In another sign of a major consolidation taking place in the U.S. wireless industry, carrier telco on Friday made known its intention to buy regional prepaid carrier Leap Wireless.
AT&T has agreed to pay $15 per share in cash to acquire all of Leap Wireless’s assets. As you know, Leap provides wireless services through its prepaid Cricket Wireless brand.
The transaction, pending customary regulatory approval, is meant to bolster AT&T’s coverage, enhance its spectrum, increase AT&T’s retail store presence and make AT&T more competitive to customers interested in low-cost prepaid service…
A media release confirms the buyout includes Leap Wireless’s licenses, network assets, retail stores and approximately five million subscribers.
AT&T, the nation’s second-largest carrier, will retain the Cricket brand name, provide Cricket customers with access to AT&T’s 4G LTE network, utilize Cricket’s distribution channels, and expand Cricket’s presence to additional U.S. cities.
“The result will be increased competition, better device choices, improved customer care and a significantly enhanced mobile Internet experience for consumers seeking low-cost prepaid wireless plans,” AT&T argued.
The acquisition includes spectrum in the PCS and AWS bands (covering 137 million people), which is complementary to AT&T’s existing spectrum licenses.
After regulators approve the deal, AT&T said it would immediately put Leap’s unutilized spectrum (covering 41 million people) to work by advancing its own 4G LTE deployment and enhancing network performance.
As of April 15, 2013, Leap had $2.8 billion of net debt.
Leap’s network covers approximately 96 million people in 35 U.S. states. Its prepaid Cricket brand, which uses both 3G CDMA and 4G LTE radio technology, started selling the iPhone 5 last September, along with a bunch of other regional U.S. telcos.
Following what was described as a weaker than expected demand, Cricket overhauled the iPhone tariffs in April 2013 by bringing the unlimited-everything offering down to $50.
The move did boost sales of the Apple smartphone on Cricket, prompting Leap to attribute its positive second-quarter results to increased iPhone sales.
Leap’s earnings filing reads:
We are also seeing improved sales of our iPhone offering, having worked with Apple on new advertising, pricing plans and other promotions, and we look forward to continuing to collaborate with them.
Looks like Russian telcos could learn a thing or two from Leap.
Nowadays, putting the iPhone on store shelves no longer guarantees huge revenues. Amid heightened competition, the march of Android cheapos and the general saturation of the high-end, wireless companies have found that the gold rush is over.
And while the iconic smartphone still sells itself, telcos should increasingly employ a more proactive approach to selling the iPhone and courting cash-strapped consumers with innovative and affordable pricing plans, installment payments and other marketing tactics (hint: T-Mobile USA).