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Alltel to Spin Off Wireline Business

Alltel Corporation said it would spin off to shareholders its local-telephone unit and merge the business with Valor Communications Group Inc. in a deal worth $4.9 billion.

The transaction would create a local-telephone company with a rural focus and 3.4 million access lines in 16 states. The companies said the deal was attractive because of their complementary market regions, and forecast $40 million of cost savings annually.

Alltel, the nation's leading rural telephone company, said in September that it had spoken with multiple possible buyers as it began evaluating a spinoff or partial sale of its local business.

The deal with Valor, expected to close by mid-2006, requires shareholder approval, as well as approval from federal and state regulators, the companies said. Alltel, which derives most of its revenue from wireless service, said it plans a $3 billion share buyback program after it completes the spinoff in mid-2006.

In the deal, Valor will issue about 400 million shares of stock to Alltel shareholders. The stock is worth about $4.9 billion, based on Valor's closing stock price of $12.24 on Thursday on the New York Stock Exchange. Valor will also assume $4.2 billion of Alltel debt.

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