Facing long odds to get its acquisition of T-Mobile approved by the government, AT&T (NYSE: T) is preparing to offload a significant amount of the assets it would acquire onto Leap Wireless, according to a report. The move would bolster the smaller carrier but may do nothing to change the overall market situation following the hypothetical merger of the second and fourth-largest carriers in the U.S.
The New York Times reported Monday night that Leap is the frontrunner for any divestitures that AT&T might be forced to make in order to be allowed to spend $39 billion on T-Mobile and become the largest wireless carrier in the U.S. Divestitures have been almost a given from the day the deal was announced–AT&T’s Chairman Randall Stephenson has acknowledged that some things will have to go–and Leap was one of the smaller players identified by earlier reports as a potential acquirer.
Leap would be in a position to take on some portion of T-Mobile’s customers as well as some amount of its wireless spectrum, according to the report. The Federal Communications Commission was blunt when describing the local market power that AT&T would acquire along with T-Mobile, calling it the largest increase in market consolidation ever in wireless and something that would affect 99 of the top 100 local markets in the U.S.
Such a move might allow AT&T to prove to the government it won’t be quite so big and bad if the deal goes through, but the report said the agreement with Leap would not be enough for the smaller carrier to surpass Sprint’s market share. There’s little doubt that Leap would prefer having more customers–all the better to secure better smartphone deals–and spectrum is certainly a valuable asset, yet this plan would still ensure that AT&T and Verizon would control around 75 percent to 80 percent of the U.S. market given that not all T-Mobile customers transferred to Leap will stick around. Leap (known for its Cricket brand sold in Best Buy) is not having a great year, but showed signs of improvement in the third quarter.
It would, however, address one of the government’s major objections to the deal. The other objections–that widespread 4G coverage is quite possible without the deal and that jobs will be lost–may be harder to explain away.