On Tuesday, AT&T (NYSE:T) announced it has agreed to buy the Alltel domestic retail wireless business of Atlantic Tele-Network (NASDAQ:ATNI) in an all-cash transaction valued at approximately $780 million.

Atlantic, which runs Alltel through a subsidiary based in Little Rock, Ark., says the business currently boasts a base of 585,000 customers across six southern states, produced $350 million in revenues over the first nine months of 2012, and generated $34 million in operating profit. The transaction is expected to close in H2 2013.

Subsequent to closing, Atlantic says its business "will consist of Commnet, serving rural communities primarily in the Southwest U.S.; Sovernet, serving residential and business customers in New England; ION, serving rural communities in New York State; GT&T, serving Guyana; CellOne, serving Bermuda; and Choice, Islandcom, and Mio, serving portions of the Caribbean islands."

As for the cash generated from the Alltel sale, Atlantic says it will consider all possibilities, including spending the money on new acquisitions or reinvesting in its remaining businesses, paying down debt, and/or increasing its dividend. As of today, Atlantic has about $282 million in debt, meaning it could extinguish the debt entirely from AT&T's payment. Atlantic currently pays shareholders a $1-per-share dividend, resulting in a yield of about 2.5%.

Shares of Atlantic Tele-Network are up 12.2% on the news at $44.16. AT&T shares are up 0.7% at $33.67.

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