AT&T Inc (NYSE:T), one of the major telecommunications carriers in the domestic market agreed to buy Leap Wireless International (NASDAQ:LEAP), a prepaid wireless provider for $15 per share or $1.2 billion in cash to boost its competitiveness in the mobile market.

Leap Wireless AT&T

The stock price of Leap Wireless International (NASDAQ:LEAP) was up by 2.5% to $7.98 per share after the market close on Friday, July 12.

Under the terms of the agreement, AT&T Inc (NYSE:T) will acquire all the stock and wireless properties including licenses, network assets, retail stores, and almost 5 million subscribers of Leap Wireless International (NASDAQ:LEAP).

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In addition, the shareholders of the prepaid wireless provider will receive a contingent right to the net proceeds of the sale of the 700 Mhz “A “Block” spectrum of Leap Wireless International (NASDAQ:LEAP) in Chicago. The spectrum was acquired by the company for $204 million in August 2012.

The network of Leap Wireless International (NASDAQ:LEAP) has a coverage within the 35 U.S. states. The company is currently operating under the Cricket brand providing 3G CDMA network and 4G LTE network covering 21 million people.  The prepaid wireless provider has 3,400 employees. As of April 15, 2013, its net debt was $2.8 billion.

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According to AT&T Inc (NYSE:T), it will keep the Cricket brand, utilize its distribution channels, and expand its presence to other cities in the United States. Cricket customers will also have access to  AT&T’s 4G LTE mobile network.

AT&T Inc (NYSE:T) will also acquire spectrums in the PCS and AWS bands of Leap Wireless International (NASDAQ:LEAP), which covers 137 million people. The spectrums will supplement the existing licenses of AT&T, which covers 41 million people. Its plan is to expand the deployment of its 4G LTE to provide additional capacity and better performance for customers.

“The result will be increased competition, better device choices, improved customer care and a significantly enhanced mobile Internet experience for consumers seeking low-cost prepaid wireless plans,” said AT&T Inc (NYSE) in a statement.

In addition, AT&T Inc (NYSE:T) indicated that acquiring Leap Wireless International (NASDAQ:LEAP) will help improve its financial resources, scale and spectrum, and ability to compete with other major players in the industry by providing affordable prepaid service.

AT&T Inc (NYSE:T) further stated that its expansion in the prepaid market will be led by the employees of Cricket.

Some of the shareholders of Leap Wireless International (NASDAQ:LEAP), who collectively own 29.8% stake agreed to support the transaction.

A related report from the Wall Street Journal quoted a statement from a former official of the Federal communications Commission stating that the chances of AT&T to receive an approval from the agency is  good.