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July 16, 2013

What the Leap Do We Know?

In the 1999 TNT movie "Pirates of Silicon Valley", Steve Jobs is confronted by the fact that he is still fighting the wrong enemy. I bring this up, because in AT&T’s Leap Wireless acquisition, one that is clearly more about spectrum than customers, the rumor is they are going to need to sell off some spectrum in order to get the deal done.

In recent years we have seen spectrum gains by T-Mobile and Sprint, each as a result of mergers (T-Mobile with MetroPCS, and Sprint courtesy of falling under the Softbank umbrella along with Clearwire), both of which in my opinion made for significantly better companies. I have concerns about the scrutiny being placed on AT&T’s efforts, though, and it will be interesting to see how much of the same forces that gathered to put the kibosh on the T-Mobile deal will rear their heads for this one.

By and large, animosity is a hard thing to overcome. For instance, in the Midwest Comcast is Enemy #1 and AT&T is loved, while in the Florida the reverse is true. Much of this has to do with legacy and perception from the past, though to some degree it may be tied to the amount of employment each company brings to the respective area. Regardless, though, when it comes to AT&T you would think former President Richard Nixon and former AT&T CEO John DeButts were still determining who is more powerful.

AT&T is a powerhouse, of course, and they have a history of being a strong competitor, but the bigger question is, under what circumstances should mergers be allowed? Consider, for example, Leap’s "weak sister" position among the competition. The company has great brand recognition through Cricket Wireless and a strong history of prepaid. Also, if you think back to when Virgin and Boost became Sprint’s responsibility you can see that Cricket and AT&T GO can probably coexist. In fact, from a consumer protection standpoint, it is difficult to imagine Leap customers being a strong objection factor as the prepaid market is wide open and has sufficient competition even with some smartphones. On the spectrum side, though, the point has been made that spectrum is needed and since we have very little available, acquisition has been a driver.

So other than legacy, I see no significant grounds for objection to AT&T’s acquisition of Leap Wireless

Oh, except perhaps for…precedence! As a "lover scorned", DISH represents a prize to be acquired with AT&T its most likely new friend (assuming that Lightsquared fails to realize that DISH represents a better regulatory environment).

The bottom line is that it isn’t much of a Leap that AT&T is acquiring, though it is certainly one heckuva leap to think they are going to manage to do so without a fight from opponents looking to DISH it out.



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