MetroPCS Withdraws Leap Wireless Bid; Both Companies Tank

Includes: T, TMUS
by: Jonathan Liss

A merger deal between pay-as-you-go wireless carriers MetroPCS Communications Inc. and Leap Wireless International Inc. isn't going to happen any time soon, as MetroPCS withdrew its unsolicited offer Thursday to buy Leap. Shares of both companies tanked on the news, with Metro falling 10.5% and Leap falling 5.8% during regular hours and another 10.7% after hours. Metro had offered 2.75 of its own shares for each one of Leap's, a deal Leap immediately rejected as insufficient (full story). The companies both offer pay-as-you-go mobile services to customers with poor credit ratings who don't qualify for the larger national carrier plans. The two companies' areas of service coverage barely overlap, and a combo would mean the formation of a national discount carrier to challenge the wireless industry's major players. Pacific Crest analyst Steve Clement believes the companies will ultimately decide to merge: "It makes too much sense for them to combine their businesses." Meanwhile, Metro "believes strongly in its stand-alone prospects."

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