UDPATE 1-MetroPCS in talks with banks over possible deal -source

* MetroPCS is talking to bankers - source

* MetroPCS not in talks with Leap - source

* Deal with Leap makes sense, but not urgent - source (Adds share movement, comments from companies)

By S. John Tilak

BANGALORE, Sept 11 (Reuters) - Low-cost wireless carrier MetroPCS Communications Inc (PCS.N) is in discussions with bankers about possible deals but is not in merger talks with rival Leap Wireless International Inc (LEAP.O), a source close to MetroPCS said.

Shares of MetroPCS rose as much as 12 percent on the news and were trading up 10 percent in heavy volumes at $9.75. Leap shares were up more than 5 percent at $19.82.

"I know they're talking to bankers. They're interviewing bankers, trying to get advice from banks to help them to conduct a strategic deal," the source told Reuters on condition of anonymity.

There has been increasing speculation over a possible deal between Leap and MetroPCS -- one that investors have long anticipated -- with some analysts saying the two companies could come together earlier than expected.

MetroPCS did not immediately respond to a request for comment. Leap spokesman Greg Lund said, "The company does not comment on rumors or speculation." Analysts have also said that MetroPCS and Leap could become targets for bigger carriers, such as America Movil (AMXL.MX)(AMX.N), AT&T (T.N) or Deutsche Telekom's (DTEGn.DE) T-Mobile USA. For a related DealTalk column, click on [ID:nBNG423685]

Asked whether companies had approached MetroPCS, the source said there have been lots of conversations.

Weak second-quarter performances at both companies and growing competition have increased pressure on Leap and MetroPCS to explore a combination.

MetroPCS does not have a sense of urgency about doing a deal, the source said.

"You can make a lot of arguments why a deal with Leap makes a lot of sense and sooner the better. But I wouldn't say it's urgent," the source said.

A deal with Leap would depend a lot on the price. And both companies have different views on how much Leap is worth.

"Why should there be a premium?" the source said. "A lot of the so-called premium's baked into the stock. They would be combining shareholder groups, management teams. It's not like one big company buying a little one or buying someone out for cash."

In 2007, MetroPCS made a $5.5 billion bid for Leap at an exchange ratio of 2.75 MetroPCS shares for each Leap share, but Leap rebuffed the offer. If MetroPCS were to acquire Leap at current levels, the exchange ratio would be 2.1.

Leap's market capitalization now stands at $1.46 billion. MetroPCS is valued at $3.12 billion.

Shares of both MetroPCS and Leap are down since they reported weak second-quarter results on Aug. 6.

But Leap shares have recovered 22 percent since touching a low of $15.62 in the weeks following the results. MetroPCS shares have risen slightly in the same period. (Editing by Mike Miller and Saumyadeb Chakrabarty)