Leap loses 269K subs in Q3, promises improved customer experience

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Cricket provider Leap Wireless (NASDAQ:LEAP) lost 269,000 subscribers and saw its churn rise to 4.8 percent in the third quarter. However, the flat-rate carrier said it is taking concrete steps to improve the customer experience.

Leap said it will focus on adding more high-quality, high-end smartphones to its portfolio, enhanced service offerings and other unspecified customer experience improvements. The company said in August, after it reported results for the second quarter, that it was re-evaluating its business. Leap CFO Jerry Elliott said all options were on the table, including a possible sale of the company. More recently, Leap CEO Doug Hutcheson told FierceWirelesss that the company is interested in the idea of network or spectrum-sharing arrangements.

"During the third quarter, we continued a significant transition of our business to meet the changing needs of our customers and improve our financial performance," Hutcheson said in a statement. "We increased pricing on entry-level smartphones to improve customer survival and plan to continue adding higher-quality, higher-priced handsets to our device portfolio. We also added compelling, new features and updated pricing for our service plans and enhanced our Muve Music service, all to provide customers with increased value at a selection of different price points."

Leap said it is reducing projected 2012 capital expenditures by approximately $85 million, largely by managing 3G network capacity investments, exploring cost-effective alternatives to deploy LTE and "exercising increased financial discipline." Leap plans to have 21 million POPs covered with LTE by year-end and two-thirds of its current network footprint covered with LTE by 2015. The company will try to strike LTE roaming deals with other carriers to fill in the gaps in its coverage as it focuses on adding LTE to its footpring in areas where it will generate a strong return.

Here is a breakdown of the company's key quarterly metrics:

Subscribers: Leap said it lost a net 269,000 customers in the third quarter, compared to net additions of approximately 10,000 customers in the year-ago period and down slightly from 289,000 net losses in the second quarter. The carrier said it had voice net customer losses of approximately 239,000, reflecting fewer gross additions due to increased pricing for the its entry-level smartphones and general wireless industry softness, as well as higher year-over-year churn levels.

ARPU: Average revenue per user in the quarter was $41.94, up from $41.25 in the year-ago quarter and $41.64 in the second quarter. Leap said the year-over-year increase in ARPU primarily reflected continued adoption of higher-value service plans.

Churn: Churn in the quarter was 4.8 percent, up from 3.8 percent in the third quarter of 2011 and 4.4 percent in the second quarter. Leap said its voice churn was 4.7 percent, which was higher due to changes in the company's retention programs and quality issues in certain entry-level smartphones.

Financials: Leap reported a profit of $26.9 million, compared with a loss of $94.1 million in the year-ago period. Leap said its profit was boosted by a spectrum swap with Verizon Wireless (NYSE:VZ), which the FCC approved in late August. Total revenue rose 1.4 percent to $774 million, just under the forecast of $775 million, according to analysts polled by Thomson Reuters.

For more:
- see this release
- see this Dow Jones Newswires article
- see this Reuters article

Special Report: Wireless in the third quarter of 2012

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