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Unsold iPhones Become a Headache for Leap Wireless

Posted on February 28, 2013
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Leap Wireless International has a problem that is, of all things, about the iPhone… lots of iPhones.

The company, known for its prepaid wireless subsidiary Cricket Wireless, has announced it still needs to sell half as many iPhones as it committed to sell on its first year of partnership with Apple, which ends in June. As a result, Leap could end up with $100 million worth of unsold iPhones by the middle of 2013.

This could spell more trouble for Leap as it struggles to keep pace with larger carriers, while Apple remains challenged in cracking the market for smartphones being bought by lower-income consumers.

Leap Wireless has about 5.3 million subscribers and is handicapped by the fact it lacks coverage compared to the bigger carriers in the US. Because of these technological limits, the prepaid carrier cannot sell the iPhone in all of its markets.

The company began offering its pay-as-you-go plans for the iPhone last year, selling the smartphones for more money–$500 for the iPhone 5–but does not require subscribers to sign contracts and charges less compared to other carriers.

Leap Wireless does not seem to mind the problem, with its COO Jerry Elliott even declaring in a conference call that the are “not concerned about… meeting the Apple commitment.” Analysts, however, are worried about the company’s future. Walter Piecyk of BTIG Research has noted that poor iPhone sales could worsen Leap’s cash burn. He estimated that Leap would sell around 160,000 iPhones by June and the company would be on the hook into buying another 160,000 units.

Good luck with that, Leap Wireless.

Source: Wall Street Journal

 
 

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