Infused with new leadership, Leap Wireless International Inc. announced plans to expand its offerings with the launch of its Jump by Cricket prepaid service, providing a true pay-as-you-go plan for customers.
The new offering, which Leap hinted to late last year when it signed a deal with telecommunications software provider VoiceCue Technologies, joins Leap’s original Cricket service, which provides unlimited calling for a flat-rate without the need of a contract or credit check. The prepaid service will be available in all of the carrier’s 39 markets.
Leap, which recently appointed Douglas Hutcheson chief executive officer following the resignation of former CEO Bill Freeman, said Jump service will allow customers to place calls at 10 cents per minute to anywhere in the 48 continental states plus Hawaii, 18 cents per minute to Alaska, and 20 cents per minute to Canada and Mexico. The service also will provide free incoming calls as long as there is a balance on an account.
Jump pricing compares favorably with competing prepaid services, including Virgin Mobile USA L.L.C., which charges 25 cents per minute for the first 10 minutes of each day, then 10 cents per minute; TracFone Wireless Inc., which charges from 10 cents to 25 cents per minute; and Verizon Wireless’ recently launched Inpulse service, which charges 10 cents per minute plus free weekends and calls to other Verizon Wireless customers.
“We’re breaking barriers and offering prepaid wireless services at the lowest prices in the industry,” said Al Moschner, executive vice president and chief marketing officer for Leap. “Plus we’re not penalizing customers for receiving phone calls by deducting minutes from their prepaid accounts.”
Jump will be available in four packages beginning at $15 of outbound calling minutes that expire in 15 days, escalating up to $25 in minutes that expire in 25 days, $35 in calling minutes that expire in 35 days and topping out at $50 in minutes that expire in 50 days. Customers also will be provided with voicemail, caller identification, call waiting and three-way calling at no additional charge as well as access to short message service, multimedia messaging service, Cricket Clicks BREW-based data applications, downloadable ringtones and games.
Customers can use any of Leap’s available handsets for the prepaid service, and the same handsets can also be used if users decide to move up to Leap’s more traditional Cricket service. Leap offers seven handsets priced between $100 and $270.
“We wanted to make it as simple as possible for our customers,” Moschner added.
While the prepaid service would appear to target the same customer base as Leap’s Cricket service, Moschner said he thought the two services would appeal to distinct market segments.
“I think [Jump] is complementary to the rest of our Cricket offerings,” Moschner said. “Unlike Cricket, Jump is not made for heavy users, but more of a traditional prepaid customer that wants to keep tabs on their usage and spending.”
Moschner added that Jump would target younger wireless users who are not typically eligible for contract offerings, customers with questionable or no credit histories, or for those subscribers not interested in signing contracts. Leap expects 10 percent of its customer base eventually could come from the Jump service.
Analysts expressed similar thoughts on the Jump offering, noting an increasing trend by wireless operators in targeting more specific customer segments.
“I think it’s a smart move and a natural progression of their Cricket service offering,” said Scott Ellison, program director of wireless and mobile communications at IDC. “Leap will be able to more effectively tune its marketing efforts to the different market segments served by Cricket and Jump.”
Ellison noted that Sprint Corp. and Nextel Communications Inc. are expected to engage in similar specific marketing efforts for their youth-oriented Virgin Mobile and Boost Mobile L.L.C. prepaid services following their pending merger.
Leap, which emerged from bankruptcy protection last August, also noted that the low cost structure used to support the Cricket service would help it profitably offer the Jump service. Leap posted an industry-leading $142 in the cost per gross addition and $18.25 in cash cost per user during its most recent quarterly report for the third quarter of last year.
“Prepaid is becoming more profitable,” Moschner said. “The secret is keeping the cost of acquisition low. We have cost leadership in the marketplace.”
A recent report from Bear, Stearns & Co. and Compete Inc. found that a large percentage of future wireless customer growth likely would come from prepaid market segments that would require a low cost structure to penetrate successfully. The report noted that new customers likely would spend less than $30 per month for wireless service, which would further stress the need for a low cost structure.
While Leap has expressed interest in further expanding its service offerings, the carrier said it probably will stay away from the highly competitive postpaid models favored by the nationwide operators.
“We don’t want to compete in the contract world,” Moschner said. “Prepaid is a new opportunity for us and a new segment that our cost structure will allow us to compete in effectively.”
