AT&T Inc. said late last night that it plans to buy regional wireless provider Centennial Communications Corp. for $944 million in an all-cash deal, in a bid to expand its reach.
The deal marks the latest consolidation amid a wave of mergers in the rural telecoms industry, which is struggling with slower wireless growth and declining home phone lines in a weak economy.
Including debt, the deal puts an enterprise value on Centennial of $2.8 billion. It and AT&T already have a roaming partnership, where AT&T customers could roam on Centennial's network in areas where AT&T did not have coverage.
This move comes after rival Verizon received approval from the Federal Communications Commission (FCC) and the US Justice Department for its proposed $28 billion acquisition of Alltel, on the condition that Verizon shed some of its current coverage areas first. This deal would effectively propel Verizon past AT&T as the number one US wireless carrier in terms of subscribers. (See: Verizon Wireless signs $28.1-billion acquisition agreement for Alltel
CenturyTel Inc also announced a deal last month to buy rival rural phone company Embarq Corp for $5.8 billion in stock, and assumed an equivalent amount in debt, for an enterprise value of $11.6 billion. (See: CenturyTel acquires Embarq for $11.6 billion in all-stock deal)
AT&T said in a prepared statement that acquiring Centennial will improve "coverage for customers in largely rural areas of the Midwest and Southeast United States," as well as in Puerto Rico and the US Virgin Islands.
The deal will also net AT&T Centennial's roughly 1.1 million wireless subscribers, and what AT&T termed "Centennial's high-quality 850 MHz spectrum" in states including Indiana, Louisiana, Michigan, Mississippi, Ohio and Texas. 40 per cent of Centennial's customers are in Puerto Rico, where it has a market penetration of about 11 per cent. It also has about 596,700 access lines for business customers in Puerto Rico.
AT&T said the deal will have Centennial shareholders receive $8.50 a share. Centennial shares, which had risen more than 10 per cent during regular session trading to $3.84, surged to $7.41 in late trading following the acquisition announcement.
AT&T, which has nearly 75 million wireless subscribers, said it expects minimal dilution to earnings and cash flow from integration costs in the first year after closing. It aims to obtain approval for the deal from Centennial shareholders and regulators by the second quarter of 2009.
The companies said Welsh, Carson, Anderson & Stowe, Centennial's largest stockholder, has agreed to vote in support of this transaction.