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The Deal: This Time, Washington is Unlikely To Foil AT&T's Plans

Stocks in this article: TLEAPVZS

NEW YORK ( The Deal) -- If precedent offers any indication, there should not be any hurdles high enough to stop AT&T Inc.'s (T) $4 billion plan to acquire Leap Wireless International Inc. (LEAP) Still, the companies' merger agreement includes a substantial regulatory protection in case the deal is challenged by antitrust regulators or the Federal Communications Commission.

"Any deal involving AT&T is going to be scrutinized closely," said Paul Gallant, a telecom analyst at Guggenheim Securities LLC.

As insurance against a permanent injunction from Washington and the courts, the companies' agreement, announced Friday, calls for Leap to enter into a three-year long-term evolution data roaming agreement with AT&T, which will provide coverage in certain of Leap's markets not covered by Leap's LTE network.

If Leap enters into the roaming agreement, AT&T will then have the option within 30 days after entry into the roaming agreement to purchase certain of Leap's spectrum assets.

If AT&T does not exercise its right to purchase all of the specified spectrum assets, Leap can then within 60 days after expiration of AT&T's option require AT&T to purchase all of the specified assets.

The assets to be made available to AT&T will be spelled out in an exhibit to the merger agreement. The exhibit had not been made public Monday.

Leap, which operates under the Cricket brand, has a network covering approximately 96 million people in 35 U.S. states. AT&T has said it will retain the Cricket brand name, use Cricket's distribution channels and expand Cricket's presence to additional U.S. cities. Gallant said the regulators have been focused on preserving competition between the four major carriers -- AT&T, T-Mobile USA, Sprint Nextel Corp. (S) and Verizon Communications Inc. (VZ) -- and have disregarded competition from Leap and Metro PCS when it comes to measuring the state of play between the four large players. In rejecting the proposed combination of AT&T and T-Mobile two years ago, the Department of Justice and the FCC concluded that regional carriers like Leap were not meaningful competitors to AT&T Wireless.

"It's hard to see how they could flip that around now and try to block the Leap merger," Gallant told The Deal.

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