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Small Carriers Push For Roaming Conditions on Leap Deal

Tickers in this article: LEAP T

WASHINGTON ( The Deal ) -- Small wireless carriers are mounting an 11th-hour push to convince the Federal Communications Commission to require that AT&T charge "reasonable" roaming 4G rates as a condition of approving AT&T's acquisition of prepaid mobile phone carrier Leap Wireless International .

AT&T Inc. announced on July 12, a $15 per share deal to acquire Leap, which sells wireless service to low-income and budget-minded consumers under the Cricket brand. Coupled with Leap's $2.8 billion in net debt, the deal values the target at roughly $4 billion.

Last week representatives from the Competitive Carriers Association met with officials of the FCC's general counsel's office and the wireless telecommunications bureau to press the case for merger conditions that would address what the group, which represents rural and regional wireless carriers, said are exorbitant rates AT&T and Verizon Wireless charge smaller carriers for roaming, particularly on their high-speed 4G LTE networks.

The group, along with public advocacy groups and some individual small wireless carriers, is asking the FCC to condition approval of the Leap acquisition on an AT&T commitment either to offer 3G and 4G LTE roaming services on the same terms that competitors negotiate with Leap for at least the next four years, or to provide roaming terms no less favorable than those Leap is entitled to if the merger is broken up. (The companies' merger agreement includes a three-year roaming agreement for Leap if the merger falls apart.)

Finally, the rural and regional carriers want the FCC to make AT&T divest spectrum in markets where the merger would put the combined company over the commission's local spectrum cap.

The smaller carriers' appeal for these conditions is considered a longshot by industry analysts because Leap at the moment does not offer roaming to its customers, so the takeover would not reduce the number of wireless players currently offering roaming. "I would be surprised if the commission's order conditioned LTE roaming because this deal doesn't reduce the number of LTE roaming players nationwide," said Paul Gallant, a telecom analyst at Guggenheim Securities LLC.

Plus, in the 38 markets where AT&T would be over the spectrum cap, previous FCC rulings indicate that the commission believes there is a sufficient number of competitors in most of those areas to offset whatever harm to competition AT&T's relatively large holdings inflict. In only a few markets is AT&T likely to face spectrum divestiture requirements.

But according to an account of the Feb. 4 meeting, CCA officials and their lawyers, Michael Lazarus and Andrew Morentz of Telecommunications Law Professionals PLLC, argued that the transaction will indeed exacerbate the difficulty smaller carriers are having obtaining "reasonable" roaming arrangements. They noted that prior to entering the proposed sale to AT&T, Leap had constructed an LTE network covering 21 million people, which would give Leap an incentive to enter roaming agreements with other carriers.