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AT&T Snaps Up Leap to Challenge Low-Cost Carriers

AT&T Snaps Up Leap to Challenge Low-Cost Carriers
By Jennifer LeClaire

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"I expect to see another wave of consolidation just like this AT&T Leap Wireless deal. Expect to see more deals with Verizon, Sprint and others," said Jeff Kagan, an independent wireless industry analyst.
 

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After a failed attempt at acquiring T-Mobile -- and in the face of industry consolidation -- AT&T cut a deal to snap up prepaid wireless provider Leap Wireless. AT&T is willing to hand over $15 million per share in cash.

Under the terms of the acquisition agreement, AT&T will acquire all of Leap's stock and wireless properties, including licenses, network assets, retail stores and about 5 million subscribers.

With the Leap buy, AT&T is indeed adding strategic assets to its brand. Leap's network covers about 96 million people in 35 U.S. states. Under the Cricket brand, the carrier operates a 3G CDMA network, as well as a 4G LTE network covering 21 million people in these areas, and has 3,400 employees.

The acquisition includes spectrum in the PCS and AWS bands covering 137 million people and is largely complementary to AT&T's existing spectrum licenses. As soon as the ink dries, AT&T plans to put Leap's unutilized spectrum -- which covers 41 million people -- to use in furthering its 4G LTE deployment and providing additional capacity and enhanced network performance for customers' growing mobile Internet usage.

Leveraging Cricket

AT&T also plans to keep the Cricket brand name, provide Cricket customers with access to AT&T's 4G LTE mobile network, tap into Cricket's distribution channels, and expand Cricket's presence to additional U.S. cities.

Through these initiatives, the second-largest wireless carrier expects to compete more effectively, offer better device choices, improve customer care, and enhance its mobile Internet experience for consumers seeking low-cost, prepaid wireless plans.

AT&T expects Cricket's employees, operations and distribution will jump start AT&T's expansion into the highly competitive prepaid segment. After the merger, AT&T said it will have the financial resources, scale and spectrum to go head to head with other major national providers for customers interested in low-cost prepaid service.

Of course, the transaction is subject to review by the Federal Communications Commission and the Department of Justice. AT&T expects the transaction to close in six to nine months.

Will the Deal Go Through?

We caught up with Jeff Kagan, an independent wireless industry analyst, to get his thoughts on the deal. He told us the increasing pressure caused by limited spectrum will be helpful if there are fewer competitors in the space.

"I expect to see another wave of consolidation just like this AT&T Leap Wireless deal," he said. "Expect to see more deals with Verizon, Sprint and others. There are many other carriers that are ready for acquisition."

Kagan is also quick to point out that the U.S. government said no to the AT&T/T-Mobile tie up because it was two of the top four players. He expects this deal to go through since Leap is a smaller brand.

"Regulators will always take a close look at approval now that there are fewer players, but I don't see any problems with this AT&T Leap Wireless deal at this point," Kagan said. "Leap Wireless will be helpful to AT&T, however it won't upset the competitive apple cart so it should be a quick approval."
 

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