Verizon to Buy Alltel, Mobile Users Want and Get Upgrades

Verizon Wireless announced it will acquire Alltel Corp. in a transaction valued at $28.1 billion, creating the largest wireless network carrier in the United States. Elsewhere, Motorola, Inc. announced the details of its upcoming Good Mobility Suite version 6.0, while IBM Corp. presented the results a new survey regarding mobile user practices and desires.

Focal Points:

• Verizon's acquisition price of $28.1 billion for Alltel includes approximately $5.9 billion in net equity and $22.2 billion in net debt. Verizon has declared that the purchase will provide it with synergistic cost savings of more than $9 billion by 2011 from reduced capital and operational expense savings. Integration costs are projected to be between $1.1 billion and $1.2 billion in the first year and $500 million and $600 million in the second year. Like Verizon, Alltel uses a Code Division Multiple Access (CDMA) network and its market includes 57 primarily rural areas that are unserved by Verizon. The merged entity would have a combined network capable of reaching 290 million Americans. Verizon has stated that it expects the merger to be "immediately accretive, excluding transaction and integration costs."
• Good Mobility Suite version 6.0 will include enhanced management, improved security, and a simpler interface for extending enterprise applications to handheld devices. The Good Administration Center is a simplified and integrated console that allows IT administrators to set rights for Good applications, data access, devices, and security policies. Additionally, it includes Web services access application programming interfaces (APIs) that can integrate with other management applications. Additionally, the new Good Mobile Connection provides a managed-service virtual private network (VPN) that provides encrypted access to behind-the-firewall applications. Motorola claims that virtually any application can be deployed using IP over the Good Mobile connection, which connects to the Good Network Operations Center (NOC) to provide a controlled delivery infrastructure and protect against security threats.  Lastly, Good Mobile Messaging will include new features such as improved personalization, including customizable home screen and voice-activated dialing.
• IBM's Institute for Business Value published a new study entitled "Grow mobile, grow…" to provide mobile device manufacturers with guidance about mobile user desires and habits, though enterprises can also benefit from the publication. Key findings include that global handheld device shipments are expected to increase annually by approximately 5.8 percent through 2012, which is down significantly from the 20 percent per annum growth witnessed between 2001 and 2007. However, findings have demonstrated that users are more likely to use mobile data applications on their devices if they are easy to use, well designed, and targeted at easing specific pain points and providing data of interest. Banking, e-mail, general browsing, instant messaging, news, and stock trading were the main areas of interest for customers. Multimedia services including television and music purchasing were also of interest to the parties surveyed, both scoring approximately 50 percent. By 2011, the worldwide mobile Internet service market is expected to reach $80 billion by 2011, up 196 percent from 2006 figures.

Experton Group believes Verizon's Alltel acquisition is likely to be a good one for the company and end users. From a company perspective, it will provide Verizon with two "number one" positions, both in most reliable network and largest customer reach. Alltel end users now have a defined upgrade path to a fourth generation network and the ability to select from a wider range of handheld devices once solutions based on Verizon's Open Development Initiative arrive. Verizon customers will see little to no change in their customer levels, unless the company needs to radically reduce spending after the acquisition because its costs and abilities were far below projections. Unlike in the Sprint/Nextel arrangement, Verizon has a far better chance of succeeding due to the complimentary nature of the networking topologies. Sprint focused on the similar customer bases the companies had, and thus suffered from exorbitant network integration costs and an inability to leverage synergies. Experton Group expects that this deal will likely be approved and that Verizon will continue to grow in customer popularity. Alltel pricing, as well as other competitive pricing in the mobile space, will very likely force Verizon to come more in line with its competitors over the next three years as wireless becomes a commodity.

Good's upcoming Mobility Suite version 6.0 offers an attractive and credible alternative to Research in Motion, Ltd.'s BlackBerry Enterprise Server, and has the added advantage of being able to work with other device platforms as well. Though Experton Group expects the technology to be attractive, issues related to the future of Motorola and its direction as an enterprise player continue to loom large until the company devises a viable business plan and can begin its road back to financial stability. IT executives can trust that the Good solution set will offer positive functionality and be available for the foreseeable future, but it is unclear exactly how and where future product and company improvements will be delivered long term.

Lastly, Experton Group expects mobile devices to continue to gain in popularity – particularly in developing nations where handheld devices may be the primary means of Internet access. Enterprises should continue to invest in extending enterprise applications to employees using controlled, secure, and auditable networks.

Moreover, customer-oriented solutions will be viable areas for revenue growth and service improvement starting in the next three to five years, depending on geography.