Yesterday, we found out that Leap Wireless rejected MetroPCS’s merger bid. We won’t go over the disappointment in the industry, since we covered it yesterday. Leap did issue a statement, though, that indicated that they’re not opposed to the deal, per se, but won’t accept the terms proposed by MetroPCS. Given the way this potential transaction has been conducted, things aren’t looking too good for this match made in heaven. The problem is that negotiations really didn’t take place. Metro made a bid, and two weeks later Leap rejected it. End of story, at least for now. Leap didn’t like the offer, Metro still thinks it’s fair, and neither company appears motivated to further talks. While that is the surface problem, the real issue may be with how the information was exchanged. Metro submitted its bid, and immediately involved the media. Yes, media involvement is usually unavoidable in these situations, but it appeared that Metro’s intention was to use the press to pressure Leap into the deal. Then, without any negotiation between the two parties — or at least not that anyone is aware of — Leap fired right back through the media. As any sports fan knows, negotiating through the media does nothing but create ill will between two parties. The difference between sports contract negotiation and this situation is that there’s no pressure to get things done. Both companies could go on co-existing, whereas in sports a deal will get done one way or another, with whatever team. Honestly, we think Leap might be eating their words by this time next week. Their shares have already been downgraded, so it’s only a matter of time before the stock price drops. Once it does, Metro’s offer might line up better. And then what is Leap going to do? Grovel back and accept the initial offer? Doubtful, but that easily could be their best option. Personally, we think we’ll see a slight increase in Metro’s bid early next week, which will lead to an agreement hopefully by mid-October. Time is of the essence for these two companies, who surely have interest in the 700 MHz spectrum auction. Auction rules prevent talks among separate companies a month or so before the auction, as to prevent collusion. So expect this story to die down for a week or so. We’ll be around when it picks back up. [North County Times]]]>
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