Leap Wireless International, Inc. (LEAP), AT&T Inc. (T): How Will This Acquisition Saga End?

Many on Wall Street had thought that Leap Wireless International, Inc. (NASDAQ:LEAP) could become the next Clearwire Corporation (NASDAQ:CLWR), and start an all-out bidding war in the quest for spectrum. However, there is now reason to believe that Leap Wireless International, Inc. (NASDAQ:LEAP) investors could have the most to lose.

Leap Wireless International, Inc. (NASDAQ:LEAP)

A look back

On July 16, I wrote an article “Should You Buy on This Opening Bid?”, in regards to AT&T Inc. (NYSE:T)’s opening bid to acquire Leap Wireless International, Inc. (NASDAQ:LEAP) for $1.18 billion. My conclusion was that companies would, in fact, bid to acquire Leap Wireless International, Inc. (NASDAQ:LEAP) and that investors were smart in buying Leap Wireless International, Inc. (NASDAQ:LEAP) above AT&T Inc. (NYSE:T)’s bid price.

The basis for my opinion was that Leap Wireless International, Inc. (NASDAQ:LEAP) is a better acquisition than Clearwire Corporation (NASDAQ:CLWR), yet AT&T Inc. (NYSE:T)’s bid is far smaller than what Sprint Nextel Corporation (NYSE:S) paid to acquire Clearwire Corporation (NASDAQ:CLWR). The bidding wars for Clearwire Corporation (NASDAQ:CLWR) took the original bid price from $2.75 to $5, as both Sprint Nextel Corporation (NYSE:S) and DISH Network Corp (NASDAQ:DISH) fought hard to buy the company. However, is the same level of competition present for Leap?

Unexpectedly, not interested!

Initially, I thought Verizon Communications Inc. (NYSE:VZ) to be AT&T Inc. (NYSE:T)’s largest threat in acquiring Leap. Verizon Communications Inc. (NYSE:VZ) has more subscribers in the U.S. than any other telecom provider, and has been very active in acquiring spectrum.

Last year, Verizon Communications Inc. (NYSE:VZ) finalized the acquisition of a 1200/2100 MHz spectrum, which is a fairly low frequency spectrum that can provide good data flow in congested areas. Leap’s spectrum covers 137 million people, but is only being used on 5.3 million subscribers. Therefore, Leap’s spectrum opens a door for significant expansion, and I thought Verizon Communications Inc. (NYSE:VZ) would find the synergies very attractive.

It turns out that Verizon is not interested in buying Leap Wireless, as the company’s CFO disclosed this information to BTIG’s Walter Piecyk. Also, the company disclosed its lack of interest on its conference call.

Verizon Communications Inc. (NYSE:VZ) already has the potential to build out its network more so than any other telecom company, so this interest wasn’t necessary, but it does hurt Leap’s chances of a bidding war.

Don’t expect a Clearwire repeat

DISH Network (NASDAQ:DISH) fought hard with Sprint Nextel Corporation (NYSE:S) for Clearwire Corporation (NASDAQ:CLWR). However, DISH was also fighting hard to acquire Sprint Nextel Corporation (NYSE:S).