Midday Commentary: Cricket bonds soar in heavy trading on news of AT&T acquisition

By Paul Deckelman

New York, July 15 - Cricket Communications, Inc.'s bonds zoomed higher by more than a dozen points on Monday morning, propelled by the news that wireless giant AT&T Inc. has agreed to acquire its considerably smaller sector peer, Leap Wireless International Inc., the corporate parent of San Diego-based Cricket.

Cricket's 7¾% notes due 2020 shot up to above the 115 bid mark in heavy trading, after having closed at 101 3/8 bid late Friday.

AT&T and Cricket announced their big deal on Friday afternoon - after the financial markets had pretty much shut down for the day and the week.

A trader said on Monday morning that Cricket's bonds were "all that's trading" in the otherwise relatively sleepy summer session. A market source said that over $75 million of the notes had changed hands by around 10:45 a.m. ET, almost all of it in round-lot trades of at least $1 million.

Leap's Nasdaq-traded shares likewise climbed sharply on heavy volume once trading opened up, gaining $9.02, or 113.031%, as of 10:30 a.m. ET, to $17.00. Volume at that point was 19.6 million shares, more than 15 times the norm.

Under the terms of the agreement between the two companies, AT&T will acquire Leap for $15 per share in cash, or a total of $1.2 billion, getting all of Leap's wireless properties, including wireless spectrum licenses, network assets and retail stores. As of April 15, Leap had $2.8 billion of net debt, including its $1.6 billion of 7¾% notes.

AT&T, based in Dallas, is currently the second-largest provider of wireless communications in the United States, trailing Verizon Wireless by several million customers - both are over the 100 million-customer mark. Its acquisition of Cricket, assuming it is approved by the shareholders of both companies and obtains the necessary regulatory approvals, would add about 5 million customers to its roster, give it the valuable and coveted radio-frequency spectrum space it needs to continue expansion, and augment its standing in the pre-paid, or "pay as you go" segment of the wireless industry, where Leap and Cricket operate.

For Leap, the deal is the culmination of years of speculation that it would be acquired by a larger industry rival. The ebb and flow of such speculation - frequently involving another Dallas-based carrier, MetroPCS Corp., which, like Leap operates in the pre-paid segment of the business - had periodically sent its bonds and share shooting higher, only for them to come back down to more normal levels when nothing ever became of such possible transactions.

Leap's acquisition is the latest in a series of consolidation transactions in the wireless industry. Late last year, Leap's sometime supposed acquirer, MetroPCS, itself agreed to be acquired by Deutsche Telekom, the parent of Number 4 U.S. wireless operator T-Mobile, a deal which closed in May. And the third-biggest carrier, Sprint Nextel Corp., is in the process of being bought by Japan's SoftBank Corp.

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