Leap takes hit from T-Mobile, loses 27% of its customers in 18 months
Leap Wireless (NASDAQ:LEAP) lost nearly 92,000 net customers in the fourth quarter, bringing its total customer base to just 4.55 million at the end of 2013. The prepaid carrier blamed the losses on increasing competition from nationwide operators, particularly T-Mobile US (NYSE:TMUS) and its MetroPCS brand.
Leap is set to be acquired by AT&T (NYSE:T), which announced last July that it would purchase the Cricket provider for $1.2 billion. At the time the deal was announced, Leap had more than 5 million customers.
Leap released its fourth-quarter and full-year 2013 financial and operational results via a securities filing, and did not issue a separate earnings release or conduct an earnings conference call. Leap said it believes the deal with AT&T will close on or before the expiration of the FCC's informal 180-day shot clock on March 14.
AT&T has said that it plans to keep Leap's Cricket prepaid brand and discontinue its own Aio Wireless brand when the deal is complete. "We're convinced that putting the Cricket brand on top of the AT&T network is going to shake things up in this space," AT&T CEO Randall Stephenson said in January.
Stephenson added that AT&T wants to use that brand "to push smartphone penetration in the no-contract space and to be aggressive as it relates to pricing."
Here's a breakdown of Leap's key metrics for the quarter:
Subscribers: Leap lost 745,297 total net customers in all of 2013, compared to 637,229 for all of 2012. When taking out the 653,305 net subscriber losses Leap reported for the first three quarters of 2013, the company lost 91,992 net customers in the fourth quarter.
"Competition in the wireless industry has increased and intensified in recent quarters, particularly from carriers and their affiliated brands with robust nationwide networks and significantly greater deployment of 4G LTE technology. In particular, we have been experiencing increased competition in many of our core Cricket markets from nationwide carriers increasingly targeting the prepaid segment, including from T-Mobile's nationwide expansion of the MetroPCS prepaid brand utilizing the T-Mobile 4G LTE network," Leap said in a filing.
Notably, the carrier added that "this evolving competitive landscape has negatively impacted our financial and operating results in recent years, as evidenced by a 26.5% reduction in customers between March 31, 2012 and December 31, 2013."
Churn: Leap's total churn in the fourth quarter was 3.5 percent, compared to 4 percent in the third quarter and 4.6 percent in the year-ago quarter.
ARPU: Average revenue per user for the third quarter was $45.30, compared to $42.73 in the year-ago period but down from $45.45 in the third quarter.
Muve Music: Leap said Muve Music was available to more than 2.3 million Cricket customers as of the end of 2013, "and is currently among the largest on-demand music subscription services in the U.S. as measured by the number of paid users."
Financials: The company posted a net loss of $177 million, compared to a net loss of $73.8 million in the year-ago period. Total revenues for the fourth quarter fell nearly 10 percent year-over-year to $682.7 million, down from around $756 million in the year-ago period.
- see this SEC filing
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