AT&T to buy Leap Wireless for $1.2bn

Price of $15 a share represents 88 per cent premium

US telecom giant AT&T, thwarted by regulators nearly two years ago on a planned $39 billion acquisition of T-Mobile USA, is back in the merger hunt, albeit with a much smaller target.

The telecommunications giant has agreed to acquire Leap Wireless International for nearly $1.2 billion (€918 million), the latest sign of consolidation in the telecommunications industry. AT&T is paying $15 a share in cash for Leap, a prepaid cellphone service provider. That figure is a premium of 88 per cent from Leap's closing price Friday. Under the terms of the deal, AT&T would gain 5 million new customers and acquire Leap network, licenses and retail stores. Leap had $2.8 billion of net debt as of April 15th.

Leap, based in San Diego, operates under the Cricket brand name, which AT&T plans to retain. Its network covers about 96 million people in 35 states. The deal comes after months of speculation about the future of AT&T and other wireless companies. Smaller carriers like Sprint and T-Mobile have recently found merger partners, fueling questions about AT&T's strategy.

AT&T previously approached Leap in 2011 while it was pursuing a deal with T-Mobile. At that time, AT&T discussed the possibility of selling a piece of T-Mobile’s customer accounts to Leap. But the T-Mobile deal was later blocked by regulators.


Since then, analysts have wondered how AT&T would find a partner to help it grow and defend against increasing competition. In June, a Spanish newspaper reported that authorities had blocked a bid by AT&T for Telefonica, the Spanish carrier.

Driving the urgency of the consolidation is the hunt for valuable spectrum. Under Friday’s deal, Leap shareholders will receive a contingent right to net proceeds from the sale of spectrum in Chicago that Leap bought for $204 million in 2012. If the deal goes through, Cricket customers will get access to AT&T’s 4G mobile network, and AT&T will expand Cricket’s reach. For AT&T, the deal will give it access to the prepaid market. – (New York Times News Service)