Leap CEO: Prepaid iPhone 5 'moving very well'
Leap Wireless (NASDAQ:LEAP) CEO Doug Hutcheson told FierceWireless that the prepaid carrier has been selling most of the iPhone 5 units it gets, and that it's unclear exactly how many of the gadgets the company will ultimately be able to sell.
Leap began selling the iPhone 5 Sept. 28.
"We are on allocation on that," he said of the device. "So we don't really know where the volume on the [iPhone] 5 is going to go for us. So the units that we get seem to move very well."
Leap began selling the iPhone 5 Sept. 28, a week after Tier 1 carriers Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and Sprint Nextel (NYSE:S) began selling the phone. C Spire Wireless, Cellcom, Appalachian Wireless, Alaska Communications and GCI of Alaska and nTelos Wireless joined Leap in selling the iPhone starting Sept. 28.
Apple (NASDAQ:AAPL) has so far been unable to meet demand for the iPhone 5; the company sold 5 million iPhone 5s during the gadget's first weekend of availability. The iPhone continues to sell well among U.S. wireless carriers: During the third quarter AT&T sold 4.7 million iPhones; Verizon Wireless sold 3.1 million and Sprint Nextel sold 1.5 million.
However, Hutcheson said that the iPhone 5 won't work on Leap's new LTE network, which works on the carrier's AWS spectrum. The device does work on the LTE networks of AT&T, Verizon and Sprint.
"The current CDMA version of the iPhone 5 does not have [Leap's] LTE currently enabled," he said, adding that Qualcomm (NASDAQ:QCOM), Apple's chipset supplier, is planning to support Leap's LTE network in its future chipsets, which could mean that future iterations of the iPhone might support Leap's LTE network. "The chipsets likely have that coming. But I can't speculate on what Apple's plans will be for that."
Leap recently launched LTE in Las Vegas, and plans to cover 21 million POPs with the network technology by the end of the year. The carrier plans to cover two-thirds of its current network footprint covered with LTE by 2015.
Cricket provider Leap is selling the iPhone 5 (as well as the iPhone 4 and 4S) through a no-contract model, which means it does not heavily subsidize the cost of the phone since it can't ensure it can recapture that subsidy through a two-year contract. Thus, the iPhone 5 at Leap costs $499--$300 more than what AT&T, Verizon and other postpaid carriers charge. But Leap's monthly service plan is only $55 (which is far cheaper than what postpaid customers charge).
It's unclear exactly how much demand there is for a $500 iPhone in a prepaid model (Sprint's Virgin Mobile sells the iPhone 4 and 4S, but not the 5). When Leap last year announced its $900 million, three-year deal to sell Apple's iPhone products, Leap said it expected the iPhone to account for less than 10 percent of its total handset sales.
But prepaid carriers in general have noted subscribers' increased willingness to pay hundreds of dollars to obtain a top-of-the-line smartphone--a reversal from several years ago when prepaid carriers generally offered inexpensive feature phones tied to unlimited talk and text plans. Indeed, Leap in the first quarter of this year said that more than 50 percent of its customers owned a smartphone or Muve Music device, and that 65 percent of its customer base subscribed to plans $45 per month or higher.
Leap is scheduled to announce its third-quarter earnings Nov. 7.
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