AT&T Seals The Deal With Leap: Raymond James’ Perspective


Raymond James analysts Ric Prentiss, Frank G. Louthan IV, Charlie Castillo, and Alexander Sklar examine the recent acquisition of LEAP by AT&T Inc. (NYSE:T).

FCC approved AT&T’s acquisition

This afternoon the FCC approved AT&T Inc. (NYSE:T)’s acquisition of Leap Wireless International, Inc. (NASDAQ:LEAP). The FCC used almost all of the shot-clock (179 out of 180 days) to make its ruling as the transaction was announced July 15, 2013 and submitted to the FCC in late August with one clock stoppage in October. The spectrum divestitures ordered by the FCC are minor as they include just 12 market areas with a total population of approximately four million, versus Leap Wireless International, Inc. (NASDAQ:LEAP)’s CDMA network covering ~97 million Pops. The AWS spectrum to be divested is just ~50 million MHz Pops, which is a tiny fraction of LEAP’s ~3 billion MHz Pops.

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FCC approval was the last major hurdle

The approval of the FCC was the last major hurdle, and just hours later AT&T Inc. (NYSE:T) announced the deal had closed with Leap Wireless International, Inc. (NASDAQ:LEAP) shareholders to get $15 per share in cash and a contingent right to the net value received when the Chicago 700 MHz A block spectrum is sold. We expect AT&T Inc. (NYSE:T) in the coming weeks to integrate the acquisition into its operations and launch the new Cricket brand with access to more smartphones and the AT&T 4G LTE network. AT&T will migrate Leap Wireless International, Inc. (NASDAQ:LEAP)’s CDMA customers to AT&T Inc. (NYSE:T)’s GSM and LTE network and sunset the LEAP CDMA network in 12 to 18 months (depending on the market). We note that T-Mobile has converted ~40% of the MetroPCS CDMA subs to GSM/LTE in the half year since that deal closed. AT&T Inc. (NYSE:T) said it will immediately begin to put some of the unutilized Leap Wireless International, Inc. (NASDAQ:LEAP) spectrum to work adding 4G LTE capacity and improving network performance.