Report: T-Mobile or Dish increasingly likely to swallow Leap Wireless

With its integration of MetroPCS' assets proceeding smoothly, is T-Mobile US (NYSE:TMUS) gearing up to acquire yet another regional operator, such as Leap Wireless (NASDAQ:LEAP)?

That is a very good possibility, according to Macquarie Capital Analyst Kevin Smithen, who upgraded shares in Leap to neutral last week, citing an increased likelihood that the regional operator will be snatched up by either T-Mobile or Dish Network (NASDAQ: DISH). A report issued in early June by research firm Pyramid Research also named Leap a "likely acquisition target."

Shares in Leap jumped more than 5.6 percent on July 3 to $7.07 after Macquarie's upgrade. By close of business on July 5, they were at $7.33. Smithen suggested a buyer would need to offer least $10 per share to take over Leap.

"T-Mobile's share price has appreciated from around $15-per-share to $24-per-share, making a stock deal for Leap more palatable in our view," wrote Smithen in a report, according to TmoNews. T-Mobile shares closed at $23.46 on July 7.

He noted that T-Mobile will be entering numerous Leap markets later this year, adding to the competitive pressures faced by Leap, which offers wireless services under the Cricket brand.

However, it is unclear whether T-Mobile would be ready to dip its toes into the M&A waters so soon after its May acquisition of MetroPCS. Nonetheless, it appears the integration of MetroPCS has gone quite swimmingly so far, which could position T-Mobile to eye additional acquisitions.

In May, T-Mobile touted its progress in shifting subscribers from its MetroPCS brand off legacy CDMA service and onto its HSPA+ and LTE networks, saying that it is ahead of schedule in the migration. The company expects to significantly expand the footprint where its MetroPCS brand offers service by around 100 million POPs over the next year and a half.

Like MetroPCS, Leap is also a CDMA and LTE operator. During the first quarter of 2013, Leap lost 93,000 customers, mostly from its discontinued daily PAYGo product line. Its traditional monthly service had a decline of 9,000 customers.

T-Mobile is planning a press conference this Wednesday in New York to unveil what it claims are its "boldest moves yet." The actual topic of the event is unknown, though it is not expected to concern M&A activity.

T-Mobile itself may be a target for Dish Network to acquire, as Leap might also be. With Sprint (NYSE:S) and Clearwire (NASDAQ:CLWR) apparently now out of reach, Ergen is likely on the prowl for another potential conquest. In April, Bloomberg reported that Dish Chairman Charlie Ergen had informally approached Deutsche Telekom about purchasing T-Mobile. Smaller operator Leap, however, might provide an easier takeover target.

Ergen, meanwhile, is reportedly the center of attention in a reorganization plan submitted to a bankruptcy judge by LightSquared financier Philip Falcone, who aims to block Ergen from receiving compensation for his interest in LightSquared, according to a report from the New York Post that cited unnamed sources. Ergen is said to have collected more than half of LightSquared's $1.7 billion in secured loans through hedge fund firm Sound Point Capital Management with an eye toward acquiring the company.

For more:
- see this TmoNews article
- see this MarketWatch article

Related news:
If he can't buy Sprint, what is Ergen's plan B? (And C and D?)
Report: U.S. LTE subscribers will make up 70% of connections by 2017
Leap suggests its LTE roaming deal is with Sprint, hints at more device financing options
Leap's Cricket dips toes into world of big data
Leap sees improved iPhone sales, but will not purchase more

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