Verizon Wireless and Alltel are merging in a $28.1 billion deal that analysts said could have a ripple effect through the U.S. wireless industry — whether the integration goes smoothly.

Verizon Wireless’ acquisition crowns it king of the carriers in the U.S., dethroning AT&T and possibly signaling an eventual acquisition of Sprint Nextel, analysts said. Verizon will add 13 million clients in 34 states and save about $9 billion from the purchase. Synergies are expected to generate incremental cost savings of $1 billion in the second year after closing.

“This merger adds a significant number of customers to Verizon’s strong and rising total. Alltel has common network technology, though Verizon has somewhat higher info rates. Alltel fills in-coverage gaps in rural areas and it’s got some good cost synergies,” said Michael Gartenberg, an analyst at JupiterResearch. “This is a merger, at least on the surface, that seems to compose a lot of sense. You can certainly understand the logistics and we now have a new king of the

hill in terms of carriers.”

Can Sprint Compete?

The multimillion-dollar question, though, is what does the Verizon-Alltel hookup mean for Sprint? T-Mobile benefits from economies of scale, thanks to its corporate parent in Europe. But does Sprint have abundant scale to be cost-competitive with the other carriers?

“T-Mobile additionally benefits by the fact that it is not into the local, lengthy distance, TV infrastructure service offerings that AT&T and Verizon are in,” Gartenberg said. “At that point, WiMAX is still just a Sprint thing. It will be very interesting to see how that plays out.”

WiMAX (Worldwide Interoperability for Microwave Access) is designed to supply wireless connections by towering distances and is faster than today’s 3G networks. With embedded WiMAX chipsets in laptops, phones, PDAs, mobile Web devices, and consumer electronics equipment, WiMAX is expected to allow…

Original post by Chase Higgins

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