Verizon Might Bid for Alltel: Report

Updated from 4:11 p.m. EDT

Verizon (VZ Quote) is close to negotiating a deal to acquire privately held Alltel for roughly $27 billion, according to a report.

CNBC said Wednesday that Verizon is in deep talks to purchase the fifth-largest U.S. wireless carrier and its 13 million subscribers from TPG Capital and Goldman Sachs (GS Quote), which took Alltel private a year ago in a $27.5 billion deal.

Verizon had been widely expected to bid for Alltel before the leveraged buyout occurred last May. CNBC added that Verizon is willing to pay no more than the two firms did.

"While surprising in its timing, as Verizon could likely have acquired Alltel for less 18 months ago, we believe such a transaction does have some compelling operational drivers for Verizon," says Stifel Nicolaus analyst Christopher King. "In the current capital markets environment, we believe TPG and Goldman Sachs would likely jump at such a valuation that would allow them to essentially break even on their investment, if the press reports are indeed accurate."

King adds that Verizon could easily afford such a transaction, but it is unclear what, if any, Vodafone would be contributing upfront to the deal.

Verizon would presumably join Alltel's subscriber base with its 67 million Verizon Wireless subscribers to top AT&T (T Quote) and become the largest U.S. wireless carrier. Verizon Wireless, the joint venture between Verizon and Vodafone (VOD Quote), is currently second in the U.S. behind AT&T, which has more than 71 million subscribers.

Should a deal go through, it would be the biggest telecom merger since SBC Communications and AT&T joined in March 2006. Representatives for Verizon and Alltel didn't return requests for a comment.

Shares of Verizon lost 1% to $36.98. Among its rivals, AT&T was lower by 0.7% to $38.50. Sprint Nextel (S Quote) fell 1.4% to $9.25.