MetroPCS Merger Hopes… A Leap or Prayer? (PCS, LEAP, VM, S)

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If you are a regular reader of 24/7 Wall Street, the notion that MetroPCS Communications Inc. (NYSE: PCS) might be a merger play won’t be a surprise.  We first noted back in early August after Sprint Nextel Corporation (NYSE: S) and Virgin Mobile USA (NYSE: VM) merged that its old deal with Leap Wireless International Inc. (NASDAQ: LEAP) could likely be rekindled. Today, shares of MetroPCS and Leap Wireless were both winners from today’s trader gossip.

Reuters ran something on the possibilities yesterday, and the Friday rumor mill and trader gossip took care of the rest.  These two companies did not get to amicably merge in the past, but one or both might need to consider that merger or getting a larger parent because of the dominance of today’s top cellular players.  Today’s report was that MetroPCS may be in the process of interviewing bankers and getting advice over a possible strategic deal, although the Reuters note said it was not in talks with Leap.

These two would suddenly be a much larger presence for prepaid or no-contract wireless carriers and might have much more leverage against the stronger market players.  But as is the case with most mergers, there is a culture issue over control and how to do a deal at lower prices today compared to two-years ago.

Shortly before the closing bell, Leap was up almost 5% at $19.81 and MetroPCS was up 8% at $9.60.

September 11, 2009