Alltel Spins off Wireline Business and Merges It with VALOR, Creates New Rural-Focused Wireline Company.LITTLE ROCK, Ark. -- Alltel (NYSE NYSE See: New York Stock Exchange : AT): --Transaction is Tax Free for Alltel, VALOR valor a rodenticide no longer marketed because of toxicity in horses causing dehydration, abdominal pain, hindlimb weakness, inappetence, fishy smell in urine. Called also N-3-pyridyl methyl N1-p-nitrophenyl urea. and Respective Shareholders --Alltel Executives Named to Lead the Wireline Business --Wireline Business Will Have Headquarters in Central Arkansas --Alltel Becomes a Pure Wireless Company --Alltel Plans $3 Billion Share-Repurchase Program After Spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. --Collective Dividend to Increase 1 Cent Alltel today announced that it will spin off its wireline business and merge it with VALOR Communications Group Inc. in a transaction valued at about $9.1 billion, based on VALOR's closing stock price as of Dec. 8. The combination creates a major wireline competitor focused on the rural U.S. The transaction will be a tax-free separation of Alltel's wireline business and will reposition the remaining Alltel as a pure-play wireless service provider with roughly 11 million customers in 34 states. The spin-off and merger with VALOR will create a new wireline company located in Central Arkansas, with Alltel shareholders owning 85 percent of the combined entity. VALOR Communications, based in Irving, Texas Irving (pronounced 'er-ving') is a city located in the U.S. state of Texas within Dallas County. According to the 2000 U.S. Census, the city population was 191,615; the 2006 estimate was 201,927 according to the North Central Texas Council of Governments, and 196,084 according to , will issue approximately 400 million shares of stock to the shareholders of Alltel in exchange for the Alltel wireline business. Current Alltel shareholders will continue to own 1 share of the remaining wireless entity and will receive 1.05 shares of VALOR stock for each share of Alltel they currently own. In addition, VALOR Communications will assume approximately $4.2 billion in additional debt. The $9.1 billion transaction will be tax-free to Alltel, VALOR and each company's shareholders. With $5.4 billion in total net debt, the new merged company will be levered at approximately 3.2 times net debt to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before depreciation and amortization, substantially lower than VALOR's current leverage ratio of approximately 4 times debt to operating income before depreciation and amortization. Alltel's and VALOR's wireline businesses have complementary geographic footprints with favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. rural characteristics, and their integration will benefit from Alltel's existing billing system outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. relationship with VALOR. "This transaction creates new growth opportunities for both the wireless and wireline businesses as separate entities," said Scott Ford Founding bassist for LA supergroup Camp Freddy. Current bassist for The Twilight Singers. Scott Ford hosts a 3 hour show on Internet Radio Station Little Radio on Thursdays. , Alltel president and chief executive officer. "Each business will have sufficient scale to compete on its own and will be appropriately capitalized to take advantage of strategic, operational and financial opportunities." Management teams drawn from Alltel will lead the wireless and wireline businesses. "Both businesses will gain skilled management teams with a great breadth of experience in the communications industry communications industry, broadly defined, the business of conveying information. Although communication by means of symbols and gestures dates to the beginning of human history, the term generally refers to mass communications. , with the wireline business adding senior leadership from VALOR's current team," Ford said. Francis X. "Skip" Frantz, currently executive vice president and secretary of Alltel who has been with Alltel for more than 15 years, will become chairman of the board of the combined wireline company. Jeffery Gardner, currently executive vice president and chief financial officer of Alltel, will become president and chief executive officer of the new company. He has been with Alltel since 1998 and has been in the industry since 1986. "VALOR is a very good fit with the Alltel wireline business and the combined companies will add value for our shareholders and provide quality service for our customers," Gardner said. "I look forward to working with my colleagues at VALOR to run our new company." Following are the highlights for the combined wireline business: --Revenues and operating income before depreciation and amortization (pre-synergy) for the last 12 months ending Sept. 30, 2005, were $3.4 billion and $1.7 billion, respectively. The company will have about 3.4 million customers in 16 states. --The company expects to gain $40 million in net annual synergies from the combination. --The company expects to pay an annual dividend of $1 per share of common stock, which equals $1.05 per equivalent Alltel share. --The combined company will have net debt of about $5.4 billion. --Alltel's wireline business will keep the majority of communications support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services , including publishing, IT outsourcing services, retail long distance and the wireline sales portion