After almost a year of talks, AT&T has announced that it will purchase Cricket parent company Leap Wireless for $1.19 billion in cash and will also take on the super regional flat-rate carrier’s $2.8 billion debt load. The purchase price also represents an 88% premium over the company’s Friday closing stock price of $7.88/share. The purchase will include the Cricket brand name, which AT&T will retain while confirming that a third of Leap Wireless shareholders voted in favor of the sale to the current #2 carrier.
The acquisition is expected to close in 9 months from today’s announcement pending regulatory approval while AT&T plans to use Leap Wireless current holdings to expand its LTE network, though no immediate word was provided on how the company’s current 96 million strong customer base will be integrated into AT&T’s network. As AT&T failed in its previous attempt to acquire T-Mobile USA after regulators blocked the sale and forced AT&T to regroup, the announcement that it wants to purchase Leap Wireless will no doubt raise the interest of federal regulators once again in the interests of ensuring marketplace competition.
However, the announcement of the purchase may represent the last real chance for Leap Wireless executives to find a real exit strategy, as Leap Wireless has previously struggled with customer losses in the past few months due to the increased competition in the marketplace from both entrenched carriers and the increased visibility of virtual operators.
This is despite Leap Wireless being the first super regional flat-rate prepaid carrier to offer Apple’s iPhone, a move that has seen it actually lose money on each one purchased due to the lack of the expected sales volume boost expected from the offering due to timing, as shortly after it began to offer the line, competitors such as Virgin Mobile responded by also offering the device with lower monthly rates, severely affecting its first mover advantage.
With Leap selling to AT&T, one can only wonder what’s next for those customers currently on the carrier, especially those that rely on the Sprint nationwide roaming agreement for service, as Cricket’s own native CDMA network has stagnated in recent years despite also winning big in terms of AWS holdings in order to expand services along with MetroPCS.
While AT&T has purchased the parent and the brand, there’s no guarantee that services will be retained after completion of the sale and AT&T may elect to pull a T-Mobile and transition customers as quickly as possible from Cricket’s CDMA network to AT&T’s much larger GSM network. More details are expected within the next few weeks as the purchase is completed.
