BASKING RIDGE, N.J. (AP) – Verizon Wireless, the nation’s second-largest wireless provider behind AT&T, said Monday it will purchase Rural Cellular Corp. for $757 million in cash in a move to expand its wireless service coverage in rural markets.
Rural Cellular’s Unicel network served 716,000 customers as of March 31 and spread across 15 states including Maine, New Hampshire and Vermont.
“The addition of Rural Cellular’s markets will enable us to expand our services into areas where previously we had little or no presence,” said Lowell McAdam, president and CEO of Verizon Wireless.
The deal has been approved by the boards of both companies and is expected to close in the first half of 2008, subject to governmental and regulatory clearance and approval of Rural Cellular’s shareholders.
Rural Cellular shareholders will receive $45 per share in cash, representing a 16 percent premium to the stock’s average closing price over the last 10 trading days and a 41 percent premium to its closing price Friday of $31.88.
Verizon Wireless is a joint venture of Verizon Communications and Vodafone. Including assumed debt, the company values the deal at about $2.67 billion.
The deal comes one month after AT&T Inc. agreed to buy larger rural wireless service provider Dobson Communications Corp. for $2.8 billion.
Wayne Jortner, general counsel of the Maine public advocate’s office, said he had concerns about the deal because it would mean fewer wireless carriers and less competition in a state that currently has only five major wireless competitors.
“Going from five to four is a very bad thing in my opinion,” he said from Augusta, Maine.
Also, Jortner said he felt that Unicel was doing a good job of expanding its service in rural Maine thanks to federal grants and that having Verizon as an owner won’t necessarily mean additional improvements for Mainers.
Finally, the different wireless technology used by Unicel and Verizon isn’t compatible, and that could cause problems for customers in Maine, he added.
Alexandria, Minn.-based Rural Cellular uses both CDMA and GSM technology separately across its five regional markets. Verizon Wireless plans to deploy CDMA service in Rural Cellular’s existing GSM markets and convert the GSM customers to CDMA service.
Verizon Wireless, however, said it expects to maintain Rural Cellular’s existing GSM networks to continue serving roaming needs of other GSM carriers’ customers.
Rural Cellular reported a loss of $116 million in 2006, on sales of $564.5 million. In premarket trading, shares jumped $5.56, or 17.5 percent, to $37.37.