Leap stock rises on buyout rumors

Leap Wireless International Inc. saw its stock rise yesterday as speculation mounted that AT&T Mobility may want to add the flat-rate carrier to its stable.
Leap’s stock jumped nearly $2 a share from $16.07 to $17.84 on the rumors, before settling down to $17.24 this morning. Leap has been the subject of acquisition fodder before, but most often with fellow flat-rate competitor MetroPCS. MetroPCS tried to buy Leap in 2007, but the deal fell apart when the two couldn’t agree on a price.
Any tie-up with AT&T is likely to attract shareholder and government scrutiny. While AT&T would increase its prepaid subscriber base by buying Leap, the two carriers don’t use the same technology, so it is likely they would continue to operate separate networks. Further, a merger between the nation’s No. 2 carrier and the seventh-largest carrier likely would spur increased regulatory scrutiny at a time when the Federal Communications Commission is already investigating whether there is enough competition in the wireless space and Sen. John Kerry (D-Mass.) asking the FCC to probe exclusive handset deals between manufacturers and carriers.
“While Leap certainly needs greater economies of scale to maintain its share against Boost and possible attack by the big two and T-Mobile, it would do better to revive its on-off merger talks with MetroPCS (to which, despite past lawsuits and bad feeling, it has become closer, signing a national roaming deal last year),” said ReThink Wireless Caroline Gabriel.