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Telecom Spinoff Detailed: The Alltel-Valor Deal Would Produce a Phone Company Called Windstream Communications.

Posted on: Tuesday, 11 April 2006, 09:00 CDT

By D.R. Stewatrt, Tulsa World, Okla.

Apr. 11--A spinoff of Arkansas-based Alltel Corp.'s landline phone business and its merger with Texas-based Valor Communications Group Inc. would create a new rural wireline phone company named Windstream Communications, company executives said Monday.

The $9.1 billion deal, first announced in December, must be approved by state and federal regulators, and it could close later this year, officials said.

Jeff Gardner, president and CEO of Windstream Corp., the parent company of Windstream Communications, announced the company's name and corporate logo to employees Monday during a Web cast.

"Windstream Communications builds on our 60-year history as a reliable customer ally with fresh, innovative thinking and technology to deliver the information, entertainment and personal connections that customers need to thrive in today's global economy," Gardner said. "It's going to mean great things for employees and customers."

The new wireline company would be based in Little Rock, which is Alltel's home.

If the merger is approved, Alltel shareholders would own 85 percent of the combined entity. Valor, based in Irving, Texas, would issue about 400 million shares of stock to the shareholders of Alltel in exchange for the Alltel wireline business.

Alltel shareholders would continue to own one share of the wireless company and would receive 1.05 shares of Valor stock for each share of Alltel they own. Additionally, Valor would assume about $4.2 billion in Alltel debt, bringing total net debt at the merged company to $5.4 billion, company officials said.

The transaction would be tax-free to Alltel, Valor and each company's shareholders.

Valor has 1,315 employees, including 139 in Broken Arrow, and serves local-phone and long-distance customers in 27 exchanges in north central and northeastern Oklahoma. The company serves 540,000 local access lines in primarily rural areas of Oklahoma, Arkansas, Texas and New Mexico.

Alltel's landline division has 8,000 employees and controls 3 million access lines.

"We're going to focus on the 16 states we're in," Gardner said in a telephone interview. "We expect to focus on Broken Arrow, which is a very important property. It's a growing area, and there's a lot of development around Tulsa."

Alltel's and Valor's wireline businesses have complementary rural geographic footprints -- Alltel's strength is in the Southeast, while Valor's is in the Southwest, executives said.

The new company expects to gain $40 million in net annual synergies from the merger, officials said.

Alltel management teams would lead the wireline and wireless businesses, they said.

Francis X. "Skip" Frantz, Alltel's executive vice president and secretary, would become chairman of the board of Windstream Communications.

The new wireline company would have nine board members, one of whom will be named by Valor.

After the merger, Alltel would remain the nation's fifth-largest wireless operator, with about 11 million customers in 34 states.

Alltel shares closed Monday at $66.21, up 52 cents. More than 1.38 million shares were traded.

Valor stock closed at $13.02, down 12 cents. The volume was 274,000 shares.

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D.R. Stewart 581-8451 don.stewart@tulsaworld.com

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Copyright (c) 2006, Tulsa World, Okla.

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Source: Tulsa World

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