AT&T Completes $4 Billion Acquisition of Leap Wireless
Published on: 13th Mar 2014
By: Ian Mansfield
AT T has completed its previously announced acquisition of prepaid wireless provider Leap Wireless which operates under the Cricket brand.
Cricket's network currently covers approximately 97 million people in 35 U.S. states, and Cricket had 4.57 million customers as of February 28, 2014.
AT&T announced in July 2013 that it would acquire all of Leap's stock and wireless properties, including licenses, network assets, retail stores and subscribers for USD1.2 billion.
As of April 15, 2013, Leap had $2.8 billion of net debt, but it was also sitting on federal and state net operating loss carryforwards (referred to as "NOLs") of approximately $2.7 billion and $2.1 billion, respectively, which could be used to reduce future federal and state income tax obligations.
In essence, including debt, AT&T paid USD4 billion to buy a company that is sitting on tax credits worth USD4.8 billion that can be offset against future profits.
In the coming weeks, Cricket will be integrated with AT&T's existing operations, while AT&T will gain access to Cricket's distribution channels and will be able to expand Cricket's presence to additional U.S. cities.
AT&T has also previously said that it will close down its own prepay brand, Aio Wireless and migrate those customers over to the Cricket service instead. Customer migrations are expected to be completed approximately 18 months after the launch of the new Cricket.
In addition to Cricket's operations, AT&T also acquired spectrum in the PCS and AWS bands covering nearly 138 million people. This spectrum is largely complementary to AT&T's existing spectrum holdings and includes unutilized spectrum covering 41 million people. AT&T will immediately begin to put the unutilized spectrum to use to support LTE services for its customers.
As of close, Leap had about 79.8 million shares outstanding. Leap will be delisted from the NASDAQ.