Goldman: Buy MetroPCS (PCS)

Goldman Sachs likes rapidly expanding wireless carrier MetroPCS, and predicts the stock could jump 45% in the next year.

The company sells simple, prepaid, all-you-can eat wireless service, focusing on young customers and people with bad credit. So far, MetroPCS service is only available in a few markets, but as it expands around the country into big markets like Las Vegas, Philadelphia, Boston, and New York, Goldman thinks it will sign up a lot of customers: Analyst Scott Malat, who initiated coverage with a "buy", projects the company will finish 2008 with 5.3 million subscribers and 2009 with 7 million subs, up from about 4 million at the end of 2007.

One of the most attractive aspects about MetroPCS: The odds that it will swallow up Leap Wireless (LEAP). Last fall, Leap turned down MetroPCS' $4.7 billion first offer. That looks silly now, since Leap's shares have plummeted since then, and the company now sports a $2.72 billion market cap. And the deal still makes sense, since the carriers have very similar business models and little geographic overlap.

But any deal will have to wait. Both carriers have entered the FCC's wireless spectrum auction, which started last Thursday and could take weeks to finish up. Bidders are bound by anti-collusion rules, meaning they can't talk M&A while the auction is in progress. And if the FCC fails to auction off all of the 1,099 spectrum licenses up for grabs -- which looks likely -- the government will hold a second auction a few weeks after the first one end. Which could delay a potential MetroPCS-Leap merger even longer.