* Leap hired bankers to advise on potential deal
* Unclear if AT&T-Leap talks still ongoing
* Deutsche Telekom also considering deal with MetroPCS
By Soyoung Kim and Nadia Damouni
NEW YORK, May 10 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
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
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
Moreover, the proliferation of bandwidth-hungry smartphones
has U.S. wireless carriers scrambling to gain access to more
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
Wireless industry analysts have long said that they expect
Leap and MetroPCS to consolidate with a bigger company, or with
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.