Leap bullish on mobile broadband, posts lower ARPU

Leap Wireless International Inc. is planning to aggressively expand its broadband offering even as that buildout weighs down its financials.
The carrier said it added added 171,000 net customers during the second quarter. Most of those additions (116,000) were new customers in recently launched markets; 44,000 net customer additions came from existing markets; and 11,000 net customer additions signed on for Leap’s recently launched mobile broadband service. The carrier counts 14,000 total mobile broadband customers.
Leap has ambitious goals for broadband; expecting to increase its broadband customer base to 100,000 subscribers by the end of the year. The carrier recently launched its unlimited wireless connectivity plan for $40 per month. During its quarterly results conference call today, Leap said although the broadband service is only available in select markets, it plans to cover 60 million potential customers by the end of the year and have the service available in almost all of its markets.
“We want to make sure we have adequate spectrum first,” a Leap executive said.
The company has been experiencing heavy usage on its network as new customers try broadband services, but Leap expects that to calm down over time.
“Every time we’ve launched unlimited products, we see them follow a curve that tends towards having higher usage when you first get a hold of the product, but will come down over time,” a Leap executive said. “We expect that will follow the same trend.”
Leap posted disappointing numbers in average revenue per user and operating income. ARPU stood at $43.97, down 1.7% from last year’s $44.75.
The carrier blamed the decrease in ARPU on churn, even though churn declined to 3.8% this quarter, from 4.3% last year at this time. The company saw higher gross de-activations, which had a dampening effect on ARPU.
“With the volatility we saw at the end of the quarter, it impacted ARPUs by some degree,” the carrier said.
Leap’s operating income totaled $14.5 million for the quarter, significantly down from $30.7 million during the second quarter of 2007. Leap said at the expansion of its mobile broadband service into new markets was partly to blame for its lower income. Other factors were investments in new initiatives, including the launch of new markets covering approximately 8 million pops and pre-launch expenses associated with anticipated future market launches.