US number two operator AT&T made a surprise move last night to acquire prepaid carrier Leap Wireless for $1.2 billion in cash.

The offer of $15 a share represents an 88 per cent premium over Leap’s closing price of $7.98 yesterday. San Diego-based Leap also has $2.8 billion in net debt.

According to GSMA Intelligence, Leap is the country’s seventh-largest mobile network operator with 5.2 million total connections (including 3 million 3G CDMA connections and 112,000 LTE connections), accounting for a 1.5 per cent share of the US market. It operates the Cricket brand and has 3,400 employees.

A statement from AT&T said the Cricket brand will be retained.

AT&T’s move comes amid an ongoing shakeup in the US mobile industry. Number three operator Sprint was this week acquired by Japanese giant SoftBank, and number four carrier T-Mobile has upped its game recently with the acquisition of Leap’s prepaid rival MetroPCS and a bold new strategy. Satellite network player Dish – which itself failed to buy Sprint – had recently been linked with a move for Leap. In May 2012 it was reported that AT&T was holding talks with Leap, but it has taken until now for agreement to be reached.

“The combined company will have the financial resources, scale and spectrum to better compete with other major national providers for customers interested in low-cost prepaid service,” noted a statement from AT&T. “Cricket’s employees, operations and distribution will jump start AT&T’s expansion into the highly competitive prepaid segment.” AT&T is already the nation’s largest prepaid operator, although it has recently struggled to attract new customers.

AT&T’s move is also likely to have been driven by the need to boost its spectrum holding. “The acquisition includes spectrum in the PCS and AWS bands covering 137 million people and is largely complementary to AT&T’s existing spectrum licenses,” added the statement. “Immediately after approval of the transaction, AT&T plans to put Leap’s unutilised spectrum – which covers 41 million people – to use in furthering its 4G LTE deployment and providing additional capacity and enhanced network performance for customers’ growing mobile Internet usage.”

AT&T aims to close the deal sometime between January and April 2014. It needs to be approved by both the Federal Communications Commission and the Department of Justice, but is likely to face less scrutiny than AT&T’s failed $39 billion attempt to buy T-Mobile US two years ago.