Leap Wireless International is blaming increased competition, higher unemployment and “less tenured” customers in its new markets for its worsening fourth-quarter finances.
The company’s losses widened to $64 million in the fourth quarter as slowing net adds, slumping ARPU and customer defections offset a 19.3 percent increase in sales, which hit $547 million.
The company added just over 297,000 customers in the fourth quarter, compared to 385,292 last year. Leap’s churn rate hit 4.7 percent as customers flocked to competitively priced services offered by other prepaid providers. The company’s promotional offers cut into ARPU, which fell to $38.66 from $42.44 last year.
Company President and CEO Doug Hutcheson said he believed the company’s competitive position remained attractive but warned things could be rough in the short term.
The company is counting on expected improvements in customer tenure in its newly launched markets and lower unemployment levels to turn around its finances. It also believes that the launch of its first 3G smartphones and new joint venture with Pocket Communications in South Texas will boost sales. Leap will introduce a BlackBerry device and Android-based smartphone later this year.
Aside from the company’s earnings, Leap agreed to pay $13.75 million in a class action lawsuit over alleged securities fraud. The company denies any wrongdoing and said it settled the lawsuit “in the best interests of its stockholders.” Leap said it expects its insurers will pay the entire settlement amount.