NEW ORLEANS-Leap Wireless International Inc. continued its rapid evolution last week, signing a pair of deals with Verizon Wireless that will allow Leap to add nationwide roaming capabilities to its Cricket wireless offering and provide Verizon Wireless with another infusion of wireless spectrum.
Leap said the roaming agreement will enable the carrier to offer its Cricket customers the ability to roam outside of their local calling areas using Verizon Wireless’ 1.9 GHz network, and allows Leap to offer a near-nationwide option that analysts note is becoming increasingly important. Today Cricket customers are provided with flat-rate, unlimited local and long-distance calling plans from their home service areas.
“We are excited to implement a roaming option for our customers who occasionally need to use their Cricket phone outside of their home area,” said Al Moschner, executive vice president and chief marketing officer for Leap. “We believe this additional service will help us to drive new subscriber growth and improve customer retention.”
Leap previously offered very limited roaming capabilities for its customers in a handful of markets that were geographically close to each other like Albuquerque and Santa Fe, N.M. But, customers could not take a phone activated in one market and use it in another Cricket market in another state.
Leap did not say how it would implement the roaming capabilities once they become available during the first half of this year, though it hinted that it would likely be prepaid or charged per minute.
“These are not plans for a nationwide offer,” Moschner noted. “It will be more for the occasional roaming, for safety issues or for college students that visit home during holidays.”
Analysts noted that while Cricket customers are not likely to need extensive nationwide roaming capabilities, the option should help retain those that think they might need to occasionally roam.
“Even though Leap’s Cricket service was aimed more at capturing landline customers with a $50 per month unlimited calling option and not competing with nationwide wireless carriers, the lack of roaming outside of Leap markets was a major drawback to the service,” noted Weston Henderek, senior analyst for wireless services at Current Analysis. “Even though most Leap customers will still call mainly within their local market and network coverage area, the ability to have off-network roaming will make Cricket service more compelling.”
The roaming agreement is similar to a deal signed earlier this year between MetroPCS Inc. and Verizon Wireless that will allow MetroPCS’ local customers to roam on portions of Verizon Wireless’ network. That deal, which also included MetroPCS selling part of its San Francisco spectrum license to Verizon Wireless for $230 million, was seen as more strategic for MetroPCS as its flat-rate, unlimited local calling service is offered in several larger markets where customers have a greater chance of needing nationwide roaming capabilities.
Leap’s nationwide roaming agreement was part of a larger deal with Verizon Wireless that involved the transfer of several spectrum licenses to Verizon Wireless in exchange for $102.5 million in cash. Leap plans to use the additional capital to expand its operations, including building out licenses acquired during the Auction 58.
The 23 licenses sold to Verizon Wireless-including 19 licenses that Leap has not yet built out-cover approximately 8 million potential customers in 20 markets. The licenses include 5 megahertz of spectrum in Little Rock, Ark.; 10 megahertz in Fayetteville and Fort Smith, Ark.; Flint, Kalamazoo, Mount Pleasant and Traverse City, Mich.; Jackson and Vicksburg, Miss.; Plattsburgh, N.Y.; and Eau Claire, Wis.; 15 megahertz in Birmingham and Tuscaloosa, Ala.; Russelville, Ark.; Grand Rapids and Muskegon, Mich.; and Watertown, N.Y.; and 25 megahertz in Adrian, Battle Creek and Jackson, Mich.
Leap also agreed to sell its operating assets in four Michigan markets to Verizon Wireless serving approximately 25,000 subscribers as part of the deal. Leap noted that it will continue to serve those customers in Flint, Battle Creek, Kalamazoo and Jackson until they are eventually transferred to Verizon Wireless’ service.
Following the Verizon Wireless transaction and acquisition of licenses from Auction 58, Leap said it will own wireless spectrum licenses covering 60.2 million pops. The carrier added that the deal will also drop its market reach to 36 markets in the short term, but that it’s planning to add the Fresno, Calif., market to its network in the near future as well as the eventual buildout of its Auction 58 licenses.
Leap’s deal with Verizon Wireless followed the launch of its Jump prepaid service earlier this month. That service is not expected to benefit from the nationwide roaming capabilities.
Leap also announced that it sold 142 towers to Mountain Union Telecom L.L.C. for $18 million that it will then lease back for $1,500 per month per site. The deal further pads the carrier’s balance sheet as it moves ahead with its network expansion, and follows a number of similar deals by other operators recently in monetizing their tower assets.
“At the conclusion of a thorough review of our business operations, we decided that cell-tower ownership and management of collocation tenants should not be a primary strategic focus. The sale and lease arrangement with Mountain Union will enable us to utilize this network infrastructure in the most efficient and productive manner possible, and improve our cash position and financial strength,” said Leap President Doug Hutcheson.
In an unrelated announcement, Dobson Communications Corp. reported that a pair of its subsidiaries were selling 563 towers to Global Tower Partners for a combined $87.5 million. The deals call for Dobson Cellular Systems Inc. to sell 359 towers for $52.4 million and for American Cellular Corp. to sell 204 towers for $35.1 million. Dobson also signed a 10-year lease agreement on those towers with three five-year renewal options for an undisclosed amount.
