By Lisa Johnston
New products on display at the American International Toy Fair, held in N
San Diego – AT&T’s planned $1.2 billion purchase of ailing no-contract carrier Leap Wireless will provide AT&T with spectrum to help accommodate future data growth and provide a shot in the arm for Leap’s Cricket brand, which AT&T vowed to maintain as part of an effort to increase its share of the fast-growing prepaid market.
The combined company will have the financial resources, scale and spectrum to better compete with other major national providers for customers interested in low-cost prepaid service,” AT&T said in a statement announcing its plans late Friday.
AT&T said it would provide Cricket customers with access to AT&T’s 4G LTE mobile network, use 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 contended.
The Cricket brand would join AT&T’s Aio Wireless brand, launched in May through a wholly owned AT&T subsidiary. The subsidiary sells Aio service only through Aio-brand stores operated by third parties and at Aio’s website. Aio operates about 116 stores in Houston and in Orlando, Tampa, Jacksonville, Gainesville, Naples and Fort Myers in Florida. The subsidiary plans to add more markets across the United States over the next year.
AT&T’s acquisition of Leap requires approval from the Department of Justice and Federal Communications Commission, but AT&T expects to close the transaction in six to nine months.
In announcing its plans late Friday, AT&T said it would acquire Leap’s licenses, network assets, retail stores and around 5 million subscribers. Leap’s network covers approximately 96 million people in 35 U.S. states, with 21 million of those people covered by Leap’s 4G LTE network.
AT&T, however, will get currently unused spectrum as well in the deal. AT&T said it would get a total of 1.9GHz and AWS band spectrum covering 137 million people and will put Leap’s unused spectrum, covering 41 million people, to expand LTE capacity.
AT&T will also acquire Leap’s 3,400 employees and $2.8 billion of net debt.
Leap has been losing money and subscribers, having lost 10.7 percent of its subscriber base in 2012 to put its year-end 2012 base at 5.3 million. Leap posted a net loss of $187.3 million in 2012 and $317.7 million in 2011..
Leap operates its own network in 65 markets, and in 2011, it expanded distribution throughout all 50 states after reaching a reseller agreement with Sprint, enabling major retailers such as Best Buy to offer Cricket-branded phones in markets where Leap did not operate. In a sign of its financial problems at the end of last year, however, Leap pulled out of most of its national retail accounts with the exception of Walmart and RadioShack.
Besies dropping multiple national retailers, the carrier late last October stopped marketing daily prepaid PayGo service to new customers and continued to deemphasize marketing Cricket Broadband data service to laptops and mobile hot-spot devices.
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