ALLTEL makes unsolicited $6.1 billion bid for CenturyTel
Wednesday, August 15th 2001, 12:00 am
By: News On 6
NEW YORK (AP) _ Alltel Corp. executives declined to say Wednesday whether they would pursue a hostile takeover of CenturyTel Inc. after the communications provider rejected its $6.1 billion unsolicited offer.
Alltel president Scott Ford told analysts in a conference call that he hoped CenturyTel would reconsider the Little Rock, Ark. company's offer, which he said would create the largest rural telecommunications company in the nation.
Separately, CenturyTel confirmed Wednesday that its in talks with unspecified parties to sell its wireless telephone operations so it can focus on its traditional telephone service business in rural areas.
The unsolicited bid ``will not deter CenturyTel from continuing to compete with Alltel for wireline acquisitions or pursuing other strategies that it believes are in the best interests of the company,'' CenturyTel president and chief executive Glen Post III said in a statement.
Ford would not say what Alltel would do if CenturyTel officials don't change their position.
``For all of the obvious reasons, we don't have any comment on what is possible or likely in terms of our future actions on this,'' he said.
Mounting a hostile takeover bid by appealing to shareholders would be difficult because of CenturyTel's opposition to the bid, and because it held its annual shareholder meeting in May and isn't required to do so again for 18 months.
Also, CenturyTel's board members serve in staggered terms, meaning the entire board cannot be voted out at the same time.
Despite the obstacles, analyst Michael Balhoff of Legg Mason thinks Alltel will likely raise its bid, possibly persuading CenturyTel to reverse course and begin merger negotiations.
``We believe that CenturyTel's board will be under more pressure as the bid escalates, which we see as likely,'' Balhoff said in a research note sent to clients.
The combined company would be a rural communications powerhouse with about 7.2 million wireless customers, 4.4 million telephone lines and more than $10 billion in revenue, Alltel said.
Analysts said that the combination could benefit rural customers who would get more telecommunications services and that cellular phone users might end up with lower roaming fees.
Under the bid's terms, CenturyTel shareholders would receive a choice of either $43 per share or 0.6934 Alltel shares for each CenturyTel share. Alltel would also assume $3 billion in debt.
CenturyTel, based in Monroe, La., is a local-exchange carrier that provides phone services in rural areas, suburbs, and small towns scattered throughout the country from Arizona to Minnesota and from Washington to Tennessee.
CenturyTel also offers cable TV, long-distance, Internet access and business data services, and security monitoring in some markets. The company has about 6,800 employees, is upgrading its analog cellular systems to digital TDMA (time division multiple access) technology.
The Louisiana company became the main telephone service provider for more than 280,000 rural Arkansans when it bought out Verizon Communications Inc.'s Arkansas operations a year ago. It has a rate increase pending for two of its six Arkansas regions, and dozens of its customers complained to the Arkansas Public Service Commission that they already pay too much for unreliable service.
CenturyTel officials say they underestimated the problems of providing service when they bought the Arkansas systems, which was part of GTE before GTE merged with Bell Atlantic to form Verizon. The boom in Internet usage and the 1997 telephone utility deregulation bill have caused CenturyTel to lose about $2.6 million a month in two of its six Arkansas service areas, it says.
Alltel is the sixth-largest U.S. wireless carrier with 6.3 million customers, and has about 27,200 workers. It has communications customers in 24 states and provides information services to telecommunications, financial and mortgage clients in 55 countries and territories.
Ford said the combined company would be able to cut costs, but did not provide specifics, say how many jobs might be eliminated, or discuss the future of CenturyTel's Monroe headquarters if the deal goes through.
Alltel made its offer public after CenturyTel rejected two merger proposals, most recently last Friday, Ford said in a letter sent to Post.
Ford initially revealed CenturyTel's plan to separate its wireless and traditional telephone service businesses when the bid was announced after the stock markets closed Tuesday. CenturyTel said Wednesday that Alltel had been invited to participate in that process and criticized the company for making the information public.
``CenturyTel is highly suspicious of Alltel's motives in making public CenturyTel's confidential exploration of the possible separation of its wireless and wireline businesses,'' CenturyTel said in a statement.
Ford said he believed the merger would ``provide a far superior return to CenturyTel's stockholders than CenturyTel would otherwise achieve,'' pointing out that the offer values CenturyTel at a 40 percent premium to its closing price Tuesday.
A combined Alltel-CenturyTel would be able to cut cellular roaming fees in contiguous service areas, making it easier to attract customers in larger local calling areas, said James Ott, a telecommunications analyst with Hibernia Southcoast Capital.
Consumer advocate Gene Kimmelman, who heads Consumers Union's lobbying efforts in Washington, D.C. said the combination could also help rural phone consumers by offering them more telecommunications services.
The deal probably would not run into antitrust concerns from federal regulators, but would require strict oversight by federal and state regulators, Kimmelman said.
``This would create a monopoly that would need price oversight,'' he said.
Alltel shares fell $4.36, or 4.4 percent, to $56.70 in morning trading Wednesday on the New York Stock Exchange. CenturyTel shares soared $4.89, or 16 percent, to $35.51, also on the NYSE.