Can AT&T Really Close the Deal for Leap Wireless?

Telecom & Wireless

Published: July 15, 2013 8:05 am

Last Updated: April 28, 2020 10:29 am

Last Friday’s announcement that AT&T Inc. (NYSE: T) would acquire Leap Wireless International Inc. (NASDAQ: LEAP) for a total of $1.2 billion in cash ($15 a share) is not a done deal yet, and it may never get done. The offer has put into play 23 MHz of wireless spectrum that is underutilized by Leap and that AT&T is getting for a song.

There is no doubt that consolidation among wireless carriers is the current trend in the industry. SoftBank’s acquisition of a controlling interest in Sprint Nextel Corp. (NYSE: S) and the recent tie-up between T-Mobile and MetroPCS to form T-Mobile US Inc. (NYSE: TMUS) are the most recent examples.

Leap’s spectrum holdings cover areas where 137 million people live, yet the company only offers service to less than one-third of these people. And while AT&T says it will retain Leap’s Cricket brand, that is pointless and in a few years that promise will be forgotten.

When AT&T tried to acquire T-Mobile in 2011 from Deutsche Telekom for $39 billion, the U.S. Justice Department stepped in with an antitrust complaint that eventually killed the merger. The 23 MHz of spectrum involved in the AT&T-Leap deal is not quite half the spectrum that T-Mobile owned at the time of Ma Bell’s offer.

Still, the U.S. Department of Justice may want to put an end to the continuing land rush for spectrum by AT&T and rival Verizon Communications Inc. (NYSE: VZ). Allowing the two largest wireless carriers to hoard spectrum is not in the public interest, no matter what the two giants say.

And then there’s the price AT&T is paying for Leap. Even including Leap’s $2.8 billion debt, AT&T gets half the spectrum quantity for about a tenth the price. It is more than a bargain, it’s a steal.

The most likely contender for Leap is Dish Network Corp. (NASDAQ: DISH), which lost out in a recent effort to acquire Sprint or Clearwire Corp. (NASDAQ: CLWR). Others may surface, and Leap’s premarket share price this morning indicates that there are plenty of investors who believe more offers are out there.

Leap’s shares are up 110% in premarket trading, at $17.30, well above the top of the stock’s 52-week range of $4.28 to $8.16.

AT&T’s shares are inactive at $35.81, in a 52-week range of $32.71 to $39.00.

Cash Back Credit Cards Have Never Been This Good

Credit card companies are at war, handing out free rewards and benefits to win the best customers. A good cash back card can be worth thousands of dollars a year in free money, not to mention other perks like travel, insurance, and access to fancy lounges. See our top picks for the best credit cards today. You won’t want to miss some of these offers.

Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.