Leap To Expand Store Count, Launch New Programs

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San Diego - Prepaid carrier Leap Wireless reported an expanded net loss in the first quarter and a drop in net subscriber additions, but the company plans multiple initiatives, including expanded retail distribution, to build volume and cut costs.

The carrier plans to add 4,500 more storefronts operated by national retailers by mid 2012 and add more Cricket-branded stores throughout the year.

To reduce costs, the company will continue to convert some company-owned Cricket-brand stores into independently owned stores that sell only Leap's Cricket-branded service. The strategy will replace fixed costs with variable costs.

The carrier added about 100 Cricket-branded stores in the first quarter to bring the number to about 2,800, and it expects to add around 250 more by the end of the year. The stores are located "where value-seekers live, work and shop," Leap said.

Cricket-brand stores operate within the markets in which Leap operates its own network. In markets outside its network footprint, Leap resells Sprint service under its own brand through retailers.

"We've been transitioning a number of company-owned stores to what we call premier dealers [since early 2011]," a spokesman explained. "So it's private ownership of stores that look like a Cricket store and sell only Cricket. We continue to open new company-owned stores, and we expect to open more new premier dealers in 2012."

Of the current 2,800 Cricket-brand stores, only about 150 are company-owned, although the spokesman noted that Leap has always had more independently owned Cricket-brand stores than Leap-owned Cricket-brand stores.

The planned addition of 4,500 more national retail outlets in midyear follows the April 22 launch of Cricket sales through 1,600 Target stores nationwide. Cricket is also sold on a national basis by Best Buy, Walmart, Dollar General and Amazon.

In other efforts to bolster the bottom line, the carrier said it would roll out a new nationwide marketing campaign to appeal to value seekers in the second half ,"refresh" service plans in the third quarter "to further differentiate out products," and introduce up to seven new smartphones by the back-to-school selling season.

The carrier will also expand its 4G LTE network from Tucson, Ariz., to markets reaching a population of up to 25 million by year's end and a further expansion in two to three years to about two-thirds of its current network footprint.

In detailing its financial performance, the carrier said revenues grew year over year by 5.9 percent to $825.6 million. Net losses grew to $94.3 million from year-ago net losses of $86.4 million. The number of new subscriber additions fell 21.9 percent to 258,060. The average cost of acquiring a customer grew to $228 from $192, and average monthly churn rose to 3.3 percent from 3.1 percent. The subscriber base expanded to 6.03 million.

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