UPDATE 3-Leap investor wants to shake up board

* Pentwater cites mistakes by Leap management

* Criticizes Leap for not accepting MetroPCs deal

* Leap shares rise nearly 10 pct (Adds Leap comment, share price, byline)

NEW YORK, March 10 (Reuters) - Pentwater Capital Management is looking to shake up the board of Leap Wireless LEAP.O and has vowed to nominate three directors, citing what it called years of management mistakes.

Pentwater, which says it is the fifth-largest institutional investor in the wireless operator with ownership of almost 5 percent of Leap shares, complained about Leap's rejection of a 2007 takeover offer by MetroPCS Communications Inc PCS.N and also accused the company of "incorrect operational decisions."

Leap shares rose 9.5 percent on Thursday after Pentwater released a letter addressed to the Leap board, as some investors bet the move would lead to management changes or a sale. At least one analyst was skeptical that would happen, however.

Pentwater criticized a poison pill measure Leap adopted to limit individual shareholder ownership to less than 5 percent, saying it “entrenches management and stifles shareholder voice.”

It noted that the board’s chairman controls almost 20 percent of Leap shares under the umbrella of MHR Fund Management and said that “largely insulates the board from constructive shareholder critique.”

Leap said that while it respects its shareholders’ rights to nominate board members, it “strongly” disagrees with “many of the assertions” in the letter.

To start, it noted that Leap had added three new independent directors to its board in November.

Piper Jaffray analyst Christopher Larsen questioned whether Pentwater would have enough clout to bring about changes, since it would need support from larger shareholders.

Such support might be difficult to get “given that many (of the biggest Leap shareholders) have been long-term holders” of the stock, Larsen said.

Another Pentwater accusation was that Leap has “mismanaged its cost structure,” pointing to its higher number of employees and lower number of subscribers compared with peer MetroPCS.

It also said Leap’s focus on broadband services has hurt the company’s free cash flow and said the company has mismanaged its handset inventory.

But the company said that changes it made in August last year, including introducing smartphones and new service plans, were already showing operational improvements.

“We believe that these trends provide significant momentum and that we are very well positioned to deliver improved financial performance and increased shareholder value,” the company said in a written statement.

Leap shares closed up $1.19 at $13.69 on Thursday. The stock was still 28 percent lower than where it traded in on April 30, 2010 as Leap has struggled to compete against rivals such as Sprint Nextel Corp S.N and MetroPCS.

Pentwater said its nominees include two former chiefs of multibillion-dollar telecommunications companies as well as its own chief executive, Matthew Halbower. (Editing by John Wallace, Gerald E. McCormick and Steve Orlofsky)