In order to combat the issue of spectrum limitation,
Leap Wireless International Inc.
(
LEAP
) recently entered into a strategic relationship with T-Mobile to
swap their spectrum in major cities in the U.S.
The deal will allow LEAP to access broad band spectrum in the
Phoenix and Texas regions, while T-Mobile will gain wireless access
to other major cities like Alabama, Illinois, Missouri, Minnesota
and Wisconsin.
Currently, LEAP is experiencing some spectrum constraints as the
company has been seeing rapid expansion in its customer base. In
fiscal 2011, the company added nearly 413,000 subscribers, an
increase of 65.9% year over year.
Such significant subscriber additions were attributed to the
launch of the popular Muve Music, which offers unlimited music
download facilities for 3G wireless subscribers. Music apart, the
increase in smartphone usage has greatly increased data volumes,
thus leading to spectrum limitations in major cities across the
U.S.
To take care of the immediate need of the customers, the company
entered into a five-year contract with
Clearwire Corporation
(
CLWR
) last month, under which the latter will provide wholesale LTE
support to different telecom carriers.Moreover, the company has
also signed definitive agreements to acquire 12 MHz of 700 MHz A
block spectrum in Chicago from
Verizon Communication Inc.
(
VZ
) for $204 million.
Therefore, in order to counter spectrum shortages and avoid the
huge expenses associated with the immediate build out of the 4G
network, LEAP is currently making strategic moves in the form of
spectrum swapping, spectrum acquisition and wholesale agreements
with different companies.
The company intends to convert atleast two-thirds of its
operational area to the 4G LTE network within the next two to three
years. Since this is not a mean task, it could be the reason for
the number of strategic alliances undertaken by the company in
recent times.
We maintain our long-term Neutral recommendation on LEAP
Wireless International Inc. Currently, LEAP has a Zacks #3 Rank,
implying a short-term Hold rating on the stock.
Based in San Diego, California, Leap Wireless International Inc.
provides digital wireless communication services in the U.S. under
the "Cricket" brand primarily through its wholly-owned subsidiary
Cricket Communications Inc.
CLEARWIRE CORP (
CLWR
): Free Stock Analysis Report
LEAP WIRELESS (
LEAP
): Free Stock Analysis Report
VERIZON COMM (
VZ
): Free Stock Analysis Report
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