Dispelling the rumor that nobody works on Labor Day, regional wireless service provider and recent IPO MetroPCS
News of the deal put some extra bounce in Leap's shares, which rose 15% on Tuesday to $83.47. That's nearly 6% greater than the value of the stock offer, based on MetroPCS' closing price. While some observers have long expected a merger between the two regional players, many see this initial offer as too low, and they're expecting the price to be sweetened -- hence the premium on Leap's shares. Leap Wireless did not offer any initial comments on the proposal as it reviews the deal.
With market saturation driving increased competition from cellular giants AT&T
But the success of Leap and MetroPCS has also incited a little envy from the major wireless carriers, leading some of them (Sprint Nextel, in particular) to dip their toes in the waters of unlimited service plans. Other, smaller carriers and mobile virtual network operators such as Disney Mobile and Virgin Mobile USA offer a variety of unlimited plans as well. But the unbounded use only applies on the home network -- roaming is not included.
The roaming limitation is a major disadvantage for regional players, one the nationwide carriers exploit. However, if MetroPCS and Leap do end up combining their networks, the new entity will cover nearly all of the top 200 markets in the U.S., positioning the company much closer to the nationwide players.
While the offer adds a little excitement to the market coming out of the slow summer, I agree that this is not likely to be the final offer. Leap will likely ask for a higher price that better values its 2.7 million subscribers. If a deal does eventually happen, though, the U.S. wireless market will get a lot more interesting, courtesy of a new, feisty competitor.
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Fool contributor Dave Mock's flying leaps often ended with scraped knees and elbows -- but oh, were the neighborhood girls impressed. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. Vodafone is an Inside Value recommendation. The Fool's disclosure policy wears its crash helmet.