Leap's subscriber growth slows in Q3

Leap Wireless reported a wider net loss in the third quarter and weaker subscriber growth, but the company saw a boost in revenues. Like its rival MetroPCS, which reported earnings Thursday morning, Leap's subscriber additions slowed in the quarter when compared with its results from earlier quarters this year.

The news comes as Leap works to broaden its distribution channels; the carrier recently inked agreements with Best Buy, Target, Dollar General and Wal-Mart for its Cricket PAYGo monthly voice product.

Here's a breakdown of Leap's key quarterly metrics:

Financials: Leap's net loss swelled to $65.4 million, up from $47.3 million in the year-ago quarter. The company reported total revenues of $599.5 million, up nearly 21 percent from the $496.7 million it had in the year-ago period. Service revenues totalled $541.3 million, up 25 percent from $434.5 million in the third quarter last year. Leap said that the boost in service revenue reflected the success of its recent market launches and its broadband service.

Subscriber additions: The carrier had net customer additions of a little over 116,000, down 25 percent from the approximately 156,000 it had in the third quarter last year and down from its 203,000 additions in the second quarter. Leap ended the quarter with 4.65 million total customers, up 35 percent from the year-ago quarter.

Churn: Leap's churn rose to 5.4 percent in the quarter, up from 4.2 percent in the year-ago quarter and 4.4 percent in the second quarter. The company said that year-over-year increase reflected several factors, including newer customers in some of the company's new markets, competitive pressures and "the significant effect of rising unemployment in our key customer segments, which decreased available discretionary income and resulted in increased deactivations."

ARPU: Third quarter average revenue per user declined 8 percent, from $42.95 in the year-ago quarter to $39.60 in the third quarter this year. Leap said the successes of its new, lower-priced Cricket Wireless service plans and its Cricket Broadband pulled on the numbers. The carrier said it expects ARPU in the fourth quarter to continue to decline.

Walter Piecyk, an analyst at Pali Research, said Leap's results confirmed that the company was feeling the effects of intense competitive pressure. "The prepaid space has effectively been taken over by Sprint and TracFone, which added 666,000 and 712,000 customers, respectively, in the fourth quarter," he wrote in a research note.  "Clearly customers flocked to lower-end rate plans and Leap potentially lost the higher value customers to Sprint's nationwide service," he said later in the note. 

Leap's stock was down 45 cents to $12.58 per share in late-morning trading.

For more:
- see FierceWireless' Q3 earnings page [1]
- see this release [2]

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