Updated: T-Mobile is fueling MetroPCS' renaissance, will AT&T do the same for Leap?

Sue Marek

A year ago prepaid carrier MetroPCS was limping along trying to expand its LTE footprint by refarming existing spectrum for LTE while searching for more spectrum opportunities. The company in the second quarter of 2012 lost 186,000 net customers and only about 8 percent of its total base had migrated to LTE.

Fast forward to today: MetroPCS, which is now owned by T-Mobile US (NYSE:TMUS), has expanded its service to 15 additional markets. In addition, the company is able to offer customers access to T-Mobile's LTE network thanks to the deployment of a unified core network between the two offerings, giving customers nearly seven times the speed without customers having to upgrade their handsets. Plus, MetroPCS' service is now being sold by an additional 325 resellers.

Speaking on the T-Mobile US investor earnings call, Tom Keys, executive vice president and COO of the MetroPCS brand, said that the company is already experiencing better customer retention rates. "People feel that it's a better network," he said.

Keys also noted that many independent distributors are "clamoring" to sell MetroPCS because they see its potential. Plus the company is benefiting from an expanded device portfolio. Keys said that thanks to T-Mobile, Metro has added seven new HSPA+/LTE devices to its lineup that access T-Mobile's network.

Certainly MetroPCS' current momentum would not have happened without the acquisition by T-Mobile. From the start, T-Mobile positioned this deal as a combination of two different companies, not the takeover of one company by another. T-Mobile also has maintained MetroPCS' Dallas headquarters, and several of MetroPCS' core management team are still around: Besides Keys, Braxton Carter, formerly MetroPCS' CFO, became the CFO of the merged company.

Contrast this deal with AT&T's (NYSE:T) July 12 announcement of its plans to acquire Leap Wireless (NASDAQ:LEAP) for $1.2 billion. AT&T said it plans to use Leap's unused spectrum to expand its LTE network and also provide additional capacity to its existing network. In addition, the operator said it intends to keep the Cricket brand and offer those prepaid customers access to AT&T's network.

Leap operates a legacy CDMA network and has deployed LTE to a coverage area of 21 million POPs. But average speeds on its LTE network are only around 4 Mbps due to the operator's spectrum constraints.

At first glance, it appears that AT&T plans to integrate Leap in much the same way T-Mobile US is integrating MetroPCS. But AT&T has remained mum on any details. There's been no mention of maintaining a presence in San Diego, Leap's home base, nor any talk of keeping members of Leap's management team. That doesn't mean it won't happen, it just means that there has been no public disclosure of those plans. 

When asked for more details about AT&T's plans with Leap, AT&T spokesman Mark Seigel provided the following statement: "As previously announced, AT&T will retain the Cricket brand and expand Cricket's distribution nationwide.  To do that, we will need Cricket's employees, operations, and know-how.  In this industry, you never have enough talent, and at AT&T you'll find lots of employees, including some in key leadership positions, who came to our business through similar combinations.  While we have not made any decisions as to how we'll structure operations going forward, we know that Cricket's people will be an important part of our plans for success in the highly competitive prepaid segment."

Likewise, on Leap's second quarter earnings call with investors, Jerry Elliott, Leap's COO, said that Leap's dealer channel is excited about AT&T's plans to keep the Cricket brand because it will give them access to a nationwide LTE network as well as AT&T's customer care organization.

But beyond the above statement, details of AT&T's plans to integrate Leap have been scarce. The deal is expected to close in the next six to nine months and in the meantime Leap's prepaid competitors will likely take advantage of the uncertainty. --Sue

This editorial was updated Aug. 12 to include the statement from AT&T's Mark Seigel.

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