Leap Inks Agreement with Kmart - Analyst Blog

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Cricket Communication, a wholly owned subsidiary of Leap Wireless International Inc. ( LEAP ), has launched its nationwide Cricket monthly voice products in more than 1,200 stores of retailer Kmart across the nation. We see this as an attempt by the prepaid service provider to increase its retail presence in order to improve the accessibility of Cricket's products and service. 

According to the agreement, two smartphones and two feature phones will be available from Kmart stores. Samsung's Vitality and ZTE's Score are the two smartphones which would feature Cricket's popular Muve Music Service and will be available at $199.99 and $129.99, respectively. The two feature phones include Samsung's Chrono and Huawei's Pillar and will be available for $39.99 and $69.99, respectively. 

The rate plan for smartphones with Muve Music is $55 per month and offers Kmart customers a combined package of voice, data, video and text coupled with unlimited music and ringtone downloads on the nationwide 3G network of Leap Wireless.

The feature phones will be available in Kmart stores under Cricket's PAYgo service plan, which is priced at $25 per month, providing unlimited access to mobile web in addition to 300 free voice minutes. Muve Music Service is one of the prime reasons for Cricket's success and the above mentioned agreement will further help the company to lure in more music loving customers from different locations. 

Leap Wireless's agreement with Kmart is the second of its kind this year after the company decided to launch its voice products in 1,600 stores owned by RadioShack Corp ( RSH ).  

Furthermore, in a major strategic move, Leap wireless became the first company to offer Apple Inc's ( AAPL ) iPhone 4 and iPhone 4S smartphones to its subscribers on a no contract basis, which we believe is a 50-50 opportunity for the company, because in spite of having a competitive pricing advantage over the postpaid carriers, it has to pay huge subsidies to Apple.

However, we remain optimistic that both the prepaid iPhone launch and the company's attempts to increase its retail presence will strengthen its position as one of the best prepaid service providers in the U.S.

Recommendation:

We are maintaining our long-term Neutral recommendation on Leap Wireless International. Currently, Leap Wireless International has a Zacks #3 Rank, implying a short-term Hold rating on the stock.


 
APPLE INC (AAPL): Free Stock Analysis Report
 
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RADIOSHACK CORP (RSH): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AAPL , LEAP , RSH

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