AT&T to acquire Leap Wireless for $1.2 bn

AT&T Inc, the second-largest wireless carrier in the US, yesterday said that it will buy its smaller rival Leap Wireless International Inc in for $1.2 billion in cash.

The move is the latest sign of consolidation in the US telecommunications industry and comes a few days after Japan's Softbank acquisition of Sprint Nextel.

AT&T is offering to pay $15 per share in cash, an 88-per cent premium to Leap's closing price.

The deal price is $1.2 billion, but including Leap's debt of $2.8 billion, the total transaction price is $4 billion.

But the hefty premium may not be enough to close the deal since Leap shares more than doubled to $16.80 per share in after-hours trading, an hour after AT&T announced the deal.

Nearly $17 per share is about 11 per cent above AT&T's offer price, an indication that investors believe that Leap may get a higher offer from other bidders.

AT&T said that shareholders holding approximately 29.8 per cent of Leap's stock have agreed to vote in favor of the transaction.

Based in California, Leap's network covers approximately 96 million people in 35 US states. It operates under the Cricket brand - a 3G CDMA network, as well as a 4G LTE network covering 21 million people in these areas, and has 3,400 employees.

AT&T said that it will retain the Cricket brand name, provide Cricket customers with access to AT&T's 4G LTE mobile network, and expand Cricket to additional US cities.

The acquisition includes spectrum covering 137 million people and is largely complementary to AT&T's existing spectrum licenses.

Post acquisition, AT&T said that it plans to put Leap's unutilised spectrum, which covers 41 million people – to use in expanding its 4G LTE deployment and providing additional capacity.

The transaction, which is expected to close in six to nine months, is subject to review by the Federal Communications Commission and the Department of Justice.