Leap and Pocket to Provide Expanded South Texas Region Mobile Services
February 23, 2010 11:46 AM | Interesting | Comments (0)
 Leap, which offers unlimited, pre-paid mobile voice, text and Web, as well as mobile broadband service through Cricket, had approximately 5 million customers across the nation at the end of 2009, including approximately 400,000 in the South Texas region. Pocket Communications, which offers similar unlimited pre-paid services, had approximately 320,000 customers in the South Texas region at the end of 2009. |
At the closing, the joint venture will acquire substantially all of Pocket Communications' and Cricket's wireless licenses and operating assets for the South Texas region. Leap will own approximately 76 percent of the joint venture and Pocket Communications will own approximately 24 percent. As one step in the transaction, immediately prior to the closing, Leap will purchase some of Pocket Communications' South Texas assets for approximately $38 million in cash, which Leap will then contribute to the joint venture together with its own South Texas assets. Pocket will contribute the remainder of its South Texas assets to the joint venture directly. The companies have certain put and call rights on Pocket's interest in the joint venture which generally commence after 3-1/2 years. In addition, Pocket will be obligated to sell its interest in the joint venture to Cricket in the event of a Leap change of control.
The joint venture is expected to generate significant cost synergies, beginning about twelve months after closing, as a result of efficiencies from improved purchasing, customer care, and broad operational improvements, as well as the elimination of overlapping cost such as coverage redundancies, overlapping distribution, and some customer awareness activities. These joint venture cost synergies, together with the OIBDA contribution from the business Pocket contributes to the joint venture, are expected to result in additional contribution to Leap's OIBDA in the range of $50-60 million annually within two years after closing. The joint venture is also expected to generate some additional revenue synergies, not included in the above estimates, primarily as a result of the joint venture being a stronger competitor in South Texas region, and reduced churn from customers' access to a more attractive wireless service footprint.
Completion of the transaction is subject to customary regulatory and other closing conditions, including approval by the Federal Communications Commission. The parties expect the transaction to be completed later this year.
Following the closing, Pocket Communications will continue to provide services under the Pocket brand in New England.
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