Verizon Wireless has agreed to sell some wireless assets to rival AT&T Inc for $2.35 billion after government regulators ordered that Verizon divest itself of properties related to its acquisition of Alltel Corp.

Verizon Wireless, a joint venture of Verizon Communications Inc and Vodafone Group PLC, purchased Alltel early this year in a $28.1 billion transaction. The assets it is required to shed include 2.1 million wireless subscribers in 22 US states, as well as radio spectrum and other assets necessary to run the businesses in those markets.

AT&T said the markets it is purchasing, which are mainly in rural areas and are mostly former Alltel territories, include 1.5 million subscribers.

In a separate transaction, Verizon agreed to purchase a small number of service areas from AT&T for $240 million. However, Verizon still must shed some other Alltel assets.

Verizon added 13.2 million subscribers from the Alltel deal and reported a total customer base of 86.6 million at the end of the first quarter, making it the largest US wireless carrier. The company expects about $1 billion in savings this year as it integrates Alltel. Verizon has already adopted a special "friends and family" service plan based on one of Alltel's that allows unlimited calling to any five or 10 numbers, including landlines.

The sale of the Centennial assets to Verizon is contingent upon AT&T's completion of its purchase of those assets, an AT&T statement said. Verizon Wireless was required to sell off those properties as a condition for getting regulatory approval of its purchase of Alltel in January. That merger created the biggest US wireless provider, surpassing AT&T in terms of subscribers.

AT&T said it expects the network integration costs to result in earnings per share dilution of $0.06 per share in the first year after closing, with additional planned capital investments of about $400 million over 2009 and 2010. The deal is expected to close in the fourth quarter of 2009, contingent on regulatory approval, AT&T said.

"This transaction will complement our existing network coverage, particularly in rural areas," said Ralph de la Vega, president and chief executive of AT&T Mobility and Consumer Markets.

AT&T had agreed to buy rural wireless provider Centennial Communication Corp in November, but a spokesman said there would now be overlap in service coverage, prompting AT&T to want to shed Centennial.

Verizon now expects to buy former Centennial wireless properties, including licenses, network assets and nearly 120,000 subscribers in five service areas in Louisiana and
Mississippi.