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MetroPCS asks to swallow Leap Wireless

'You don't do contracts. I don't do contracts. Let's get it on.'

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MetroPCS wants to buy Leap Wireless, intent on creating one big we-don't-do-contacts wireless carrier. And it wants the world to know it wants to buy Leap Wireless. But there's no telling what Leap wants.

This morning, the Texas-based MetroPCS sent a letter to Leap's board of directors, offering to purchase its San Diego-based competitor for more than $5bn in stock. Then it slapped the letter into a press release, flirting with stockholders everywhere.

"We believe a combination of Leap Wireless and MetroPCS is compelling and would yield substantial immediate benefits to the shareholders of both companies," the letter reads. "Institutional shareholders of both of our companies as well as the Wall Street research community repeatedly have articulated their desire to see a business combination between our two companies announced before the end of 2007."

With MetroPCS offering to exchange 2.75 of its shares for each share of Leap stock - and the average MetroPCS share price hovering around $28 - the deal would be worth close to $5.5bn. Plus, MetroPCS would assume or refinance approximately $2bn in Leap debt.

According MetroPCS, the merger would create a new national wireless carrier covering each of the country's top 200 markets. "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 very open letter continues.

It's hard to argue that the two companies are anything less than a natural fit. Both MetroPCs and Leap charge flat monthly fees for unlimited cell calls - rather than chaining customers to longterm contracts a la Verizon or AT&T. MetroPCS is sure that a merger of the two like-minded operations would only make them more efficient.

"Based on our preliminary analysis, we believe that the combined company would achieve significant operating cost savings through a combination of market-level operating efficiencies and corporate overhead reductions," the MetroPCS says. "MetroPCS' and Leap's existing market operations are complementary, and we believe that the combined company, as a result of the expanded service area, would likely benefit from incremental improvements in customer penetration and retention."

The PCSers think this could save two companies as much as $2.5bn. What do the Leapers think? Who knows. The company won't respond to our requests for comment. ®

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