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Legal & Regulatory Analysis of the AT&T-Leap Wireless Merger Earlier this summer, telecommunications giant AT&T announced its agreement to acquire prepaid wireless provider Leap Wireless International at a purchase price of $15 per share, roughly $1.2 billion total. This comes less than two years after AT&Ts ill-fated attempt to acquire a much larger rival, T-Mobile. All signs indicate the deal will be approved by government regulators. However, on the heels of its failed T-Mobile bid, AT&T knows better than anyone that the acquisition is far from complete. The AT&T-Leap merger is subject to review by two federal government agencies, the Federal Communications Commission and Department of Justice. These regulators nixed AT&T’s attempt to merger with T-Mobile due to concerns that such a deal would result in decreased competition in the wireless market and an excessive concentration of spectrum in key markets. The AT&T-T-Mobile merger would have resulted in 2 companies, AT&T and Verizon Wireless, combining for over 75% of the wireless market. Unlike T-Mobile, AT&T’s proposed merger with Leap does not carry the same potential for broad market consolidation or spectrum concentration, which should provide AT&T a far greater likelihood of withstanding both DOJ and FCC scrutiny. One unique facet of the AT&T-Leap merger is the nature of Leap’s service offerings and customer base. By and large, Leap Wireless is a “pay as you go” prepaid service provider. Prepaid wireless and wireless broadband services have gained in popularity over the past several years and AT&T’s acquisition of Leap marks the first encroachment by a major wireless carrier into the prepaid wireless market. To date, this niche market had been the one area of the wireless industry not dominated by the retail arms of the “big three,” AT&T, Verizon and Sprint. When one considers T-Mobile’s recent acquisition of MetroPCS, also a strong player in the prepaid niche, this proposed merger demonstrates that prepaid wireless services are not only legitimized, they are here to stay. Let’s not get ahead of ourselves, however, as the AT&T-Leap merger is far from a done deal. AT&T must first pass through the regulatory approval gamut that proved fatal to its last attempt to acquire a smaller rival. “One unique facet of the AT&T-Leap merger is the nature of Leap’s service offerings and customer base.” 87 W D M


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