Verizon gets DOJ approval for Alltel purchase

Verizon Wireless has made it through an important regulatory hurdle in its bid to acquire rural wireless operator Alltel, but the approval didn't come without conditions.

The U.S. Justice Department on Thursday gave the green light on the merger. But it is requiring Verizon to divest assets in 22 states, including service in all of North Dakota and South Dakota; large portions of Colorado, Georgia, Kansas, Montana, South Carolina, Utah and Wyoming; and parts of Alabama, Arizona, California, Idaho, Illinois, Iowa, Minnesota, Nebraska, Nevada, New Mexico, North Carolina, Ohio, and Virginia.

The $28.1 billion deal, which was announced in June, still needs approval from the Federal Communications Commission. The agency is expected to vote on the acquisition at its November 4th meeting.

The bulk of the deal's value comes from Alltel's debt. Verizon plans to pay Alltel about $5.9 billion for equity in the company, but it will also take on about $22.2 billion in debt. Alltel incurred most of this debt when it was taken over in a leveraged buyout last year.

Investors have been concerned that the acquisition has gotten too expensive as debt financing costs have risen. But Verizon's CEO Ivan Seidenberg assured them during the company's quarterly conference call this week that Alltel is still a good purchase and would pay for itself in the long run.

Once the purchase is complete, Verizon will become the largest cell phone operator in the U.S. in terms of subscribers, unseating AT&T, which is currently the largest U.S. wireless operator.