AT&T to buy Leap Wireless for $1.2 billion

Roger Yu | USA TODAY

Consolidation continues in the wireless industry.

After failing to land T-Mobile US, AT&T said Friday it agreed to buy prepaid wireless provider Leap Wireless International for $15 per share in cash.

The nation's second largest carrier will pay about $1.2 billion for all of Leap's stock and wireless properties, including licenses, network assets, retail stores and about 5 million subscribers.

Shares of Leap, which is based in San Diego and sells its wireless service through the Cricket brand, rose 2.5% to end Friday at $7.98 before the news was released.

In after-hours trading, Leap shares more than doubled to $17.31.

The deal allows AT&T to quickly build its presence in the increasingly lucrative pre-paid market. AT&T plans to retain the Cricket brand name and will open up its fastest data network -- 4G LTE -- to Cricket customers. It also wants to expand Cricket's presence in more U.S. cities.

Once the deal is completed, AT&T will tap Leap's unused spectrum – which covers 41 million people – to expand its LTE network, it said.

"The combined company will have the financial resources, scale and spectrum to better compete with other major national providers for customers interested in low-cost pre-paid service," AT&T said in a statement.

Leap's network covers customers in 35 U.S. states. As of the end of the first quarter, it had 4,63 million customers, down from 5.17 million in the year-earlier period. Its first quarter revenue fell 4.3% to $789.9 million. As of April 15, Leap had $2.8 billion of net debt.

The deal is subject to review by the Federal Communications Commission and the Department of Justice. AT&T expects the transaction to close in six to nine months.

Owners of about 29.8% of Leap's outstanding shares have agreed to vote in favor of the transaction, AT&T said.

In 2011, AT&T agreed to buy T-Mobile for $39 billion. But citing anti-trust concerns, federal regulators quashed the deal.

SoftBank, a Japanese wireless carrier, las month completed buying Sprint Nextel for $21.6 billion. T-Mobile, the fourth largest carrier in the U.S., also completed its acquisition of pre-paid carrier MetroPCS earlier this year.