AT&T, one of the largest mobile carrier companies, has agreed to purchase Leap wireless Company. The move aims to maximize the telecommunication’s company dominance over the airwaves. The deal will cost approximately 1.2 billion. This deal will be the first acquisition for Randall Stephenson, AT&T Chief Executive. Randall’s initial deal to buy T-Mobile was stopped by the justice department in 2011(Gryta).
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Concerned regulators are closely monitoring the AT&T deal. The company is hopeful, stating the odds are good and the regulators will let the deal materialize. This means AT&T will have to give up US wireless spectrum. These deals are a series of procurements that have seen bigger companies buy off smaller upstarting companies that offer cheaper plans. Subscribers of the services stand to face several changes due to the deals.
Providers that offer cheaper services are fast diminishing, while smaller players in the industry like T-Mobile are a growing threat to AT&T. These deals have also had effects on the stock markets, raising the prices. In July, more than a third of Leap’s shares increased to 7.98$ between 12th and 15th. This had no impact on the price for AT&T who are still purchasing the shares at 15$ each.
The company had its most active day on 12 July, with many of the investors hoping for stock gains before the deal was publicly announced. This gave the buyers a chance to purchase the shares, letting them set the price. Leap’s shares rose to 16.70$ in just a few hours due to this.
Leap’s subscribers avoid the arduous task of paper work through signing of contracts. They also enjoy the option of paying monthly. Even so, Leap has been losing its subscribers to competitors.
AT&T boasts about 107 million subscribers. It hopes to maintain Leap’s subscribers by offering them network access. It also plans to gain more users in new cities. AT&T controls very little spectrum per subscriber, while Leap brings spectrum that covers 137 million subscribers.
Jonathan Chaplin, an analyst with New Street Research, explains this. The move aims to improve its 4G Long Term Evolution (LTE) by expanding it and gaining more capacity. This will increase its usage and give it better connectivity (Prnewswire.com)
Analysts speculate AT&T will increase its earnings and success by gaining more spectrum, LTE technology introduction, and better connectivity. After the deal is completed, AT&T will be better equipped to compete with other mobile service providers who offer cheaper alternatives to their subscribers.
In San Diego, Leap operated under Cricket prepaid brand. The brand covers 96 million subscribers and ranks sixth in the US. AT&T is planning to start their expansion by using Cricket to expand its prepaid operations (Gustin).
Young people and low-income earners mainly use Leap technology services. The acquisition by AT&T will create a gap in the market. The effect will leave the subscribers misplaced. The effect might lead to withdrawal of subscribers, as well as hesitation of potential subscribers to join. AT&T might not get the success and expansion they expected.
Public sector regulators and interested parties are still forming inquires to stop the takeover. AT&T might not enjoy the much-awaited monotony it expects. The deal runs for approximately eight months. Anything can happen considering the attention it has created. The concerned parties are worried AT&T already holds more than it can handle.
Gryta, Thomas. “AT&T to Buy Smaller Rival Leap.” Wall Street Journal 15 July 2013: 18. Print.
Gustin, Sam. “AT&T’s $1.2 Billion Leap Wireless Buyout Faces Static.” Business Time (2013). Web.
Prnewswire.com. “AT&T, Verizon Communications, Atlantic Tele-Network, Leap Wireless International and DTE Energy.” Prnewswire (2013). Web.