Leap and AT&T Merger Unlocks iPhone 5 for Cricket Customers
On Thursday evening, AT&T, Inc. (NYSE:T) announced that the Federal Communications Commission had finally cleared its deal to acquire Leap Wireless International Inc. (NASDAQ:LEAP), a wireless carrier that operates under the Cricket brand. The $1.3 billion deal ($15 per share in cash) was first announced in July 2013 and was initially expected to be completed by the beginning of March, but was slightly delayed due to the lengthy regulatory vetting process.
Cricket, Leap’s wireless brand, currently covers approximately 97 million people across 35 states in the United States. The deal will bring the unit under the AT&T umbrella, but the brand will remain independently operated as a competitor in the no-contract segment of the market. Leap Wireless is the sixth-largest carrier and Cricket claims about 4.57 million customers. Migration of these customers to AT&T’s network is expected to take about 18 months.
In addition to the customers, AT&T got its hands on some valuable spectrum in the PCS and AWS bands that it will use to continue its 4G rollout. “This spectrum is largely complementary to AT&T’s existing spectrum holdings and includes unutilized spectrum covering 41 million people,” the company commented in a press release. “AT&T will immediately begin to put the unutilized spectrum to use to support 4G LTE services for its customers. This additional spectrum will provide additional capacity and enhance network performance for customers using smartphones and other mobile Internet devices.”
Market watchers may remember that Cricket became the first pre-paid carrier to offer the iPhone in June 2012. Cricket sold the 16GB iPhone 4s without a contract for $500 and offered an unlimited plan for $55 — not cheap, but still clearly compelling to a large market. AppleInsider estimates that Cricket paid a $150 subsidy to Apple Inc. (NASDAQ:AAPL) at the time. As part of its deal with the company, AT&T will be offering the iPhone 5 to Cricket customers once the buyout is complete.
Sprint Corp. (NYSE:S) recently announced that it will now support the iPhone 5 on its no-contract mobile virtual network operator Ting, which competes with Cricket for the no-contract crowd. However, Ting does not subsidize phone sales and instead of a flat monthly rate has dynamic pricing structures for voice, text, and data. Those who wish to use the service must already have an iPhone in hand. Ting, for its part, argues that the average monthly bill paid by its customers is less than half the flat rate charged by Cricket.