AT&T Inc said Friday it will buy the bulk of Alltel Wireless assets being divested by Verizon Communications Inc for $2.35 billion, and will sell some Centennial Communications Corp assets to Verizon Wireless for $240 million.

Under terms of the deal, AT&T will buy licenses, network assets and 1.5 million subscribers in 79 service areas, mostly rural areas in 18 states, the company said in a statement.

AT&T will buy mostly Alltel assets but will include some assets from Verizon Wireless and the former Rural Cellular Corp, AT&T said. The sale of the Centennial assets to Verizon is contingent upon AT&T's completion of its purchase of those assets, the statement said.

Verizon Wireless was required to sell off those properties as a condition for getting regulatory approval of its purchase of Alltel in January. That merger created the biggest U.S. wireless provider, surpassing AT&T in terms of subscribers.

AT&T said it expects the network integration costs to result in an earnings per share dilution of $0.06 per share in the first year after closing, with additional planned capital investments of about $400 million over 2009 and 2010.

The deal is expected to close in the fourth quarter of 2009, contingent on regulatory approval, AT&T said.

This transaction will complement our existing network coverage, particularly in rural areas, said Ralph de la Vega, president and chief executive of AT&T Mobility and Consumer Markets in a statement.

AT&T had agreed to buy rural wireless provider Centennial Communication Corp in November, but a spokesman said there would now be overlap in service coverage, prompting AT&T to want to shed Centennial.

Verizon now expects to buy former Centennial wireless properties, including licenses, network assets and nearly 120,000 subscribers in five service areas in Louisiana and Mississippi.

Verizon Wireless is owned by Verizon and Britain's Vodafone Group Plc .

Verizon previously had said more than 30 companies had expressed interest in the Alltel assets.

(Reporting by Jessica Hall, additional reporting by Phil Wahba editing by Gerald E. McCormick, Matthew Lewis and Bernard Orr)

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