LEAP's Q3 Loss Wider than Expected - Analyst Blog

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Leap Wireless International Inc. ( LEAP ) declared grim financial results for the third quarter of 2013, with both the top and the bottom line missing the Zacks Consensus Estimate. Additionally, Leap Wireless suffered a significant net subscriber loss.

Reported net loss in the third quarter of 2013 was $185.4 million or a loss per share of $2.37 compared with a net profit of $25 million or 32 cents per share in the prior-year quarter. However, the figure was significantly wider than the Zacks Consensus Estimate of a loss of $1.14. Quarterly cash cost per user (primarily indicating carrier subsidy for new smartphone) was $31.64, up 31.3% year over year.

Quarterly total revenue was $694 million, down 10.3% year over year and slightly below the Zacks Consensus Estimate of $695 million. Service revenues came in at $646.3 million, down 10.5% year over year. Equipment revenues were $47.7 million, down 8.3% from the year-ago quarter.

Quarterly gross margin was 35.3% compared with 39.3% in the prior-year quarter. Operating loss was $83.4 million against an operating profit of $81.4 million in the prior-year quarter. Adjusted OIBDA was $78 million, down 40.7% year over year. Adjusted OIBDA was 12.1% of the service revenues compared with 18.2% in the year-ago quarter.

During the third quarter of 2013, Leap Wireless generated $71.7 million of cash from operations compared with $210.5 million in the prior-year quarter. Free cash flow was a negative $25 million compared with a negative $218.1 million in the year-ago quarter. At the end of the third quarter, Leap Wireless had over $909.2 million of cash and marketable securities compared with $675 million at the end of 2012. Total debt was over $3,368.2 million compared with $3,298.5 million at the end of 2012. Debt-to-capitalization ratio was 1.00 versus 0.88 at the end of 2012.

Subscriber Statistics

During the reported quarter, Leap Wireless lost 196,045 net customers against 268,984 customers in the year-ago quarter. Total subscriber base, at the end of the third quarter of 2013 was 5,643,430 exhibiting a 17.6% year-over-year drop. ARPU was $45.45 against $41.94 in the prior-year quarter. Quarterly cost per gross was $319 as against $310 in the comparable earlier -year quarter. Consolidated customer churn rate was 4% compared with 4.8% in the prior-year quarter. Leap Wireless lost 139,636 net customers at its wireless segment against 181,573 customers in the year-ago quarter. Quarterly wireless churn rate was 3.5% compared with 4.2% in the year-ago quarter. Wireless subscriber base was stood at 4,242,096 exhibiting a 12.5% year-over-year drop fall.   

Our Take

The prepaid wireless market in the U.S. is intensely competitive as most low-cost carriers like Sprint Corporation ( S ) and America Movil SAB ( AMX ) are continuously offering attractive plans like Boost Mobile, Virgin Mobile and Tracfone. Apart from these players, telecom giants like AT&T, Inc. ( T ) and Verizon Wireless are targeting the prepaid market segment, which we believe may further intensify competition going forward.

Leap Wireless currently has a Zacks Rank #2 (Buy).



AMER MOVIL-ADR (AMX): Free Stock Analysis Report

LEAP WIRELESS (LEAP): Free Stock Analysis Report

SPRINT CORP (S): Free Stock Analysis Report

AT&T INC (T): 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: AMX , LEAP , S , T

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