Shares in Leap Wireless International were down more than 10 percent, to $15.10, at one point this morning after the carrier reported a wider-than-expected loss in the first quarter.
Leap’s net loss for the first quarter of 2010 was $65.4 million compared with a net loss of $47.4 million for the first quarter of 2009. The higher loss was attributed in part to expenses related to market launches.
Leap gained about 446,000 net customer additions in the first quarter compared with rival MetroPCS Communications, which earlier on Thursday reported adding nearly 700,000 net adds in the quarter. In addition, Sprint on the same day announced its four-brand prepaid strategy, including a $25 Virgin Mobile plan aimed at people who prefer messaging over talking.
During a conference call with analysts, Leap President and CEO Doug Hutcheson declined to comment specifically on Sprint’s new offers, but he said in the last two or three weeks, a number of competitive announcements have been made and it seems like pricing has seen some stabilization, a trend the company will continue to closely monitor.
Leap management was relatively upbeat during the call, noting they believe the company – a pioneer in the low-cost facilities model for no-contract services – is well positioned to compete. High-speed data services are an increasingly important part of the mix.
In a research note, Bernstein Research analyst Craig Moffett said Leap’s results all in all were good, “but not great.” The inevitable comparison to MetroPCS’ “blowout Q1 is not flattering,” he said. Still, Leap continues to execute well, maintaining its tight focus on costs while continuing to take share in prepaid and building out its presence in broadband, all against a backdrop of stabilizing prepaid pricing. “As with MetroPCS, Leap’s cost structure remains at the core of its success.”
Leap launched its new nationwide offering late in the first quarter and also introduced new Cricket service plans for unlimited nationwide talk starting at $30.
The company plans to introduce smartphones this year and is testing the elimination of the first month free in some markets.
Here are some other metrics from Leap’s first quarter:
• Service revenues for the first quarter increased 14 percent over the prior year quarter to $584.8 million. Operating income for the first quarter of 2010 was $5.1 million compared to an operating loss of $1 million for the first quarter of 2009.
• ARPU in the first quarter was $38.42, and churn was 4.5 percent. Cost per gross addition tallied $176.
• Leap ended the quarter with almost 5.4 million customers, but if its pending joint venture with Pocket Communications were included, the total would have been about 5.75 million.