Leap Wireless is back in the spotlight after a report said the flat-rate carrier was close to hiring a bank to explore its strategic options, including a possible merger with another wireless operator. Companies usually employ a bank in order to navigate major strategic moves like mergers or acquisitions.
The DealReporter.com report cited an unnamed source and said possible merger discussions were still in the early stages and would likely continue through the second quarter. Leap declined to comment on the report.
The report fueled ongoing speculation that Leap might be considering a merger with its oft-rumored merger partner and flat-rate competitor MetroPCS. However, as recently as November, MetroPCS CEO Roger Linquist reiterated that the company was not interested in a merger with Leap. Analysts remained divided over whether such a partnership still makes sense, given that the companies signed a reciprocal roaming agreement in the fall of 2008. Leap rejected a $4.7 billion takeover bid from MetroPCS back in 2007.
"It's certainly in Leap's best interest to at least explore the potential of attracting as many interested parties as possible," Soleil/Nelson Alpha Research analyst Michael Nelson told Reuters. Other analysts thought the time had passed for a merger.
"They're very complementary companies, so they would fit nicely together," Pacific Crest analyst Steve Clement told Dow Jones Newswires. "But the biggest justification for a merger in the past was combining the companies' network footprints to sell to a wider footprint."
Both Leap and MetroPCS have suffered slowing growth amid increasing competition in the prepaid wireless market. Leap has focused its attention on its prepaid mobile broadband business, which it has said is a key growth driver for the company.
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