Leap Partners T-Mobile - Analyst Blog


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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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: CLWR , LEAP , VZ



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