AT&T consoles itself with Leap Wireless International, Inc (NASDAQ:LEAP) consolidation

Denver, CO, 07/15/2013 (Avauncer.com) – AT&T was unsuccessful in acquiring T-Mobile US and probably the one consolation is that it will now be acquiring Leap Wireless International, Inc (NASDAQ:LEAP), the prepaid wireless provider at $15/share in cash. The second largest carrier in the company will be paying around $1.2B for the entire Leap stock as well as its wireless properties. This is inclusive of its network assets, licenses, retail stores and of course it’s close to 5 million subscribers. The company sells its wireless service under the Cricket brand.

When pay-as-you-go counts

Though most service providers go whole hog with wooing post-paid or contract customers, the prepaid or the pay-as-you-go market is an increasingly lucrative one. Though customers may not be bound to the company by a contract, a large percentage of prepaid customers are still high spenders. A large number of younger people tend to be on prepaid but they also end up using a lot of data as they are always online, thus adding to the company revenue.

Subscribers benefit

Post this acquisition, AT&T will be retaining Leap’s Cricket brand name. Cricket subscribers tend to benefit as well, as they will now gain access to AT&T’s 4GLTE network and Cricket will also foray into new cities in the U.S. Leap’s unused spectrum will definitely come in handy for AT&T and the latter will automatically gain the scope to expand its LTE network.

In unity lies strength

In a statement, AT&T said that the combined company will now be stronger in terms of scale, financial resources as well as spectrum and will be better equipped to compete with competitors who also target the prepaid market. The Leap network covers 35 states in America. At the end of Q1, the company had 4.63M customers, which were down from 5.17M in the same period in the previous year. As of 15 April, Leap had $2.8B in net debt while its Q1 revenue dropped 4.3% to $789.9M.