Verizon Should Buy Rival CDMA Operators - Report

The market research group, Yankee Group has published a paper recommending that Verizon acquires the CDMA operator, Leap Wireless as the company weighs potential merger opportunities. Verizon could benefit from Leap's penetration into key Hispanic markets while maintaining Leap's unlimited, local service model. The combined company would bring additional focus to markets in states such as Oklahoma and Arkansas where Leap maintains a healthy leadership position.

"Acquiring Leap would dramatically increase Verizon's muscle in several key areas. Leap would not only increase Verizon's market penetration into certain consumer markets, but also round out Verizon's overall service offering," said Adam Zawel, Yankee Group research director. "Leap would expand Verizon's presence in the in-home/office market for voice and give Verizon the ideal platform to trial fixed wireless broadband into the home or office."

Along with Leap, Metro PCS is another target Verizon should consider. Leap and Metro PCS have profited from offering voice services at less than half the price per minute of the major national carriers. Both Leap and Metro PCS could allow Verizon to promote a no-frills service bundle to less affluent consumers. Verizon could allow Leap and/or Metro PCS to operate as a national sub-brand targeting price-conscious users.

In the DecisionNote Verizon Should Consider Purchasing Leap Wireless, Yankee Group proves how additional inroads into the wireless broadband market will help ease FCC worries over consolidation between wireless players, which could ultimately lead to a duopoly. To increase the likelihood of merger, activity regulators would need compelling reasons to stop viewing the wireless industry in isolation, instead considering mobile and fixed services, including voice and data, as overlapping markets. A Verizon/Leap deal would help crystallize that view."

Posted to the site on 26th July 2005