AT&T Bid for Leap Seen Winning Approval of U.S. Agencies

Photographer: Tim Boyle/Bloomberg

An AT&T Inc. store in Chicago. Close

An AT&T Inc. store in Chicago.

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Photographer: Tim Boyle/Bloomberg

An AT&T Inc. store in Chicago.

AT&T Inc. (T)’s $1.2 billion deal to buy Leap (LEAP) Wireless International Inc. would probably win approval from U.S. regulators, who may demand the company give up airwaves where its holdings surpass federal benchmarks.

“This deal is probably achievable, but it will get looked at closely,” Allen Grunes, an antitrust lawyer with GeyerGorey LLP in Washington, said in an interview today.

The deal extends a frenzy of telecommunications mergers this year as small U.S. carriers look to team up with larger companies. T-Mobile US Inc. merged with Leap rival MetroPCS Communications Inc. in May, and this month SoftBank Corp. bought Sprint Nextel Corp.

Antitrust officials at the Justice Department and airwaves regulators at the Federal Communications Commission aren’t expected to conclude consumers would be harmed by the loss of Leap as a competitor, Paul Gallant, Washington-based managing director at Guggenheim Securities LLC, said in a note today.

Leap, based in San Diego, is the fifth-largest U.S. wireless carrier and has 5.3 million customers compared with 77.8 million for No. 2 AT&T and 98.2 million for leader Verizon Wireless, according to Bloomberg Industries data.

AT&T offered $15 a share, or an 88 percent premium over Leap’s July 12 closing price. Leap shares rose $8.97 today, or 112 percent, to $16.95 at 4 p.m. New York time after trading as high as $17.25. The heightened price shows traders think another bidder may vie for Leap, Todd Rethemeier, an analyst with Hudson Square Research Inc., said in an interview.

Concentrated Airwaves

The FCC and Justice Department in 2011 moved to block AT&T from buying fourth-largest provider T-Mobile US Inc., concluding regional carriers weren’t meaningful competitors, and regulators probably won’t decide differently now, Gallant wrote.

In some markets, the deal may bring the company above the FCC’s thresholds designed to ensure competition by preventing concentrated airwaves holdings.

“This is where regulators are likely to focus,” Gallant wrote. The number of such markets may become clear in AT&T filings with the FCC, he wrote.

AT&T could resolve any concerns by giving up airwaves, Warren Rosborough, an antitrust lawyer with McDermott Will & Emery LLP in Washington, said in an interview.

“There could be some local markets where the picture isn’t so good for AT&T, but I don’t think AT&T will have any problems spinning off towers to fix local concentration issues,” Rosborough said.

Low-Income Customers

Leap’s Cricket brand sells to low-income customers, who may be disproportionately affected by Leap’s removal from the market, Harold Feld, senior vice president of the Washington-based policy group Public Knowledge, said in a July 12 statement. He said regulators should reject the deal.

“The wireless market does not need more mergers,” Feld said.

AT&T said in a July 12 statement it will keep and expand the Cricket brand after it acquires the company’s retail stores, customers and a network that covers about 96 million people in 35 states.

AT&T Chief Executive Officer Randall Stephenson has been on a hunt for spectrum -- the airwaves that let mobile devices make calls and download data -- ever since regulators blocked the $39 billion T-Mobile proposal.

Since then, AT&T has resorted to smaller acquisitions, such as a $1.9 billion deal in January to acquire airwaves from Verizon Wireless, to build enough capacity to handle increasing demand for music downloads and video streaming on mobile devices.

Reviewing Deals

The deal with Verizon is under FCC review, as is AT&T’s proposal to buy spectrum and subscribers from Atlantic Tele-Network Inc., and the review of the Leap transaction may be slowed as officials work to review the three deals together, Jeffrey Silva, a Washington-based analyst with Medley Global Advisors, said in an interview.

AT&T’s Washington-based spokesman Michael Balmoris referred questions to the company’s July 12 statement, which said the Dallas-based company expects the Leap deal to close in six to nine months. Justin Cole, an FCC spokesman and Gina Talamona, a Justice Department spokeswoman, declined to comment.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Michael Hytha at mhytha@bloomberg.net

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