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Mobile Broadband Strategies

FCC Approves AT&T’s Leap Acquisition

Daily Insight | Rich Karpinski | March 14, 2014

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AT&T finally owns Leap. The operator received approval from the FCC, enabling it to hop the final hurdle to closing the deal.
 
FierceWireless reports AT&T made a series of concessions to get the approval, including agreeing to keep Leap’s Cricket brand, aggressively compete on price in prepaid and to divest Leap spectrum in 12 markets, primarily in Texas and Nevada. AT&T said it plans to deploy LTE on Leap’s unused AWS and PCS spectrum licenses, as well as shutter Leap’s CDMA network and re-farm the spectrum for LTE soon after the deal officially closes. AT&T will also shutter its own prepaid brand, Aio.
 
Yankee Group Senior Analyst Rich Karpinski comments
 
“AT&T's challenge here will be in combining the traditional prepaid demographic of Cricket with the more mid-market no-contract customer its Aio brand pursued. Keeping the Cricket name makes sense due to its brick-and-mortar brand recognition (and 4.6 million subscribers), but the business has had a hard time balancing costs and growth. When it went all-in to get new subscribers—making a big iPhone commitment and boosting promotional costs—its profitability took a hit. When it dialed back those enticements, it had a hard time attracting new subscribers (it’s lost nearly 27 percent of its customers in the past 18 months).  
 
AT&T's solution to that challenge—and it's a smart one, in our opinion—is to focus squarely on growth. That comes from Jennifer Van Buskirk, president of the new Cricket, whom we talked to today shortly after the deal was announced. Van Buskirk, who led the Aio charge at AT&T, says she aims to energize the new Cricket to compete in the value segment of the market, a place T-Mobile has found so much recent success. To grow, Van Buskirk and the new Cricket brand will have to entice new customers into the fold. But they’ll also have to convince existing Cricket customers not to churn away but rather purchase a new device that will work on AT&T's 4G/LTE network. That network and customer transition will happen over 12-18 months, making it a fairly unforced upgrade window for most Cricket customers, but one not without risks (and a transition rival T-Mobile is also navigating via its MetroPCS acquisition). That's plenty of customers in play in a no-contract space where loyalty by definition isn't given in two-year increments but earned every billing cycle—leaving us to watch the shifting sands of prepaid market share very closely in 2014.”
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