Leap, MetroPCS May Be Buyout Targets for AT&T, JPMorgan Says

Leap Wireless International Inc. (LEAP) and MetroPCS Communications Inc. (PCS) may be takeover targets for bigger rivals AT&T Inc. (T) or T-Mobile USA after the larger companies’ $39 billion merger plan collapsed, JPMorgan Chase & Co. said.

The pay-as-you-go carriers could be suitable “near-term” sources of spectrum for a buyer, Phil Cusick, a JPMorgan analyst in New York, said in a note to clients today. AT&T cited a need for more spectrum as a reason for its attempt to buy T-Mobile.

Leap’s spectrum and certain potential cash-flow benefits following a takeover could be worth more than $13 a share to a buyer, said Cusick, who reiterated his “overweight” rating (LEAP) on both stocks. MetroPCS’s airwaves and some potential cash-flow benefits could be worth more than $6 a share, the analyst said. Leap’s spectrum alone is worth $1.9 billion and MetroPCS’s airwaves $2.6 billion, he said.

There is a “strong likelihood” that regulators would approve the purchase of San Diego-based Leap or Richardson, Texas-based MetroPCS by a larger national carrier, Cusick said. Dallas-based AT&T abandoned its nine-month campaign to acquire T-Mobile this month amid opposition from regulators, which said the combination would reduce competition.

Leap advanced 4.3 percent to $8.49 at the close in New York. MetroPCS rose 2.5 percent to $8.24.

Mark Siegel, a spokesman for AT&T, and Greg Lund, a spokesman for Leap, declined to comment. Andreas Fuchs, a spokesman for T-Mobile’s parent, Bonn-based Deutsche Telekom, wasn’t available to comment. Calls to MetroPCS representatives weren’t returned.

To contact the reporter on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net