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Follow up: Leap Wireless pays $900 million over three years for the Apple iPhone

Follow up: Leap Wireless pays $900 million over three years for the Apple iPhone
On Thursday, pre-paid carrier Cricket announced that it will be the first of its ilk to offer the Apple iPhone to its customers. On Friday, Cricket's parent Leap Wireless revealed that it had agreed to pay $900 million over three years in order to provide the iconic smartphone to Cricket users. Leap CEO Dough Hutcheson noted that Apple iPhone users are more loyal than the users of other handsets, and churn is lower. Without a contract to sign, Cricket customers will pay $499.99 for the 16GB Apple iPhone 4S or $399.99 for the 8GB Apple iPhone 4. That is discounted from the usual off-contract prices of $650 and $550 respectively.

While Cricket will give its Apple iPhone users the chance to use its $55 monthly unlimited talk, text and data plan, the user can find his speeds throttled after exceeding 2.3GB of data use in one month. CEO Hutcheson says that because the current unlimited plan is not profitable in the long term, Leap will provide Cricket users with more plans that they can use with the iPhone, saying that the company will evolve the way it sells data. The device also is not compatible with its AWS spectrum meaning that it can be sold only in areas where it uses PCS spectrum. That means that 70% of its POPS, or 70 million people, will have the pre-paid Apple iPhone available. Unfortunately for Leap, that eliminates major cities like Boston, New York and Chicago. But thanks to an MVNO agreement signed with Sprint (who has a number of such arrangements), users can roam onto the network allowing Cricket's service to be offered nationwide.

The Apple iPhone 4S

The Apple iPhone 4S

Is the pre-paid Apple iPhone a good deal for consumers? Analysts were divided. Sanford C. Bernstein analyst Craig Moffett said it was a good deal and that the higher, unsubsidized cost of the phone would be made up after six months of paying just $55 for Cricket's unlimited service. On the other hand, JP Morgan analyst Phil Cusick said expensive phones are "nearly irrelevant"to pre-paid customers. In comparison, Verizon and AT&T charge $70 and $60 respectively for their lowest cost iPhone plans, and both carriers offer less data per month than Cricket's plan.

BTIG analyst Walter Piecyk said the deal harkens back to Sprint's $15.5 billion dollar four year commitment to offer the Apple iPhone. The analyst says as more and more smaller operators sign deals with Apple, Sprint's deal looks more and more expensive since there is less and less of a distinction to offer the unit to customers. Piecyk added that while the move is a bold one for Leap, considering that the market for a $400-$500 Apple iPhone is "unproven," it is still less aggressive than Sprint's deal. Ironically, Sprint's Boost Mobile said today that it too, will be offering Apple's smartphone to its pre-paid customers starting in September.

Credit Suisse analyst Jonathan Chaplin wrote a research note to clients in which he says that the deal will be a good one for Leap if it can sell the required number of iPhones. In the meantime, the commitment adds a level of risk to the company and margins will be impacted despite managements denial. Cricket customers will be able to purchase the Apple iPhone starting June 22nd.

source: Reuters

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posted on 01 Jun 2012, 14:50

1. -box- (Posts: 3991; Member since: 04 Jan 2012)

Sounds like leap got a better deal than sprint. Still, almost a billion dollars for the deal... that is a lot for a old phone that is losing market share...

posted on 01 Jun 2012, 14:59 5

2. Sprintfan (Posts: 68; Member since: 18 Nov 2011)

Umm Cricket has 5 million customer Sprint has 50 million. DUH?

posted on 01 Jun 2012, 22:30

16. hepresearch (unregistered)

Sprint paid 15 times as much as Cricket did, but has only 10 times the customers. If anything, this proves that Apple knows when it can afford to milk a carrier for their failure to adopt the iPhone when it would have been more expedient, especially when that carrier is already struggling and hemorrhaging cash. Furthermore, it is also possible that overpricing Sprint's subsidy for the sale of the iPhone is an effective cooperative strategy by Apple for bringing Sprint to its knees before the likes of Verizon and AT&T. All three 'mutual benefactors' would stand to gain a great deal from such an arrangement. Just a theory...

