Leap strikes MVNO deal with Sprint, posts Q2 subscriber loss

Leap Wireless (NASDAQ:LEAP) said it inked a 3G data roaming deal with Sprint Nextel (NYSE:S), thereby becoming an MVNO of Sprint.

The news capped a busy day for the flat-rate, prepaid carrier, which posted a net subscriber loss for the second quarter. Leap also introduced a tiered pricing model for data, announced its first BlackBerry from Research In Motion (NASDAQ:RIMM) and revamped its calling plans. 

The deal between Leap and Sprint is the second major MVNO deal Sprint has made in recent months. Last month, Sprint announced an MVNO deal with Best Buy to provide EV-DO data support for the retailer's Best Buy Connect service. And in March, Leap expanded its service nationwide via roaming agreements with Sprint and other carriers.

Leap executives explained that the Sprint agreement allows the regional carrier to sell its services through national retailers, and to expand quickly into new markets. However, Leap executives cautioned that market expansions using Sprint's network will happen gradually during the next several quarters. The expansion will fully take place over the next five years, the companies said in a regulatory filing. The deal is worth $300 million and, according to the filing, Sprint will get at least $25 million next year, $75 million in each of the following three years and $50 million in 2015. Sprint is also supposed to get an undisclosed amount for each new Leap subscriber.

Here's a breakdown of Leap's key metrics for its second quarter:

Financials: Leap's net loss in the second quarter was $19.3 million, narrowing on the net loss of $61.2 million it posted in the year-ago period. The company said that total revenue jumped to $633.5 million in the quarter, up 6 percent from $597.4 million in the second quarter of 2009. Leap said service revenue clocked in at $597 million, up from $541.6 million in the year-ago period. Leap CEO Doug Hutcheson said on the company's earnings conference call that "from an operational perspective we were not satisfied" with the results.

Subscribers: Leap said it lost a net 112,000 customers, comprised of approximately 73,000 voice customers and 39,000 broadband customers. The subscriber numbers are a sharp departure from the 203,000 net subscriber additions Leap had in the year-ago period.

Churn: Leap said churn rose to 5 percent, up from 4.4 percent in the year-ago period and 4.5 percent in the first quarter. Leap said the increase was primarily due to "less-tenured" customers, including Cricket Broadband and Cricket PAYGo customers. The company predicted its broadband pricing changes will improve churn.

ARPU: The company said ARPU fell to $37.61, down from $40.73 in the year-ago quarter. Leap said the 8 percent decline was due to more customers buying cheaper plans, as well as changes it made to its plans in the third quarter of last year. 

Investors sent Leap's stock down around 5 percent in after-hours trading immediately following the release of its numbers, to around $11 per share.

For more:
- see this Bloomberg article
- see this Reuters article
- see this earnings release
- see this Leap investor presentation (PDF)
- see this Sprint release
- check out the FierceWireless Q2 earnings page

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