LEAP Pre-Release Is "Solid," Citi Reports

Leap Wireless (NASDAQ: LEAP) pre-released better 1Q/11 net adds of 300k “vs. our estimate of 250k on lower churn of ‘less than 3.5%' vs. our estimate of 3.7%, implying better distribution productivity and better retention from its all inclusive rate plans,” Citi reports.

“We estimate these results implied better gross adds of 897k, representing seq. growth of 18%,” Citi writes. “The company disclosed ARPU is expected to increase from 3Q/10 & 4Q/10 levels of $37.13 and $38.14, respectively, vs. our estimate of $39.48.

“Better customer activity (and the associated acquisition costs) during the quarter could dilute our 1Q/11 OIBDA forecast of $121.2 mil.

“Further, Leap expects 2Q/11 adjusted OIBDA should ‘reflect strong 1Q customer additions, further increases in ARPU and typical seasonal customer activity,' and we currently estimate a sequential rebound to $171.9 mil. or 24.8% growth yoy and consensus of $153.5 mil. Results highlight progress with its new rate plan strategy, positive 1Q seasonality, and a rising mix of Smartphone sales.”

Leap Wireless closed Monday at $14.05.