Alltel Nears Deal for Western Wireless ; $4 Billion Buy of Bellevue-Based Company Could Lead to Layoffs

Bellevue’s Western Wireless Corp., co-founded by cellular pioneer John Stanton, last night was close to agreeing to be bought by Alltel Corp., the nation’s sixth-largest wireless carrier.

Sources familiar with the situation said Alltel was set to buy Western Wireless for about $4 billion, plus the assumption of roughly $2 billion in debt.

Alltel will pay roughly $40 a share, with about 75 percent in stock and the remainder in cash.

The deal, which is subject to regulatory approval, is the latest in a series of consolidations within the cellular industry, extending the trend toward mergers and acquisitions downward to smaller, regional carriers.

It could mean layoffs among the 2,357 employees of Western Wireless, many of whom are based in the Puget Sound region.

The deal would make Alltel the nation’s fifth-largest cellular carrier, with about 9.7 million subscribers. Analysts said the advantages of greater size include reduced roaming fees paid to competitors and control over new pools of subscribers.

Western Wireless serves customers in 19 states and eight foreign countries. If the deal goes through, Alltel will get service areas where it now has none, in parts or all of Idaho, Minnesota, Montana, Nevada, North Dakota, South Dakota, Utah and Wyoming.

The buy would also expand Alltel’s service areas in Arkansas, Arizona, California, Iowa, Kansas, Missouri, New Mexico, Oklahoma and Texas.

Larger companies also have more clout when negotiating deals with handset makers and providers of services such as ring tones and the audio and video services that cellular carriers are rushing to provide.

“Bigger carriers are in a better position to drive deals with content providers,” said Ira Brodsky, president of technology analysts Datacomm Research Co. “That’s going to start to be a real issue.”

Stanton is one of several pioneers who helped develop the cellular industry in the United States.

In the 1980s, he helped Seattle’s McCaw Communications enter the cell phone business, serving as a director from 1986 and 1994 and as chief operating officer from 1985 to 1988. In 1988, he and his wife, Theresa Gillespie, formed Stanton Communications, which focused on cellular services as well as pagers and other wireless products.

Stanton and Gillespie co-founded Western Wireless in July 1994, when the country had only 25 million cellular subscribers, and took it public in 1996. They built it quickly, countering conventional wisdom by buying up cellular licenses at lower cost in rural Western areas, eschewing the more expensive licenses in the urban areas over which bigger companies were scrapping.

“The company focuses on (rural markets) because it perceives such markets, which are less densely populated, to be less susceptible to competition and to have greater capacity for future growth than most major markets,” the company said in its prospectus before offering stock to the public, in May 1996.

Stanton later followed the same contrarian philosophy abroad, buying up cellular licenses in trouble spots such as Haiti and the former Soviet republic of Georgia.

“He’s been a master of acquisitions all the way,” said John Snyder, an investor-relations consultant who has worked with the company for a number of years.

Stanton was chairman and chief executive of Western Wireless, which was then based in Issaquah. Gillespie was chief financial officer. At the same time, Stanton founded and was chairman of VoiceStream Wireless, which focused more on urban markets. That company was sold to Deutsche Telekom AG in May 2001. He was chairman of T-Mobile USA Inc., the successor to VoiceStream, until 2003.

In other recent cellular company consolidations, Cingular Wireless bought Redmond-based AT&T Wireless Services Inc. for $41 billion in November, and Sprint moved to buy Nextel Communications for $35 billion in December. Sprint’s purchase will make that combined company the nation’s third largest carrier by subscribers, after the newly combined Cingular and No. 2 Verizon.

P-I reporter Dan Richman can be reached at 206-448-8032 or danrichman@seattlepi.com