Verizon buys Alltel to pass AT&T

Reuters reports today that adding Alltel’s 13 million subscribers puts Verizon at 80 million, surpassing AT&T’s 71 million. The deal is valued at $28 billion.

Smart move for Verizon.

With US mobile subscribers approaching saturation, there are few options for growth. Verizon moves into rural markets they don’t already operate in. If their estimates are right, the deal is cash flow positive from the first year and saves $9 billion in operating and capital savings over the next three years.

What about cell phone users?

I love having choices in carriers, but the consolidation seems inevitable, and like it benefits me.

The expenses of building scalable networks and systems, of supporting them and of matching pricing is just too large for lots of smaller players to stay competitive.

The failure of the MVNOs shows us how subscribers see wireless as commodity wireless market, and how competitition in this market won’t tolerate any additional layer of overhead.

Ultimately, it should be a good thing for consumers when carriers grow. Economies of scale allow continued downward pressure on wireless prices at the same time as more R&D and infrastructure investment.

Big companies don’t always act in the consumer interest that way, especially when they become a (near) monopoly. However, both Verizon and AT&T are far from being a monopoly. Competing with each other is likely to continue to drive value for the consumer.

Who knows, maybe Sprint will even become competitive again…

before AT&T acquires them to take back #1.

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