Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

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).

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.