Bloomberg News

AT&T Gets FCC Permission to Buy Pay-as-Go Provider Leap

March 13, 2014

AT&T Inc. (T:US) won final federal regulatory clearance for its $1.2 billion purchase of Leap Wireless International Inc. (LEAP:US), adding customers and spectrum to the second-largest U.S. wireless carrier.

The Federal Communications Commission today announced its approval of the transaction for Leap, the sixth-largest U.S. wireless carrier, in a statement on the agency’s website. Antitrust regulators also have cleared the deal, said Gina Talamona, a Justice Department spokeswoman.

AT&T, with 110 million wireless subscribers, agreed to divest airwaves in 12 areas, mainly in Texas, and to maintain rate plans of $40 per month and less, according to the FCC order. The deal (LEAP:US) would bring Leap’s 4.6 million pay-as-you-go customers and airwaves in 35 states to AT&T, which has been hunting spectrum since it abandoned a bid for T-Mobile US Inc. under regulators’ objections in 2011.

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Wireless companies are competing to acquire airwaves -- the frequencies that let devices make calls and download data -- to meet rising demand for video and music downloading from smartphones and tablet.

The Leap deal extends a string of telecommunications acquisitions as small U.S. carriers look to team up with larger companies. Interest in mergers continues, with Japanese billionaire Masayoshi Son, chairman of Tokyo-based SoftBank Corp., considering a purchase of fourth-largest U.S. carrier T-Mobile after buying No. 3 Sprint Corp. last year.

$1.2 Billion

In the Leap transaction, AT&T agreed to pay $15 a share, or $1.2 billion, for the San Diego-based company and to add proceeds from the sale of some of Leap’s frequencies in Chicago. The deal also includes about $2.9 billion in net debt.

Leap shares jumped (LEAP:US) after the July 12 announcement of the deal as investors speculated the airwaves’ worth at $2 a share. Leap rose less than 1 percent $17.52 at 4 p.m. New York time.

Leap in a March 6 filing (LEAP:US) said it lost $603.5 million in 2013 following losses the previous two years, and had a 26.5 percent reduction in the number of customers over 21 months to Dec. 31, 2013.

AT&T, based in Dallas, agreed to help Leap customers with some legacy models of Apple Inc.’s iPhone migrate onto its network without having to replace their devices, according to AT&T filings with the FCC.

Cricket Brand

When it announced the deal, AT&T said it would expand Leap’s pay-as-you-go Cricket brand after it acquires the company’s retail stores, customers and network that covers 96 million people.

AT&T told the FCC that customers of both companies will enjoy better coverage. The transaction doesn’t trigger extra scrutiny under FCC spectrum policy in most areas, and where it does “ample spectrum remains available,” AT&T said.

Public Knowledge, a Washington-based policy group, said in an e-mailed statement it was pleased with the airwaves divestitures. The removal from the market of low-cost provider Leap was “troubling,” John Bergmayer, senior staff attorney with the policy group, said in the statement.

Verizon Wireless is the revenue leader among U.S. mobile carriers, according to data compiled by Bloomberg.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Elizabeth Wasserman, Romaine Bostick


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