Leap Wireless International Inc.
) posted disappointing financial results for the second quarter of
2012, missing the Zacks Consensus Estimates. The results were
significantly hurt by higher customer churn rate. Leap Wireless has
restructured its business model through which it is emphasizing on
higher ARPU generating smartphone subscribers, while shedding less
profitable wireless broadband subscribers as these users generally
place huge load on its network.
We believe the decision of management to offer iPhone of
) is a 50-50 winning opportunity for the company as it has to pay
huge contract money to Apple. Sequential fall in ARPU was a major
concern since the company has to opt for promotional activities to
contain subscriber churn. Meanwhile, the stock price plummeted
nearly 47% in the last year providing a cushion for further
downslide. We believe Leap Wireless is currently fairly valued and
thus reaffirm our long-term Neutral recommendation.
On August 28, Leap Wireless disposed 23 PCS and 13 AWS spectrum
Verizon Communications Inc.
) for about $120 million. Additionally, the company also acquired
12 MHz of 700 MHz A block spectrum in Chicago from Verizon. In last
April, Leap Wireless entered into a spectrum sharing partnership
with T-Mobile USA. The new partnership will expand the two
carrier's 4G LTE network capability.
Leap Wireless will get expanded broadband spectrum in Phoenix
and Texas and T-Mobile will get additional spectrum in Alabama,
Illinois, Missouri, Minnesota, and Wisconsin. Leap Wireless will
offer LTE services in two-thirds of its overall network foothold in
the next 2-3 years.
APPLE INC (AAPL): Free Stock Analysis Report
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