Leap to overhaul service pricing plans in 2nd half of 2012

During Cricket provider Leap Wireless' (NASDAQ:LEAP) first quarter earnings conference call, Leap CEO Doug Hutcheson announced the carrier will refresh its service pricing plans and its device portfolio but provided little detail about the upcoming changes.

Click here for key slides from Leap's first quarter earnings report.

"We also intend to roll out our first major service plan enhancement in nearly two years in the second half of 2012, and believe these new plans will further position us to capture higher ARPU, higher value customers, while offering a variety of compelling options for consumers," Hutcheson said. "As we have historically done, we expect that our new service plans will continue to put more value into our rate plans while providing opportunities for customers to select premium add-ons that meet their needs."

The last time Leap refreshed its services plans was two years ago when it debuted pricing plans with several unlimited voice and texting options as well as tiered data pricing.

During the call the company revealed that it added 258,000 net customers to its base during the first quarter, bringing its total customer count to around 6.2 million. However, Leap reported an operating loss of $15.8 million, slightly better than the $18.1 million Leap lost in the same period of the prior year.    

Hutcheson also said Leap plans to offer a range of new devices in the coming months--he said the carrier will offer up to seven new smartphones in time for back-to-school shopping this fall.

"We expect to expand and enhance our device portfolio in the coming quarters. We will continue to offer devices in each price category with an increasing focus on more sophisticated devices," he said. "Customers are demanding higher-quality devices."

Interestingly, Hutcheson also said Leap saw higher device subsidy costs during the first quarter. The company said its total subsidy cost increased by $54 million over the same quarter a year ago, driven primarily by customers upgrading to smartphones. Hutcheson said Leap would take steps to decrease its device subsidy expenses in the coming months.

Here's a look at some other key Leap metrics:

Subscribers: Leap recorded 860,000 gross customer additions in the first quarter and 258,000 net customer additions. The net additions comprised 257,000 voice customers and 1,000 broadband customers. (Leap has been working to move its focus from broadband customers to higher-revenue smartphone customers.) Leap's 258,000 net customers during the quarter comprised 220,000 net customers added inside Leap's own network footprint and 38,000 net customers added outside of Leap's network footprint. Leap in 2010 inked an MVNO deal with Sprint Nextel (NYSE:S) that allows Leap to sell its services nationwide. Leap just last week announced it expanded its retail distribution to 1,600 Target stores nationwide.

Smartphones: Smartphones continued to entice customers to Leap's more expensive plans. The company said nearly 62 percent of its new handset sales in quarter were smartphones and Muve Music-enabled devices. Leap said 13 percent of its subscriber base upgraded their handsets during the quarter. The company said that more than 50 percent of its customers now own a smartphone or Muve Music device, and that 65 percent of its customer base subscribes to plans $45 per month or higher.

Churn: Leap's churn for the first quarter was 3.3 percent, up from 3.1 percent from the first quarter of 2011.

Financials: Leap's service revenues for the first quarter increased to $774 million, a 14.1 percent increase over first quarter.

Lifeline: Leap said it plans to expand its Lifeline efforts. Lifeline is a government program that subsidizes the cost of cell phones and services to low-income Americans. Leap said its Lifeline offerings are currently available in nine states covering 37 million POPs, and the company will expand that to 95 million POPs by the end of the year. The company said the program will reduce the cost of its unlimited talk and text program by between $10 and $13.50 per month for Americans covered under the program.

ARPU: Leap's average revenue per user reached $42.59, an increase of $3.24 over first quarter 2011.   

Capex and LTE: Leap said it spent $146.3 million on capital expenditures during the quarter, and it expects to spend between $600 and $650 million on its network and business in 2012. Much of that spending will go toward Leap's rollout of LTE network technology. Leap plans to cover up to 25 million POPs with LTE network technology this year, and will deploy LTE across two-thirds of its current network footprint over the next two to three years. Leap has already launched LTE in Tucson, Ariz., and said customer feedback on the offering so far is "positive."    

For more:
- see this release

Special Report: Wireless in the first quarter of 2012

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Article updated April 25 to include additional information from Leap's quarterly conference call.