Leap Wireless Jumps as Cricket Communications Chirps iPhone Offering
Shares of Leap Wireless (NASDAQ: LEAP) are seeing much strength during Thursday's pre-market session after the company's wholly-owned subsidiary, Cricket Communications, announced it will offer Apple's (NASDAQ: AAPL) iPhone on June 22, 2012.
Cricket will offer the iPhone 4S and iPhone 4 with its $55 per-month unlimited talk, text and data plan. Leap Wireless signed a 3-year, $900 million iPhone commitment with Apple. The company expects no change in its capital expenditure plan in 2012, with no significant impact to its financials.
However, this is not the only time Leap Wireless has seen recent intraday strength in its share price.
Back in December 2011, Dow component AT&T (NYSE: T) dropped its $39 billion takeover bid for Deutsche Telekom's (PK: DTEGY) T-Mobile unit after both the Federal Trade Commission (FTC) and the Justice Department opposed the takeover.
In recent months, in order to make up for the failed takeover, there has been chatter circulating that AT&T may be interested in making a bid for Leap Wireless (NASDAQ: LEAP).
According to Reuters citing people familiar with the matter, AT&T has held talks with Leap Wireless in order to grow in the maturing US carrier market. Supposedly, Leap Wireless hired bankers to advise it on a potential bid.
A spokesperson from Leap Wireless would not comment on the speculation. However, amid the news, CEO of Leap Wireless, Doug Hutcheson, did address the positive news of the iPhone offering news unveiled today.
"Our customers want the best products available and we are excited to bring iPhone to our pre-paid consumers with an industry leading $55 per-month service plan," said Hutcheson. "Launching iPhone is a major milestone for us and we are proud to offer iPhone customers attractive nationwide coverage, a robust 3G data network and a value-packed, no-contract plan."
Soon after the release, JP Morgan published a research report, commenting on Leap Wireless' announcement that it will be releasing two versions of the iPhone starting on June 22.
In the report, JP Morgan wrote, "We will watch with interest how the iPhone impacts Cricket sales. The $399 and $499 price points have historically been nearly irrelevant in the prepaid landscape, and unlike T-Mobile's Value plan, customers will need to come up with the full price on the day of sale. This is not something that traditional prepaid customers can usually do. However, we do believe that the iPhone could benefit Cricket in terms of driving traffic to the store, with most customers choosing a more reasonably priced device instead. Given the launch is in the slow summer months, it could be a nice traffic driver in 3Q."
JP Morgan maintained its Overweight rating on Leap Wireless, which closed yesterday at $5.77.
Shares of Leap Wireless did trade over 7% higher soon after the news hit the wires, however, shares are currently trading up about 6.5% at $6.15 per share. Leap Wireless has seen better days, as shares are down over 35% year-to-date.
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