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IRVINE, Calif. – The first big corporate acquisition in the financial technology space this year might have been a bit of a surprise to industry observers who were expecting to see continued consolidation in the core processing arena. ALLTEL Corp. last week sold the financial services division of its ALLTEL Information Services (AIS) subsidiary to Fidelity National Financial, the nation’s largest provider of title insurance and real-estate related products and services. The $1.05 billion purchase means the biggest player in the title insurance market (with about a 30% share) will have beginning-to-end punch in the mortgage business, since it just bought the processor of about 46% percent of all U.S. residential mortgage loans. As for the impact in credit union land, Arkansas-based ALLTEL – the nation’s largest rural wireless and local telephone company – had at least two notable clients: CUNA Mutual Services uses its mortgage servicing platform and Navy Federal Credit Union is a core customer, says a consultant who specializes in advising credit unions and banks on vendor relations. Navy Federal, the industry’s biggest CU, was still assessing the move, its spokeswoman said. “Navy Federal is an ALLTEL customer and we are aware of the sale and will be following the transition with interest in the months to follow,” said Loren Moeller, public relations manager at Navy Federal. At CUNA Mutual, spokeswoman Sydney Lindner said: “We have been in contact with ALLTEL and expect the sale will have no effect on the software platform we use. “Long-term, the sale may result in quicker software enhancements as ALLTEL now has a parent company that fully understands their business,” Lindner said. “But, in short, little to no impact will be perceived.” She added: “In our discussions with ALLTEL, they’ve said they are pleased with the acquisition. It appears that Fidelity National Financial is a better fit than their former parent company, which is part of the telecommunications sector,” she said. Scott Hodgins, a consulting manager with Arizona-based Cornerstone Advisors, said the acquisition by Fidelity National Financial, rather than another core-processing specialist, means that core customers, especially users of the former Systematics mainframe service, should be able to breathe a bit easier. “Conservative bankers will likely be more comfortable with their processor being owned by a relatively stable insurance company than by a player in the volatile telco industry,” he said. “Given that an AIS sale was inevitable, AIS clients could do a lot worse than FNF as a buyer,” Hodgins added. “Had the acquirer been another core player, the current AIS customer base would be coming down with a case of the sweats. Despite the would-be press releases of a win-win deal, AIS customer would be facing the unavoidable full or partial forced migration of a new parent’s product line. “This type of jammed-down-your-throat migration understandably conjures up bad blood between financial institutions and vendors like few other disputes can.” FNF said the takeover of AIS, which had revenue of $820 million in 2002 and has about 5,500 employees (3,000 of them in Jacksonville, Fla., and Little Rock, Ark.) helps it meet a goal of being a full-services provider to the real estate and financial services industries, as well as loosens some of the company’s dependence on the cycles of the mortgage business. “The acquisition of AIS accelerates our ongoing evolution into a fully diversified provider of products, services and solutions to the real estate and financial services industries,” said Fidelity National’s chairman and CEO, William P. Foley II. “AIS’ extensive relationships with retail and commercial banks, mortgage lenders, community banks and other financial institutions will further deepen our relationships with other significant mortgage lenders and financial institutions,” he said. Fidelity National Financial had $5.1 billion in 2002 revenue and is the owner of Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title. It also is a provider of escrow, default management and other insurance products and provides technology solutions through its publicly traded subsidiary, Fidelity National Information Services (FNIS). “The acquisition of AIS complements our ongoing activities at FNIS to extend the range and reach of our technology products, services and solutions to improve efficiencies and reduce costs for our customers,” Foley said. Hodgins was a bit less effusive. “We think that the mortgage-related customers at ALLTEL will eventually benefit from the post-merger company, but we don’t see any major changes, good or bad, in the near term,” the Cornerstone Advisors consultant said. However, the takeover also is a positive from the macroeconomic perspective, he said. “Long-term, the last thing the industry needs is less competition, the sure result had another core player bought AIS,” Hodgins said. [email protected]

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