Reuters reported yesterday that AT&T Inc. (NYSE:AT&T) are in talks with Leap Wireless International (NASDAQ:LEAP) with a possible acquisition of the smaller communications company on the cards.
The report confirmed that the two companies were in talks but there is no certainty about whether or not those talks are continuing. The motivation for much of the flurry in activity seems to be carriers attempting to gain control of larger areas of bandwidth. The limited spectrum is used for several different technologies and firms are hungry for more as data use is increased by users with smart phones.
It is the proliferation of wireless data using devices that is putting pressure on wireless service providers and causing them to seek more bandwidth. M&A activity in the environment has been constant though the most prominent attempt in recent years was unsuccessful.
At&T attempted to purchase Deutsche Telecom (DTEGn.DE) owned T-Mobile last year in a deal agreed between the two firm’s. The $39 billion merger was shot down by regulators in the United States. At&T and T-Mobile are the second and fourth biggest carriers in the United States respectively.
The recent changes in the telecommunications industry will inevitably change the structure of firms providing service. The FEC needs to get on board with that philosophy when it comes to acquisitions in the sector. Bandwidth is rare and large companies need more of it in order to offer the service that’s in demand.
Other problems with spectrum include the debacle surrounding Lightsquared. That firm was authorized to buy spectrum on the condition that it started a cellular data service with it. After conflicts with GPS equipment and an appeal to the FEC the company had its authorization to use the spectrum revoked. It is now locked in that battle unusable by anyone.
Spectrum will become a more and more topical issue going forward as more and more services come to rely on it. mergers appear to be the only way forward for the industry.
Leap Wireless is a telecommunications company that offers nationwide cellular coverage in the United States under its Cricket Wireless brand. That carrier is the seventh largest in the country providing service to over 7 million customers. It operates its national coverage in coordination with Sprint Nextel Corporation (NYSE:S) in a deal the two firms finalized in 2010.
The firm’s shares have risen over 11% today propelled by the news. The company’s market capitalization is in the region of $470 million with the rise taken into account.
