Realign Spectrum Holdings with View Toward 4G Deployment

Leap Wireless International announced on April 9, 2012 that it has entered into definitive license exchange agreements with T-Mobile USA, Cook Inlet/VS GSM VII PCS (a joint venture between T-Mobile and Cook Inlet) and Leap’s non-controlled, majority-owned venture Savary Island Wireless to exchange wireless spectrum in various markets. Financial details of the transaction were not disclosed.

These transactions involve only the assignment of spectrum – no other assets are included, and are primarily aimed at realigning the spectrum holdings of the involved parties. “These transactions will enhance our spectrum depth in these markets and provide us longer term flexibility to offer a larger LTE channel,” said Leap’s president and ceo Doug Hutcheson. “In addition the transactions will allow us to re-align spectrum in key markets into contiguous channels thereby optimizing our delivery of wireless services.”

Through its wholly-owned subsidiary, Cricket License Company, Leap has agreed to assign eight of Cricket’s AWS licenses to T-Mobile covering portions of Alabama, Illinois, Missouri, New Jersey and Pennsylvania, among others. Cricket acquired the majority of these licenses at Auction 66 for approximately $230 million, or $0.42/MHz POP on average.

Also, Leap’s non-controlled, majority owned venture Savary Island Wireless will assign four AWS D-block licenses covering portions of Illinois and the midwest to T-Mobile.

In exchange, T-Mobile will assign nine AWS licenses to Cricket. These licenses were purchased by T-Mobile at Auction 66 for approximately $572 million in aggregate, or $0.33/MHz POP on average. These licenses cover portions of Arizona, Texas, New Mexico, New Jersey and Pennsylvania, among other areas.

T-Mobile’s joint venture, Cook Inlet/VS GSM VII PCS, will assign two PCS licenses covering Austin and Temple-Killeen, Texas to Cricket. These licenses were acquired at Auction 58 for approximately $12 million, or $0.73/MHz POP.

And in exchange, Leap will assign two PCS licenses covering Austin and Temple-Killeen, Texas to Cook Inlet/VS GSM VII PCS.

According to the companies, there will be no loss of an existing service provider in any of the market areas subject to the transactions at issue. Although T-Mobile, Cook Inlet/VS GSM VII PCS and Cricket are each providing service using some of the licenses included in the license exchange, all of these operations will be transitioned to other spectrum that the applicable carrier has in the same market or is acquiring through this transaction. In the case of the Savary Island Wireless licenses included in the exchange, the company is not currently providing service on these licenses.

Looking at the licenses included in the exchange, it’s clear the geographic realignment of spectrum is the main goal of the transaction. By aligning the spectrum blocks in adjacent markets, the carriers are able to operate more efficiently by facilitating handoffs when users transition to the adjacent markets.