MetroPCS, Leap Wireless in Play?
The on-again, off-again potential merger between MetroPCS Communications and Leap Wireless might be on again, Reuters suggests. But both companies might be in play, with rumored buyers including the likes of America Movil , Deutsche Telekom (owner of T-Mobile USA or AT&T.
As often is the case, intense competitive conditions that are good for consumers are not so good for providers. A brutal and ongoing price war in the prepaid wireless business is depressing profit margins at MetroPCS and Leap Wireless, many note.
And while prepaid specialists long have toiled in the shadow of the larger post-paid market segment, growth now is higher in prepaid, which is attracting new interest. Sprint Nextel already has acquired Virgin Mobile, and most market watchers have expected more consolidation for some time.
For America Movil, which operates theTracfone prepaid business, the advantage of acquiring a facilities-based competitor would allow Tracfone to boost its profit margins, as at least some of its traffic could be carried and terminated on owned facilities.
Such a merger also would provide heft in a market where scale economies are important, and allow America Movil to expand in the postpaid market as well as the broadband access market.
MetroPCS might be interesting for T-Mobile USA, which would acquire a facilities-based prepaid brand, a move that would allow T-Mobile to expand in the prepaid market while protecting post-paid profit margins and retail pricing.
Others say it could make sense for AT&T, again as a way to expand in the prepaid segment with a distinctly different brand.