AT&T Buys Cricket & Saved Leap From Disaster!
On July 12, 2013, Cricket announced that AT&T agreed to
buy Cricket Communications (the sole division of Leap Wireless) for
$1.19 billion in cash, which translates to $15 per share. This was an
88% premium over its stock at the time, and includes taking over
ownership of every aspect of the business, including its $2.8 billion
in debt. For most, this came as a surprise. On
March 13, 2014, the FCC and DOJ (Department Of Justice)
the deal, and the rest is history. I keep this page here as
it serves as an interesting piece of history in this industry!
For nearly a decade prior to the acquisition there had be talks and
rumors of MetroPCS and
Cricket merging given their complimentary network coverage, and similar
demographics. However, following the 2013 acquisition of
MetroPCS by T-Mobile, it was expected that T-Mobile would also
ultimately make a play for Cricket. In addition, given that
Sprint struck a 3G roaming agreement with Cricket in 2010, and
ultimately an 4G LTE roaming agreement, coupled with the fact that
had a strong interest in prepaid brands (both owned and MVNOs), Sprint
acquiring Leap was also a more obvious buyer.
That said, this purchase was a wise move for AT&T as it had
been struggling to achieve relevance in the rapidly growing prepaid
market. Despite its own prepaid GoPhone brand having slightly
more customers than Cricket at the time, its plans were largely
uncompetitive. In fact, in May 2013, AT&T launched a
new prepaid brand, Aio Wireless, which targeted the lower end of the
market. Aio never really grew to anything significant, and
arguably AT&T purchased Cricket before Aio could either thrive
or die. Ultimately the Aio Wireless brand was killed, and all
customers were converted to the Cricket program, though the Aio
platform was selected over the legacy Cricket platform.
Truth be told that Cricket had been struggling to achieve profitability
for years, despite being able to restructure following its October 2003
bankruptcy. Achieving and maintaining profitability in this
competitive market as an independent carrier of Cricket's size was a
challenge to say the least. Particularly with T-Mobile
converting its entire business to no contract, and the general
consolidation within the industry, Cricket's survival required a merger
Is Where The True Value Is!
Although AT&T was certainly in dire need of making a play in
the prepaid space, let's not forget that Cricket's wireless spectrum is
also extremely valuable. Spectrum is a limited resources that
carriers require to build out network capacity in each market,
ensure sufficient capacity to deliver not only quality voice service,
but even more importantly, high speed data.
AT&T's spectrum was complimentary to Cricket's spectrum, which
meant that combining both assets provided tremendous value.
Also keep in mind that spectrum is only available via auctions or
buying and trading with other carriers. In other words, even
if AT&T dismantled the entire Cricket business, the
holds a lot of value. Obviously that's not what they
AT&T's acquisition of Cricket allowed it to accelerate its
prepaid expansion, and can be seen as a wise decision. The
new Cricket did struggle during the conversion process, and it still
hasn't shown any kind of market dominance. However, it has
provided AT&T with a much needed presence in the no contract
market. It will be interesting to see how things evolve over
the coming years as it continues to swap out senior leadership, and it
has lost most of the legacy employees who really understood the prepaid
market, technologies, and systems.
AT&T Acquires Cricket Communications
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