Leap Wireless International, Inc. (LEAP) Could Have Further Upside

Shares of Leap Wireless International, Inc. (NASDAQ:LEAP) rallied well over 100% in after-hours trading on Friday. U.S. wireless giant AT&T Inc. (NYSE:T) has offered to acquire the company for $15 per share — Leap stock closed Friday at $7.98.

But is there more upside in the name? Perhaps. Shares of Leap Wireless International, Inc. (NASDAQ:LEAP) broke above AT&T’s $15 offer, to trade near $17.30. Clearly, some investors are expecting AT&T Inc. (NYSE:T) to sweeten the deal.

Recent history suggests a better offer

In just the last year, investors in the space have seen a number of major deals — and if those are any indication, AT&T’s $15 bid might not be its final offer.

Take T MOBILE US INC (NYSE:TMUS)’s efforts to acquire MetroPCS Communications Inc (NYSE:PCS). After some big shareholders (like Paulson & Co) threatened to oppose the deal, T-Mobile was forced to sweeten the offer. MetroPCS Communications Inc (NYSE:PCS) shareholders ultimately received the same amount of cash and stock as before, but the new combined entity carried $3.8 billion less debt.

Shares of that entity, T MOBILE US INC (NYSE:TMUS) US, have performed spectacularly since the merger — up over 50% since it began trading in early May.

Then there’s Sprint Nextel Corporation (NYSE:S) and Clearwire Corporation (NASDAQ:CLWR). Japan’s SoftBank was set to acquire some 70% of the company, and Sprint Nextel Corporation (NYSE:S) itself was going to buy the rest of Clearwire that it didn’t already own.

But that was before DISH Network Corp. (NASDAQ:DISH) got involved. The satellite TV company has been buying up spectrum and spectrum related-assets since 2008 (it has paid about $3 billion for these assets over the years).

DISH Network Corp. (NASDAQ:DISH) tried to buy both Sprint and Clearwire Corporation (NASDAQ:CLWR) to put its spectrum to work. DISH didn’t succeed, but Sprint Nextel Corporation (NYSE:S) and Clearwire shareholders should be happy the company got involved. Sprint’s initial bid for Clearwire Corporation (NASDAQ:CLWR) was only $2.90 — it was forced to raise that offer to $5 after DISH submitted a series of rival bids.

SoftBank, too, was forced to make its Sprint Nextel Corporation (NYSE:S) offer more attractive — raising the bid from $7.30 per share to $7.65.

What’s Leap worth?

AT&T Inc. (NYSE:T) is likely buying Leap Wireless International, Inc. (NASDAQ:LEAP) for its spectrum. Last November, Leap’s CEO Doug Hutcheson admitted that the company wasn’t using 60% of it, and was interested in deals to share spectrum.

By acquiring Leap Wireless International, Inc. (NASDAQ:LEAP), AT&T will control that spectrum, and will probably use it to bolster its expansive network. AT&T has over 100 million subscribers — Leap has only 5.3 million.