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Leap Hopes Music Will Muve It Nationwide

Leap Wireless International Inc. (Nasdaq: LEAP) made strides in the first quarter with its recently launched unlimited music service, Muve Music, as its tweaks on the mobile-music business model seem to be paying off. (See Cricket Comes With Music Too and Leap Makes Gains But Reports Q1 Loss.)

Mobile music hasn't been a hot service for other wireless operators, which usually charge per download. By contrast, Muve is an unlimited service, and its $10 price is included in a $55 unlimited voice and data plan -- a better value than most of its competitors.

The additional charge gives Leap an easy way to nudge its average revenue per user (ARPU) upward. In the first quarter, 1 million customers owned smartphones at Leap, and ARPU was $39.95, a 3.4 percent increase over the previous year's first quarter. Leap has migrated more than 80 percent of its customer base to these all-inclusive plans, CEO Doug Hutcheson said on Leap's earnings call Wednesday.

He added that Leap is already making money on the new service. Leap has about 50,000 customers using the service and expects to add 100,000 more soon.

Leap also has a mobile virtual network operator (MVNO) relationship with Sprint Corp. (NYSE: S) working in its favor. The carrier has Muve in all of its nationwide markets and the agreement with Sprint will help it to continue to grow to cover more than 200 million people through national retail outlets. It plans to use this strategy to expand the appeal of Muve Music beyond its typically younger, cost-sensitive demographic. (See Leap Revamps Prepaid With Tiered Data and Leap Muves Music to All Its Markets.)

"We know our customer," Hutcheson said. "They want music and many of them want to shop in national retail."

Right now, the download service is only on one feature phone, but Hutcheson said Leap plans to extend it to more devices, including feature phones, and with more rate plan options. Eventually, Leap may also explore other media services with the same unlimited model.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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