New Service Plans from Leap

In an effort to boost its subscriber growth, Leap Wireless International Inc. (LEAP - Analyst Report), plans to launch an array of attractive service plans from the beginning of next month. The company offers wireless communication services in the U.S., under the “Cricket” brand primarily through its wholly-owned subsidiary Cricket Communications Inc.

Firstly, LEAP Wireless will make its popular Muve Music service available to all Android-based smartphones at no extra cost and without any contract terms. Smartphone data plans will be starting at $50 per month with unlimited talk time, text and 1 GB 3G full speed data usage.

For $60 and $70 monthly plans, apart from unlimited talk time, the customers can access 3G full speed data of 2.5 GB and 5 GB per month, respectively. However, the Muve Music service automatically stops if a customer terminates the service.

Secondly, the company is improving its international calling service by introducing Global Plus Bundle to its customers at $15 per month. Important features of this plan are that the subscribers will be offered a local telephone number in the country of their choice coupled with 500 minutes of outgoing international landline and 30 minutes of outgoing international mobile calls free.

LEAP Wireless has also added other important features like Visual Voice Mail (which helps to prioritize messages), My Account service (to easily refill balances) and also allows an individual to get six connections on the same account.

In the recently concluded quarter, the company reported a drop in subscriber growth. So we believe that the launch of such attractive plans will accelerate its subscriber growth in the forthcoming quarters.

We also believe that such promotional efforts initiated by the company will help its low-end customers using only feature phones to subscribe for smartphone services, thereby driving its top-line growth.

However, the up gradation of customers from feature phones to smartphones will result in huge consumption of data, thereby causing shortage of spectrum. In order to counter this issue, LEAP is planning to roll out its 4G LTE service in the U.S.

Recently, the company sold 23 PCS and 13 AWS spectrum to Verizon Communication Inc. (VZ - Analyst Report) for about $120 million, which will be utilized to set up 4G LTE service. Additionally, the company also acquired 12 MHz of 700 MHz A block spectrum in Chicago from Verizon.

We maintain our long-term Neutral recommendation for LEAPWireless International Inc. Currently, LEAP has a Zacks #3 Rank, implying a short-term Hold rating on the stock.