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Leap gets serious about merger, hires Goldman Sachs

Last we checked, Leap Wireless was talking to investment banks, hoping “to explore strategic options.” This usually means a company wants to see what a merger or acquisition would look like. Yesterday The Wall Street Journal reported (sub. required) that Leap has created a “special board committee” which will help it determine the best course of action going forward. Goldman Sachs Group will advise the company. This doesn’t necessarily mean a merger with MetroPCS, but given the state of the wireless industry it remains the clearest option.

As per usual, reports circulate that Leap is also looking into selling the company to a larger company, but there doesn’t appear to be a clear match. AT&T and T-Mobile both run GSM networks, while Leap runs CDMA. Sprint has bigger issues at hand, and they also have a strong prepaid arm. The remaining large carrier, Verizon, recently acquired Alltel, and likely doesn’t have a need for another regional provider. There are other regional carriers, but the compatibility with MetroPCS makes them the most likely combination.

Industry people agree. The Journal reporters, Jeffrey McCracken and Niraj Sheth, spoke to someone familiar with the matter who said that a MetroPCS merger is “the one that makes the most sense for Leap, and both sides know it.” As you might recall, Metro made a bid to acquire Leap in September of 2007, but were rebuffed. The offer, for about $5.5 billion in stock, represents five times Leap’s current market value, according to the Journal report.

Every time this issue comes up, I want to say that it makes sense now more than ever. But every time it happens, nothing comes of it. Many analysts and journalists think this makes sense. So what I’m wondering is what holds back the two companies? Does it all come down to each one trying to extract every last penny? Can they not find a common ground?