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Verizon, Vodaphone bid for takeover

Vodaphone's German headquarters

TEXT OF STORY

Renita Jablonski: Verizon Wireless and its British partner, Vodafone, are bidding to become the number one cell phone operator in the U.S. Talks are underway to take over Alltel with a price tag of nearly $30 billion. From London, Stephen Beard reports.


Stephen Beard: The deal is complex. Three telecom companies, two private equity firms, and three investment banks are involved. That means plenty of opportunity for crossed wires and missed connections.

But if the takeover goes ahead, it will create a America's biggest cell phone provider. With around 80 million subscribers, the new group would easily overtake the current number one, AT&T.

Analysts say the deal looks good. The new group could save up to a billion dollars a year by combining operations. And for Vodaphone, the attractions are clear. The U.S. has a lot of potential growth -- 20 percent of Americans don't own a cell phone, while in many of Vodaphone's mature European markets there more cell phones than people.

In London, this is Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.
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wanted to know if i have any lost money.

To whomever said this merger is NOT in the public interest, I'd like to know what mergers ARE in the public's best interest? I've never, ever known two company presidents get together and say to themselves "how can we better the public good?" No, that question is for GOVERNMENT. BUSINESS is interested in the shareholder interests.

And as a shareholder, I'm interested.

Before we consumers get all bent out of shape, let's take a good look at life before this merger. First of all, Alltel is rural - that's a fact. It is a very well run company, although they tend to lag the so-called tier-1 carriers when it comes to new technology and devices, but all-in-all a good company. They derive a good portion of their "largest coverage area" from their roaming agreement with none other than Verizon Wireless. The eVDO and CDMA technologies that both companies deploy are used interchangably on each other's networks. The point is - like it or not - consumers have long benefited from this alliance in the first place. Bringing this alliance together under one roof doesn't change the consumer benefit.

Secondly, does this deal reduce innovation? Not hardly. Carriers use economies of scale to bring products to market faster. There is a reason ATT and Verizon typically get the coolest phones first - they're the largest carriers. They also have the largest networks. Individually, there's ATT, who will now be the second largest carrier, but who still has the ubiquitous iPhone. They aren't going away and they aren't giving up anytime soon. T-Mobile is still in the running providing good service, albeit with a smaller footprint, and touting a discount carrier image. There is still Sprint pushing their dream called WiMax which will directly compete with whatever 4G technologies that come from ATT, T-Mobile, and Verizon/Altell (likely to be LTE or Long Term Evolution). They are also still using iDEN which other carriers are STILL trying to match. In other words, the competition is still there. Now, whether Sprint can stay in business long enough to actually deploy WiMax depends on whether they learn how to run a wireless business properly - but that's a rant for another day. And of course you have so called tier 2,tier 3 and a host of virtual operators with names such as US Cellular, Cricket, Leap, Virgin, etc. The point - there are other choices.

But hold the phone - so to speak.... Do we consumers really want competition? How many times have I heard people say they wish carriers wouldn't "lock" their phones. They wish they could buy their iPhone and use it on Sprint or Verizon or Alltel or US Cellular etc. They don't want to be bound to ATT. Or maybe they want the Voyager on ATT or the Blackberry Bold on Sprint, whatever. Well, Tonto, in order for that to happen the industry has to decide on one uniform technology, in this case either GSM or CDMA - just like Europe. That, my friend, by definition thwarts competition.

This proposed merger will meet strong regulatory scrutiny, as well it should. There will be required divestures and such, but I think this merger will be approved. My advice to any consumer advocates taking their case to the FCC or DOJ is to focus on the area where Verizon and Alltel overlap. If you try to make generalities nationwide, you're sure to lose your case. In fact, if you're looking to derail this merger, you'll probably lose your case anyway, but I know you have to try. I look forward to seeing your opening arguments.

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