It turns out AT&T was negotiating a deal with Leap Wireless but it wasn’t to simply buy T-Mobile assets once its proposed acquisition of the Deutsche Telekom-owned carrier went through. No, it actually wanted the whole company outright.
This is if a story published by Reuters is to be believed. The news organization is reporting that AT&T and Leap Wireless held talks of a possible acquisition. Furthermore, Reuters says that it “could not learn whether those discussions are still ongoing.”
The negotiation was serious as the “people familiar with the matter” Reuters is quoting for the story said that Leap Wireless had apparently even hired bankers to advise them regarding the possible acquisition by the US wireless giant.
It was reported in November of last year that AT&T was in talks with Leap Wireless about the smaller prepaid subscribers-focused carrier possibly buying assets T-Mobile assets from AT&T if the giant carrier succeeded in buying its rival.
Apparently, this was a strategy done by AT&T to get its proposed multi-billion-dollar deal to acquire T-Mobile to get approved by regulators.
AT&T has repeatedly argued in its bid for T-Mobile that it needed a lot more spectrum if it will continue to provide good service to its subscriber base. This need is aggravated by the rise of smartphones and tablets ever needing more and more bandwidth to consume content over wireless mobile networks.
However, rivals like Sprint continually argued that AT&T buying T-Mobile will not benefit consumers but will actually lead to higher prices for services and the loss of thousands of jobs.
AT&T apparently saw that potential deals with smaller carriers like Leap Wireless – which operates the prepaid brand Cricket Wireless – in which assets from T-Mobile will be bought once T-Mobile is acquired by AT&T will help the proposed acquisition gain support from regulators who needed to approve the deal for it to go through.
In the long run, AT&T’s proposed acquisition of T-Mobile did not succeed and it had to a massive $4 billion breakup fee to T-Mobile ($3 billion in cash and $1 billion in other assets like spectrum). As a result, AT&T reported a massive loss of $6.7 billion for the last three months of 2011.
Image from kfisto on Flickr (CC)