Leap adds 446,000 subs, but loss widens to $65.4M

Much like fellow flat-rate provider MetroPCS Communications Inc., Leap Wireless International Inc. added customers during the first quarter, but at a cost. The results highlight the increased competition in the prepaid field as wireless service providers attack that market segment full force.
Indeed, the nation’s third-largest operator, Sprint Nextel Corp., said it expected up to 70% of new subscriber additions this year to be prepaid users. Sprint revamped its Virgin Mobile brand earlier this week and is expected to introduce a fourth prepaid brand into the market shortly.
For its part, Leap added nearly 446,000 net new subscribers to its Cricket-branded services in the period. Of that amount, 249,000 were voice users and 179,000 subscribed to its wireless broadband service. However, unlike MetroPCS, Leap’s Q1 2010 additions fell 9.5% short of the number of subscribers added in the same period one year ago. MetroPCS posted nearly 8,000 more subs in Q1 2010 compared to the year-ago quarter, which the carrier attributed to its Wireless for All tax-inclusive program launched in early January.
Leap also fared worse in its churn and average revenue per user metrics when compared year over year. Churn ratcheted up to 4.5% this quarter, compared to 3.3% in Q1 2009. ARPU slid 10% to $37.96 in the period. On the plus side, Leap spent less to acquire new customers in the quarter—its cost per gross addition was down 12.3% to $171 (which still compares unfavorably with MetroPCS, whose CPGA stood at $146.18.) Leap also reduced its cash cost per user by 13.1% to $17.41.
“This first quarter customer growth helped deliver a 27% 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”,” said CEO and President Doug Hutcheson. “Looking ahead, we expect that our new markets and Cricket Broadband service will begin to contribute positive adjusted OIBDA, and that adjusted OIBDA for the second quarter of 2010 will grow on a sequential basis over the first quarter of 2010 at a rate approaching the 45% growth rate we experienced in the second quarter of 2007 when our Auction 58 markets similarly began to contribute positive adjusted OIBDA, although we expect that this growth may be somewhat moderated by the effects of the competitive and economic environments.”
Leap revenues increased 11.4% to $654 million, and the company’s operating income totaled $5.1 million, compared to a $1 million loss in the same period one year ago. Nevertheless, net loss for the first quarter rose 38% to $65.4 million.