Verizon Wireless Strikes Deal to Buy Alltel

Citigroup analyst Michael Rollins said that the acquisition of Alltel is constructive for the telecom sector, and that Verizon will be able to generate meaningful operating synergies by integrating the operations and the network. "We believe the savings can also be higher over time, depending on the level and speed of integration," Rollins wrote in a note.

Chris Larsen, analyst with Credit Suisse, says that a transaction makes sense now for Verizon because it not only adds to the carrier's scale and scope, it will fill in some network coverage holes and beat struggling rival Sprint Nextel (S Quote) to the punch.

"[Verizon had] more leverage now with Sprint focused on turning around its struggling operations," Larsen said in a note. "If Sprint's financial situation [improved] in future years, the company could bid for Alltel itself -- if not to buy, to at least ensure that Verizon pays a higher price."

Larsen adds that the banks that financed the original deal with TPG Capital and Goldman Sachs -- Citigroup (C Quote), Barclays (BCS Quote) and the Royal Bank of Scotland (RBS Quote) -- were willing to take a haircut in selling the debt below face value, "rather than have to price the bonds/debt at today's value."

After losing ground during Wednesday's session, shares of Verizon were up 5.4% to $38.96 Thursday. Among its rivals, AT&T was higher by 2.5% to $39.46. Sprint lost 0.5% to $9.20.

Verizon's board of directors separately announced it has declared a quarterly dividend of 43 cents a share, unchanged from the previous quarter. The dividend is payable on Aug. 1 to shareholders of record at the close of business on July 10.