Inexpensive, unlimited wireless phone service plans could drive further consolidation in the wireless phone business, as industry leaders AT&T Inc. (NYSE:T) and Verizon Wireless watch customers hit hard by the recession defect to cheaper services from Leap Wireless International Inc. (NASDAQ:LEAP), MetroPCS Communications Inc. (NYSE:PCS) and even Sprint Nextel Corp. (NYSE:S).
This is the rationale behind the rumor that AT&T may lunge for Leap, a wireless carrier that has been taking customers from the big carriers via inexpensive, unlimited cellular plans. However, despite the relatively affordable price tag of $2.7 billion, which would be less than $1,000 per subscriber, the move isn't without pitfalls, most notably the expense of converting Leap's 3.8 million subscribers to AT&T's competing technology. Such pains are what has ailed Sprint Nextel since its creation in the 2005 merger of Sprint and Nextel, which used competing technologies. However, the company may have finally found a means of turning its lemon of a $35 billion deal into lemonade via inexpensive, unlimited wireless plans.
When Sprint acquired Nextel, buried amongst the target's mostly corporate-oriented products was a prepaid consumer wireless service called Boost Mobile. Sprint has dusted it off and has had some success amid the recession pushing the brand in the first quarter of 2009. Boost's $50 per-month unlimited plan dialed up 764,000 customers in the first quarter, offsetting Sprint's lose of 1.3 million contract customers from its namesake brand.
Interestingly, Boost's service still operates off of the old Nextel network, suggesting that AT&T could in the short run continue to operate Leap's network for prepaid customers until it roles out new networks expected in the next two years. By then, the economy will hopefully have improved, and AT&T could try to convert the low-revenue Leap customers to traditional contract plans. So, the AT&T-Leap merger doesn't necessarily seem like such a dangerous jump for AT&T after all. - Matthew Wurtzel
See earlier story about AT&T-Leap from Dealscape
See Sprint Nextel's recent 10-Q from SEC
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"until it roles out new network" == rolls
"offsetting Sprint's lose of 1.3 million contract customer" == loss
Seems like, with the recession, you are missing an in-house proofreader.