of communications products. The wireline business will have nine total board members, including Frantz and Gardner, each serving a staggered three-year term. Dennis Foster, currently a member of Alltel's board, will join the board of the new wireline company as lead director. Alltel will name five other directors, and one director will be named by VALOR Communications. The company initially will locate its headquarters in facilities currently owned by Alltel and will seek a permanent location. The wireline leadership team also will include: --John Koch, currently president of Alltel's wireline operations, will become chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . Koch has been with Alltel since 1998 and has been in the communications business since 1991. --Brent Whittington, currently senior vice president of operations support for Alltel, will become executive vice president and chief financial officer. Whittington joined Alltel in 2002 as vice president for finance and accounting. --Rob Clancy, currently vice president of investor relations Investor relations The process by which the corporation communicates with its investors. for Alltel, will become senior vice president, treasurer and will lead investor relations efforts. Clancy joined Alltel in 1998 and has been in the communications industry since 1987. The transaction is expected to close by mid-2006 and requires approval from VALOR shareholders, federal and state regulators and a letter ruling from the Internal Revenue Service approving the tax-free status. The separation of the wireless and wireline businesses is part of Alltel's strategic push to grow its domestic wireless business. During the year, Alltel has purchased Western Wireless, certain assets of Cingular and Public Service Cellular. The company also has agreed to acquire Midwest Wireless Midwest Wireless was a wireless telephone company serving southern Minnesota, northern Iowa and western Wisconsin in the United States. The company served roughly 400,000 customers and used CDMA phone technology. The company's slogan was "We answer to you. . Here are the highlights for the wireless business: --Alltel will remain the nation's fifth-largest wireless carrier with about 11 million customers in 34 states. Revenue and operating income before depreciation and amortization for the last 12 months ending Sept. 30, 2005, were $7.5 billion and $2.6 billion, respectively, pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma to include Western Wireless and Midwest Wireless. --Alltel will own and operate the nation's largest wireless network covering a population of 75 million with its 850 MHz (MegaHertZ) One million cycles per second. It is used to measure the transmission speed of electronic devices, including channels, buses and the computer's internal clock. A one-megahertz clock (1 MHz) means some number of bits (16, 32, 64, etc. business. Alltel also will remain the largest independent roaming The ability to use a communications device such as a cellphone or PDA and be able to move from one cell or access point to another without losing the connection. partner to the top four wireless carriers. --Alltel expects to receive cash proceeds and debt reduction totaling about $4.2 billion resulting from the spin-off. --Alltel plans an open market $3 billion share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program for the two years following the spin-off. The company also plans to implement a $1 billion debt-reduction program. --The wireless business expects to pay an annual dividend of 50 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. of common stock. --After the spin-off, Alltel will have net debt of about $1.2 billion and be levered at about 0.5 times net debt to operating income before depreciation and amortization, prior to the planned repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. program. In the wireless business, Ford will continue in his current role as will Kevin Beebe, group president of operations; Jeff Fox, group president of shared services shared services, n.pl the administrative, clinical, or other service functions that are common to two or more hospitals or their health care facilities and used jointly or cooperatively by them. ; and John Ebner, treasurer. Sharilyn Gasaway, currently controller for Alltel, will become executive vice president and chief financial officer. Gasaway has been with Alltel since 1999 and has served in various management roles in accounting and finance. Tony Thomas, currently vice president of wireless wholesale operations, will become vice president of investor relations. Additionally, Alltel today announced it has signed an agreement to sell the Haitian and Bolivian wireless operations it acquired from Western Wireless earlier this year for an undisclosed cash price. The transaction, subject to regulatory and other approvals, is expected to close by mid-2006. J.P. Morgan Securities Inc., Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. & Co. and Stephens Inc. acted as financial advisers to Alltel. Skadden, Arps, Slate, Meagher & Flom LLP LLP - Lower Layer Protocol served as counsel to Alltel. Investor Call and Webcast A conference call and Webcast will be held today at 8 a.