In an industry increasingly dominated by mega-sized companies, no. 6 wireless carrier Alltel Corporation announced yesterday its own plans to bulk up by acquiring Western Wireless Corporation through a $6 billion cash and stock deal.

The deal, which is expected to close in May or June, will give Alltel, a Little Rock, Ark., provider of wireline and wireless communications services, 1.4 million additional American customers. Alltel will remain the no. 6 wireless player, but will have 10 million customers. The company will also gain 1.6 million international subscribers.

Alltel’s acquisition makes it the latest of a string of wireless companies to announce such a deal. Companies have come under increased pressure to consolidate after Cingular – a joint venture of BellSouth Corporation and SBC Communications – acquired AT&T Wireless to become the largest American wireless carrier, with 47 million customers. Last month, Sprint Corporation announced its plans to acquire Nextel Communications.

Despite all the benefits of consolidation, analysts said Alltel paid quite a premium for Western Wireless, a Bellevue, Wash., wireless carrier focused on rural areas. Under the terms of the $6 billion transaction, Alltel has agreed to issue approximately 60 million shares and pay $1 billion in cash. That means each share of Western Wireless stock will be exchanged for .535 shares of Alltel stock in addition to $9.25 in cash. Shareholders will have the option to take all-stock or all-cash. Alltel will also assume $1.5 billion in debt.

The 60 million shares of Alltel stock alone represent a premium over Western Wireless’s market valuation since it is equivalent to roughly 112 million shares of Western Wireless. The company only has a total float of 84 million shares and 100 million shares outstanding.

“Clearly they overpaid somewhat,” said an analyst at Legg Mason Wood Walker, Christopher King. Mr. King doesn’t own shares of Alltel or Western Wireless, but his firm owns 1% or more of Alltel; the firm doesn’t have a banking relationship with either company.

But analysts also said that Alltel’s acquisition price is more or less in line with the kind of premiums offered in recent wireless deals.

Looking at price paid per subscriber, Alltel paid roughly $2,800 per American subscriber, said Mr. King, which is cheaper than either the Cingular-AT&T and Sprint-Nextel deals.

Looking at the acquisition price as a multiple of earnings before interest, taxation, depreciation, and amortization, Alltel is paying 8.4 times estimated 2005 Ebitda – just slightly more than the Sprint-Nextel deal, which was 8 times.

The deal is more pricey than what Alltel has paid in the past, but Alltel realizes that “to play in the wireless game it will cost more,” said Power.

The industry is likely to see more consolidation, particularly among smaller, regional players. Larger players will likely have their hands full – at least in the near future – and thus hold off on more acquisitions for the time being.

Chicago-based U.S. Cellular Corporation, which has 4.8 million customers in 26 states, is seen as a possible candidate for consolidation, either as a buyer or acquisition. Among more rural wireless players, Dobson Communications Corporation and Rural Cellular Corporation are seen as “logical” acquisitions for national companies or larger regional players.