News: Page (1) of 1 - 02/20/13

Leap Wireless customer losses disappoint, shares fall

US-LEAP-EARNINGS:Leap Wireless customer losses disappoint, shares fall

(Reuters) - Leap Wireless International Inc reported a 1.5 percent decline in quarterly revenue as it lost far more customers than Wall Street had feared, sending its shares down 5 percent.

The wireless service provider for budget-conscious customers who pay for calls in advance, said it lost 337,000 net customers in the fourth quarter. The average expectation on Wall Street was for losses of 55,000 customers, according to analysts.

Leap said it was hurt by "general softness in the prepaid sector" and an increased average price of its mobile devices.

New Street analyst Jonathan Chaplin said subscriber losses, which compared with customer growth in the year-ago quarter, had "deteriorated drastically" in the quarter.

The company - which competes with rivals such as MetroPCS Communications Inc and Sprint Nextel Corp and a host of other prepaid services - promised a reduction in customer defections for 2013 from initiatives such as expanded device financing for its customers.

But some analysts said that the best investors could hope for is an eventual sale of Leap. Hudson Square analyst Todd Rethemeier questioned whether the company would be able to turn around on its own.

"In the last three quarters they've lost about 14 percent of their subscriber base," said Rethemeier. "Management seems unable to find a strategy to reverse that.

"The only reason the stock is trading as high as it is because people think there's potential for a buyout," Rethemeier added.

But Roe Equity Research analyst Kevin Roe noted that potential Leap suitors Sprint and MetroPCS may not be able to make a bid for the company for some time.

Sprint is currently seeking to buy Clearwire Corp and to sell 70 percent of its own shares to SoftBank Corp and MetroPCS is looking to merge with T-Mobile USA, a unit of Deutsche Telekom.

"What Leap has to do is conserve cash to survive until the next round of consolidation," Roe said.

Leap said its fourth-quarter net loss narrowed to $74.3 million, or 96 cents per share, from a loss of $84.4 million or $1.10 per share in the year-earlier quarter.

Revenue fell to $756 million from $767.4 million and was below Wall Street expectations for revenue of $778.8 million, according to Thomson Reuters I/B/E/S.

Leap shares were down 33 cents or more than 5 percent at $5.78 in morning trade on Nasdaq.

(Reporting By Sinead Carew; Editing by Gerald E. McCormick and Nick Zieminski)

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