After weeks of rumors, it's now official: RadioShack will launch its own prepaid branded wireless service powered by Leap Wireless' (NASDAQ:LEAP) Cricket Communications. The new venture, dubbed RadioShack No-Contract Wireless, will begin service Sept. 5.
As expected, the prepaid RadioShack service will offer both feature phone service and options for smartphone users. Feature phone plans start at $25 a month for 300 voice minutes plus unlimited messaging and Web access; a $35 plan adds 1,000 voice minutes. Smartphone plans start at $50 per month, with the $50 plan including unlimited voice, domestic messaging, Cricket's Muve Music and 1 GB of data before throttling. The $60 RadioShack plans includes all of that plus 2.5 GB of data before throttling.
Although the service will be sold through RadioShack stores, Cricket will handle all of the billing and the customers will be Cricket subscribers. The service is similar in that way to partnerships Cricket has struck with Walmart and Best Buy. Thus, Leap executives said the offering is not an MVNO deal; MVNOs typically purchase network access in bulk from network owners, and then the MVNOs handle the subscriber billing and customer management.
The new RadioShack plans match with Leap's new flat-rate plans, which were announced last week and include the addition of Muve Music for all of its Android smartphone plans. Leap is banking on the new plans to help it attract more customers and reduce churn.
RadioShack, which has struggled recently in the face of tough competition from online retailers like Amazon and larger competitors in the brick-and-mortar business, including Walmart, hopes the new service will help it revitalize its brand in mobile.
In terms of device selection, RadioShack said it will initially offer the Huawei Mercury Ice and the Huawei Pillar, with two more phones expected to be available by the end of September. The Mercury Ice runs Android 2.3, has a 4-inch screen and 1.4 GHz processor, and will retail for $150. The Pillar is a Qwerty messaging phone that will sell for $40.
For Leap, the deal represents another potential revenue stream as it seeks to overhaul its service and turn around its fortunes after a disappointing second quarter. Leap reported a net loss of 289,000 customers in the second quarter and a net loss of $41.6 million, which was more than analysts expected. The company also plans to narrow its national retail expansion to just 8,000 stores--fewer than its previous expectations.
Leap has also said it does not feel it is contractually obligated to make its $75 million minimum wholesale purchase commitment of network access from Sprint Nextel (NYSE:S). However, the company has said it expects to pay "a significant majority" of it anyway and the two companies are holding discussions on the issue. Leap signed a wholesale agreement with Sprint in 2010. The agreement allowed Leap--a regional wireless carrier headquartered in San Diego--to take its offerings nationwide, beyond the markets where it operated its own network.
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Correction, Sept. 4, 2012: This article incorrectly referred to RadioShack No-Contract Wireless as an MVNO of Leap Wireless' Cricket Communications. It is instead a branded wireless service running on Cricket's network.