In the wake of SoftBank’s acquisition of Sprint and T-Mobile’s merger with MetroPCS, analysts believe other smaller carriers will also be takeover targets. Kevin Smithen of Macquarie Capital, per Investor’s Business Daily, upgraded Leap Wireless last week to a neutral rating from underperform on speculation that T-Mobile or Dish may be looking to acquire the carrier. The analyst noted that T-Mobile’s higher share price could be appealing for a potential stock deal, adding that Leap wouldn’t settle for anything less than $10 per share. He noted that the carrier could be pressured to sell at a lower price though, because T-Mobile will be entering more of Leap’s markets in the second half of the year. Smithen thinks this could “put further pressure on Leap’s already eroding operating business.” He also believes the carrier could be on Dish’s radar following the company’s failed acquisitions of both Sprint and Clearwire.
In a recent filing with the Securities and Exchange Commission, Cricket owner Leap Wireless (LEAP) indicated that iPhone sales have fallen short of its expectations. The carrier revealed that it is on pace to purchase only half of its first-year commitment from Apple (AAPL) through June 2013. The information in the filing contradicts earlier statements made by the company’s chief financial officers Jerry Elliot. The executive previously said that “sales of Apple devices were pretty good in the fourth quarter” and the carrier wasn’t concerned about meeting its commitment with Apple. As noted by BTIG Research analyst Walter Piecyk, Leap could now be on the hook for $100 million of additional iPhone purchases in 2013 and $450 million over the course of its three-year contract.
The nation’s second largest wireless carrier has reportedly held talks with Leap Wireless in recent months over a possible acquisition, according to Reuters. The move is the latest attempt by AT&T in its efforts to find additional wireless spectrum after its failed acquisition of T-Mobile. The talks were serious enough that Leap reportedly hired bankers to advise it on a potential deal, although it is unclear if discussions are still ongoing. Leap Wireless, which operates the nation’s seventh largest wireless network, has a market value of roughly $400 million and $3.2 billion of long-term debt. Earlier in the week it was reported that T-Mobile and MetroPCS were also holding discussions regarding a possible merger. More →