AT&T to buy Leap Wireless for $1.2bn

Price of $15 a share represents 88 per cent premium

Leap’s network covers about 96 million people in 35 US states.
Leap’s network covers about 96 million people in 35 US states.

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.

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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)