For Leap Wireless International Inc., it’s all about clusters. The carrier, which offers its flat-rate Cricket service in 37 markets, furthered its market cluster plans last week, announcing a deal to expand its footprint in the Northwest and exit some of its operations in the Midwest.
Leap signed an agreement to enter a joint venture with CSM Wireless L.L.C. and WLPCS Management L.L.C. to offer service in Portland, Ore., which is adjacent to Leap’s operations in Salem and Eugene, Ore. In connection with the deal, Leap said it has agreed to sell its Toledo and Sandusky, Ohio, operations to Cleveland Unlimited Inc., which offers a similar flat-rate service targeting the youth segment under the Revol brand in Cleveland.
“This transaction is another step forward in our market clustering philosophy, an approach we believe allows us to more effectively provide value and services to customers,” explained Doug Hutcheson, Leap’s president and chief executive officer.
Hutcheson noted the carrier’s clustering plans allow customers to use their unlimited calling service when making calls from adjacent markets. Leap already offers such clusters in a handful of markets and recently launched its Fresno, Calif., market as a cluster with its other central California operations.
Hutcheson added that the carrier planned to cluster similar markets where it has already launched as well as markets it plans to build out using spectrum it acquired during the Federal Communications Commission’s Auction 58 earlier this year.
For the Oregon joint venture, dubbed LCW Wireless L.L.C., Leap said it would contribute approximately $65 million in investments, including its existing Salem and Eugene operations, and control 73 percent of the venture. CSM Wireless will contribute the 10-megahertz C-block license it won during Auction 58 and control 27 percent of the partnership.
Leap’s management said it expects the Portland operations to add 1.9 million covered potential customers to the 522,000 covered pops in Salem and Eugene. The carrier added that the Portland market will be part of its planned CDMA2000 1x EV-DO deployments, which are expected to begin in earnest next year.
Under the Ohio agreement, Leap said it was selling its 15-megahertz spectrum licenses covering more than 1.5 million pops in Toledo and Sandusky and network assets to Revol and network partner CSM. Leap said it plans to continue serving its Cricket customers in the Ohio markets until the transaction is completed. Leap will maintain its Dayton, Ohio, operation, which is near a 10-megahertz license that bidding partner Alaska Native Broadband 1 L.L.C. won during Auction 58.
Leap previously offered a network-sharing arrangement with Revol covering the Ohio properties, which was initiated when the Cleveland market was operated by Northcoast Communications L.L.C.
Once the transactions are completed, Leap said it plans to use proceeds from the Ohio sale to fund the buildout of the Portland license and expects to pocket approximately $3 million in cash.
Leap noted the deal was contingent on Revol gaining waiver approval for financing prior to Dec. 15. If the financing waiver is not granted, the transaction will be converted into a transfer of Leap’s Toledo and Sandusky assets to Revol and CSM for $12.4 million in cash proceeds and the transfer of CSM’s Portland spectrum licenses to the LCW joint venture. If the transfer occurred, Leap would control 75 percent of the LCW joint venture and WLPCS would control the remaining 25 percent, with Leap funding the network buildout through a $75.6 million senior secured credit facility between Leap and LCW.
Revol President and CEO Rocky Crossland expressed similar market clustering aspirations, noting the markets acquired from Leap would complement plans to offer service in Canton, Youngstown and Columbus, Ohio, as well as Indianapolis.
