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May 9, 2010

Prepaid mobile service provider Leap Wireless has managed to add over 445,000 new subscribers during its first quarter.

These results underscore the increased competition in the wireless segment as various service providers compete agressively for the same market and with fewer new customers that sign up for the service.

Leap added about 445,650 net new subscribers to its Cricket-branded services in the first quarter. Of that amount, about 248,700 were voice users and 179,200 subscribed to its wireless broadband service.

But unlike MetroPCS, Leap's first quarter net new subscriber additions actually fell 9.5 percent short of the number of subscribers added in the same period in 2009.

MetroPCS posted nearly 8,000 more subs in Q1 2010 compared to the year-ago quarter, which the wireless carrier attributed to its Wireless for All tax-inclusive program launched in early January.

The nation's third-largest operator, Sprint Nextel said it expected up to 70 percent of new subscriber additions this year to be prepaid users.

Sprint actually revamped its Virgin Mobile brand Thursday and is expected to introduce a fourth prepaid brand into the market in the next few weeks.

Leap also fared worse in its customer churn rates and ARPU (average revenue per user) metrics when compared year over year.

Churn rates ratcheted up 4.5 percent this quarter, compared to 3.3 percent in Q1 2009. ARPU slid about 10 percent to $37.96 in the period.

But on the positive side, Leap Wireless spent less to acquire new customers in the quarter. Its cost per gross new addition was down 12.3 percent to $171, which still compares rather unfavorably with MetroPCS, whose CPGA stood at $146.18.

Leap also reduced its cash cost per user by 13 percent to $17.42.

Leap revenues increased 11.5 percent to $653 million, and the company's operating income totaled $5.2 million, compared to a $1.08 million loss in the same 2009 period.

At any rate, net loss for the first quarter rose 38 percent to $65.4 million.

Leap CEO Doug Hutcheson says "this first quarter customer growth helped deliver a 27 percent annual increase in adjusted OIBDA (operating income before depreciation and amortization), even as we absorbed higher acquisition costs related to the company's strong customer additions during the quarter and approximately $4 million of expense relating to store and staffing adjustments."

He added “looking ahead, we expect that our new markets and Cricket Broadband service will begin to contribute positive adjusted OIBDA."

"That adjusted OIBDA for the second quarter of this year will actually grow on a sequential basis over the first quarter of this year at a rate approaching the 45 percent growth rate we experienced in the second quarter of 2007 when our Auction 58 markets similarly began to contribute positive adjusted OIBDA," he said.

"But although we expect that this growth may be somewhat moderated by the effects of the competitive and economic environments," said Hutcheson.

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Source: Leap Wireless.