AT&T, Leap talked merger in recent months -sources
* Leap hired bankers to advise on potential deal
* Unclear if AT&T-Leap talks still ongoing
* Deutsche Telekom also considering deal with MetroPCS
NEW YORK, May 10 (Reuters) - AT&T Inc has held talks to buy smaller rival Leap Wireless International in recent months, according to people familiar with the matter, in the latest sign U.S. carriers are looking at acquisitions as a way to grow in a mature market.
These talks were serious enough for Leap Wireless to hire bankers to advise it on a potential deal, said the three sources who asked not to be identified because the discussions were private. Reuters could not learn whether those discussions are still ongoing.
Leap Wireless has a market value of roughly $400 million and $3.2 billion of long-term debt.
Representatives for AT&T and Leap Wireless declined to comment.
These discussions were held amid a flurry of deal activity in the U.S. telecom sector, in which the four national carriers and smaller operators like Leap and MetroPCS Communications Inc are fighting mainly for customers who already have cellphones. The market is dominated by Verizon Wireless , AT&T, Sprint Nextel and Deutsche Telekom's T-Mobile USA.
Moreover, the proliferation of bandwidth-hungry smartphones has U.S. wireless carriers scrambling to gain access to more airwaves.
AT&T has said that it urgently needs access to additional wireless spectrum and will explore every possible way to achieve that. Last year, the company struck a deal to buy T-Mobile USA for $39 billion, but U.S. regulators blocked the attempt by the No. 2 and No. 4 U.S. wireless carriers to merge.
Deutsche Telekom has since been considering other strategic options for T-Mobile USA, including a possible deal to merge the unit with MetroPCS, other sources familiar with the matter said. The considerations, however, are at a very early stage and the German telecom company is not close to any decision on a deal with MetroPCS, the sources said.
T-Mobile USA Chief Executive declined to comment on Thursday about whether it was ready for an acquisition of another company. A MetroPCS spokesman was not available to comment on Thursday but the company has declined to comment on talks with Deutsche Telekom earlier.
Meanwhile, in February, Sprint Nextel pulled the plug on a deal to buy MetroPCS at the last minute, people familiar with the matter told Reuters at that time.
Verizon Wireless is seeking regulatory approval for a purchase of $3.9 billion worth of spectrum from cable companies.
Both Leap and MetroPCS, which focus on prepaid services for cost conscious customers, are having a tough time competing with their bigger rivals, which have also been eyeing opportunities in the prepaid market with growth slowing for contract customers.
Wireless industry analysts have long said that they expect Leap and MetroPCS to consolidate with a bigger company, or with each other.
However, an AT&T-Leap deal would be complicated by the fact that Leap and AT&T use incompatible network technologies, which would make the integration of both companies more costly and time consuming. The same technology problem would exist for a combination between T-Mobile and MetroPCS.