AT&T bids for Leap Wireless for $1.2 billion

Cricket Wireless Store

Cricket Wireless Store

AT&T said Friday it agreed to buy prepaid wireless provider Leap Wireless International for $15 per share in cash. This has begun with the purchase of Leap Wireless (LEAP), known for its Cricket brand of prepaid wireless plans, for $1.2 billion. The deal was announced Friday.

In 2011, AT&T wireless agreed to buy T-Mobile for $39 billion. But citing anti-trust concerns, federal regulators annulled the deal. The nation’s second largest carrier will pay for all of Leap’s stock and wireless properties, including licenses, network assets, retail stores and about 5 million subscribers.

The stock jumped 110% to $16.75 in recent trading, above the current cash offer, but according to analysts the total offer from AT&T is worth well over $17.That’s because, along with $15 in cash, AT&T has promised to pay shareholders a portion of whatever it makes from selling a block of spectrum Leap has in Chicago. Though estimates vary on Wall Street as to what that will sell for, an average of five analyst estimates seen by Money Beat was $2.20 a share. The estimates ranged from $1.25 to as high as $2.68.

AT&T has dual motives behind this buyout offer. The first is the spectrum, and the second is the Cricket prepaid wireless business of Leap. The deal allows AT&T to quickly build its presence in the increasingly lucrative pre-paid market. AT&T plans to retain the Cricket brand name and will open up its fastest data network — 4G LTE — to Cricket customers. It also wants to expand Cricket’s presence in more U.S. cities. Cricket is attractive to AT&T because of its success with prepaid customers as the market for post-paid customers is getting saturated. Post-paid customers have been the big adopters of high-end smart phones.  The prepaid market is still growing. This acquisition will help AT&T boost its market share in the prepaid market quickly.

Once the deal is completed, AT&T will tap Leap’s unused spectrum – which covers around 41 million people – to expand its LTE network, it said.

In a statement AT&T said, “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 pre-paid service” .

The deal is to be reconsidered by the Federal Communications Commission and the Department of Justice. AT&T anticipates the transaction to close in six to nine months. Owners of about 29.8% of Leap’s outstanding shares have agreed to vote in support of the transaction, AT&T said.

Avatar
Jay Raol

Recent Posts

Food Stocks to Lookout for in 2021

Food Stocks to Lookout for in 2021

The COVID-19 pandemic has seen a resurgence in recent weeks and talks of normalcy are still far away, even with the vaccinations. For invest...
1 hour ago
Big Three Credit Agencies: Who are they?

Big Three Credit Agencies: Who are they?

Credit rating agencies are risk assessment firms that provide ratings on the creditworthiness of bonds and other debt instruments. Investor...
1 hour ago
Pat Gelsinger takes over Intel, expected to focus on manufacturing and execution

Pat Gelsinger takes over Intel, expected to focus on manufacturing and execution

Pat Gelsinger, the ex-chief technology officer of Intel, will be taking over the reins at the chip-making tech company Intel on February 15 ...
3 hours ago
Netflix gets overweight rating from analysts for 4th quarter

Netflix gets overweight rating from analysts for 4th quarter

Netflix will report fourth-quarter earnings Tuesday and its results will be a strong indication for an industry waiting to transition to a p...
23 hours ago
Microsoft partners with Cruise to commercialize self-driving vehicles

Microsoft partners with Cruise to commercialize self-driving vehicles

Microsoft Corp. is joining hands with Cruise, the self-driving subsidiary of General Motors., to help accelerate the commercialization of dr...
23 hours ago
Apple car may upset auto industry manufacturing model

Apple car may upset auto industry manufacturing model

Since last December, the Apple car project called Titan has been generating much interest with speculations surrounding design manufacturing...
2 days ago