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LEAP Adds to Smartphone Portfolio

Zacks Equity Research

As the prepaid wireless market is getting more competitive owing to the availability of attractive wireless plans by other low-cost operators, Leap Wireless International Inc. (LEAP), which primarily caters to low income groups, has recently added BlackBerry Curve 9350 handsets to its ever expanding smartphone portfolio, enhancing its competitive edge.

The new BlackBerry OS 7 based-smartphone, featuring a 5 megapixel camera and memory expandable up to 32GB, is available at LEAP stores for $199.99 without any contract terms. Moreover, the handset comes with an attractive LEAP’s prepaid wireless plan of $55 a month that offers unlimited talk time, text and data to its prepaid subscribers.

A few days back, LEAP also announced the availability of Apple Inc.’s (AAPL) iPhone 4S from its stores. Leap Wireless is the first prepaid operator to sell iPhones to U.S. subscribers without any contract terms.

We believe that the company’s new strategy of selling smartphones to its subscribers at a higher price than Verizon Communication Inc. (VZ) and AT&T (T) will increase competition in the prepaid market. This is because of the fact that LEAP offers unlimited $55 plans that offer talk time and data usage compared to Verizon’s and AT&T’s $70 and $60 limited plans.

Moreover, these large carriers sell high-value smartphones with a minimum of 2 years postpaid contract terms while LEAP offers such smartphones without any contract terms.

During the first quarter of 2012, Leap Wireless added around 258,060 net customers, down 21.9% year over year. So we believe that such a move initiated by LEAP will not only help them to drive customer growth but also help them to counter the stiff competition that exists in the prepaid market.

Currently, Leap Wireless International Inc. has a Zacks Rank #3, implying a short-term Hold rating.

Based in San Diego, California, Leap Wireless International Inc provides digital wireless communication services in the U.S. under the “Cricket” brand primarily through its wholly-owned subsidiary Cricket Communications Inc.

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