Zacks_Analysts' Blog : LEAP Boosts Customer Growth - Analyst Blog

Leap Wireless International Inc. (LEAP), one of the low-cost wireless service providers in the U.S, announced huge subscriber additions in the last quarter of fiscal 2011. The company gained nearly 175,000 subscribers in the fourth quarter of 2011, mainly fueled by the launch of Muve Music, increased smartphone sales and attractive service plans

The company stated that it has added 413,000 subscribers in fiscal 2011, up 65.9% year over year. Out of the total net customer addition for the year 2011, 238,000 users were added in the first nine months of fiscal 2011 with an average of 79,333 customers per quarter. At the end of fiscal 2011, the company had 5.9 million subscribers.

In 2011, Leap Wireless introduced their unlimited music download facilities for its 3G wireless subscribers. The new digital music service is called “Muve Music” and is available on smartphone devices across all its existing markets, which also aided customer growth during the year.

In order to sustain such subscriber growth in the future,the company plans to launch their LTE 4G services across the country. Moreover, the company has extensive plans to expand its reach through 200 new Cricket locations and at least 5,500 additional national retail locations.

Improving churn rate and Average revenue Per User (ARPU) coupled with the launch of several other Muve Music-enabled handsets in the coming quarters will act as positive catalysts for growth.

Despite such positive traits, we remain cautious regarding Leap Wireless as it faces intense competition from other carriers like AmericaMovil’s (AMX">AMX) Tracfone, which also offers such attractive plans. Moreover, lack of spectrum depth coupled with mounting debt and continuous loss of broadband subscribers, will act as headwinds for the company going forward. We, thus, maintain our long-term Neutral recommendation on Leap Wireless International Inc.

MetroPCS(PCS), one of the arch rivals of Leap Wireless, also declared 197,410 net subscriber additions for the fourth quarter of fiscal 2011. However, the company experienced 33.7% year-over-year decline in customer growth mainly attributable to higher churn rates.

Currently, Leap Wireless International Inc has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

Based in San Diego, California, Leap Wireless International Inc. provides digital wireless communication services in the U.S. under the “Cricket” brand primarily through its wholly-owned subsidiary Cricket Communications Inc.