Verizon Denies Rumors Of Counterbid For Leap Wireless


During its quarterly conference call with analysts, Verizon Communications Inc. (NYSE:VZ)’s CFO confirmed the company is not interested in bidding for Leap Wireless International, Inc. (NASDAQ:LEAP).


Verizon Communications Inc. (NYSE:VZ) chief financial officer Fran Shammo denied rumors that Verizon is interested in bidding for the prepaid U.S. mobile operator Leap Wireless International, Inc. (NASDAQ:LEAP).

The CFO, however, gave sufficient indication of possible acquisition of wireless assets in Canada. He feels from a technical and territorial standpoint, a neighboring operator in Canada would gel well with Verizon Communications Inc. (NYSE:VZ)’s existing network.

Incidentally, Canada is planning to auction more in the wireless spectrum later this year. Citing an article in Globe and Mail, Marguerite Reardon of CNET indicates Verizon might consider participating in the auction to position itself as a major player in the Canadian market.

AT&T slated to acquire Leap Wireless

Earlier, AT&T Inc. (NYSE:T), one of the major telecommunication carriers in the U.S. market, agreed to buy Leap Wireless International, Inc. (NASDAQ:LEAP), a prepaid wireless provider, for $15 per share or $1.2 billion in cash to enhance its competitiveness in the mobile market. The terms of agreement involves acquiring all the stock and wireless properties including licenses, network assets, retail stores and almost 5 million subscribers of Leap Wireless International.

The recent proposal from AT&T Inc. (NYSE:T) values Leap Wireless International, Inc. (NASDAQ:LEAP) at 88 percent above its share price. However, one of the major shareholders of Leap Wireless, the Booth family, sued Leap Wireless claiming the $1.2 billion buyout offer significantly undervalues the company’s actual worth.

Verizon’s earlier presence in Canada

Until 2004, Verizon Communications Inc. (NYSE:VZ) was a major shareholder in Canadian carrier TELUS Corporation (NYSE:TU) (TSE:T). Earlier, it was rumored the U.S.-based carrier is considering a plan to acquire a smaller carrier in Canada to facilitate Verizon to compete in buying wireless spectrum during auction later this year. The reports indicated that such a bid would catapult Verizon into the top four carriers in Canada.

During the quarterly conference call with the analysts, Verizon Communications Inc. (NYSE:VZ) CFO confirmed that the U.S.-based carrier is not desperate to acquire a new spectrum in the U.S., as they are in good shape for the next three to four years. He also indicated Verizon’s strategy to use the 3G network to the maximum possible extent. Considering no additional investments are made in the 3G network, the CFO feels Verizon can derive enhanced contribution margin.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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