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May 10, 2009

Late Friday, Leap Wireless reported a hefty increase in its net new subscribers for the first quarter.

However, it still came in behind competing wireless operator MetroPCS.

Both companies have benefited from the current economic slowdown as mobile customers defect to their flat-rate, no-contract wireless services instead of sticking with landlines or high-end plans.

MetroPCS appears to be doing a bit better than Leap after posting a net profit and higher customer additions in its latest quarter, although its churn rate and ARPU (average revenue per user) come in behind Leap’s.

Leap added 493,000 new subscribers while MetroPCS plowed its way ahead with an additional 684,000 customers in the same period, and it expanded into highly-populated markets in New York and Boston and covered an additional 15 million people.

Leap launched service in Chicago and Philadelphia toward the end of the first quarter, covering an additional 17 million people and adding 193,300 customers in those new markets.

The company’s subscriber base now stands at 4.3 million, behind MetroPCS’ subscriber base of 6.1 million customers.

But Leap Wireless still managed to post a healthier churn rate and higher ARPU than MetroPCS. Leap’s churn rate dropped to 3.3 percent from 3.6 percent in 2008. MetroPCS’ churn rate jumped a full percentage point, hitting 5 percent in the same period. Some wireless analysts think that's a huge increase.

An uptake in Leap’s broadband and prepaid services took a bite out of ARPU, which slipped 6 percent to $42.21. Leap attributed the ARPU decrease to its Cricket Broadband and Cricket "Pay-Go" services, which are priced lower than its most popular Cricket Wireless plan.

Leap Wireless said it remains on track to meet its previous earnings estimates and expects to add 1.5 million voice and broadband customers by the end of this year with adjusted operating income before depreciation and amortization coming in between $560 million and $640 million.

While MetroPCS posted profits of $44 million, Leap lost $47.4 million, or 74 cents per diluted share, despite a 30 percent jump in sales, which hit $514 million.

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Source: Leap Wireless.