Telecom & Wireless
Leap Wireless iPhone Shakes Up Wireless Market With Prepaid Model
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Leap Wireless International Inc. (NASDAQ: LEAP) is out with the announcement that many consumers have been hoping for. The company will now be the first pre-paid cellular carrier in the United States to offer the iPhone from Apple Inc. (NASDAQ: AAPL). Leap’s Cricket service will begin offering the iPhone on Friday, June 22. The move is meant to give the company a “leap” over rival MetroPCS Communications, Inc. (NYSE: PCS).
In a roundabout way you could imagine that this would be yet one more thorn in the side Sprint Nextel Corporation (NYSE: S). You have to consider how much the iPhone cost Sprint here. It was bad enough that CEO Dan Hesse had to deduct the iPhone plan gains from counting toward his incentive package. Oops, imagine the iPhone being bad for your business!
This brings up a point for Leap too… Will the subsidy that Apple Inc. (NASDAQ: AAPL) demands end up costing Leap money that it cannot afford? Leap’s closing market value was $457 million as of Wednesday and Thomson Reuters already sees losses expected in 2012 and 2013 at -$3.52 EPS and -$2.22 EPS.
AT&T, Inc. (NYSE: T) and Verizon Communications (NYSE: VZ) are still the iPhone kings in America, and AT&T had a huge leap as far as the time exclusivity.
As far as what is being offered by Leap, this is the iPhone 4S and iPhone 4 at a price of $55 per month. Customers will get unlimited talk, texting and data in the plan. The move is instantly helping out Leap Wireless shares. Shares closed at $5.77 on Wednesday and the stock is up around $6.00 in the pre-market trading against a 52-week range of $4.68 to $17.66.
JON C. OGG
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