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Verizon: Alltel Deal to Close Jan. 9

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whoa!

chainmail311

Jan 5, 2009, 1:27 AM
I didn't realize Alltel was 22 billion in debt! That's massive!

I suppose all the cell phone companies are in debt, perhaps. Can anyone clarify this for me?
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Mektah

Jan 5, 2009, 2:09 AM
I think when they say debt they don't mean the company is operating at a loss. they mean that verizon is going to pay off any loans the company may have . phone companies operate for the most part on a debt system meaning they are not paying for all of their equipment upfront. they are basically getting loans to cover operations.
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dave73

Jan 5, 2009, 9:51 AM
The investment group put Alltel into debt. Had the economy not taken a downturn, then there's a chance that the investment group would have held onto Alltel longer to get them growing. Instead, the money ran out, and couldn't easily get more financing. That's why Alltel ended up getting sold. If Alltel had been smart in the beginning, they wouldn't have sold to the investment group.
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jskrenes

Jan 5, 2009, 10:47 AM
I don't know if the economy has much to do with it. The merger was in the works long before the economy started to sour and financing started to dry up. Verizon bought Alltel for two reasons: 1, to acquire more customers, and 2, they were paying Alltel $3B a year in roaming fees. Doesn't take a genius to figure out that in about ten years they will have paid for the acquisition merely by redirecting money they were already spending, and that's a good move.
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CellStudent

Jan 5, 2009, 1:12 PM
You make a few good points, but you're off the mark with your credit-crunch figures. Corporate credit lines began to get tight in early 2008. The general public didn't become aware of the problem fully until the Fall when the bad mortgages finally blew up, but Goldman Sachs and every other CFO on the planet knew about this problem six months before you and I found out about it.

The Private Equity firm didn't jump out because they wanted to, they did it because they had to, and VZW executives knew it. VZW has wanted Alltel to come under their wing for many, many years, but mid 2008 was when the price was finally right. The investors needed to get out, quick. They still made a small profit, but it was nowhere near the return they would...
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fracturedpsyche

Jan 5, 2009, 9:52 AM
for xampl, big red (by assuming alltel's debt and financing more debt for the acquisition) now has a total debt load of $63 billion. Sprint has about $23 billion in debt.

verizon debt: http://money.cnn.com/2008/06/05/technology/ve rizondebt.fortune/index.htm

sprint debt: http://www.reuters.com/article/marketsNews/id INN1034736720081210?rpc=44

much of this debt is financed like a municiplaities issues bonds. it is for the purpose of raising revenues from investors. not all the debt exclusively, but most of it.
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Slammer

Jan 5, 2009, 11:32 AM
fracturedpsyche said:
for xampl, big red (by assuming alltel's debt and financing more debt for the acquisition) now has a total debt load of $63 billion. Sprint has about $23 billion in debt.

verizon debt: http://money.cnn.com/2008/06/05/technology/ve rizondebt.fortune/index.htm

sprint debt: http://www.reuters.com/article/marketsNews/id INN1034736720081210?rpc=44

much of this debt is financed like a municiplaities issues bonds. it is for the purpose of raising revenues from investors. not all the debt exclusively, but most of it.


Don't forget about AT&T with a 72 billion dollar debt still on the books.
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JeffdaBeat

Jan 5, 2009, 12:37 PM
Man, I don't feel so bad for Sprint knowing that. Still, that's a lot of debt to have on hand. But I guess as long as they pay their debters, they are good to go...
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CellStudent

Jan 5, 2009, 1:04 PM
JeffdaBeat said:
Man, I don't feel so bad for Sprint knowing that. Still, that's a lot of debt to have on hand. But I guess as long as they pay their debters, they are good to go...


Don't get too excited.

The AT&T $72 billion figure and the VZW $63 billion figure are COMBINED debt loads with their land-line and long distance operations, it's the WHOLE enterprise.

The Sprint debt-load is cellular only, because they spun off from their land-line counterpart quite some time ago and keep completely separate ledger sheets.

$60 to $75 billion in debt for an organization with a vast footprint and a wide array of services which are actually drawing a profit every year is a totally different scenario then ...
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DiamondPro

Jan 6, 2009, 12:47 AM
How many of those landline customers have dropped there home phones and went wireless? And how many do you think will be ditching there landlines for cell phones in the next year or 2? Part of Verizons and att mobile growth is from there own land based subscribes switching to wireless. With options like the magicjack, vonage and skype landlines will be way cheaper and more customers will be ditching Vz and att's landline service. 😎
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willv

Jan 6, 2009, 1:20 PM
DiamondPro said:
...Part of Verizons and att mobile growth is from there own land based subscribes switching to wireless.....


so whats sprints excuse for loosing customers and not gaining them?

i think a big part of vzw and att mobile growth is sprint customers leaving for vzw/att 😎
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HawkeyeOC

Jan 6, 2009, 5:30 PM
Landline service has been a loser for any company in recent years but it will never go away because of the "options" you mentioned.

Aside from poor customer service issues with magicjack, vonage and skype you have problems with seperate 911 systems

But in a time where all mobile carriers are gaining subscribers, where does that leave losers like Sprint?

Jump that sinking SS Sprint ship while you can Diamond. 😁
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Overmann

Jan 7, 2009, 10:15 AM
Magicjack is evil, has spyware, and their Customer Service even boasts about their ability to see your activities!

VoIP isn't a replacement for landline reliability, but it is worth the low cost when you consider the price difference.
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crood

Jan 5, 2009, 12:25 PM
Carrying debt is pretty much standard in the corporate world. Most of a company's value is tied up in equipment, property, outside investments, monies owed to them, etc. They don't keep a lot of liquid cash on hand.
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Slammer

Jan 5, 2009, 12:37 PM
crood said:
Carrying debt is pretty much standard in the corporate world. Most of a company's value is tied up in equipment, property, outside investments, monies owed to them, etc. They don't keep a lot of liquid cash on hand.


This is so true however these billion dollar debts are extreme. You are allowed so much and then it just becomes excessive. Verizon now has almost a billion dollar per customer debt and AT&T has more than that. This is pretty extreme.
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CellStudent

Jan 5, 2009, 1:35 PM
Slammer said:


This is so true however these billion dollar debts are extreme. You are allowed so much and then it just becomes excessive. Verizon now has almost a billion dollar per customer debt and AT&T has more than that. This is pretty extreme.


🤭 Verizon only has 63 customers? 🤭

Even IF the $63 billion was in reference to wireless subscribers only (and it's not), then that would put the debt-load per customer around $900 to $1,000 per customer after the acquisition.

The average customer pays VZW $50/month which is $600/year and Verizon Wireless's historical Operating Cash Flow (translation: Profit) is about 40% overall. Even if the profit margin dropped to 25%, that's still $150 p...
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Protege

Jan 5, 2009, 2:12 PM
I completely agree... VZW has a terrific executive team at the helm!
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Slammer

Jan 5, 2009, 2:32 PM
WOW!!!! did I screw that one up or what? 😁
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