Cricket provider Leap Wireless (NASDAQ:LEAP) said it will launch an LTE trial market in Tucson, Ariz., later this year, and will cover a total of 25 million people with LTE by the end of 2012. The carrier said it expects to spend around $250 million on the buildout through the end of next year. Leap plans to cover two-thirds of its existing CDMA network with LTE technology within the next two to three years.
Click here for key slides from Leap's third quarter earnings presentation.
The news comes as little surprise; Leap has repeatedly discussed its plans to eventually move to LTE. However, this is the first time Leap has set specific metrics and goals for its LTE buildout.
Leap CEO Doug Hutcheson said Leap expects to offer LTE smartphones in mid-to-late 2012. He also said that Leap currently owns enough spectrum--23 MHz in most of its markets--to offer LTE service without any additional spectrum. However, he said Leap would look to acquire additional spectrum if the opportunity presents itself.
As it travels toward LTE, Hutcheson said Leap is taking a four-pronged strategy for its business:
--Expand distribution through the opening of another 200 Cricket-branded stores by the end of the year. The company also plans to expand to 5,500 new national retail locations (such as Best Buy and Walmart) by the end of this year, bringing Leap service to a total of 11,000 national retail locations by year-end.
--Improve device lineup. Leap said it will offer a total of seven smartphones and five Muve Music devices by year-end.
--Launch new advertising. Leap said it will offer a new marketing message, with details here.
--Focus on Muve Music. Leap said it now counts 270,000 subscribers to its unlimited Muve Music download service, and will continue to push the service.
As for its third quarter results, Leap reported a surprising gain in customer additions, adding a net 10,000 new customers to its systems. According to Reuters, analysts had expected Leap to report a net loss of customers, as it has in a number of past quarters.
Leap said the gains were due to the carrier's focus on selling smartphones and Muve Music devices.
"Investors might get excited by some marginal upside to subscriber growth and ARPU but the resulting $10 million of revenue upside was completely offset by eroding gross margins, likely from increased roaming expense," wrote BTIG analyst Walter Piecyk. "Since Leap launched smartphone service, its Voice ARPU has risen $3.87 but its network expense per average sub has risen by $3.40 and voice CCPU has risen over $5."
Here's a look at Leap's other key quarterly metrics:
Subscribers: Leap's net customer additions for the third quarter were 10,000, a significant reversal from the 200,000 net customer deactivations Leap recorded in the third quarter of 2010. During the third quarter Leap gained a net 73,000 voice customers and lost around 64,000 broadband customers--the carrier has been working for most of the year to shed its broadband customers in favor of smartphone users. Leap ended the quarter with 5.75 million customers, up 13.1 percent from the third quarter of 2010.
Churn: Leap's customer churn for the third quarter of 2011 was 3.8 percent, a decrease from 5.5 percent for the comparable period of the prior year. The carrier's voice churn for the third quarter was 3.4 percent, compared with 5.2 percent for the comparable period of the prior year.
ARPU: Leap's ARPU clocked in at $41.25, an increase of 11.1 percent over the comparable period of the prior year. The carrier said the rise in ARPU was due to sales of smartphones and its more expensive broadband service.
Financials: Leap reported a net loss attributable to common stockholders of $68.8 million, way down from the $536.3 million net loss it posted in the third quarter of 2010. Leap's service revenues for the third quarter of 2011 increased 19.4 percent over the prior year quarter to $717.3 million.
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Article updated Nov. 1 with commentary from BTIG.