Leap Wireless International posted an impressive increase in net customers in the first quarter but still came in behind rival carrier MetroPCS.
Both of the competing discount carriers have benefited from the economic downturn as customers defect to their flat-rate, no-contract wireless services instead of sticking with landlines or high-end plans. While the economic conditions favor both, MetroPCS appears to be faring better than Leap after posting a net profit and higher customer additions yesterday, although its churn rate and ARPU come in behind Leap’s.
Leap added 493,000 customers while MetroPCS pulled ahead with an additional 684,000 customers in the same period as it expanded into highly-populated markets in New York and Boston and covered an additional 15 million people. Leap launched service in Chicago and Philadelphia toward the end of the first quarter, covering an additional 17 million people and adding 193,300 customers in those new markets. The company’s subscriber base now stands at 4.3 million, behind MetroPCS’ subscriber base of 6.1 million customers.
However, Leap managed to post a healthier churn rate and higher ARPU than MetroPCS. Leap’s churn rate dropped to 3.3 percent from 3.6 percent last year. In contrast, MetroPCS’ churn rate jumped a full percentage point to, hitting 5 percent in the same period.
An uptake in Leap’s broadband and prepaid services took a bite out of ARPU, which slipped 6 percent to $42.21. Leap attributed the ARPU decrease to its Cricket Broadband and Cricket PAYGo services, which are priced lower than its most popular Cricket Wireless plan. Despite the slump, Leap’s ARPU was still higher than MetroPCS’ ARPU of $40.40.
MetroPCS pulled ahead when it came to the bottom line. While MetroPCS posted profits of $44 million, Leap lost $47.4 million, or 74 cents per diluted share, despite a 30 percent jump in sales, which hit $514 million.
Leap said it remains on track to meet its previous earnings estimates and expects to add 1.5 million voice and broadband customers by the end of 2009 with adjusted operating income before depreciation and amortization coming in between $560 million and $640 million.
“We expect margins to continue to improve as the business absorbs the initial investments associated with our expansion initiatives and these new initiatives begin to contribute cash flow to our business,” said Leap CFO Walter Berger in a statement.