MetroPCS Ends Merger Talks With Leap Wireless - InformationWeek
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11/2/2007
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MetroPCS Ends Merger Talks With Leap Wireless

A merger between the two had been predicted for months because the companies serve different groups of customers.

The merger of two wireless providers -- MetroPCS and Leap Wireless International -- was looked at by many as a wireless marriage made in heaven. But it won't happen. MetroPCS has pulled its $5.2 billion offer and Leap said it didn't matter anyway, because the whole affair was "moot."

Saying that Leap was unwilling to conduct "meaningful" negotiations on its offer, MetroPCS ended its pursuit Thursday. A merger between the two had been predicted for months because the two serve different geographical customers; Leap serves customers generally located in rural areas while MetroPCS typically markets to urban consumers.

The deal proposed by MetroPCS would have left it as the dominant partner in a combination that would have created a nationwide network capable of competing with the established nationwide wireless service providers; both MetroPCS and Leap offer similar no-contract, flat-rate service plans.

Responding to MetroPCS' formal withdrawal, Leap said the merger issue "became moot in any case on Sept. 16 when our Board rejected it as inadequate. Leap has long stated that there could be merit in a strategic combination and disagrees with MetroPCS' characterization today of the recent discussions between the companies. Our position regarding MetroPCS has not changed and we remain open to substantive discussions concerning a strategic combination that is in the best interests of all of Leap's shareholders."

MetroPCS had argued that a merger of the two firms would have created a new national carrier with "licenses covering nearly all of the top 200 markets in the United States."

In a letter to Leap's management, MetroPCS chairman and chief executive officer Roger Linquist said: "Such a combination would significantly expand the network service area available to the subscribers of both companies and would better position the combined company to more aggressively compete with the other national wireless carriers."

The letter was addressed to Leap's chairman, Dr. Mark Rachesky M.D., and S. Douglas Hutcheson, president and chief executive officer. Linquist, who noted that the two firms' operations were complementary, predicted a merger would result in savings of $2.5 billion.

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