Cricket Leaps to Nationwide

Leap Wireless International Inc. (Nasdaq: LEAP) is taking its consumer-facing brand Cricket Communications Inc. nationwide through a deal with big-box retailer Best Buy Co. Inc. and a wholesale agreement with Sprint Corp. (NYSE: S).

This will expand Leap's regional service to markets across the U.S. and encompass 1,300 Best Buy stores at launch.

Leap also added another smartphone to its music-playing lineup, the ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) Score. The Score, along with the Samsung Corp. Vitality, from Best Buy will require $55 monthly plans for unlimited text, data and music and 1,000 minutes of talk time. A feature-phone plan will cost customers $45 per month. Both represent a $10 discount on the plans when purchased directly through Leap.

Why this matters
Leap's new strategy is expected to boost its market share, but come at a cost.

Leap is betting the farm on its Muve Music service to attract new users. So far, the plan has paid off as Leap has signed up 200,000 customers to Muve, with most purchasing its higher-value smartphone plan. (See Leap Hopes Music Will Muve It Nationwide and Cricket Comes With Music Too.)

Even while it enters new markets, however, Mizuho Securities USA Inc. analyst Michael Nelson points out that margins will suffer through Best Buy. Leap is letting the retailer offer its plans at a discount with the only distinction being that they include 1,000 minutes of talk instead of unlimited time.

His concern is that increased subsidies will lead to margin pressure for the small operator, which is already bleeding subscribers (100,000 in the last quarter) and feeling increasing pressure from its competitors like CDMA and Long Term Evolution (LTE) operator MetroPCS Inc. (NYSE: PCS). Gaining a nationwide presence will also put it up against other prepaid operators like Sprint's own Boost Mobile and Virgin Mobile USA Inc. (NYSE: VM), and value player T-Mobile US Inc. .

"Leap's nationwide distribution expansion should drive higher gross add share for the company," Nelson wrote in a research note. "However, the plans are likely to generate lower margins and represents incremental pricing competition for the sector."

For more
Leap has benefited from an interest in both prepaid and music in the past year, but its LTE plans are still a couple years out.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

Be the first to post a comment regarding this story.
Sign In