Nearly three years after Atlantic Tele-Network Inc. acquired rural cellphone carrier Alltel for $200 million, the Beverly-based company is cashing in, selling Alltel to wireless giant AT&T Inc. for $780 million in cash.
“We are pleased with today’s outcome, which represents a strong return on our investment,” said Atlantic chief executive Michael Prior.
Alltel was once the nation’s fifth-largest cellular carrier with about 13 million subscribers. In 2009, the company was acquired by Verizon Wireless for $28.1 billion. But as a condition for approving the deal, federal regulators ordered Alltel to spin off some assets. Atlantic Tele-Network acquired its wireless operations in Georgia, Idaho, Illinois, North Carolina, Ohio, and South Carolina, and continued to operate them under the Alltel name.
Atlantic invested about $85 million to upgrade the network. Alltel generated revenue of $350 million, or 63 percent of Atlantic Tele-Network’s total revenue, during the first three months of 2012.
But Alltel also saw its subscriber count decline from about 800,000 in 2009 to about 580,000 today.
Prior said that the deal reflects the increasing consolidation of the US wireless phone market. “The dispersed, all-rural, multistate geography of the Alltel customer base and network has become increasingly challenging to operate in this era of rapidly growing mobile data usage,” he said. “We believe Alltel is best suited to be part of a national network with the scale and resources of a national provider like AT&T going forward.”
An AT&T spokeswoman said that the acquisition would supplement the company’s existing network by improving service in rural areas. However, AT&T must first overhaul the entire Alltel network, because it’s based on a cellular technology called CDMA. That makes it incompatible with the AT&T network, which uses an alternative system called GSM.
The AT&T spokeswoman said that the upgrade would include 4G wireless data service, but she declined to comment on whether AT&T would give the network the fastest available cellular data service, known as 4G LTE.
AT&T is rapidly deploying 4G LTE throughout the United States, in response to consumer demand for high-speed wireless data service. The company offers the service in 135 markets, and said it expects to make 4G LTE available to 300 million US residents by the end of 2014.
John Byrne, research director for wireless network infrastructure at IDC Corp. in Framingham, called the deal “a nice little turnaround” for Atlantic, because it got a good price for a fading business.
“The underlying industry isn’t getting any better for them,” Byrne said. “They’re still losing customers. I don’t think they saw that changing any time soon. . . . I think they see the end of the ride coming.”
Byrne added that AT&T mainly wants the radio frequencies controlled by Alltel. Nearly all of the radio spectrum that’s suitable for cellphone use has been taken, but wireless usage continues to surge.
“Spectrum is more valuable now than it was three or four years ago,” Byrne said, which is why AT&T is paying nearly four times what Atlantic paid for the Alltel assets.
Atlantic will continue to operate wired and wireless telephone services in several US states and the Caribbean. These include Sovernet Communications, which serves Vermont and other parts of northern New England, as well as Commnet Wireless in the Southwestern United States and the primary provider of telephone service in the small South American nation of Guyana.
Shares of Atlantic Tele-Network closed up $4.83, or 12 percent, at $44.20 on the Nasdaq stock market; AT&T rose 17 cents, or half a percent, to $33.61 on the New York Stock Exchange.