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Leap loss widens while new market launches pay off

Regional, flat-rate carrier Leap Wireless International Inc. lost nearly $50 million during the third quarter, but said it will continue to focus on growth.
Leap reported a third quarter net loss of $48.8 million, which it attributed to its “new initiatives.” The numbers showed a greater loss than the $43.3 million Leap posted in the year-ago quarter. Leap Wireless is in the process of doubling its covered pops, and at the end of the quarter it sat on 32 million covered pops, a 38% increase since the end of the second quarter of this year.
However, the carrier’s efforts are seemingly paying off. Leap scored 156,000 new customers. Of that number, 24,000 subscribers signed up for voice services in existing markets, while a whopping 92,000 of the new subscribers were from the new markets launched in 2008. The remaining 40,000 new subscribers came from Leap’s new mobile broadband service, which offers laptop Internet connections for a flat rate with no long-term commitments or credit checks.
Leap said it continues to work toward expanding to 36 million pops by mid 2009 and 50 million pops by the end of 2010. Leap also said it plans to add 600 sites to its existing markets.
“We believe that the cash generated by our business, together with our third quarter cash and short-term investment position of $826 million, provides us with the financial resources necessary to operate our business and pursue our planned expansion activities,” said Walter Berger, Leap’s executive VP and CFO. “Further, the company has no significant scheduled repayments of principal on its debt obligations until September of 2012. In addition, we have the flexibility to defer or substantially reduce our investments in business expansion efforts, if necessary, due to changes in general economic conditions.”
As for Leap’s customer metrics:
–Churn was 4.2%, an improvement from its 5.2% churn during last year’s third quarter. But during the carrier’s conference call, executives said the third quarter is typically the most popular quarter for tenures to end, forcing subscribers to de-activate and re-activate contracts, which adversely affects churn.
–Average revenue per user, or ARPU, declined by 3.5% year-over-year to $42.95, which the carrier credited again to seasonal de-activation and re-activation and the lower-than-expected customer uptake of the company’s higher-value rate plans and optional add-on products. However, during the conference call the carrier said ARPU has slightly improved over the past 30-60 days due to the lowered gas prices seen across the country.


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