Leap's net loss widens in Q4

Cricket provider Leap Wireless (NASDAQ:LEAP), the nation's seventh largest wireless operator, released full fourth quarter results showing a widening net loss but improving customer metrics, results the carrier said indicate it is improving and strengthening its business after a rough few quarters.

"During the second half of 2010, we implemented a significant number of initiatives to transition our business to better meet the changing needs of our customers," Doug Hutcheson, Leap's president and CEO, said in a statement. "These initiatives, which included the evolution of our rate plans, the expansion of our device portfolio and the introduction of nationwide 3G data coverage, have produced operating results that have exceeded our expectations in many areas."

Specifically, Hutcheson said Leap sold more than 600,000 CDMA EV-DO data devices during the quarter, and that it recorded its lowest voice churn in nearly a decade. He said the carrier's device upgrade activity increased more than 300 percent year-over-year, and that customers who upgraded to a new device and migrated to Leap's new service plans are around 60 percent less likely to deactivate service in the next five months than those who do not.

In an interview with Dow Jones Newswires, Hutcheson said the company is seeing positive momentum for the first quarter. He said 10 percent of Leap's subscriber base has upgraded to smartphones, and that the smartphone upgrade pace should accelerate, which he said will "materially expand the lifetime value of our customers base."

Hutcheson said Leap will focus its efforts on smartphones and will ease off marketing its mobile broadband business. Reiterating comments he made in December, Hutcheson said Leap could launch LTE in select markets this year, and was open to partnerships. In December, he said Leap likely will will build "hotspots" of LTE coverage in some of its markets this year, and that he was open to partnerships with wholesale providers Clearwire (NASDAQ:CLWR), LightSquared and others, but did not elaborate further.

Here is a breakdown of Leap's key quarterly metrics:

Subscribers: As Leap detailed in January, the carrier gained around 430,000 customers during the fourth quarter of 2010, including around 107,000 net customer additions and around 323,000 former customers of Pocket Communications. Leap's net customer additions for the fourth quarter included 155,000 voice net customer additions and a net loss of approximately 48,000 broadband customers, bringing its total net customer additions for the full-year 2010 to around 242,000. The carrier ended the year with 5.52 million customers.

Financials: Leap's net loss was $249.4 million for the fourth quarter of 2010, a dramatic increase from the $61.9 million it reported in the comparable period of the prior year. Some of the net loss was attributed to the company's purchase of the remaining interests in Denali Spectrum, LLC and the formation of the company's new joint venture in South Texas.  No further details were provided in the company's earnings press release. The carrier's service revenues for the fourth quarter increased to $636.6 million, a 10.9 percent increase over the same quarter a year ago.

Churn: Leap's churn for the fourth quarter of 2010 was 4 percent, an improvement from 4.7 percent in the comparable period of the prior year. Leap said its fourth quarter voice customer churn was 3.6 percent--its lowest fourth quarter voice churn in nearly a decade.

ARPU: Leap's average revenue per user in the fourth quarter was $38.14, down 1.5 percent from the year-ago quarter. Leap blamed the addition of former customers of Pocket Communications, who it said are currently on lower-ARPU rate plans, as well as Leap's elimination of late fees and other fees in the third quarter of 2010. However, Leap said the losses were partially offset by additional sales of its higher-value service plans.

For more:
- see this release
- see this Reuters article
- see this FierceWireless Q4 earnings page

Related Articles:
Leap CEO: We plan LTE 'hotspots' next year
Leap returns to subscriber growth in Q4
Appraising U.S. wireless operators in the third quarter
Leap loses 200K subs in Q3, bets on smartphones, data for turnaround
Leap settles class action lawsuit with $13.75M payout

Phil Goldstein contributed to this report.

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