AT&T says it wants to acquire Leap for its spectrum and prepaid business but if it hurts T-Mobile, all the better

Sarah Thomas, Director, Women in Comms

July 15, 2013

2 Min Read
AT&T's Leap Bid: Stickin' It to T-Mobile?

AT&T Inc. says it is splashing down US$1.19 billion to acquire Leap Wireless as a way to get much-needed spectrum, bolster its prepaid play and expand its reach. But there's a nice side effect of the deal, too: AT&T gets to give a big middle finger to its ex, T-Mobile US. (See AT&T to Acquire Leap Wireless for $1.19B.)

It's not hard to see why the carrier might be feeling a little bitter after its deal to acquire T-Mobile went up in smoke two years ago. Since then, T-Mobile, under the leadership of new CEO John Legere, has been running around town trashing its would-be partner and its network to everyone that will listen.

Now it appears AT&T is getting a little revenge by announcing its intention to buy up Leap Wireless, a carrier that T-Mobile was reportedly eyeing for its own acquisition.

Of course, this isn't the reason AT&T cited for the buy at all. And its reasoning for wanting Leap is quite valid. The smaller operator gives it complementary spectrum for its LTE rollout and has a sizable customer base in the prepaid market, which AT&T has been bolstering its presence in recently. (See AT&T Nudges Prepaid Customers to LTE and AT&T Updates GoPhone Prepaid LTE Plans.)

But industry analyst Craig Moffett pokes some holes in AT&T's logic. He points out in a research note that not only is Leap's spectrum portfolio small and concentrated in Tier 2 markets, but it also isn't all that compatible with AT&T's since more than two-thirds of it is in the AWS band. AT&T gave up most of its AWS holdings to T-Mobile in the breakup and to Verizon Wireless in a January deal.

Instead, he writes, "AT&T's purchase of Leap keeps Leap's highly complementary spectrum out of T-Mobile's hands, where it might otherwise have been put to use, and it blunts the impact of T-Mobile's initiatives to expand the MetroPCS brand into additional markets."

Leap's spectrum would have meant a lot more to T-Mobile than it does to AT&T, and that's one reason AT&T had to get there first. (Although, it's worth noting that this might not be the end of the story for Leap as T-Mobile could still respond with a counter-bid of its own. Remember how well that worked out for Dish Network Corp.?)

In my opinion, spectrum and prepaid were both very real motivators of AT&T's acquisition as postpaid growth and capacity continue to be an issue for the number two wireless operator. But, I'm sure T-Mobile factored into its decision, and the bid suggests that Magenta's "uncarrier" strategy is actually making its bigger competitors a little nervous -- or at least mad enough to strike back.

— Sarah Reedy, Senior Editor, Light Reading

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like