Rumor Mill: Is Leap an acquisition target?

Shares of Leap Wireless spiked yesterday on speculation that the prepaid carrier could be bought, perhaps by AT&T. However, analysts dismissed the possibility of that combination and instead focused on the more likely scenario: the long-discussed possible tie-up between Leap and rival MetroPCS.

Leap's shares surged more than 6 percent on the M&A noise, but analysts dismissed the AT&T takeover. "We have heard market chatter that AT&T may potentially acquire Leap, which we believe is unlikely," Soleil/Nelson Alpha Research analyst Michael Nelson said in a research note. "However, we continue to believe a merger with MetroPCS would make strategic and financial sense for both companies."

Nelson said an AT&T deal likely would face significant regulatory hurdles, and also would not really make sense since Leap operates a CDMA network and AT&T is a GSM carrier. The idea that AT&T would buy Leap first surfaced in May, and then quickly disappeared. However, rumblings of a Leap-MetroPCS combo have been around for far longer.

"We have said that some sort of strategic collaboration with MetroPCS makes sense," Leap spokesman Greg Lund told Reuters. "We've not changed our view on that." Lund did not comment on whether the two companies had moved any closer to such a deal.  

For more:
- see this Reuters article
- see this Bloomberg article
- see this Barron's blog post

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