Report: AT&T, Leap held merger talks recently

AT&T (NYSE:T) and Cricket provider Leap Wireless (NASDAQ:LEAP) held merger discussions in the past few months, according to a Reuters report, in the latest flurry of rumor and speculation over potential acquisitions in the industry.

According to the report, which cited three unnamed sources familiar with the matter, the talks were serious enough for Leap to hire bankers to advise it on a potential deal. However, Reuters noted it could not discover whether the talks were still ongoing.

Representatives from AT&T and Leap declined to comment.

When AT&T was pursuing its failed $39 billion acquisition of T-Mobile USA last year Leap was often floated as a potential carrier to buy assets that might have been divested from that deal. Leap owns AWS spectrum, which AT&T had wanted to gain from the T-Mobile deal. However, unlike T-Mobile, Leap is a CDMA carrier, which would make any merger more complicated. Leap has a market value of roughly $400 million and $3.2 billion of long-term debt.

Separately from the Reuters report, AT&T CEO Randall Stephenson said that the FCC's review of Verizon Wireless' (NYSE:VZ) proposed purchase of AWS spectrum from cable companies is holding up other potential deals as the industry awaits regulators' judgment. "The industry is just kind of stuck and we're all sitting here watching Verizon-Comcast waiting to see what happens," Stephenson told Bloomberg in an interview. "You have got to make sure we put spectrum in the market. They need to become liquid spectrum markets."

Earlier this week at the CTIA Wireless 2012 conference in New Orleans, FCC Chairman Julius Genachowski defended the decision to block the AT&T/T-Mobile deal. "Some have argued that 'specific transaction' is somehow causing a shortage and causing a price change. But the overall amount of spectrum has not changed except for steps we've taken to add spectrum to the market," Genachowski said. "At core, the argument that competition is bad for consumers is at odds with free market principles." He also added that the "review of one transaction that crossed the line simply proves that there is a line."

The Reuters report comes shortly after Bloomberg reported that parent Deutsche Telekom is holding talks over a merger between T-Mobile and prepaid player MetroPCS (NYSE:PCS) as it reviews its options for the company. However, analysts have criticized the concept rumored deal, since like an AT&T/Leap merger, a T-Mobile/MetroPCS tie-up would bring together a GSM and CDMA carrier.

"And so we go around and around, proposing combinations of companies, much like the children's books with the top and bottom halves of pages that allow for any number of improbable and ultimately unsightly combinations," wrote Sanford Bernstein's Craig Moffett, according to the Wall Street Journal. "A zebra bottom and giraffe top. Or a baby's head on a monkey's body. Our children laugh simply because it's such an ugly baby." 

For more:
- see this Reuters article
- see this Bloomberg article

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