media logos

Leap and Pocket Communications join up for enhanced coverage in Texas

Part of the reason many people see an inevitable merger between MetroPCS and Leap Wireless is because they’re both regional carriers offering similar services. Why not combine and make a more nationwide network? Clearly the matter is a bit more complicated than that, which is why we haven’t seen a merger, but the similar services aspect plays into it. Before yesterday I hadn’t heard much about Pocket Communications, but they appear to offer similar services as well, though in smaller regions. They do own spectrum, though, and they do offer services similar to those of Cricket and MetroPCS. Yesterday we learned that they joined up with Leap Wireless for a joint venture in the South Texas region, which will provide better coverage for both Pocket and Cricket.

The basic idea is that both Cricket and Pocket customers will realize the coverage of both networks now. The companies will move their South Texas licenses and assets to the joint venture, with Leap owning 76 percent and Pocket owning 24. There’s also a matter of a $38 million asset purchase by Leap from Pocket, but those assets still go into the joint venture. Cricket customers in South Texas will then have access to Pocket’s network, and vice versa. It also appears, from what Leap CEO Doug Hutcheson said, that Pocket customers in South Texas can roam on Leap’s network nationwide.

I wonder if this is a precursor to an acquisition. We know that Leap hired Goldman Sachs to explore strategic maneuvers, so perhaps part of the plan is to build up the company before making a move. Given the timing, however, it seems like Leap and Pocket were working on this before Leap hired Goldman.

There is one interesting provision in this deal. “Pocket will be obligated to sell its interest in the joint venture to Cricket in the event of a Leap change of control.” Since Pocket’s interest in the joint venture includes its South Texas licenses and assets, it appears those would go with Leap in any merger. That might make the company more attractive to MetroPCS, or perhaps other wireless carriers, and in addition perhaps fetch Leap a better price.

For now, though, Cricket’s network gets a bit stronger. We’ll see how this plays into any M&A talks. I’m sure it will.