Leap entering the 700 MHz auction
December 5, 2007/
financial reporting errors and a possible class action lawsuit, Leap Wirless has announced that it will bid for in the 700 MHz spectrum auction. Of course, they won’t be gunning for the $4.5 billion, 22 megahertz portion that’s been reserved for open-access. Rather, they’ll bid on a smaller slice in order to fill out their network. So the company must have some level of faith in their revised reportings, which are scheduled to be released sometime this month. Dare we mention both MetroPCS and Leap buying spectrum separately and then merging? [Reuters]]]>
Posted in 700 MHz spectrum, Cricket
MetroPCS (Stock symbol PCS) has a good business plan.
They focus their efforts on the more profitable urban areas. Large communications companies likely spent a fortune putting in cell equipment in sparsely populated areas.
Furthermore, MetroPCS (PCS) is a relatively new company, so it is purchasing relatively new, so probably cheaper and more effective electronics to handle cell calls. Cell phones have been around for a long time, and probably older equipment from older companies is outdated (possibly even the wrong frequency).
MetroPCS (PCS) also has an aggressive and new marketing strategy. Before they had no advertising and relied mostly upon “block parties” (sponsoring parties to advertise their products), and word of mouth. Now they use fliers on doors, commercials on radio and TV, people outside stores (in some locations) waving MetroPCS signs, etc.
MetroPCS currently has about 850 (or more) stores in the Los Angeles/Orange County areas, and very good corner locations with high visibility. They are also in San Francisco, CA, Dallas, TX, and parts of Florida.
Expansion plans, I heard, included San Diego, CA.
They concentrate on one area at a time and make a blitz campaign to sell phones.
I believe that MetroPCS stores will do well in the initial few months in southern California, but I think many will close soon after that. Due to excessive competition. I suppose that individual franchise owners will lose a lot of money due to this competition and that MetroPCS might lose a bit when closures occur (though they will likely move to new areas by then, and expansion might make up for problems).
Existing MetroPCS cities have stabilized (that is, new customers roughly equal the number of customers leaving the plans for other companies).
Customers are sometimes not satisfied with the roaming charge areas (they could pay $0.73/minute, I heard from a salesperson, if originating a call outside of a designated area and accepting the charges to initiate the call).
Because of this, MetroPCS wants to expand its service area quickly by buying Texas rival, Leap Wireless. Leap, I believe, had a $2 billion debt, it was facing further litigation, and its sales were terrible. Yet, MetroPCS felt that under different management (and using just PCS management without Leap management) the combined companies would be more efficient. MetroPCS stock was hurt by the recent resignation of the Chief Financial Officer and the CEO of Leap. MetroPCS retracted its bid for the company (probably because Leap sales were flagging).
MetroPCS profits, on the other hand, are great (even during expansion into new markets).
John Scully (who used to be the CEO of a soft drink company before being the CEO of Apple Computer) is on the Board of Directors of MetroPCS. Scully might have been responsible for Apple sales to drop (he was kicked out). Scully, after that, worked for a company that aged wine using magnets. . . the idea apparently wasn’t very “attractive.” Scully’s impact on MetroPCS seems minor.
MetroPCS went public, in 2007, at a price in the mid $20’s, but is currently selling well below that figure (partly due to the Leap fiasco, and partly due to the delay in breaking into the southern California markets. . . but they broke in now). At one point, MetroPCS stock was selling for about $45/share. The company, now, is worth approximately $10 billion.
It seems like a solid and up and coming little company. I think that it is a very good investment.