Verizon Wireless Thursday agreed to buy Alltel for $28.1 billion in stock and debt. The deal dethrones AT&T, which has 71.4 million subscribers, making Verizon the largest carrier in the United States. Alltel has 13.2 million subscribers in 34 states, compared to Verizon Wireless' 67.2 million. The agreement comes seven months after TPG Capital and a unit of Goldman Sachs Group took Alltel private in a $27 billion buyout.
The sweet deal for Verizon could turn sour for the Alltel customers, who have grown fond of the carrier's branding characters. In fact, the potential demise of the company's infamous branded personalities, Chad and the guys from rival wireless carriers, could force Alltel's devoted fans and followers into support groups to help them cope with the loss, according to some marketing experts.
"There are certain characters you grow to love; that's what marketers want you to do," says John Zhang, professor of marketing at the University of Pennsylvania's Wharton School. "They have to handle the situation with a lot of tender loving care. Verizon must be sensitive to the people who hold the Alltel brand dear to their heart."
Zhang references Kellogg's decision to bring back Hydrox, Oreo's rival, after receiving more than 1,300 phone inquiries, an online petition with more than 1,000 signatures and Internet chat sites lamenting the demise of the cookie, as reported by The Wall Street Journal.
Taking to heart the emotional reaction of people who have bonded with the Alltel brand will enable Verizon to retain more subscribers as the two companies work through the transition. Consumers who tend to prefer smaller brands often resent the larger company following an acquisition.
Verizon, however, has a strong branding message. The carrier found a way to identify the strongest reason to prefer one wireless provider over another, and dramatized its position with the "Can you hear me now" campaign. With the idea that the network works everywhere, it convinced consumers that the situation applies to them.
"Ask consumers what company has the largest carrier network and most would likely identify Verizon, whether they do or not," says Mickey Brazeal, marketing professor at Roosevelt University. "If a marketer does their job, people attach themselves to the brand."
Verizon expects to realize synergies with a net present value--after integration costs--of more than $9 billion driven by reduced capital and operating expense savings, according to the joint press release.