When AT&T announced on July 12 that it had reached an agreement to acquire San Diego-based Leap Wireless, it marked the consummation of a very long series of discussions with the small prepaid carrier.
The agreement, which would include all of Leap's facilities, licenses and spectrum as well as the customer base, would cost AT&T about $1.5 billion. AT&T would get the Cricket trademark along with everything else.
This acquisition mirrors T-Mobile's recent purchase of MetroPCS, which closed earlier in 2013. Like the MetroPCS deal, AT&T would get a Code Division Multiple Access (CDMA) network in which customers are now getting low-cost cell service with no contracts. Also like the MetroPCS deal, AT&T will have to move that existing customer base to new GSM handsets capable of working on AT&T's 4G Long Term Evolution (LTE) network.
But there are differences. Notably for AT&T, Leap Wireless has substantial unused spectrum holdings that are complementary to AT&T's own spectrum (meaning they're on nearby frequencies). In addition, Leap Wireless is tiny, so the cost of the acquisition will be relatively low. All of this sounds nice. But will this deal actually happen? Maybe not because it's not necessarily a slam dunk.
Before AT&T can acquire Leap, it must go through the antitrust approval process with the U.S. Department of Justice, and it must be approved by the Federal Communications Commission. This means that groups opposed to any such merger will have the opportunity to formalize their opposition, and it means that other potential investors may try to disrupt the deal (Dish Networks, perhaps?).
What's also different is that while T-Mobile's deal with MetroPCS went through with little opposition, AT&T is less likely to have such an outcome. The most obvious reason is that AT&T is far larger than T-Mobile. It's already had its previous attempt at merging with a smaller company shot down, and some groups see AT&T as less friendly to consumers.
One of the groups leading the fight against the AT&T attempt to buy T-Mobile in 2011 has already noted its opposition to the Leap Wireless deal. "AT&T already has more wireless capacity than it needs to serve its customers, and it should focus on using what it has rather than continuing to try to buy out competitors," said Harold Feld, senior vice president of Public Knowledge, in a statement. "The wireless marketplace does not need more mergers and more concentration."
Feld noted that Leap Wireless, the fifth-largest wireless carrier in the United States, serves mostly low-income people, people with poor credit and people who want to do without the annoyance of a wireless contract.