Leap Wireless Sale?

Posted by Sam Churchill on

Seeking Alpha thinks a Leap Wireless sale may be on the way.

Its Q2 earnings release and conference call contain suggestions that a sale is being explored. That, alongside its sagging stock price and industry trends, could be signs that a sale of the company is on the way.

The prepaid wireless market is even more challenging than the postpaid wireless market. And while MetroPCS is able to compete profitably in it, the same cannot be said of Leap Wireless. That is why the company’s stock has lost over 93% of its value in the past 5 years. While MetroPCS has also lost a great deal of value, the company is at least profitable, and is in a much stronger position.

MetroPCS is the fifth largest mobile network operator in the US, with 9.5 million subscribers as of January 2012. MetroPCS runs both a CDMA 1X and LTE networks in 14 major markets. Its CDMA network covers 146 million POPs.

CFO Jerry Elliott took the unusual step of saying that in Leap’s view, the market value of its spectrum is near $3 billion, almost 87% more than what they are being carried at on the balance sheet.

On its own, that statement suggests that Leap is considering a deal involving its spectrum. There is no reason for the company’s CFO to point out that he thinks the company’s spectrum is undervalued if the company does not plan to fix that discrepancy.

Despite its problems, Leap still has value: The company holds over $1.5 billion of spectrum (and given the demand for it in the market, management’s claim that it may be worth $3 billion could prove accurate), and has almost 6 million subscribers.

MetroPCS and T-Mobile are not a good technological or customer fit, one analyst told Reuters. “It would make no sense at all,” said Roe Equity Research analyst Kevin Roe, noting that T-mobile USA and MetroPCS networks run on different technologies. Same deal with AT&T. Leap uses CDMA on their AWS frequencies.

A merger of Leap Wireless and MetroPCS would seem to make more sense since their technologies and coverage compliment each other.

The Four Regional operators have now announced LTE plans:

Could a new nationwide mobile competitor be created by combining the AWS spectrum of Leap and MetroPCS (1.7/2.1 GHz), with the 40 MHZ of 2.1 GHz (MSS) spectrum owned by Dish? Sure. AWS infrastructure can handle 2.1 GHz. Suddenly, it’s real competition.

AT&T and Apple might bring it together. Or T-Mobile and Microsoft. Or SK Telcom and Google.

And why not? UK-based Vodafone owns 45% of Verizon Wireless, the country’s largest mobile carrier. With LTE-A microcells on lampposts, urban hubs can be served faster and cheaper than old-style macrocells. It could deliver some 60 GHz of LTE. Nationwide.

It would upset the Apple cart.

Related Dailywireless article include, U.S. LTE Networks Expand Rapidly, T-Mobile & Leap Wireless Do Spectrum Swap, MetroPCS Moves to Voice over LTE, Verizon and Cricket Swap Spectrum, Cricket Announces LTE, FCC Releases Critical Report on AT&T Merger , Plan B for T-Mobile?, AT&T/T-Mobile Merger: Unlikely?, DOJ Blocking AT&T/T-Mobile Merger

Posted by Sam Churchill on Tuesday, August 7th, 2012 at 8:25 am .

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