With the exciting tech news buzzing seemingly everyday, it was time for AT&T to set the tech town talking regarding their S1.2 billion all cash deal to acquire Leap Wireless. Leap is the sole operator over the Cricket prepaid mobile services.
AT&T has provided a favor to the double punched carrier, after Softbank announced their merger with Sprint earlier this week and T-Mobile completed their acquisition of MetroPCS earlier this year. In acquiring Leap Wireless, AT&T is also assuming the $2.8 billion in net debt the failing company has developed.
Why? Is the question from many in the industry. AT&T is the largest mobile carrier establishing a consumer base that exceeds over 107 million wireless customers. The answers are in the network. In absorbing Leap Wireless, AT&T gains:
- Spectrum licensing is needed to grow mobile capacity. AT&T will gain that advantage with Leap
- AT&T can tap into expanding the prepaid 4G LTE model
- Make price points more attractive for customers considering prepaid plans
Overall, the bottom line is about growing the multi-platform communications behemoth. Leap Wireless currently provides services to around 5 million subscribers who would automatically become AT&T customers once the deal is finalized. For now, AT&T has committed to keeping the Cricket line as part of the all cash $1.2 billion deal with Leap.
In a statement released to the media, AT&T said, “The combined company will have the financial resources, scale and spectrum to better compete with other major national providers for customers interested in low-cost pre-paid service.”
AT&T already has a current line of prepaid phones called GoPhones. While the company is slowly starting to introduce 4G into the pre-paid plans, many customers are not happy with the limited selection of phones available.
Interestingly, AT&T has pledged to Cricket customers they will not only provide a broader array of phones but also give those customers full access to AT&T’s “4G LTE” networks. AT&T spokesman Brad Burns relays the growing need in mobile telecommunications,
“The pre-paid market for us is relatively untapped,” said Burns. “From a competition perspective, this creates a much healthier competitor in the pre-paid space.”
This may be a way for AT&T to separate their contract phones from their pre-paid services. This of course can still allow their post-paid customers to enjoy their contracts, instead of offering a competitive item on the same site. Whatever the motive from AT&T, Leap Wireless is probably popping open champagne bottles.
During the first quarter of this year, the mid-range pre-paid carrier had seen a loss of over one million customers and revenue drop by over 4 percent. The outlook was pretty dismal for Leap and rumors started spreading they would liquidate and close their doors.
AT&T saw a way to acquire a live business and breathe life back into it. Now, it’s about the next steps which has to be reviewed by the Federal Communications Commission. If the path is smooth, AT&T can close the deal right at the start of the new year.
In 2011, AT&T had stepped in to purchase the then ailing T-Mobile brand. FCC regulators slammed close the possibility of the sale, citing anti-trust concerns. It seems T-Mobile has rebounded, especially after the announcement of their 6 month upgrade specials for all new and current customers. Now Leap Wireless can breathe a sigh of relief as AT&T looks to close the impressive $1.2 billion cash deal quickly.