* MetroPCS, Leap shares surge
* Wall Street thinks industry needs to consolidate
* Deutsche, MetroPCS decline comment on Bloomberg report
(Adds details on industry consolidation, executives' comments,
updates stock prices)
By Sinead Carew
May 9 Shares of MetroPCS Communications Inc
surged as much as 29 percent on Wednesday after
Bloomberg reported the mobile phone service provider was
discussing a merger with Deutsche Telekom subsidiary
Many Wall Street analysts argue that consolidation is needed
among smaller U.S. carriers as the bill for 4G network upgrades
climbs and smartphone usage accelerates.
Deutsche Telekom was considering a stock swap that would
give the German company control over a combined entity,
Bloomberg cited two unidentified sources as saying. Other
options included an initial public offering or an outright sale
of T-Mobile USA, Bloomberg cited its sources as saying.
MetroPCS and Deutsche Telekom both declined comment on
The report came amid persistent speculation on Wall Street
about consolidation among carriers. On Wednesday, shares of Leap
Wireless - another company often mentioned as an
acquisition or merger candidate - gained as much as 25 percent.
Some analysts have speculated that smaller carriers might
band together to better compete with the likes of industry
leader Verizon Wireless and No. 2 carrier AT&T Inc,
which had tried to buy T-Mobile before the deal was scrapped
over regulators' fears it could hurt consumers.
MetroPCS and rival Leap Wireless, which cater to
cost-conscious customers, have been feeling heat as bigger
rivals such as Sprint Nextel Corp enter their low-cost
Analysts say Deutsche Telekom has wanted to unload T-Mobile
because of the expense - estimated in the billions of dollars -
of having to upgrade U.S. networks over the long-term.
MetroPCS and T-Mobile are not a good technological or
customer fit, one analyst said, although both are expected to
move to faster, fourth-generation "LTE" networks eventually.
"It would make no sense at all," said Roe Equity Research
analyst Kevin Roe, noting that T-Mobile USA and MetroPCS
networks run on different technologies.
A deal would also not alleviate T-Mobile's spectrum
"MetroPCS is spectrum- and capacity-constrained," Roe added.
MetroPCS stock was up 19.7 percent at $7.85 on Wednesday
afternoon, following a brief trading halt. It hit a high of
$8.45 earlier in the session.
Leap Wireless stock was up 20.4 percent at $6.19 in the
afternoon, off an earlier high at $6.43.
Mobile carriers are on the prowl for additional wireless
spectrum and are spending heavily to upgrade or expand their
networks as they seek to cope with the growth of smartphones and
multimedia-streaming on handheld devices. Sprint had also
considered a plan to buy T-Mobile but abandoned it.
"Because of our focus on execution and network vision a deal
would have to be very compelling for us to do it at this time,"
Sprint CEO Dan Hesse told the CTIA wireless industry conference
in New Orleans on Tuesday.
(Reporting by Sinead Carew in New York, writing by Edwin Chan;
Editing by Carol Bishopric and Matthew Lewis)