Leap Wireless at all-time low on subscriber losses

AP News
Posted: Aug 07, 2012 11:06 AM
Leap Wireless at all-time low on subscriber losses

NEW YORK (AP) — Shares of Leap Wireless International Inc., the nation's sixth largest cellphone carrier, hit an all-time low Tuesday after it reported the loss of a record number of subscribers.

The stock plunged $1.18, or 21 percent, to $4.28 in morning trading, before regaining a few cents back. That was the lowest ever price for the company, which went public in 2004.

Leap operates under the Cricket brand, which lost a net 289,270 customers in second quarter to end June with 5.9 million. Promotional efforts failed, executives said.

Cricket has posted losses for the second quarter in the previous two years, but this year's loss was the largest for any quarter.

Cricket customers were more likely to cancel service, but the biggest contributor to the net loss of subscribers was that fewer new customers signed up. Leap in the past focused on urban populations in the areas where it has its own network. Last year, it shifted its strategy and started selling phones in much wider areas, where it buys access to Sprint Nextel Corp.'s network. So far, the strategy hasn't resulted in the hoped-for influx of customers.

Sanford Bernstein analyst called the results "abysmal," but said there might be a silver lining for investors in that the company, a frequent subject of acquisition rumors, might finally be bought. Leap's market capitalization is $343 million.

"What is clear for now, in our view, is that the current strategy, indeed the entire current business, isn't working," Moffett wrote in a research report.

Baird analyst William Power was among those who downgraded the stock, cutting shares to "Underperform" from "Neutral," and dropping his price target to $3 from $6 and said he isn't sure there will be much of a market for San Diego-based Leap. "Given the challenging industry backdrop, continued free cash flow losses, a levered balance sheet, and a spectrum value that likely won't cover the debt, we are unconvinced that a buyer will step in," he wrote in a note to investors.

Leap's financial net loss in the quarter came to $46 million, or 54 cents per share, compared with a net loss of $58.4 million, or 85 cents per share, a year ago. Leap has posted a loss every quarter for the last six years.

Analysts, on average, were looking for a loss of 50 cents per share, according to FactSet.

Revenue rose 3.5 percent to $786.8 million from $760.5 million. That was below the $836.8 million expected by analysts.

Leap started selling the iPhone on June 22, a week before the end of the quarter, as one of the first companies to sell it on a no-contract basis with prepaid service.