ALLTEL & SPRINT TO SELL OFF THEIR local wire-line businesses

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http://www.bizjournals.com/industrie...te_story6.html


Charlotte Business Journal


From the November 7, 2005 print edition
Phone cos. cutting ties by spinning off wire lines
David Mildenberg
Staff writer
Alltel Corp. and Sprint Nextel Corp., major players in the region's telephone market for decades, are looking to spin off their local wire-line businesses.

Sprint Nextel plans to sell its local telephone business to its shareholders next spring, creating new ownership and management structures, though details haven't been concluded, spokesman Tom Matthews says. The Reston, Va.-based company's wire-line business operates 1.45 million access lines in North Carolina, including the Hickory area.

Arkansas-based Alltel is also considering various options, including selling the wire-line business to its shareholders or merging the business with another phone company and retaining a 51% ownership.

No formal decision has been made, though the probability of taking some action is "pretty darn good," says Keith Beebe, Alltel's group president of operations.

Alltel, with about 242,000 access lines in the state, is the local phone company in Matthews and parts of Cabarrus, Rowan, Stanly and Union counties. It has more than 2,000 employees in North Carolina.

Both Sprint and Alltel are focusing on their fast-growing wireless businesses, hoping to redeploy money raised from the slower-growth wire-line units. Both companies get the bulk of their revenue from wireless sales.

Nationally, telephone companies are losing about 3% or more of their wire-line customers annually as consumers shift to wireless and Internet-based phone services provided by Vonage, Time Warner Cable and other rivals. BellSouth Corp., the state's major phone company, has 7% fewer access lines now than it did a year ago.

"We think that separating the two businesses right now might be the best thing to allow both to follow their own strategic path," Beebe says.

That is a reversal from previous strategy as Alltel and other phone companies aimed to offer an ever-growing basket of services including local, long distance, wireless and Internet access.

Alltel is the nation's second-largest independent telephone company and the largest regional wireless service provider. Tax considerations make it unlikely it would sell its systems in small chunks to regional wire-line companies, Beebe says.

Such companies include Concord-based CT Communications Inc., which operates in Cabarrus, Rowan and Stanly counties, and Charlotte-based FairPoint Communications Inc., a rural telephone operator that does not have any N.C. systems.

Despite the decline in customers, phone companies remain profitable. Last year, Alltel's local phone business in North Carolina had operating profits of $42 million on sales of $152 million. Industry analysts say Alltel's phone business, with 2.9 million access lines nationally, could be worth as much as $10 billion, or more than $3,000 per access line. It also has 10.4 million wireless customers.

Alltel's Matthews call center, which has more than 500 employees, won't be affected by a sale of the wire-line business, says spokeswoman Alice Hartnett.