Nov. 7 (Bloomberg) -- AT&T Inc., fighting Verizon Wireless for control of the U.S. wireless market, agreed to buy Centennial Communications Corp. for $944 million to add mobile- phone subscribers.

Centennial stockholders will receive $8.50 a share in cash, more than double the closing price of $3.84 today. The transaction will add 1.1 million wireless customers and enhance AT&T's coverage in the Midwest, Southeast and Puerto Rico, Dallas-based AT&T said today in a statement.

AT&T and Verizon are expanding through acquisitions as subscriber growth slows -- more than four-fifths of the U.S. population already has a mobile phone. When Verizon completes its purchase of Alltel Corp., it will leapfrog AT&T as the biggest U.S. carrier.

Verizon, co-owned by Verizon Communications Inc. and Vodafone Group Plc, will have almost 85 million subscribers when combined with Alltel. AT&T had 74.9 million wireless customers at the end of last quarter.

AT&T gained $1.01, or 3.9 percent, to $27 at 4 p.m. in New York Stock Exchange composite trading. Centennial, down 59 percent this year, based in Wall, New Jersey, rose 37 cents, or 11 percent, to $3.84.

Fill Holes

The purchase will fill holes in AT&T's coverage in areas where its subscribers currently roam on Centennial's network, AT&T said. The transaction, due to close in the second quarter of 2009, will have ``minimal'' negative effect on earnings and cash flow, AT&T said.

Barclays Capital and Evercore Partners Inc. were financial advisers to Centennial. AT&T's legal counsel was Sullivan & Cromwell, and Centennial got legal advice from Skadden, Arps, Slate, Meagher & Flom.

Verizon, based in Basking Ridge, New Jersey, is paying $28.1 billion for Alltel. The transaction won conditional approval this week from the Federal Communications Commission.

AT&T bought rural wireless carrier Dobson Communications Corp. last year for $2.8 billion, and Verizon countered in August with the $757 million purchase of Rural Cellular Corp.

In addition to its wireless network, Centennial offers high-speed Internet service and phone lines to business customers in Puerto Rico. Those operations will help AT&T serve corporate customers there, the company said.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net

Last Updated: November 7, 2008 18:56 EST