Leap's Loss Widens Despite Revenue, Customer Growth
Leap Wireless International's fourth-quarter loss widened as the company's spending on new markets and declining ARPU outpaced revenue growth and subscriber base growth.
After market close yesterday, the discount carrier reported a net loss that was more than double last year's figures. Leap lost $54.8 million in the fourth quarter, or 81 cents per share, compared to a loss of $18.1 million, or 27 cents per share, in the year earlier period. Despite the growing losses, the company managed to beat analysts' estimates of an 83-cent per-share loss. Revenue grew 20.7 percent, to $518.9 million compared to $429.8 million last year.
Leap attributed the loss to the cost of expanding into new markets, which accounted for 86 cents per share. The company added 385,000 customers in the fourth quarter, a healthy increase from last year's net adds of 152,000. The company's subscriber base grew 34 percent, to 3.8 million, on improved net additions.
The company's churn rate also improved, dropping to 3.8 percent compared with 4.2 percent last year.
For the full year, revenue grew to $1.96 billion, up 20 percent from last year, when the company brought in $1.63 billion. Despite the rise in revenue, Leap's full-year losses widened to $147.8 million, or $2.17 per share, from a loss of $75.9 million, or $1.13 per share, last year.
The company expects to add more than 1.5 million customers in 2009 as its expansion into new markets generates net adds. Leap forecast its 2009 adjusted operating income before depreciation and amortization (OIBDA) to come in between $560 million and $640 million.
Discount carriers like Leap Wireless and competitor MetroPCS have benefitted from the downturn in the economy as consumers looking to cut household expenses have defected from landlines and turned to low-rate wireless plans.
MetroPCS fared better than Leap in the fourth quarter. Before the market opened yesterday, MetroPCS reported it had swung to a fourth-quarter profit on subscriber growth and rising service revenue. MetroPCS made $15 million in the fourth quarter on revenue of $724 million, up from last year's net loss of $47 million. It reported the best quarterly subscriber growth in its history, with 520,000 net subscriber additions.
Like Leap, MetroPCS will expand into new markets over the coming year. Though it plans to lower capital expenditures, MetroPCS said it will focus on building out networks to cover 40 million people during 2009 and 2010, including the Boston and New York metropolitan areas, where service was launched this month. The company forecast a rise in net customer additions, which should come in between 1.4 million and 1.7 million.
MetroPCS reaffirmed its November guidance on net subscriber additions, capital expenditures and earnings before interest, taxes, depreciation and amortization (EBITDA). For 2009, EBITDA should come in between $900 million and $1.1 billion, with net adds rising. Capital expenditures are expected to fall to between $700 million and $900 million, compared with last year's capex of $1.2 billion.