Leap Drops as Analyst Says AT&T Deal Unlikely: San Diego Mover

Leap Wireless International Inc. (LEAP) fell after Collins Stewart LLC cut its rating on the pay-as-you- go wireless provider, citing increased competition and little chance of a sale to AT&T Inc.

Leap declined 4 percent to $9.24 at the close in New York. The stock has fallen 33 percent in the last twelve months.

The San Diego-based company, which yesterday posted weaker- than-expected fourth-quarter revenue, was reported to have held discussions with AT&T about a possible deal, according to the Wall Street Journal. The newspaper didn’t identify its sources in a report posted online Feb. 15.

“It becomes increasingly difficult to recommend Leap shares for purchase at a time when the risks for the entire U.S. wireless industry has increased and Leap remains in a relatively weak position,” Gregory Miller, a New York-based analyst with Collins Stewart, wrote in research note today. It’s also “highly unlikely AT&T (T) would acquire it as recently speculated,” said Miller, who cut his rating from “buy” to “neutral.”

Leap had gained 10 percent yesterday after the Journal reported the talks with AT&T, the second-largest wireless carrier.

Leap reported a smaller fourth-quarter loss than analysts predicted as smartphone sales increased. The net loss was $84.4 million for the fourth quarter, or $1.10 a share, compared with a net loss of $249 million, or $3.28, a year earlier, the company said in a statement. That was narrower than the $1.13 average of analysts’ estimates in a Bloomberg survey.

Revenue was $767.4 million, up 8.4 percent from a year earlier. Analysts had predicted $806.5 million. Cost per gross addition, or the average price to add each new customer, rose 14 percent to $238 in the period.

Greg Lund, a Leap spokesman, wasn’t available for comment.

To contact the reporter on this story: Alexander Yablon in New York at ayablon@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net