As speculation mounts that Leap Wireless International Inc. has hired advisers to explore a potential sale or merger of the company, look for international operators to be interested in the property.
Leap stock was up 13% Monday after the Wall Street Journal reported that the company is once again exploring its merger options. The stock was down a few points on Tuesday. While conventional wisdom has Leap teaming with MetroPCS Communications Inc. because those two companies previously talked about combining, but that may be unlikely after a 2007 merger attempt failed. Likewise, Verizon Wireless and AT&T Mobility are often mentioned as likely partners, but both carriers would face increased scrutiny from federal regulators who already worry too much that the nation’s No. 1 and No. 2 operators wield too much power in the marketplace.
The Leap-MetroPCS rumors pop up every few months, although this speculation appears different in that news outlets are going so far as to name the advisers hired. In the past, carriers have been known to watch Wall Street’s reaction to potential tieups to see how the Street responds to the news.
Deutsche Telekom and SK Telecom both have shown their interest in the U.S. marketplace; DT owns T-Mobile USA Inc., the nation’s fourth-largest wireless operator. Speculation heightened last fall that DT was interested in increasing its presence in the U.S. by buying Sprint Nextel Corp. T-Mobile and Leap use different technologies, which may have dampened DT’s interest Sprint Nextel and likely would be a factor in weighing a purchase of Leap.
Despite its writeoff of the failed Helio venture, SK Telecom reportedly is still interested in a U.S. wireless play. SK Telecom issued a statement in 2008 that it was not interested in acquiring Sprint Nextel following weeks of rumors the two companies were in talks.
Leap is set to release its fourth-quarter and full-year 2009 results Feb. 25. The flat-rate carrier is under increased pressure as larger rivals step up their efforts in the prepaid space. Verizon Wireless, for its part, noted it gained 1 million of its 2.2 million net additions in the fourth quarter from its resale channels, which include America Movil subsidiary Tracfone. Verizon Wireless, AT&T Mobility and regional carrier U.S. Cellular Corp. all introduced unlimited voice calling plans for $70 per month earlier this year. Those calling plans could lure customers away from Leap and MetroPCS, which both offer similar calling plans that include data and text messaging for around $60 per month.