Leap Wireless surprised some by posting first quarter results that were not as bad as anticipated. Sure, that’s faint praise, but when you are trying to compete in the ultra-competitive wireless market, any praise is welcome.
The carrier said it lost 93,037 customers during the quarter, which was a significant drop from the more than 258,000 customers it added during the same quarter last year and pushed the carrier’s full-year customer losses to nearly one million. The customer defections were attributed to a 45% drop in gross customer additions and an increase in customer churn from 3.3% last year to 3.6% this year.
Leap attempted to spin the news by noting net losses from its “core” operations, which is its traditional Cricket offering, numbered 8,502 customers compared with a gain of 163,613 core customers last year. That segment also posted just a 37.8% fall in gross customer additions, though a drop in churn from 3.1% to 2.9% year-over-year.
Leap’s non-core customers are those subscribed to its discontinued PayGo offering and those that continue to use the carrier’s de-emphasized mobile broadband service.
A consensus of analysts had predicted approximately 120,000 net customer additions for the quarter, so Leap did manage to beat those expectations.
Leap also managed to grow average revenue per user from $42.59 during the first quarter of 2012 to $43.72 this year. That growth was bolstered by continued strong sales of smartphones, which require a higher per-month rate plan. Leap’s management acknowledged some initial issues in meeting iPhone sales targets, noting it was working on several fronts with Apple that could help propel sales volumes.
“We believe that our iPhone sales volumes will resolve over time, and we’re comfortable that the relationship we have with Apple will allow for an appropriate resolution over the lifetime of the agreement,” explained Leap CEO Doug Hutcheson. Leap last month rolled out new plans for iPhone devices that included a lower-priced entry-level plan as well as a discount for multi-line plans.
That ARPU growth helped to prop-up total revenues, which fell just 4.3% year-over-year to $790 million, not bad considering those revenues came from nearly one million fewer customers. Leap ended the first quarter with just over 5.2 million total subscribers.
Increased customer acquisition and service costs weighed on Leap’s bottom line, with net losses growing from $98.4 million in 2012 to $111.3 million this year. This despite the fact that Leap slashed capital expenditures from $146.3 million during the first quarter of 2012 to just $26.4 million this year.
The carrier also noted that capex could remain subdued for the rest of the year as it looks for alternatives to rolling out its own LTE services. The carrier signed an LTE roaming deal with Clearwire last year, and reiterated a previous claim that it has “entered into a 4G LTE roaming agreement with a national carrier to provide Cricket’s customers with nationwide 4G coverage.” While that carrier was not named, a likely candidate would be Sprint Nextel, which has a long-standing 3G roaming agreement with Leap and recently announced plans to begin providing LTE roaming services to other operators.
“We remain focused on improving free cash flow and plan to continue our focus on making smart investments in our business,” explained Leap CFO R. Perley McBride, in a statement.
Leap also noted that while its LTE plans remain fluid, it was looking to move more aggressively in integrating Wi-Fi offloading into its service offering.
“You’ll see us expand and move more traffic through that channel, as others have done,” Hutcheson explained. “We do quite a bit already. But we think that there’s a chance to expand that.”
Bored? Why not follow me on Twitter?
