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With CenturyTel Inc. accusing Alltel Corp. executives of deceiving its shareholders, the chances that the two rural telephone providers will ever sit down to negotiate a friendly merger are looking increasingly dim, industry observers say. The charges, contained in a CenturyTel lawsuit filed Aug. 17, adds to the acrimony created by Alltel’s unwanted bid. CenturyTel CEO Glen Post fanned the flames earlier by vowing that the family-owned rural telecommunications company based in Monroe, La., is prepared to use its many takeover defenses to deflect a hostile acquisition. “It is fair to say that any peaceful resolution is out of the question,” said John Bauer III, telecom analyst at Gerard Klauer Mattison & Co. in New York. The New York law firm of Wachtell, Lipton, Rosen & Katz is representing CenturyTel while Alltel’s legal advisers are from New York-based Skadden, Arps, Slate, Meagher & Flom. CenturyTel’s lawsuit, made public Tuesday in a U.S. Securities and Exchange Commission filing, alleges that Little Rock, Ark.-based Alltel made “false and misleading statements” when it charged that CenturyTel’s board of directors failed to inform the company’s stockholders about Alltel’s offer to buy the company. CenturyTel said in the lawsuit that Alltel’s bids, made verbally, were rejected after thorough consideration by the board. A week ago, Alltel offered to acquire CenturyTel for $43 a share or one CenturyTel share for every 0.6934 Alltel shares, and the assumption of $3.3 billion in CenturyTel debt. The stock portion of the deal, which was valued at roughly $6.1 billion at the time of the announcement, has since fallen to about $5.8 billion. The lawsuit also reveals the deep animosity borne of Alltel’s decision to make public CenturyTel’s efforts to sell the wireless side of its business. Bauer explains that both companies are eager to become consolidators of the country’s more than 1,300 rural telephone companies. CenturyTel would like to sell its wireless operations in order to pay down its debt and acquire additional rural telephone lines. Alltel, which said the lawsuit was “totally without merit,” appears prepared to let its offer stand rather than attempt to gather support for a hostile takeover, said John Bright, analyst at Johnson Rice & Co. in New Orleans. CenturyTel’s takeover defenses, which include a staggered board and a “poison pill” shareholder rights plan, would almost certainly preclude a friendly merger of the two companies. As a result, Alltel is left with the option of either increasing the size of its offer or attempting to convince those CenturyTel shareholders not directly connected to the company — about 60 percent of the CenturyTel’s shareholder base — to support its bid. “If the market drops significantly, maybe then Alltel’s $43 a share offer looks good, and a deal could get done,” Bright said. “Right now, Alltel faces a very tough road.” Alltel’s financial advisers are Merrill Lynch & Co. and Stephens Inc. CenturyTel is advised by J.P. Morgan and Lehman Brothers Inc. Copyright (c)2001 TDD, LLC. All rights reserved.

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