Under the deal, Verizon Wireless would acquire the equity of Alltel for US$5.9 billion and take on an estimated US$22.2 billion in debt, mostly incurred when Alltel was taken private in November in a leveraged buyout by TPG Capital and Goldman Sachs Group Inc.'s GS Capital Partners.

The shares of Verizon Communications Inc., which owns 55 percent of Verizon Wireless, rose 6 percent after it said the deal would boost earnings by more than 10 cents a share in the first year after the deal, excluding items such as integration costs. The shares of Britain's Vodafone Group Plc, which owns 45 percent of Verizon Wireless, rose 3.8 percent.

"This is a way of getting growth from a market that's becoming fully saturated and beginning to slow down," said analyst Joseph Bonner at Argus Research.

"They get the bragging rights," he said, referring to Verizon overtaking AT&T as the largest U.S. player.

Verizon Wireless said the deal would create savings of US$1 billion in the second year after closing, which is targeted for the end of 2008, pending regulatory approval. It forecast total savings of more than US$9 billion by 2011, driven by reduced capital and operating expenses.

Verizon said the deal would be cash-flow positive in the first year, although it estimated integration costs at US$1.1 billion to US$1.2 billion in the first year and US$500 million to US$600 million in the second.

Verizon said it would take on about US$5 billion in bridge loans in the next few days as part of the agreement at a US$200 million discount to face value. It plans to assume about US$2.3 billion of Alltel debt that predated the LBO and plans to set up new finance agreements to immediately pay back the remaining roughly US$15 billion of debt when its Alltel purchase closes.

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