Leap Wireless Promises Results After Weak Q2

Prepaid carrier lowers its LTE coverage target for 2012, but says it's exploring all options to return to growth

Sarah Thomas, Director, Women in Comms

August 6, 2012

3 Min Read
Leap Wireless Promises Results After Weak Q2

Leap Wireless International Inc. (Nasdaq: LEAP)'s new Chief Financial Officer Jerry Elliot is already making big promises just three months on the job. After a second quarter he admitted was unacceptable, the CFO told investors that Leap wouldn't just try harder, it will transform its business -- and it isn't ruling out any options to do so.

When asked about Leap's strategy and if a potential acquisition of the company or divestiture of its underperforming assets was in the cards, Elliot said nothing is off the table. The company is focused on investing in 4G and creating better cash flow, but it's also open to outside help.

"There's nothing you can think of that you should eliminate now from the list of possibilities," Elliot said, adding, "We prefer to always control our destiny and worry about ourselves and what others might do later."

Elliot's never-say-never attitude also applied when he was asked if Leap would get on board with the re-emerging mobile virtual network operator (MVNO) trend and sell off its spectrum.

The attitude comes after the prepaid company, which operates under the brand Cricket Communications Inc. , lost $41.6 million, or $0.54 per share on revenues of $786.8 million in the second quarter. More concerning was its customer loss. Leap managed to add 493,000 customers in the second quarter, but lost 289,000 with a churn rate of 4.4 percent.

Leap is putting most of its focus on Long Term Evolution (LTE), but it's had to pull back some on the 4G technology. It's now saying it will cover 21 million PoPs, or potential customers, by the end of the year, down from previous projections of 25 million.

Elliot says the prepaid carrier isn't pulling back hard, but one of its original markets planned for a late 2012 launch is now pushed back to the fist half of 2013, hence the change in numbers.

Despite the 4 million dip in PoPs covered, Leap says it will still cover two-thirds of its footprint with the 4G technology during the next two to three years. But, it knows it has its work cut out for it.

Assuming an acquisition doesn't pop up, Leap's planned makeover includes looking at more cost-effective ways to deploy LTE, either with partners or through facilities-based coverage, improving its customer service and retail sales channels and driving up average-revenue per user (ARPU) metrics. (See Cricket Leans on Its Competitors for LTE, Cricket Wants to Chirp on Other 4G Networks and Cricket Leaps to Nationwide.)

Specifically, Leap President and CEO Doug Hutcheson said Cricket will add 10 handsets to its lineup in the next six months, as well as shake up its higher-ARPU service plans "to provide more alternatives and value at different price points." But, Hutcheson added, Cricket will stick to the simplicity in pricing its known for amongst its cost-sensitive customer base. (See Cricket Fires Off $30 Shot in Data Price War and Leap Preps for Session-Based Pricing.)

"We will not have a large number of plans, so we will be working on keeping it simple," he said.

— 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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