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

Related phones

iPhone 4s
  • Display 3.5" 640 x 960 pixels
  • Camera 8 MP / 0.3 MP VGA front
  • Processor Apple A5, Dual-core, 800 MHz
  • Storage 64 GB
iPhone 4
  • Display 3.5" 640 x 960 pixels
  • Camera 5 MP / 0.3 MP VGA front
  • Processor Apple A4, Single core, 1000 MHz
  • Storage 32 GB
  • Battery 1420 mAh(7.00h 3G talk time)

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20 Comments

1. -box-

Posts: 3991; Member since: Jan 04, 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...

2. Sprintfan

Posts: 68; Member since: Nov 18, 2011

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

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...

6. taco50

Posts: 5506; Member since: Oct 08, 2009

iPhone is gaining market share. Try to stay factual.

18. Apphole

Posts: 3; Member since: May 31, 2012

GTFO welcher

10. Roomaku

Posts: 278; Member since: Feb 06, 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

14. kindlefireowner

Posts: 504; Member since: Dec 05, 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.

3. Jojofromdabay

Posts: 39; Member since: Apr 06, 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

9. lsutigers

Posts: 832; Member since: Mar 08, 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)

4. lubba

Posts: 1313; Member since: Jan 17, 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.

11. Roomaku

Posts: 278; Member since: Feb 06, 2012

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

5. ApphoIe

Posts: 78; Member since: May 31, 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!"

7. taco50

Posts: 5506; Member since: Oct 08, 2009

Another ignorant comment by you that contributes nothing.

13. ApphoIe

Posts: 78; Member since: May 31, 2012

You would know all about that huh welcher?

8. mahoganyheart

Posts: 11; Member since: May 23, 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.

12. Roomaku

Posts: 278; Member since: Feb 06, 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.

15. kindlefireowner

Posts: 504; Member since: Dec 05, 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.

17. ivanko34

Posts: 617; Member since: Sep 04, 2011

So they must pay to apple one million each day

19. JunitoNH

Posts: 1946; Member since: Feb 15, 2012

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

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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