AT&T "Knee-Deep" in Talks to Sell T-Mobile Assets to Leap

AT&T (NYS: T) is "knee-deep" in last-ditch talks with Cricket provider Leap Wireless (NAS: LEAP) to sell Leap substantial assets of T-Mobile USA in a bid to keep AT&T's $39 billion acquisition of T-Mobile afloat, according to a report in the New York Times.

The report, which cited unnamed sources familiar with the matter, said AT&T hopes such a deal would calm concerns at the Department of Justice, which has sued to block the deal on antitrust grounds. The report said such a sale would make Leap the fourth-largest wireless carrier in the country but would still leave AT&T with enough of T-Mobile's spectrum to make the deal worthwhile.

Leap spokesman Greg Lund declined to comment on the report, and an AT&T spokesman did not immediately respond to a request for comment.

For Leap to become the fourth-largest wireless carrier by subscribers, AT&T would have to sell Leap at least 40 percent, if not more, of T-Mobile's subscribers and spectrum, a figure that has been discussed in previous reports. T-Mobile ended the third quarter with 33.7 million subscribers, while Leap ended the period with around 5.8 million total customers. Leap's larger prepaid rival MetroPCS (NAS: PCS) counted over 9.1 million subscribers at the end of the third quarter.

The Times article described AT&T's attempts to sell to Leap as a "Hail Mary pass," and indeed it seems that AT&T's options to offload T-Mobile assets through divestitures are dwindling. Leap has around $800 million in cash and short-term investments, compared with $2.1 billion for MetroPCS. According to a Bloomberg report, which also cited unnamed sources, MetroPCS is not interested in buying T-Mobile customers and spectrum in as many markets as AT&T needs to sell.

Last week, AT&T said it withdrew its application for the T-Mobile acquisition from the FCC so that it could concentrate on it legal battle with the Department of Justice. That trial is set to begin Feb. 13. U.S. District Judge Ellen Huvelle, who is overseeing the case, postponed a hearing in the case set for Wednesday until Dec. 9 "due to the court's scheduling conflict."

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