Following more than six months of restructuring under Chapter 11 bankruptcy protection, Leap Wireless International Inc. is set to re-launch its Cricket branded service this week using some of its original ideas, including unlimited local calling for a fixed rate, updated with new initiatives the carrier expects will prove more appealing to consumers.
The carrier’s approach includes offering its trademark unlimited local calling service for a flat $30 per month in all of its 39 markets. Customers also can choose from a pair of premium options that include caller identification, call waiting or three-way calling for an additional $6 per month, or add either 1,000 domestic long-distance or 200 international long-distance minutes, unlimited text messaging and three directory assistance calls per month for $15 per month.
Leap previously offered unlimited local calling at price points ranging from $30 to $33 depending on the market. Leap expanded its offering earlier this year with its Cricket Talk service, which included unlimited local calling and 500 minutes of long distance for $40 per month, breaking away from its original plan by requiring customers to sign a one-year contract that included a $150 early termination fee.
“We always felt we were the value leader in the industry,” explained Harvey White, chief executive officer of Leap. “This is a return to basics of being a simple and straight choice for consumers.”
The re-launch will also include a new advertising campaign stressing Leap’s “simple” message and will be constructed by Butler, Shine, Stern & Partners, which won the $25 million contract in September. While the campaign is expected to continue to use green as its primary color, Leap will no longer be using the talking green couch, which has previously performed as part company spokesman in its advertisements and as a place to sit and get a picture taken in carrier-owned stores.
Leap’s return to its roots follows the recent confirmation of a financial restructuring initiative that has allowed it to reduce its debt load from more than $2.4 billion to $426 million, and the carrier’s plans to emerge from Chapter 11 bankruptcy with more than $100 million in cash to support ongoing operations.
White, who announced in September plans to retire as Leap’s CEO but remain on the company’s board of directors, explained that Leap’s financial problems were centered on slumping capital markets that could not support its rapid expansion and derailed its operating focus over the past year.
“If I knew then what I know now, we might have done some things differently,” White added.
The reorganization left existing Leap shareholders empty-handed as the company’s stock was cancelled as part of the restructuring, though Leap’s stock price was trading around the 1 cent per-share range for the past several months.
Industry opinion on Leap’s future have been mixed. Some analysts question how the carrier expects to continue to compete against nationwide operators that have increasingly marginalized unlimited local offerings with more aggressive rate plans and rural carriers that support their own local offerings with roaming revenues.
“They were one of the poorer performers before they restructured and it’s hard to believe they would be any different after,” said Jeffrey Hines, president of N. Moore Capital Ltd.
Others note even if Leap can keep its financial house in order, increased competition in the wireless market will not be kind to operators stuck between the nationwide operators and the regional players.
“The industry is still viewed as having too many competitors, which leaves little room for a carrier with an untraditional business model,” said Albert Lin, telecommunications industry analyst at American Technology Research.
Leap’s White countered questions about the company’s business model, noting it was EBITDA break even before its bankruptcy filing, and that there was no reason with its tighter focus it could not operate profitability in the future.
Leap is also still one of the country’s 10 largest wireless carriers, serving 1.5 million customers in 20 states. Its consistent support of the government’s wireless local number portability mandate in connection with the recent decision providing for wireline to wireless number porting should help the carrier add to the current 37 percent of its customer base who have already “cut the cord.”
“Leap is in a good position to benefit from [WLNP],” added Seamus McAteer, managing partner and senior analyst at Zelos Group. “The business model may well come back into vogue.”
