Leap Wireless stands to take big $100 million hit on unsold Apple iPhones for 2013

Leap Wireless stands to take big $100 million hit on unsold Apple iPhones for 2013
In a filing made with the SEC, Leap Wireless explained that in order to add the Apple iPhone to its roster of handsets, it had to commit to purchase certain amounts of the smartphone for three years. Leap says that it plans on paying Apple for half the amount it had agreed to buy in the year that ends this June. If Apple were to demand that Leap pay for the contracted amount, it could be in the hole for $100 million. And to make matters worse, the number of units that the pre-paid carrier is on the hook for with Apple, increases in 2014 and 2015. According to its SEC 10-K filing, Leap had agreed to pay Apple $800 million over the three year period.

In its filing with the SEC, Leap adds that if Apple holds them to the contract, and the phone continues to sell at current rates, besides the $100 million it will owe the Cupertino based firm in 2013, it will owe $150 million more for 2014 and $200 million for 2015. In May 2012, Leap signed the deal with Apple so that its Cricket Wireless subsidiary could be the first pre-paid carrier in the U.S. to offer subscribers the Apple iPhone. On June 22nd, Cricket started offering the device with its $55 monthly unlimited text, talk and data plan. At the time, the 16GB Apple iPhone 4S was $499.99 and the 8GB Apple iPhone 4 was $399.99. Now, the Apple iPhone 5 is available at Cricket, priced at $499.99.

Leap President and COO Jerry Elliott was more positive about Apple iPhone sales during a recent conference call, as the executive said that sales of Apple products were pretty good in the fourth quarter. However, when push came to shove, the executive did admit that sales of the Samsung Galaxy S III were better.

source: SEC via PCMag

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9 Comments

1. lolioslol

Posts: 182; Member since: Dec 10, 2012

Freaking apple

2. dorianb

Posts: 617; Member since: Oct 24, 2012

For once this is not the fruits fault. Leap got in the game at the wrong time. No one who uses Cricket is gonna pay that kinda money for an iPhone if they can't pass a credit check. Also I think most people on Cricket would bring in their own Craigslist bought iPhone.

3. 14545

Posts: 1835; Member since: Nov 22, 2011

Because when people actually have to pay full price for a phone, they realize how rotten the fruit is.

4. D.Aceveda

Posts: 433; Member since: Jun 30, 2012

GS3 sold better....a more capable device than the iPhone and is cheaper as well sold better!??! You don't say *Nicholas Cage face*

5. belovedson

Posts: 1061; Member since: Nov 30, 2010

leap is done for. unless apple comes out with something fabulous

7. BadAssAbe

Posts: 508; Member since: Apr 22, 2011

Not only does uninformed customers buy the iPhone but also uninformed providers

8. lauremar

Posts: 181; Member since: Feb 29, 2012

That's what they get for getting into the Apple iPhone bandwagon... Leap made a bad business decision, I think, and it's to their own fault... I commend T-Mobile for doing the right thing and not get into any agreement with Apple that could end up just what Leap is suffering now. BYOD to T-Mo's network strategy is I think the best thing that the company did. Leap should learn from it.

9. JunitoNH

Posts: 1946; Member since: Feb 15, 2012

I wouldn't mind owning an iPhone 5, but when you consider the price point of the device i.e. $649, rather purchase a cheap Android device such as the Nexus 4 and/or Xperia or other cheap brands from Amazon. Certainly not going to sign any two year agreement. If they want to survive the US economy, they had better start making cheaper devices.

10. ZeroCide

Posts: 816; Member since: Jan 09, 2013

ok, They should unlock the overstock sell it on the open market and recoup losses... maybe make profit.

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