Should You Leap Wireless International, Inc. (LEAP) Into Action With AT&T Inc. (T)?

In another sign of the continuing consolidation in the telecommunications industry, AT&T Inc. (NYSE:T) recently indicated that it wants to scoop up the much smaller Leap Wireless International, Inc. (NASDAQ:LEAP).

The Goliath vs. David deal will probably benefit long-suffering Leap Wireless International, Inc. (NASDAQ:LEAP) investors. The stock price had been on a downward spiral until a reversal occurred on news of the potential acquisition. While the company has been signing up new subscribers, and revenue is growing, it isn’t profitable. That could change once AT&T Inc. (NYSE:T) comes into the picture.

Will the transaction, worth $1.2 billion in cash, also help AT&T? It has the potential to work out for two reasons (*):

1. AT&T Inc. (NYSE:T) needs more capacity in order to expand its mobile unit. Leap happens to own a healthy slice of the available wireless spectrum that AT&T needs for its 4G LTE technology.

2. The fastest growing segment of wireless is in pre-paid plans, and Leap Wireless International, Inc. (NASDAQ:LEAP) is a big player in that area.

(*) A caveat of the deal is that AT&T Inc. (NYSE:T) will need to assume Leap’s $2.8 billion in debt.

Sprint Nextel Corporation (NYSE:S) to the finish

Another transaction in wireless just wrapped up. The number three U.S. carrier, the newly reminted Sprint Nextel Corporation (NYSE:S), merged with the number three Japanese wireless provider, SoftBank. Nextel is gone from the Sprint corporate name now.

The deal will provide a much needed $5 billion cash infusion for Sprint Nextel Corporation (NYSE:S) to stabilize its balance sheet, and it also enriches shareholders to the tune of $16.5 billion. Not a bad payday all around. Expect Sprint to show signs of life when it doesn’t have to service as much debt as it had before.

Sunset on the Verizon

The merger will allow Sprint Nextel Corporation (NYSE:S) to become more competitive with AT&T and the nation’s top wireless company, Verizon Wireless, a joint venture of Verizon Communications Inc. (NYSE:VZ) and Britain’s Vodafone Group Plc (ADR) (NASDAQ:VOD).

Rumors have abounded this year that Verizon Communications Inc. (NYSE:VZ) wanted to buy out Vodafone Group Plc (ADR) (NASDAQ:VOD)’s 45% share of the combined wireless business. So far nothing concrete has emerged from all the hype.

Vodafone Group Plc (ADR) (NASDAQ:VOD) has been active in mergers and acquisitions, and recently made a bid for the cable company Kabel Deutschland to give it more exposure to the expanding German market. As long as it doesn’t overpay, the deal should be a positive for them.