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Last updated on April 21, 2014 at 1:20 EDT

Leap Wireless Being Acquired By AT&T For Double Its Value

July 14, 2013
Image Credit: Thinkstock.com

Michael Harper for redOrbit.com – Your Universe Online

AT&T announced on Friday its plans to buy Leap Wireless International, Inc., the company that offers pre-paid cell service under the brand name Cricket Wireless. AT&T will pay nearly double what Leap is worth, about $1.19 billion in cash or $15 a share.

In the hours before this deal was officially announced, shares of Leap rose by 2.5 percent and ended at $7.98, according to USA Today. The news was released after markets had closed, and shares of Leap skyrocketed to $17.31 in after-hours trading.

AT&T has held talks with Leap in the past. When Ma Bell was looking to buy Deutsche Telekom’s T-Mobile in 2011 they offered to sell some of this spectrum to Leap as a way to make the deal more appealing to regulators. The AT&T/T-Mobile deal never went through, however, some analysts have noted they are hoping the company will make another bid to buy the struggling carrier, which only recently got the rights to sell the popular iPhone. This acquisition comes just days after Japanese-owned Softbank Corp. took full control of Sprint. Now some analysts are saying more mergers like this can be expected in the future.

AT&T’s deal now brings some five million pre-paid customers underneath its umbrella and gives the runner-up in the mobile sector the right to use Leap’s spectrum on its network. As a part of the deal, AT&T has promised to keep the Cricket Wireless brand and offer customers a wider range of products and services, including access to its 4G LTE network. The company also says it will expand the Cricket brand and hope to sign on even more pre-paid customers across the US.

“The pre-paid market for us is relatively untapped,” explained AT&T spokesperson Brad Burns in a statement to the Associated Press. “From a competition perspective, this creates a much healthier competitor in the pre-paid space.â€

The deal is now subject to regulatory approval, and some 30 percent of Leap shareholders have said they’ll agree to the deal.

According to Greg Lund, a Leap Wireless spokesperson, an AT&T buyout was the best option to ensure the company’s survival. The sixth-place American company has $2.8 billion in debt and reported losses of $110 million in the quarter, which ran through March 2013. During the same quarter the telecom also lost 93,000 customers to other wireless carriers.

“Senior management looked at [the acquisition by AT&T] as our best path forward for the company’s long-term success,” said Lund in a statement.

AT&T now expects the deal to close in six to nine months, pending approval from the Federal Communications Commission and Department of Justice.

Analyst Jeff Kagan told Reuters this deal and others that have been signed in recent months are a sign wireless and telecommunications companies are beginning to consolidate to grab more spectrum, an increasingly valuable commodity as more people go wireless.

“The next wave of consolidation is beginning in wireless. This deal … is an example of such a deal that not only helps AT&T get their hands on more spectrum, customers and revenues, but also further consolidates the industry,” said Kagan in a statement. “Expect to see more deals with Verizon, Sprint and others.”


Source: Michael Harper for redOrbit.com - Your Universe Online