DEALTALK-MetroPCS, Leap may revisit merger plans later this year

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By S. John Tilak

BANGALORE, Jan 27 (Reuters) - U.S. low-cost wireless carriers MetroPCS Communications Inc (PCS.N) and Leap Wireless International Inc (LEAP.O) will likely come to the table to revisit merger plans later this year when their rapid expansion into new markets eases off.

The rivals are having to contend with rising competition from larger carriers, underlined by Sprint-Nextel (S.N) unit Boost Mobile's recent launch of a $50-a-month unlimited calling plan. This gives them one more reason to join forces: a common enemy. A merger would make the new company a distant No. 5 in the U.S. wireless carrier market and pit it head-to-head with national carriers in the fast-growing unlimited-calling space.

"Bringing these two together, you could cause a lot of distraction from the four other national guys," Wachovia Capital Markets analyst Jennifer Fritzsche said. "You're talking about almost a three-quarters of a national player at this point, with a much, much lower cost structure."

The companies coming to the table for talks, Fritzsche said, "could be a late-this-year event."

It is only a matter of time before they merge, analysts said. In 2007, MetroPCS made a bid, then worth about $5.5 billion, for Leap Wireless, but was rebuffed.

MetroPCS and Leap typically target youth and ethnic minorities with relatively lower earnings power by offering unlimited calls at flat monthly rates without tying customers to contracts.

The new Boost plan is seen as an attempt by Sprint to create a beachhead in what has been the turf of Leap and MetroPCS. Until now, the national carriers offered unlimited services at much higher price points.