As of June 30, 2001, customers of the company’s Cricket service grew to more than 472,000, up approximately 39 percent from the just over 339,000 customers reported as of March 31, 2001.
We pioneered the Cricket concept of flat-rate, all-you-can-talk local wireless service as an affordable alternative to traditional wireless and landline service. With Cricket service, consumers can more comfortably gain the advantages of mobility in their lives, said Harvey P. White, Leap’s chairman and CEO. We are pleased to see our cost-focused business model is working as we continue our rapid expansion across the country. We look forward to launching even more Cricket markets this year, including Phoenix and Denver planned for later this summer.
Our strong results this quarter indicate that Cricket is becoming a household name in the market areas we have launched across the country, said Susan G. Swenson, Leap’s president and chief operating officer. We are pleased with the success of our Cricket service and we believe that the continued momentum in growth we have demonstrated indicates that customers are drawn to the predictable value of our service, even in uncertain economic times. Our results to date are testimony not only to Cricket’s innovative cost model, but also the dedication and hard work put forth by the entire Leap team.
Leap launched an additional six market areas Spokane, Wash.; Fort Smith, Ark.; Columbus and Macon, Ga.; Hickory, N.C., and Pittsburgh, Pa. bringing the total potential customers covered by Cricket service in markets across the United States to approximately 12.3 million (1998 POPs) at the end of the quarter. Subsequent to the end of the quarter, Leap also launched Cricket service in Fayetteville, Ark.
Average revenue per user per month (ARPU) across all of Leap’s operational markets rose to approximately $36, up from the approximately $35 reported for the first quarter of 2001.
Overall cost per gross customer addition (CPGA) was approximately $245.
Leap also reported the following results for its one-year or older markets, Chattanooga and Nashville, Tenn.:
Churn for both markets combined was 3.8 percent.
Earnings before interest, taxes, depreciation, amortization, and marketing (EBITDAM) margin for both markets combined was over 50 percent.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for both markets combined was over 10 percent.
Average minutes of use for the aggregate of both markets was approximately 1,100 minutes of use per month and was consistent with historical customer usage patterns.
Key financial performance measures for the second quarter ended June 30, 2001 are as follows:
Total operating revenues for Leap’s U.S. operations for the second quarter were $47.8 million, an increase of $11 million over the $36.8 million reported for the previous quarter. Service revenue rose to $39.5 million, an increase of 54 percent over that reported for the first fiscal quarter of 2001.
Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) was negative $56.6 million, compared to the negative $48.1 million reported for the previous quarter.
Leap’s consolidated net loss for the quarter was $128.5 million or $3.91 per share, compared to a net loss of $114.4 million or $3.88 per share in the prior quarter. Of the $3.91 net loss per share reported in the second quarter, $0.52 was the result of Leap’s share of losses for PEGASO recognized under the equity method of accounting.
Leap’s total cash and cash equivalents, investments, and deposits on pending wireless license acquisitions as of June 30, 2001 were $593.4 million.
The book value of wireless licenses at the end of the second quarter rose to $681.5 million, an increase of $408.1 million over what was reported at the end of the previous quarter and reflecting the completion of several spectrum acquisitions.
Leap’s property and equipment, net of depreciation, rose to $686.5 million in the second quarter, an increase of $178.5 million over that reported at March 31, 2001.
Based on our planned launches in the third and fourth quarters and the uptake rates of Cricket service in our operational markets today, we continue to expect that we will reach approximately one million Cricket customers by the end of 2001, said White. I believe that the successful completion of our underwritten offering in May, which generated net proceeds of $97 million, is an indication of our ability to finance our operations in the equity markets. However, we intend to scale the growth of Cricket and other innovative information services as we move forward beyond 2001 according to the financial resources we have at our disposal at that time.
In May 2001, Leap introduced its Telephone Entertainment Network, a company initiative focused on turning wireless communications into an entertainment and information medium. During the quarter, Leap launched Slice, the first channel to debut on the Telephone Entertainment Network, in Chattanooga and Nashville, Tenn., and further expanded this service in July 2001 to include Albuquerque, N.M. Marketed as Your Personal Telephone Entertainment Channel, Slice is designed to deliver short, crisp voice clips directly to the customer’s wireless phone. With Slice service, customers hear entertaining, short clips of local news and events, sports, weather, traffic and more before their calls connect. Leap intersperses short advertisements and promotions that can save customers money with these fun, fresh slices of information. With a simple press of a button, customers can get more information by voice or text on selected voice clips.
Leap used its innovative, customer-focused approach to develop the Telephone Entertainment Network and its first channel, Slice, Swenson said. While it is still too early to provide guidance as to how this service is expected to add to our business, we are very encouraged by the early results we have seen in our Nashville and Chattanooga market areas. We look forward to the further expansion of this service in the future.
During the second fiscal quarter, Leap completed the acquisition of 40 new wireless licenses totaling approximately 14.2 million potential customers (1998 POPs), bringing the total potential customers covered by the licenses that Leap owns to approximately 49.8 million. In total, Leap now owns or has rights to acquire 72.7 million potential customers (1998 POPs) in 36 states. This number includes licenses covering 22.4 million potential customers (1998 POPs) on which Leap was the high bidder in FCC Auction 35 that ended in January 2001.
