Fewer Customers Leaves Leap Facing iPhone Glut
NEW YORK (TheStreet) - Wireless company earnings season is revealing that some of are having trouble keeping customers satisfied -- or even keeping customers.
This country's number four major provider, T-Mobile USA, just reported in its fourth-quarter financials that, despite some signs of growth in its prepaid customer rolls, they continue to lose contract customers. The bottom line: a revenue decline of $1 billion for the year, leading to an overall operating loss of $6.4 billion. That's up from a $4.3 billion setback in the previous year.
It remains to be seen whether T-Mobile's upcoming merger with MetroPCS(PCS) will solve that problem, with that pairing set to be completed next month.
Meanwhile Leap Wireless International(LEAP) and its pre-paid cellular operation Cricket lost more than 600,000 subscribers last year, which has left the company with a surprisingly large backlog of Apple(AAPL) iPhones.
According to the Wall Street Journal, Cricket's excess iPhone inventory is worth some $100 million, and is expected to grow even larger.
Cricket/Leap has a three-year, approximately $800 million contract in place with Apple, which includes set purchase amounts of smartphones per year. Unfortunately for Leap, Cricket appears to be on track to sell only half of this year's allotment -- and its commitment to purchase iPhones increases in the second and third years of that contract.
Officially, Leap blames its shortfalls on ever-increasing competition and "overall softness in the wireless industry."
Cricket currently sells the iPhone 5 for $499 (remember there's no contract) with prepaid service plans starting in the $50 a month range.
--Written by Gary Krakow in New York.
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