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Verizon Wireless announces a deal to buy out one of the nations largest rural cellular providers

Verizon Wireless announced on Monday that it will acquire Rural Cellular Corp., one of the nation’s largest rural carriers, for $2.67 billion in cash.   The agreement will extend Verizon Wireless' current customer base of 62.1 million by 700,000.  The acquisition will also expand Verizon's network coverage by 4.7 million POPs (population). 

Rural Cellular Corp uses CDMA and GSM technology separately across the markets.  Verizon Wireless has said that it will keep RCC's existing GSM networks for customers roaming needs and will begin CDMA service in RCC's current GSM markets.  Also Verizon Wireless will convert GSM customers to CDMA service.

“Verizon Wireless continually looks for opportunities to enhance our customers’ wireless experience,” said Lowell McAdam, president and CEO of Verizon Wireless. “The addition of Rural Cellular’s markets will enable us to expand our services into areas where previously we had little or no presence, and will give Rural Cellular’s Unicel customers access to the nation’s most reliable network and a broader range of voice and data services.”

The acquisition will allow Verizon Wireless to extend its service into certain parts of the East Coast, the South, Minnesota, North Dakota, South Dakota, Wisconsin, Kansas, Idaho, Washington and Oregon.

The deal is expected to close during the first half of 2008 at $45 per share.

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You now know what a customer is worth
By theapparition on 7/31/2007 8:33:07 AM , Rating: 2
2.67 billion for 700,000 customers. That's approx $3,800 per customer.

If each customer had a $100 bill per month (and I think that figure is WAY high for rural areas), it would take over 3 years to get a return. That, of course, is not including any upgrades, personnel, service, stores, etc. What I'm neglecting is their future customer base, so they must see this as a signifigant growth potential.

So each customer is worth to them much more than $3,800, probably closer to $10k. Remember that next time you renew your plans.




By mdogs444 on 7/31/2007 8:39:29 AM , Rating: 3
In a way your figures are correct, but not complete.

They are also aquiring the towers and hardware that come with the cellular corporation. On top of that, they get paid royalties for other service providers using those towers. It also gives them the opportunity to expand their client base through the new coverage area - which you touched on. So if it takes 3 years to get a return, thats not bad business, being that most contracts are for a minimum of 2 years anyway.


By cozappz on 7/31/2007 8:39:33 AM , Rating: 2
I bet not the customer base is the target here but the network coverage. Nonetheless, I might be wrong.


By Sahrin on 7/31/2007 8:40:58 AM , Rating: 3
Verizon is investing in Rural for four reasons, in order of importance greatest to least: The network, the social/political upside (get leverage with the FCC), the future customer base (4.7 million potential customers who have been watching Verizon ads on TV for 5 years now but have until now been unable to get service from them), and the current customer base.

The current customer base barely registers as a factor in this decision. Much more important are the potential customers, and of even greater performance is the fact that the FCC is ALL OVER the telecos for "equitable access" to all citizens. A move like this will DRAMATICALLY improve Verizon's chances of getting a national franchise for Video, Voice and Data.

Finally, every time a Verizon customer drives outside of verizon's service area and makes a call, Verizon has to pay an access fee to use their network during roaming. Rural's network is likely VERY large geographically (more than 70% of the 300 million people in the US live in urban areas) - which means TONS of savings in access fees, because a network they once leased from they now own.

Additionally, you aren't factoring in revenue from OTHER carrier's roaming access fees. Maybe the revenue figure is only 1/2 or 1/3 of what you offer, but I'd imagine that MOST of the calls originating on Rural's network are from other carrier's handsets. That's a pretty big chunk of change (though I haven't seen the financials yet).


RE: You now know what a customer is worth
By hwhacker on 7/31/2007 8:41:08 AM , Rating: 2
I just became a Verizon customer???

*As Vader* "NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO..."


RE: You now know what a customer is worth
By mdogs444 on 7/31/2007 8:46:05 AM , Rating: 2
I've had Verizon in Ohio & Chicago for 5 years now, and love it. Best service I've ever had, and wouldn't change. It's also nice that everything inside of the "IN" network is free - calling, text message, picture message. Perhaps for me thats more of the "cake" than the "icing on the cake" because my entire family and many friends have Verizon, so that keeps me from needed a landline.


RE: You now know what a customer is worth
By geeg on 7/31/2007 10:45:21 AM , Rating: 3
With tmobile, I pay $60 (plus taxes) for 3 (three) lines, 500 mins shared family plan and unlimited calls after 9pm and weekends. Equivalent verizon plan is $80 and with the worst customer service I experienced (on my DSL and local landline phone).
Verizon is a super inefficient company which is getting bigger and bigger towards being a monopoly.


By mdogs444 on 7/31/2007 11:05:41 AM , Rating: 2
Dont know much about Verizon local phone & DSL services...but

I pay $50/mo + taxes for 600 minutes, unlimited nights & weekends (9pm), unlimited incoming and outgoing text & picture messaging, and internet service (email, VZ navigator), and video messaging, and free IN Network Calling. Not sure where you are located, but almost everyone I know in the Columbus & Cleveland areas of Ohio have Verizon, which makes land lines for me a thing of the past.


By UNCjigga on 7/31/2007 2:10:48 PM , Rating: 2
You're equating VZW customer service with DSL and landline? FYI Verizon Wireless and Verizon Comm are different operating units with different customer service experiences. Their wireless customer service is consistently rated the best--while I've heard that FiOS customer service makes Comcast look like saints.


Convert GSM customers to CDMA
By Flunk on 7/31/2007 9:43:44 AM , Rating: 3
If my cell company told me they were switching to CDMA I would cancel my service and switch to another company. GSM is much easier to manage because you can switch handsets and keep the same phonebook. Not only that but you can use any unlocked handset, unlike CDMA which must be programmed by the provider.




RE: Convert GSM customers to CDMA
By MDE on 7/31/2007 11:19:46 AM , Rating: 2
When I get a new phone from Verizon they transfer my phone book for me right on the spot. If I get a new phone I just input the info from the back of the phone on their website and my new phone works. Not quite as simple as swapping SIMs, but it works and Verizon's coverage around Chicago is pretty darn good.


CDMA vs. GSM
By tcunning on 7/31/2007 9:51:35 AM , Rating: 2
You'd have to pry my Verizon phone out of my cold, dead hands because I've had all the rest and it's the only carrier that works everywhere I need it to (hmmm, it really is the network). From what I have read CDMA sound quality is theoretically superior to GSM, although both sound pretty poor to me. However, I recently traveled to England and rented a GSM phone through Verizon and Vodaphone (which owns 45% of Verizon Wireless) and was absolutely amazed by the call quality. I called back to the States and it was like we were in the same room. Do the Europeans know something we don't?




RE: CDMA vs. GSM
By DARGH on 7/31/2007 11:46:16 AM , Rating: 2
They are entirely on GSM.
They are implementing UMTS (3G), not patching up old technology (EDGE).

Why does the US have to be so backwards?


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