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Leap 1Q Loss Widens, Beats Rev

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Leap Wireless International Inc. declared mixed financial results for the first quarter of 2013, with the bottom line lagging the Zacks Consensus Estimate and the top line beating the same. Additionally, Leap Wireless suffered a significant net subscriber loss. Consolidated customer churn rate was 3.6% compared with 3.3% in the prior-year quarter.

The prepaid wireless operator Leap Wireless, which offers products under the brand name of “CRICKET”, faces massive competitive threat from other prepaid service providers. Apart from its closest rival MetroPCS Communications Inc. , the Boost Mobile and Virgin Mobile services of Sprint Nextel Corp. (S - Free Report) and Tracfone of America Movil SAB (AMX - Free Report) are competitive threats. Moreover, MetroPCS is on the verge of being acquired by T-Mobile USA. Leap Wireless currently has a Zacks Rank #3 (Hold).

Net loss, in the first quarter of 2013, was $111.3 million or a loss per share of $1.43 compared with a net loss of $98.4 million or a loss of $1.28 per share in the prior-year quarter. Quarterly net loss per share of $1.43 was significantly higher than the Zacks Consensus Estimate of a loss of $1.20. Quarterly cash cost per user (primarily indicating carrier subsidy for new smartphone) was $26.36, up 7.4% year over year.

Quarterly total revenue was $789.9 million, down 4.3% year over year but well above the Zacks Consensus Estimate of $735 million. Service revenues were $684.6 million, down 11.6% year over year. Equipment revenues were $105.2 million, up 103.9% year over year.

Quarterly gross margin was 35.5% compared with 38.3% in the prior-year quarter. Operating loss was $29.4 million compared with $15.8 million in the prior-year quarter. Adjusted OIBDA was $121.1 million, down 7.2% year over year. Adjusted OIBDA was 15.3% of the service revenue compared with 15.8% in the year-ago quarter.

During the first quarter of 2013, Leap Wireless generated $25.6 million of cash from operations compared with $35.4 million in the prior-year quarter. Free cash flow was a negative $0.8 million compared with a negative $111 million in the year-ago quarter. At the end of the first quarter, Leap Wireless had over $667.1 million of cash and marketable securities compared with $675 million at the end of 2012. Total debt, at the end of the reported quarter, was over $3,303.6 million compared with $3,302.5 million at the end of 2012. Debt-to-capitalization ratio was 0.91 compared with 0.88 at the end of 2012.

Subscriber Statistics

During the reported quarter, Leap Wireless lost 93,037 net customers against a gain of 258,060 customers in the year-ago quarter. Total subscriber base, at the end of the first quarter of 2013 was 5,203,747, exhibiting a 16% year-over-year drop. ARPU was $43.72, up 2.7% year over year. Quarterly cost per gross addition increased 39% year over year to $317.

Leap Wireless lost 8,502 net customers for its wireless segment against a gain of 163,613 customers in the year-ago quarter. Quarterly wireless churn rate was 2.9% compared with 3.1% in the year-ago quarter. Wireless subscriber base was 4,636,867, exhibiting a 10.3% year-over-year drop.  

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