Piper Jaffray: LEAP / PCS Merger Would Have "No Real Effect" On Tower Stocks

In its weekly update on telecom services, Piper Jaffray reports that the potential merger of Leap Wireless LEAP and MetroPCS PCS would have no real effect on the tower stocks.

“Overlapping markets are extremely limited, so there is little risk for cell site decommissioning,” Piper Jaffray writes. “In fact, one could argue that a stronger combined company would be better for future network spending.

“If Clearwire's CLWR management shakeup catalyzes reconciliation with Sprint S, network spending could accelerate; alternatively, if the relationship sours, we would envision Sprint moving forward with a plan B…and network spending continues. This would still leave T-Mobile as a potential Clearwire partner.

“The only real negative outcome (for the towers) that we see stemming from last week's headlines is if TMobile and Sprint merge and consolidate networks. Even then, we estimate the impact to public tower companies would be at most $325M in annual revenues with no pickup in capacity spending (see our 3/8 note for details). This would equate to 5% of 2015 revenues, less than a year's worth of growth.”

MetroPCS closed Friday at $15.01; Sprint closed at $5.00; Clearwire closed at $5.76; and Leap closed at $13.22.