FCC Approves AT&T Takeover of Leap, Implements Conditions, Orders Spectrum Divestitures

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The FCC has issued a memorandum opinion and order consenting to the transfer of control and assignment of FCC licenses, as well as the sale of subscribers and other assets, from Leap Wireless International, Inc. to AT&T, Inc.  In July of 2013, AT&T announced that it agreed to buy Leap, its network, licenses and all of its 4.6 million customers for $1.2 billion.  The FCC’s order conditions its approval on various obligations that AT&T must honor post-closing.  Within 6 months of the date of the merger, AT&T must divest itself of between 10 megahertz and 20 megahertz of AWS-1 spectrum in twelve markets, including Reno, Spokane, Lake Charles, portions of Nevada and Kansas, and various markets in South Texas.  AT&T will also be required to “honor the rates, terms and conditions” of Leap’s CDMA roaming agreements “for so long as AT&T operates Leap’s CDMA network.”  AT&T anticipates that the subscriber migration from, and eventual turn-down of, the Leap CDMA network will conclude in 12 to 18 months.  Additionally, AT&T is also required to deploy LTE in various South Texas markets in as little as 90 days after the deal closes, and in all instances, no later than one year after closing.  The LTE deployment deadline in the South Texas markets hinges on the specific market involved and whether Leap was operating on AWS-1 or PCS and AWS-1 spectrum.

For all customers who wish to maintain their existing Leap rate plan during the transition period (including Lineline customers), those rates and or Lifeline discounts will be honored by AT&T until the earlier of the date:  (1) the customer voluntarily upgrades his or her device; or (2) the customer chooses another rate plan; (3) the customer migrates to the “New Cricket” billing platform using AT&T’s GSM or LTE-based network; or (4) AT&T decommissions Leap’s CDMA network.  For up to 18 months after the merger closes, AT&T will make available in all Leap markets a nationwide, pre-paid $40 per-month rate plan for feature phones (but not smartphones or other data devices) that includes unlimited talk, text and data.  However, AT&T makes no commitment to extend this low-rate pre-paid offering after 18 months.  Furthermore, for up to 12 months after the merger closes, AT&T will offer another pre-paid rate plan, costing less than $40 per-month, with fewer features intended for value customers.  Finally, AT&T also agreed to additional device “trade-ins” and “credits” for existing Leap customers, including those Leap customers with CDMA-based Apple iPhones.  For up to two years after the issuance of the order, AT&T will be required to submit to the FCC a quarterly report detailing the company’s status on honoring the various commitments and the progress of its network transition plan and LTE build-out.

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