Analyst: Is Leap Wireless next for T-Mobile or Dish?

Analyst: Is Leap Wireless next for T-Mobile or Dish?
According to Macquarie Capital analyst Kevin Smithen, Leap Wireless could be the next prize to be battled over in the wireless industry. Following Dish's inability to pick up spectrum to help it start a new gig as a wireless carrier, CEO Charles Ergen could turn his attention to Leap. Smithen also notes that the rise in T-Mobile's shares from $15 to $24 give it a valuable currency to use to also make a play for the pre-paid carrier which is the parent company of Cricket Wireless.

Smithen says that Leap is controlled by a few holders which could help be a catalyst to a deal, but also could make it harder to get done. The analyst says that to get done, a bid would have to be at least $10 a share to have a chance. The stock closed on Monday at $7.35. With T-Mobile beginning to move into the same regions covered by Leap in the second half of this year, it could cause the latter to more easily embrace a deal.

Leap closed out Q1 with 5,203,747 accounts, a drop of 16% year over year.

source: IBD via TmoNews



2. Zero0

Posts: 592; Member since: Jul 05, 2012

Alright, did some searching. Leap appears to have a little more than $3.5 billion in debt. Their market cap is pushing $600-700 million. We'll give them a markup, and they'd cost about $5 billion (in cash/stock and debt). Their spectrum looks pretty good, though. In my county, they have a few AWS licenses that would fill in some gaps in the T-Metro spectrum holdings. Still, T-Mobile has a metric ton of AWS spectrum (thanks, AT&T!). Extra AWS and PCS would certainly be a help to capacity, but it's not at all a necessity. Low frequency spectrum is more important now. Hopefully they (and Sprint) can manage to buy a good 20 or so MHz at the 600MHz auction (if the broadcasters even give up enough spectrum to let it happen, and if Verizon and AT&T don't fix the system in their favor).

1. Zero0

Posts: 592; Member since: Jul 05, 2012

From what I understand, Leap is also debt-ridden. They have a good amount of valuable spectrum (AWS and PCS, as well as some 700MHz which I'm sure they can swap), but that's about it. I don't know if T-Mobile has the funds to buy Leap, cover its debt, and still have the money to buy big at the 600MHz auction. Now, if Dish gets involved, we could be looking at a Sprint-esque situation for T-Mobile. Dish buys T-Mobile, and T-Mobile buys Leap, just as Softbank bought Sprint, and Sprint bought Clear. Dish should still have enough money (or at least the ability to take out debt) to get a wide band of 600MHz.

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