Verizon Wireless to Purchase Price Communications Wireless

The deal is expected to give Verizon Wireless more than 475,000 new subscribers.
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Updated from 11:46 a.m. EST

Verizon Wireless

, the largest U.S. mobile phone and paging company, will buy

Price Communications Wireless

, a competitor in the South, in a stock deal valued at $1.5 billion, the companies said Wednesday.

The deal is expected to give Verizon Wireless more than 475,000 new subscribers, but it faces significant hurdles. If the company does not complete an initial public offering of stock, recently deferred because of the stock market's volatility, its intended currency will vanish and either party could abandon the deal.

In the purchase, the amount of stock would be determined by the initial public offering price, with the total fixed at $1.5 billion. Verizon Wireless, which is jointly owned by

Verizon Communications

(VZ) - Get Report

and

Vodafone Group

(VOD) - Get Report

of Germany, would also assume $550 million in debt.

Verizon Wireless's IPO prospectus, filed in August with the

Securities and Exchange Commission

, says the company plans to raise as much as $5 billion in equity markets, but it does not specify the number of shares to be sold or the offering price.

In the filing, the company said that building its cellular network, excluding acquisitions, would cost approximately $2.3 billion in the last six months of 2000 and $4.3 billion in 2001.

For

Price Communications

(PR)

, finding a buyer for its wireless unit has always been the plan. Over the last three years, the company has cobbled together its network through multiple tiny mergers and acquisitions. Its strategy has been to buy, develop and eventually sell media and communications operations, with Price Communications Wireless its latest project.

The wireless unit offers cellular service in Alabama, Florida, Georgia, and South Carolina, serving around 475,000 subscribers in its 16 licensed service areas. The service areas, mostly in small cities and rural areas, cover a total population of 3.4 million. Verizon Wireless would also acquire 41 retail stores, a regional call center in Atlanta and network infrastructure.

Verizon Wireless serves around 26 million mobile phone customers and about 3.5 million paging clients. The company began operations earlier this year when

Bell Atlantic

and Vodafone combined their assets. When Bell Atlantic bought

GTE

to form the Verizon Communications parent company, the wireless arm gained GTE's wireless operations.

To complete this deal, Verizon must gain the approval of Price's shareholders and complete its IPO by Sept. 30, 2001.

If the purchase is completed, a technological hurdle awaits. The Price Communications network uses Time Division Multiple Access digital wireless technology, which Verizon Wireless would have to convert to Code Division Multiple Access. Unlike the system used by Price, CDMA does not assign a specific frequency to each user. Verizon uses CDMA in 96 of its top 100 markets.

Verizon finished Wednesday regular trading down $1.56, or 3%, at $54.19. Price ended down 19 cents, or 1%, at $20.88.