Cricket provider Leap Wireless (NASDAQ:LEAP) reported a rise in its net customer additions in the fourth quarter from a year ago, but the company's revenues came in below some investor expectations. As a result, the company's shares fell slightly to $9.41 in after-hours trading immediately after the release of the company's earnings.
Leap's revenues rose to $767.4 million in the fourth quarter, from $708 million in the year ago quarter. However, according to Reuters, Wall Street analysts had expected revenue of $807.96 million. Moreover, Leap's churn also generated concern from some analysts.
"It's getting tougher to retain customers as prepaid competition continues to rise," Roe Equity Research analyst Kevin Roe told Reuters.
Leap, for its part, argued the churn was expected and manageable, and that its results in the fourth quarter were partially affected by troubles in the carrier's billing software.
Leap used much of its investor conference call to discuss its nationwide service rollout, which the carrier is conducting through its MVNO deal with Sprint Nextel, signed in August 2010. Leap said the agreement gives it the ability to take its Cricket-branded services beyond the reach of its own CDMA network. The carrier said it earns margins similar to other MVNOs via the offering, though it did not provide specifics.
"We had solid performance in the fourth quarter and are pleased with the operational progress the business has made," said Doug Hutcheson, Leap's president and CEO. "Sales volume in the quarter generally followed broader retail trends, reflecting strong sales throughout the holiday selling season."
LTE: Leap said it remains on track with its LTE network rollout, which the company said will cover 25 million people by the end of 2012. Interestingly, the company said it expects to eventually reach an LTE deployment covering 5x5 MHz channels, though it might introduce narrower channels initially. In comparison, Verizon Wireless' LTE buildout uses 10x10 MHz channels. Wider channels result in faster download speeds.
Subscribers: Leap added around 179,000 customers during the fourth quarter, up from the 107,000 net customer additions it posted in the fourth quarter of 2010. Leap's quarterly subscriber figure includes the addition of 209,000 voice customers and the loss of 30,000 broadband customers. Leap has been working to ditch broadband customers in favor of smartphone users.
Churn: Leap's fourth quarter churn clocked in at 3.9 percent, a decrease from 4 percent for the comparable period last year.
ARPU: Leap's average revenue per user in the quarter was $42.09, an increase of $3.95, or 10.4 percent, over the year-ago quarter. Leap said its ARPU popped on sales of more expensive smartphones and Muve Music devices.
Muve Music and smartphones: Leap said smartphones accounted for 60 percent of its handset sales in the fourth quarter of 2011, a doubling of the carrier's year-ago figures. Leap counted over 500,000 subscribers to its Muve Music service at the end of the year, "making it the second-largest digital music subscription service in the U.S.," the company said.
Financials: Leap reported a fourth quarter 2011 operating loss of $3.5 million, a narrowing of its $27.0 million loss in the fourth quarter of 2010.
Special Report: Wireless in the fourth quarter of 2011
Report: AT&T searching for spectrum from Dish, Leap, MetroPCS
Leap deploys CDMA 1X Advanced for more efficient voice calling
Will LightSquared's troubles push Leap into the arms of Clearwire?
Leap launches LTE service in Tucson
Leap to cover 25M people with LTE by the end of 2012