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. . To take part in the conference call, dial 866-831-6162 and enter the pass code 74875056. The Webcast may be accessed at www.alltel.com/investors. Media Call and Webcast A conference call for media will be held today at 11 a.m. CST. To take part in the conference call, dial 866-383-8119 and enter the pass code 48612524. The Webcast may be accessed at www.alltel.com/news. About Alltel Alltel is a customer-focused communications company Communications Company is a communications unit of the United States Marine Corps. They are part of Combat Logistics Regiment 37 , 3rd Marine Logistics Group (3MLG) and III Marine Expeditionary Force (III MEF). The unit is based out of the Marine Corps Base Camp Smedley D. with more than 15 million customers in 36 states and nearly $10 billion in annual revenues. Alltel claims the protection of the safe-harbor for forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. contained in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements are subject to uncertainties that could cause actual future events and results to differ materially from those expressed in the forward-looking statements. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events and results. Actual future events and results may differ materially from those expressed in these forward-looking statements as a result of a number of important factors. Representative examples of these factors include (without limitation) adverse changes in economic conditions in the markets served by Alltel; the extent, timing, and overall effects of competition in the communications business; material changes in the communications industry generally that could adversely affect vendor relationships with equipment and network suppliers and customer relationships with wholesale customers; changes in communications technology Noun 1. communications technology - the activity of designing and constructing and maintaining communication systems engineering, technology - the practical application of science to commerce or industry ; the risks associated with pending acquisitions and dispositions, including the pending acquisition of the Idaho markets and Midwest Wireless and the pending dispositions of Western Wireless' Kansas and Nebraska markets, the Austrian, Bolivian and Haitian operations, and the wireline business; the risks associated with the integration of acquired businesses, including the integration of Western Wireless; the uncertainties related to any discussions or negotiations regarding the sale of any of the international assets; adverse changes in the terms and conditions of the wireless roaming agreements of Alltel; the potential for adverse changes in the ratings given to Alltel's debt securities by nationally accredited accredited recognition by an appropriate authority that the performance of a particular institution has satisfied a prestated set of criteria. accredited herds cattle herds which have achieved a low level of reactors to, e.g. ratings organizations; the availability and cost of financing in the corporate credit and debt markets necessary to consummate To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. the disposition of the wireline business; the uncertainties related to Alltel's strategic investments; the effects of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; and the effects of federal and state legislation, rules, and regulations governing the communications industry. In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , economic conditions, and governmental and public policy changes. Non-GAAP Financial Measures This news release includes certain non-GAAP financial measures. A reconciliation of each such measure to the most directly comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure is below.
Wireless Net Debt to Operating Income for
the twelve months ended September 30: Pro Forma
(Dollars in millions) Combined
---------------------------------------------------------
Long-term debt, including current maturities $1,223.1
Cash and short-term investments (69.4)
-----------
Net debt $1,153.7
Operating income under GAAP $1,489.7
-----------
Net debt to operating income 0.8
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Wireless Net Debt to OIBDA from Current
Businesses for the twelve months ended
September 30, 2005 Pro Forma
(Dollars in millions) Combined
---------------------------------------------------------
Net debt (see above) $1,153.7
-----------
Wireless Operating income under GAAP $1,489.7
Restructuring and other charges 6.2
Incremental costs related to
Hurricane Katrina 10.2
Change in accounting for leases
with scheduled rent increases 19.8
Depreciation and amortization expense 1,079.4
-----------
OIBDA from current businesses $2,605.3
-----------
Net debt to OIBDA from current businesses 0.4
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Wireline Net Debt to Operating Income
for the twelve months ended
September 30, 2005: Pro Forma
(Dollars in millions) Combined
---------------------------------------------------------
Long-term debt, including current maturities $5,389.1
Cash and short-term investments (55.1)
----------
Net debt $5,334.0
Wireline Net Debt to OIBDA from Current
Businesses for the twelve months ended
September 30, 2005: Pro Forma
(Dollars in millions) Combined
---------------------------------------------------------
Net debt (see above) $5,334.0
Operating income under GAAP $1,088.8
Restructuring and other charges 11.8
Depreciation and amortization expense 572.5
----------
OIBDA from current businesses $1,673.1
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Net debt to OIBDA from current businesses 3.2
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