Saturday, July 13, 2013

Why Does AT&T Want to Buy Leap Wireless Now?

Why does AT&T want to buy Leap Wireless now? That’s a different question than asking why AT&T might want to buy additional assets.

AT&T has been among the list of potential Leap Wireless acquirers for some time, along with T-Mobile USA and Sprint.

There are lots of reasons for the expectations of further acquisitions by the U.S. market leaders. Organic growth has become quite difficult in a saturated market, making acquisitions within the core market, and acquisitions in new markets, the fastest way to obtain additional subscribers and revenue growth.

And though top-tier mobile service providers are not unduly enamored of prepaid accounts, as opposed to postpaid, prepaid remains one of the few places in the domestic market where growth is expected.

And since the major carriers have tended to favor separate brands when participating in the prepaid business, the Cricket business works for AT&T.

One motivation that was behind the ill-fated bid for T-Mobile USA--spectrum assets--also is an attraction here. Getting additional customers is helpful, but spectrum assets also are helpful, especially when complementary to AT&T’s current holdings.

Still, there is the issue of timing. Assuming regulatory issues are not an issue, and market conditions are neutral to favorable, why make the bid now?

Maybe because other potential rivals are preoccupied. T-Mobile USA continues to digest MetroPCS, while Sprint has combined with SoftBank and Clearwire. Verizon Wireless has little interest in becoming a bigger force in prepaid.

But there is Dish Network.

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