Leap Wireless results hurt by customer churn, shares fall
Published: Wednesday, 7 Nov 2012 | 9:58 AM
(Reuters) - Low-cost mobile telecom operator Leap Wireless International Inc reported lower-than-expected quarterly revenue, hurt by a rise in customer attrition as the company cut some retention programs.
Leap shares fell 8 percent to $4.75 on the Nasdaq in early trading on Wednesday.
Leap, like rival MetroPCS Communications Inc sells wireless services to cost-conscious customers through its unit Cricket Communications.
Both have been feeling pressure from larger rivals such as Sprint Nextel Corp and Deutsche Telekom AG's T-Mobile USA, which have been targeting the same consumers.
"Third-quarter customer results also reflect previously discussed churn pressures from the effects of certain retention programs and handset quality issues we experienced in the second quarter, as well as general industry softness," Chief Executive Doug Hutcheson said on Wednesday.
Leap, however, continued with its cost-cutting efforts mainly by managing investments on 3G network and by seeking cheaper alternatives to deliver 4G LTE services.
It lowered its full-year forecast for capital expenditures for the second time this year. It now expects capex between $450 million to $470 million, down from $530 million to $560 million.
Average revenue per subscriber (ARPU) in the third quarter rose to $41.94 from $41.25 a year earlier, while churn, or the rate at which subscribers stop using the company's services, rose by 1 percentage point to 4.8 percent.
"Our checks suggest that end markets remain weak and we see risk to both ARPU and EBITDA expectations in light of the weakening mix and the higher costs associated with Muve music (service)," Pacific Crest Securities analyst Michael Bowen said in an earnings preview note.
MetroPCS posted a better-than-expected quarterly profit last month, helped by a rise in demand for its 4G LTE services and lower costs.
Leap reported a net profit of $25 million attributable to common stockholders, or 32 cents per share, for the third quarter, compared with a loss of $68.8 million, or 90 cents per share, a year earlier.
Total revenue rose 1.4 percent to $722 million.
Analysts had expected a loss of 70 cents per share, on revenue of $774.6 million, according to Thomson Reuter