BMO Capital "Slightly Positive on VZ/LEAP Transactions

BMO Capital Markets has published a research report on Verizon VZ and Leap Wireless LEAP after LEAP announced a series of spectrum transactions with VZ. In the report, BMO Capital Markets writes, "Leap announced a series of spectrum transactions with Verizon Wireless where it will: (1) acquire 12MHz of A-block 700MHz spectrum in Chicago for $204 million ($1.65/MHz-POP vs. $1.23/MHz-POP Verizon paid in Auction 73); (2) divest excess PCS/AWSspectrum across various markets for $188 million; and (3) through its 85% non-controlled subsidiary, Savary Island, divest ~10 MHz of AWS spectrum in the upper Midwest regionfor $172 million. Through a series of debt repayments, the company will receive net cashproceeds of ~$100 million, to be used in deploying its 4GLTE network. These transactions enhance Leap's spectrum position in Chicago, where it held only 10 MHz, and help financeits 4GLTE build-out, which we estimate will cost ~$635 million ($10 per covered POP) overthe next two to three years (two-thirds coverage overlay)." BMO Capital Markets maintains its Outperform rating on Verizon and Market Perform rating on Leap Wireless. Verizon wireless is currently trading up $0.43 from yesterday's $38.05 closing price while Leap Wireless is trading up $0.08 from yesterday's $9.36 closing price.