Jan. 6 (Bloomberg) -- Shares of Western Wireless Corp. gained as much as 19 percent after the New York Times said the company is in talks to be bought by Alltel Corp., the sixth- largest U.S. wireless company, for about $4 billion.

The combined company would have revenue of about $10 billion and 9.8 million subscribers, or almost 6 percent of the national market. Bellevue, Washington-based Western Wireless, which hasn't had an annual profit since 2000, sells mobile services in 19 western U.S. states under the Cellular One brand.

A transaction may help Alltel fend off bigger competitors such as Verizon Wireless that are making advances into rural regions that Alltel and Western Wireless serve. Verizon Wireless agreed in November to buy airwave licenses in rural Pennsylvania from Ntelos Inc. and in December to buy Mountain Cellular to expand its network in northern California.

``The obvious allure is scale,'' Greg Gorbatenko, an analyst at Chicago-based Marquis Investment Research, wrote in a note to clients today. ``If we were Western Wireless, we would jump on the offer like a trampoline.''

The U.S. mobile-phone industry has consolidated in the past year as Cingular Wireless LLC, owned by BellSouth Corp. and SBC Communications Inc., bought AT&T Wireless Services Inc. in October for $41.3 billion. Sprint Corp. agreed last month to buy Nextel Communications Inc. for $35 billion.

Western Wireless shares added $5.56 to $36.56 at 9:48 a.m. New York time in Nasdaq Stock Market composite trading and rose as high as $37. The stock gained 60 percent last year. Little Rock, Arkansas-based Alltel dropped $1.90, or 3.3 percent, to $56.10 in New York Stock Exchange composite trading and rose 26 percent in 2004.

Too Expensive?

An agreement between the two companies may be reached within the next week, the Times said, citing executives close to the talks. The transaction includes the assumption of about $2 billion of debt from Western Wireless, the newspaper said.

Alltel spokesmen Andy Moreau and David Avery didn't return calls to their cell phones. Western Wireless Co-Vice Chairman Donald Guthrie and spokesman Steve Winslow didn't reply to messages left on their cell phones seeking comment.

Alltel may be overpaying, Marquis's Gorbatenko said. The premium Sprint is paying for Nextel is about 7 percent, less than one-fourth the premium on the reported offer for Western Wireless, he said. Gorbatenko rates Alltel shares ``hold'' and Western Wireless shares ``sell.''

Western Wireless now has an estimated price-to-earnings ratio of 20, compared with about 18 at Alltel and 26 at Sprint.

Rural Markets

Western Wireless Chief Executive John Stanton and his wife, the company's co-vice chairman, Theresa Gillespie, created a predecessor to Western Wireless in order to buy rural mobile licenses. They helped spin VoiceStream Wireless Corp. out of Western Wireless and agreed to sell it to Germany's Deutsche Telekom AG for about $51 billion in July 2000.

Alltel Chief Executive Scott Ford, a former Merrill Lynch & Co. banker, is seeking further control over U.S. rural markets, helping his company set charges to urban carriers when their subscribers make off-network calls.

Western Wireless's territory covers about 25 percent of the continental U.S. in 88 rural areas and 19 metropolitan ones.

Alltel operates wireless services in almost two dozen states, primarily in the Southeast and Midwest. The company also offers traditional local-phone service in 26 U.S. states.

Past Purchases

Alltel began as Allied Telephone in Little Rock, Arkansas, in 1943 and started its first wireless system in 1985, according to the company's Web site. Alltel grew through acquisitions in the 1990s, including its $6 billion purchase of wireless company 360 Communications Co. in 1998 and its $1.8 billion buyout of Aliant Communications Inc. in 1999.

The company in the past year has bought wireless assets from U.S. Cellular Corp. and TDS Telecom to add more cell towers and access to customers in states such as Florida and Ohio, and is buying some airwave rights and clients from Cingular Wireless LLC in states including Texas.

Alltel said in October that third-quarter net income rose 33 percent to $323 million on revenue from cell-phone and high- speed Internet services. Revenue rose 2.6 percent to $2.1 billion from a year earlier.

To contact the reporter on this story: Angus Whitley in London at at awhitley1@bloomberg.net; J. Kyle Foster in Princeton at kfoster2@bloomberg.net.

Last Updated: January 6, 2005 10:06 EST