The continuing consolidation of the US mobile market took another step on Friday with AT&T agreeing to buy smaller US mobile network operator Leap for $1.2bn, which will take the combined company to within a few million customers of market leader Verizon.
Leap isn’t exactly a thriving network. The company has around five million customers using low-margin prepaid handsets, has lost money and market share for some time, and currently owes creditors $2.8bn. What it does have is spectrum, and AT&T needs that to compete with top dog Verizon and keep the underdogs off its turf.
"The acquisition includes spectrum in the PCS and AWS bands covering 137 million people and is largely complementary to AT&T’s existing spectrum licenses," said AT&T in a statement.
"Immediately after approval of the transaction, AT&T plans to put Leap’s unutilized spectrum – which covers 41 million people – to use in furthering its 4G LTE deployment and providing additional capacity and enhanced network performance for customers’ growing mobile Internet usage."
It has been a year of consolidation for the US mobile industry. T-Mobile has snapped up Metro PCS, another player in the prepaid market with a nice chunk of spectrum and LTE hardware, and earlier this month the FCC approved Softbank's merger with Sprint. Both companies are trying new techniques to win over customers, offering real unlimited data plans and no contracts.
These newly revitalized lesser players mean AT&T and Verizon are girding up to defend their patch, and the spectrum they can buy up will be used in the future to keep competition to a minimum.
Leap's Cricket brand and 3G and LTE networks will be carried on under AT&T's stewardship and the company will continue to pitch itself to the low end of the market – either young people or those with poor credit who don’t enter into two-year contracts. Based on current US economic statistics, the latter market is going to grow for some time to come. ®