AT&T acquires Cricket for $1.19 billion, has a lot to gain

July 13, 2013
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With yesterday’s $1.19 billion Cricket buy, AT&T hopes to both expand its prepaid programs and augment its 4G LTE footprint.

AT&T

In a cellphone carrier market where high-profile acquisitions and the ready exchange of billions in cash are almost commonplace, AT&T’s $1.19 billion purchase of Leap Wireless –  known better as Cricket to most – doesn’t seem that surprising. With yesterday’s buy, the network giant hopes to both expand its prepaid programs and augment its 4G LTE footprint.

The prepaid cellphone market, once relegated to inflexible plans and cheap devices on big carriers like AT&T, has now become the focal point of national networks’ new strategies. T-Mobile acquired a prepaid provider of its own – MetroPCS – in May, and has been extolling the virtues of prepaid plans since the carrier unleashed its “uncarrier” ad blitz earlier this year.  Sprint has made moves, including the purchase of Virgin Mobile and Boost, to boost its prepaid portfolio in recent years. Even Verizon, arguably the least outwardly enthusiastic about the shift to prepaid, has taken steps to increase the attractiveness of its offerings. AT&T’s buy, then, makes sense from a competitive standpoint. AT&T will gain nearly 5 million prepaid customers from the sale.

Though Leap’s customer base is an inarguable boost to AT&T’s prepaid subscriber base, the network giant has a lot more to gain from Leap’s network spectrum. Leap’s existing infrastructure is nothing to scoff at: the carrier has deployed LTE to 11 markets covering 21 million people. However, the Leap’s PCS and AWS are capable of far more. In an interview with FierceWireless last year, Leap CEO Doug Hutcheson said a substantial amount of the carrier’s spectrum – 60 percent – had yet to be used. That could help AT&T rapidly build out 4G service in a number of locations.

It’s not all roses and rainbows for AT&T. The network’s Leap buy faces a few hurdles, both legal and technological. The deal is certain to face regulatory scrutiny, as AT&T’s relative size and previous attempted purchase place the network in a difficult position. Advocacy group Fress Press opposes the deal, which it believes will limit consumer choice and lead to higher prices. Of lesser (but still valid) concern is network incompatibility. Cricket’s 3G uses CDMA, while AT&T’s  GSM. It’s unclear how AT&T plans to transition customers to its network technology. One thing’s for certain, though: AT&T has a lot to gain from the purchase of Leap, and will do everything in its power to convince governing bodies and the public that the acquisition is in everyone’s best interest. How successful the carrier will be in that endeavor remains to be seen.

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