Leap Wireless International Inc.
) plans to gain from the success of its popular Muve Music
subscription by spinning it into a separate entity and licensing
the music platform to other telecom carriers around the
Muve Music service, which was originally launched in Jan 2011,
allows Leap Wireless customers to download unlimited songs,
ringtones and ringback tones at an additional cost of $10 per
month. On an average, subscribers download more than 100 songs
and listen to 20 hours of music per month.
According to LeapWireless, a standalone entity will make Muve
Music attractive to other operators as they will not have to
license it from a rival carrier. Leap already has signed
agreement with an international carrier but has not disclosed the
name of it yet.
Moreover, the spin-off unit will offer music distribution,
discoverability and a licensing platform as a managed service,
thereby allowing the telecom company to establish their own
brands and rates. Telecom carriers can also offer the service as
a value added one to the customers. However, it isn't clear
whether the company will be listed on the stock exchange or
Of late, the prepaid carrier has been subject to massive
subscriber losses based on high unemployment rate. The company
has undertaken a major restructuring effort to turnaround its
business. Nevertheless, the attempt hasn't yielded any meaningful
result as the company lost a net total of 337,035 customers in
the fourth quarter of 2012.
Currently, Muve Music is the only bright spot left in Leap
Wireless' business, which offers its service under the Cricket
brand. Muve Music managed to add more than 1.1 million Muve Music
subscribers by 2012-end from only 600,000 customers in Aug 2012.
The impressive showing was primarily attributed to Cricket's
strategy to include Muve Music service in all its smartphone
More people are now using their smartphones to download songs
and videos. Going forward, this pattern is expected to continue
as smartphone penetration is only expected to increase. We
believe this is a good move by Leap Wireless, which will not only
popularize its Muve Music, but will also establish it as a
significant music streaming company.
On the flip side, the pay-as-you-go carrier will lose its
identity as the sole provider of its popular Muve Music service.
Reportedly, search giant
) is currently negotiating with music companies to start a
similar subscription-based music service.
Pandora Media Inc.
) also has a popular custom radio service and
) is also working on offering similar music service to its
customers, which could act as a threat for Muve Music in the
Currently, Leap carries a Zacks Rank #3 (Hold).
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