Cricket Leaps to Nationwide

Small CDMA player is regional no more after deal with Best Buy and Sprint, but offering discounted plans could hurt Leap's bottom line

Sarah Thomas, Director, Women in Comms

September 22, 2011

2 Min Read
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.

  • Cricket's Muve Music Comes to Android

  • Leap Takes Its Time on LTE

  • Leap Posts Loss as Broadband Subs Flee

  • Cricket's Muve Music Adds 100K Customers

  • More Growth Predicted for Pre-Paid

  • CTIA 2011: Leap Looks Ahead to LTE

— Sarah Reedy, Senior Reporter, Light Reading Mobile

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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