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AT&T to Take Control of Leap

Screen Shot 2014-02-15 at 4.45.56 PMWritten by Yawen Ge

Edited by Sarah Mejia

AT&T, one of the largest mobile carrier companies, has agreed to purchase Leap wireless company. The deals are a series of procurements that have seen bigger companies buy off smaller, upstarting companies that offer cheaper plans. The move aims to maximize the larger telecommunication’s company dominance over the airwaves. The deal will cost approximately $1.2 billion. It will be the first acquisition for Randall Stephenson, AT&T Chief Executive. Randall’s initial deal to buy T-Mobile was stopped by the justice department in 2011 (Gryta).
Concerned regulators are closely monitoring the AT&T deal. The company is hopeful, stating the odds are good and the regulators will let the deal materialize. This means that AT&T will have to give up the US wireless spectrum. Spectrum is the frequency through which mobile phone carriers are able to transmit wireless signals. Some of the AT&T’s stakeholders, such as subscribers for the services, are to face several changes because of the deals. Providers that offer cheaper services are fast diminishing, while smaller players in the industry like T-Mobile are a growing threat to AT&T. These deals have also had effects on the stock markets, raising the prices. In July, more than a third of Leap’s shares increased to $7.98 between 12th and 15th. This had no impact on the price for AT&T, who are still purchasing Leap’s shares at $15 each. Leap had its most active day with many AT&T stakeholders, particularly investors hoping for stock gains before the deal was publicly announced, on July 12. This gave the buyers a chance to purchase the shares, letting them set the price. Leap’s shares rose to $16.70 in just a few hours as a result.

Stakeholders are individuals who have an interest in a firm or business setup. They are affected by the firm’s activity either directly or indirectly. AT&T’s stakeholders include owners, employees, customers, consumers, suppliers, analysts, public interest groups, non-governmental organizations, educational institutions, investors and the community. All stakeholders share certain responsibilities and interests within the company. In the AT&T-Leap deal, the stakeholders will be interested in the welfare, protection, and rights of the workers. Their organizations and groups will be directly affected by the activity of the two firms. The owners are specifically interested in the company’s profit margins. The workers’ main interest is in the wages they receive. The lenders are interested in getting refunds of credits owed. The community around the business is directly affected by the firm’s activities.

 Screen Shot 2014-02-15 at 4.44.12 PM
Leap was focused on prepaid services, so their subscribers did not have to sign contracts; the plan expected them to pay monthly. Because Leap lacks both the diversity and scale of its competitors and focuses on prepaid services, it has been losing subscribers.AT&T boasts about 107 million subscribers. It hopes to maintain Leap’s subscribers by offering them network access. It also plans to gain more users in new cities. AT&T controls very little spectrum per subscriber, while Leap brings spectrum that covers 137 million subscribers. The move aims to improve its 4G Long Term Evolution (LTE) by expanding it and gaining more capacity. This will increase its usage and give it better connectivity (The Zacks Analyst Blog Highlights, 2013).

After the deal is completed, AT&T will be better equipped to compete with other mobile service providers who offer cheaper alternatives to their subscribers. Young people and low-income earners mainly use Leap technology services. The acquisition by AT&T will create a gap in the market. When AT&T takes over, the subscribers will be misplaced, and this is because AT&T does not offer Leap’s unique services. The deal will leave the subscribers misplaced, which may lead to withdrawal of subscribers, as well as hesitation of potential subscribers to join. AT&T may not get the success and expansion they expected. Although Leap’s stocks were going up, the takeover is under speculation because interested parties felt AT&T were trying to monopolize its services in the market by taking over smaller companies. Public sector regulators and interested parties are still forming inquires to stop the takeover. The deal runs for approximately eight months. Anything can happen considering the attention it has created.

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**Due to technical difficulties, we recently had to switch domains and transfer all of our website content.  Please keep in mind that while we have been publishing articles for two years, the published dates shown may not reflect the initial publish date.

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Gryta, Thomas.  “AT&T to Buy Smaller Rival Leap.” Wall Street Journal, 15 July 2013. 18. Print
Gustin, Sam. “AT&T’s $1.2 Billion Leap Wireless Buyout Faces Static.” Business Time. 15 Nov. 2013. Web. 15 Nov. 2013.
“The Zacks Analyst Blog Highlights: AT&T, Verizon Communications, Atlantic Tele-Network, Leap Wireless International and DTE Energy.” Prnewswire Web. 15 Nov. 2013.

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