Call it an example of newfound pragmatism among the flat-rate wireless service providers, which are coming under growing pressure to consolidate.
San Diego’s Leap Wireless (NASDAQ: [[ticker:LEAP]]) announced today that it’s forming a “joint venture” with San Antonio, TX-based Pocket Communications that will provide pre-paid wireless services to customers of both companies in South Texas. As joint ventures go, however, this one clearly puts Leap in the driver’s seat.
Under the agreement, Leap, the operator of the Cricket wireless network, will own 76 percent of the joint venture and will manage wireless services in a region that extends from San Antonio to Laredo and includes the Rio Grande Valley. “As one step in the transaction,” the company says in a statement, “Leap will purchase some of Pocket Communications’ South Texas assets for approximately $38 million in cash.” Leap says it also will contribute its own assets in South Texas to the joint venture—along with the remainder of Pocket’s assets. (Pocket Communications, which also serves areas of Massachusetts and Connecticut, says its New England operations are not included in the deal.)
Other terms of the deal make the joint venture sound more like a de facto acquisition. Leap says that after the joint venture has operated for three and a half years, the two partners will gain certain rights to Pocket’s 24-percent stake. And if Leap gets acquired or merges with another company—which is a much-rumored possibility—Pocket will be obligated to sell its stake in the joint venture.
Speculation about a Leap M&A deal erupted in January, after the Wall Street Journal reported that Cricket’s parent company had hired investment bankers to advise it on its strategic options. I called Leap spokesman Greg Lund to ask if those bankers
