Leap Offers Unlimited Music Download - Analyst Blog

Leap Wireless International Inc. (LEAP), a small-sized prepaid wireless services provider in the U.S. operating under the brand name “Cricket,” has decided to offer unlimited music download facilities to its 3G subscribers. The new digital music service will be called “Muve Music.” Leap is the first wireless service provider in the U.S. to launch this innovative service.

For just a $55 service plan, Cricket customers will get a combined package of voice, data, and text together with unlimited music download on the nationwide 3G network of Leap. Muve Music will be introduced in January 2011. Initially, this facility will be available on Samsung Suede (SCH-r710) mobile handsets, which currently costs $199.

This smartphone will have a 4GB flash memory card of SanDisk Corp. (SNDK) to download music without digital rights management protection. Leap announced that later on, Muve Music will be available on all smartphones running on Google Inc.'s (GOOG) Android operating system.

We believe this product innovation is a desperate attempt by management to revive the company's financial position. As the prepaid wireless market is getting more competitive, Leap is suffering since its larger peers such as Metro PCS Communications Inc. (PCS), Boost Mobile, a subsidiary of Sprint Nextel Corp. (S), and Tracfone, a subsidiary of America Movil SAB (AMX), continue to attract subscribers with their competitive service plans, greater network coverage and better product offerings.

Currently, Leap has around 5.1 million wireless subscribers. During the third quarter of 2010, the company suffered 200,000 net subscriber losses. Out of this, 172,000 were voice customers and 28,000 were broadband customers. Quarterly churn rate was 5.5% compared to 5.4% in the year-ago quarter. Voice churn rate was 5.2% compared to 5.4% in the prior-year quarter. Broadband churn rate was 7.6% compared to 5.6% in the year-ago quarter. Average revenue per user, in the same quarter was $37.02, down 6.5% year over year.

Nevertheless, Leap remains as one of the low-cost wireless service providers in the U.S, which enables it to roll out a range of cheap service plans that start as low as $35 per month. The company has strategic plans to expand coverage in urban and suburban markets and avoid less populated areas to keep its infrastructural cost low.

After establishing its network in a new market, the company will promote its services mostly through less expensive media. We maintain our long-term Neutral recommendation for Leap. Currently it is a short-term Zacks #3 Rank (Hold) stock.

 
AMER MOVIL-ADR (AMX): Free Stock Analysis Report
 
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
 
LEAP WIRELESS (LEAP): Free Stock Analysis Report
 
METROPCS COMMUN (PCS): Free Stock Analysis Report
 
SPRINT NEXTEL (S): Free Stock Analysis Report
 
SANDISK CORP (SNDK): Free Stock Analysis Report
 
Zacks Investment Research