Rivals MetroPCS and Leap Wireless probably won't embark on a possible merger until the second half of 2011, an analyst said, casting doubt on speculation that the two prepaid unlimited carriers are poised to combine their operations to combat fierce competition.
Oppenheimer analyst Tim Horan said the two companies are dealing with a weaker prepaid market and that MetroPCS does not have much in the way of competition from other suitors for Leap. Horan also noted the companies are pursuing different long-term strategies: MetroPCS is moving ahead with the deployment of an LTE network while Leap is concentrating on its recently announced joint venture with Pocket Communications and other initiatives.
"The market is slowly coming to the realization that a merger is not imminent," Horan wrote in a research note. The prepaid industry is "still hurting from effects of increased competition, though we believe the industry is nearing the end of this price-war cycle, which would take some pressure off" Leap and MetroPCS.
In February, Reuters reported MetroPCS had hired JP Morgan Chase & Co. and Credit Suisse for advice on a potential purchase of Leap. That report came weeks after the Wall Street Journal reported Leap Wireless hired Goldman Sachs and formed a special committee of its board to consider various strategic options, including selling the company or merging with another carrier. Leap rejected a $4.7 billion takeover bid from MetroPCS in 2007.
- see this San Diego Union-Tribune article
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