a year ago.

Sales for its Verizon Wireless venture grew a hefty 17 percent to $10.8 billion.