Verizon denies interest in Leap, but considers a bid in Canada

On quarterly conference call with investors and press, Verizon CFO Fran Shammo lays to rest rumors the company is interested in bidding on Leap Wireless. But he acknowledges that it's exploring buying a small Canadian provider.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
3 min read
Eager customers line up at a Verizon Wireless store in midtown Manhattan for the iPhone 5. Roger Cheng/CNET

Verizon is not interested in bidding on prepaid wireless service provider Leap Wireless. But the company may be looking to buy a carrier in Canada, according to Verizon Chief Financial Officer Fran Shammo.

Speaking on the company's quarterly conference call on Thursday, Shammo responded to an analyst's question about AT&T's proposed $1.2 billion acquisition of Leap Wireless. Shammo said he wouldn't make specific comments regarding the proposed acquisition, but emphatically said that he wanted to put to rest any rumors that Verizon may be interested in the Leap network.

"We are not interested," he said.

But he did say that the company is in the early stages of exploring a possible acquisition of wireless assets in Canada. Shammo said that from a territorial and technical standpoint, an operator in neighboring Canada could fit nicely with Verizon's existing network.

Rumors about Verizon eying a smaller carrier in Canada heated up last month. Canada is auctioning off more wireless spectrum later this year. And according to unnamed sources in a Globe and Mail article, Verizon may be interested in getting its hands on this spectrum and establishing itself as a major player in the Canadian market.

Verizon has competed in the Canadian market before: until 2004, it was a major shareholder in carrier Telus Corp.

Speculation about Verizon's interest in Leap Wireless has also been tied to a quest for more wireless spectrum, which is likely the impetus for AT&T's bid for the small prepaid carrier. But Shammo said Verizon is not in desperate need of new spectrum in the U.S.

"We are in good shape for the next three to four years," Shammo said. "We will participate in the upcoming broadcast spectrum auction in 2014. But we are not under any spectrum pressure."

That said, Shammo said that Verizon is constantly looking and exploring deals for more wireless spectrum. He said that the company buys some spectrum almost every quarter in smaller deals that rarely pique the interest of financial analysts or press.

Moving the company's subscribers from its older 3G CDMA network to the more spectrally efficient and faster 4G LTE network is also helping the company free up spectrum for additional capacity as it adds new users and those subscribers increase usage. In addition to using freed up 3G spectrum capacity for its 4G network, Shammo also said the company will continue to push its 3G wireless network for prepaid services.

And he added that Verizon has no intention of announcing a separate prepaid brand, as some of its competitors have done.

"We don't see a need for a secondary brand around Verizon," Shammo said. "We've built our wireless network around quality and reliability. It doesn't help our brand to introduce another separate prepaid brand."

But he said that Verizon has gotten more aggressive in its pricing to entice customers interested in those types of services to choose Verizon over others. And the company has already seen some growth prepaid sales. He added that the company plans to continue its current strategy of using the 3G network exclusively for prepaid services. Currently, the company's prepaid services do not use Verizon's 4G LTE network.

"We want to make sure we keep the 3G network as full as possible," he said. "Since we are not investing anymore on that network, the contribution margin is very high (if we can put prepaid customers on it.)"