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News > Deals
Verizon to buy Price unit
November 15, 2000: 3:10 p.m. ET

Deal for $1.5 billion in stock to expand Verizon's Southeast reach
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NEW YORK (CNNfn) - Verizon Wireless, the largest U.S. wireless-phone service provider, agreed Wednesday to acquire Price Communications Wireless for about $1.5 billion in stock, in a bid to expand the company's presence in the southeastern United Sates.

The purchase will give Verizon Wireless control of Price's Cellular One brand, while also filling in Verizon's reach in Georgia, where it primarily served the greater Atlanta area. Verizon will add Price's 500,000 subscribers in Alabama, South Carolina and Florida, as well as Georgia, to its 26.3 million subscribers nationwide.

Bedminster, N.J.-based Verizon Wireless will assume $550 million in debt. Verizon Wireless, which postponed its planned initial public offering last month, will pay $1.5 billion in stock based on the offering price of shares in its IPO.

graphicVerizon Wireless is buying all the assets of Price Communications Wireless, a unit of New York-based Price Communications Corp. (PR: Research, Estimates), and will gain 41 retail stores, a regional call center in Atlanta and network infrastructure.

Verizon must complete its IPO by Sept. 30, 2001 or either party can walk away from the transaction, a Verizon Wireless spokesman said.

"There is no telling how many shares Price will get until the IPO is priced," the company spokesman said.

In August, Verizon Wireless, the nation's largest wireless provider, filed with the Securities and Exchange Commission for a $5 billion IPO. The offering, co-led by by Goldman Sachs & Co. and Merrill Lynch & Co., was expected in September. However, in October, Verizon Wireless disclosed that it was delaying the sale due to market volatility.

No official date has been set but insiders now expect the deal next year.

"We didn't officially state when it was going to go," said Verizon Wireless spokesman. "We are keeping our options open on the timing."

Good for Price

Tthe deal is seen as a boon for New York-based Price Communication Corp., which is marketed under the CellularOne brand, and will retain about $70 million worth of assets. 

Verizon is paying about $605 a potential customer, which is significantly above current market value for similar potential customers, which typically go for around $175 to $250 each, said analyst Patrick Comack, of Guzman & Co.

Verizon Wireless, a unit of New York-based Verizon Communications (VZ: Research, Estimates), was formed earlier this year through the merger of Bell Atlantic and GTE. Verizon will have to spend millions to convert Price's network, which uses Time Division Multiple Access digital wireless technology, to Code Division Multiple Access, which is used by Verizon, Comack said.

"It looks like Verizon really wanted this additional spectrum," he said. "Price made the right deal but we don't know if it is good for Verizon."

Price's high valuation indicates that the federal auction in December of nationwide licenses may also fetch high price tags. "It looks like there is a very expensive auction coming up," Comack said.

Analyst Tony Ferrugia, of A.G. Edwards, said the Price transaction fills out Verizon Wireless's strategic footprint, adding coverage of the Southeast.

"For a company that is the size of Verizon, this is a small deal," Ferrugia said. "I wouldn't expect they would pick up a ton of subscribers because they are already big. They don't need a whole lot of states."

Meeting the Street

Separately, Price also announced its third-quarter earnings Wednesday, matching Wall Street estimates.

For the quarter ended Sept. 30, Price reported net earnings of $7.9 million, or 14 cents a share, compared with net earnings of $21.4 million, or 38 cents a share, in the year-earlier quarter. That is in line with the 14-cents-a-share consensus estimate of analysts surveyed by First Call Corp.

Revenue increased to $70 billion from $65 billion a year ago.

Shares of Verizon (VZ: Research, Estimates) fell $2.19 to $53.56 in afternoon trading, while Price gained 12 cents to $21.19. graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.