As a convenient example, if Sprint ends up with 5 million customers, and Cricket with 50 million, after the next few years, then we would definitely know...

posted on 01 Jun 2012, 15:37 3

6. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)

iPhone is gaining market share. Try to stay factual.

posted on 02 Jun 2012, 13:01 1

18. Apphole (Posts: 3; Member since: 31 May 2012)

GTFO welcher

posted on 01 Jun 2012, 17:49

10. Roomaku (Posts: 278; Member since: 06 Feb 2012)

LOL. The iPhone may not be the best phone but for prepaid customers, at least those that don't know the ins and outs of jailbreaking and using simplemobile or other mvnos to use the iphone, this "old phone" means a lot of people can finally use a legitimate iPhone on prepaid

posted on 01 Jun 2012, 20:44 1

14. kindlefireowner (Posts: 503; Member since: 05 Dec 2011)

Dude. You might want to do some research before you post. Apple has sold 66 million iphones in the past 6 months worldwide. Name one model of android phone that sold more than 20 million in the same time period. NONE. Not even the Note.

posted on 01 Jun 2012, 15:01 1

3. Jojofromdabay (Posts: 39; Member since: 06 Apr 2010)

That Means they have to sale 1,500,000 handsets to meet their quota which I dont see being a problem considering all those people who want an iphone without a contract

posted on 01 Jun 2012, 16:45

9. lsutigers (Posts: 821; Member since: 08 Mar 2009)

Speculation of Boost / Virgin Mobile picking up the iPhone may trump Leap / Cricket's offering, considering they are on a Nationwide Network (Sprint) vs. regional (Leap / Cricket)

posted on 01 Jun 2012, 15:29 3

4. lubba (Posts: 1313; Member since: 17 Jan 2011)

Companies would sacrifice so much for the iPhone! I think ATT is going the right path. Find a worthy product like WP, popularize it, and make it the next iPhone but for less.

posted on 01 Jun 2012, 17:50 1

11. Roomaku (Posts: 278; Member since: 06 Feb 2012)

It's going to be awhile before WP7 eclipses the iPhone or Android, but yeah they have the right idea!

posted on 01 Jun 2012, 15:35 3

5. ApphoIe (banned) (Posts: 78; Member since: 31 May 2012)

LMAO, poor people on their pre paid plans. "Duhuhuhuuh, big boy contracts are too expensive and I can't afford it, but I'll gladly shell out $500 for a year old iphone that was already obsolete the day it launched. Derp!"

posted on 01 Jun 2012, 15:38 3

7. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)

Another ignorant comment by you that contributes nothing.

posted on 01 Jun 2012, 19:37 1

13. ApphoIe (banned) (Posts: 78; Member since: 31 May 2012)

You would know all about that huh welcher?

posted on 01 Jun 2012, 15:56

8. mahoganyheart (Posts: 11; Member since: 23 May 2012)

I'm not an iPhone fan nor lover, but saying the phone was obsolete on release, is just plan nonsense. Anyway, it is my point of view.

posted on 01 Jun 2012, 17:56

12. Roomaku (Posts: 278; Member since: 06 Feb 2012)

Yeah you may have a point about the price and price per month not being worth it, but with the phone you are way off. YOU may not like the iPhone but it's a great phone for basic things, and has the apps that people want. It's not my first choice, but I understand it's appeal and why it's still sells a fair number, and likely more then any other Android Phone. If you think about it the iPhone is the number two spot and it only has 3 phones, all running the same OS and it's up against an army of Android phones. If you ask me holding the number two selling spot spot is not bad especially because of it's up against a huge amount of Android phones, all being released for more or far less then the iPhone.

posted on 01 Jun 2012, 20:51 1

15. kindlefireowner (Posts: 503; Member since: 05 Dec 2011)

Google PC Mag network speed test. Anybody that would pay $400 dollars to use and iphone on that slow network is an idiot. Then they say it would roam on Sprint. The 2 slowest nationwide 3g networks. NO THANKS.

posted on 02 Jun 2012, 11:17

17. ivanko34 (Posts: 617; Member since: 04 Sep 2011)

So they must pay to apple one million each day

posted on 03 Jun 2012, 09:31

19. JunitoNH (Posts: 1934; Member since: 15 Feb 2012)

And we wonder why the US supremacy, economy & leadership is going down the drain. Exhibit A, above comments.

posted on 04 Jun 2012, 11:22

20. hepresearch (unregistered)

No kidding... not many people, especially here in the US, realize that the United States does not even own itself anymore... our nation (the US) is owned almost entirely by private banking institutions OUTSIDE of the country, funded by other nations and powers across the rest of the world. So, when the US eventually declares that it is unable to make good on its own sovereign debts, the rest of the world will come in here legally, by force if necessary, to take back all US-based property, which is now rightfully theirs after all! None of us here actually, honestly, "own" any of the stuff that we think we "own"... we were already being sold out a generation ago, and 'the transaction' is just being completed now in this generation...

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