Friday, April 2, 2010

The Truth Behind Cricket Wireless Layoffs....

So a little investigating does a mind good! I have had MANY unanswered questions regarding Cricket's recent mass layoff across the nation. Cricket is a privately owned company under the Leap Wireless brand. Headquartered in San Diego, CA and also in Denver, Colorado, Cricket recently closed 30 stores, transitioning about 10 of those stores into premier dealers. Cricket also laid off a total of 180 employees nationwide.
While this may not be a shock to many, given the current economical situation, I have stop and ask myself, if Cricket is rapidly growing and expanding and we were constantly celebrating our quarterly numbers, what gives? Well, as said above, a little investigating does a mind good!
Here is what I found....


Leap Wireless Closes Cricket Stores, Cuts 180 Employees
By: Bradley Fikes — March 11th, 2010Reports Xconomy’s Bruce V. Bigelow
Amid considerable speculation about a potential merger, San Diego’s Leap Wireless (NASDAQ: LEAP) has trimmed about 4 percent of its workforce and closed or transferred 38 of its Cricket Communications storefronts.
Leap spokesman Greg Lund confirms that the flat-rate wireless service provider laid off a total of 180 employees nationwide on March 1 as part of a cost-cutting review, which the company did not announce. The cutbacks occurred after Leap reported its fourth-quarter and 2009 financial results on Feb. 25 . The company posted a bigger-than-expected loss of $64 million, or 82 cents a share, for the fourth quarter, on revenue of $547 million.
The 12-year-old company has been the subject of merger rumors since reports surfaced in January that Leap had hired Goldman Sachs as a strategic adviser in a possible sale of the business. Kansas City-based Sprint and Dallas-based MetroPCS are two companies most frequently mentioned as potential buyout partners. MetroPCS made an unsolicited bid in 2007 for Leap, but a deal never materialized.

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Leap Wireless Seeks a Buyer
Cellular provider Leap Wireless International Inc. has hired advisers and formed a special board committee to look into selling the company or merging with rivals, several people familiar with the matter said.

Leap, which sells its service under the Cricket brand and has about 4.7 million customers, has hired Goldman Sachs Group to advise the company as it "reassesses its alternatives and checks its options out there right now," according to one person familiar with the process.

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Leap Wireless: No Easy Sell
Leap Wireless has hired Goldman Sachs and asked its board members to consider selling the company, according to The Wall Street Journal. Leap's shares jumped 13.1% today, to $14.92, amidst investor hopes of a quick deal.

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Is Leap Wireless For Sale?

The Wall Street Journal reported today that Leap Wireless Leapis organizing a group of strategic advisers and board members as a first step in readying the company for a sale or merger. Leap Wireless (LEAP) closed at +$1.73, a number received by analysts as good news for the low cost provider of wireless services that are sold to consumers under the Cricket brand. Goldman Sachs will be facilitating the future plans of the company.

Many in the financial markets suspect that MetroPCS, another low cost wireless provider that also focuses on the pre-paid market, will prove to be the most likely partner for Leap and have been suggesting a Leap-MetroPCS merger for several months. However, recent moves by the Tier 1 carriers to lower prices to attract the value-oriented consumer during tough economic times may potentially enable Leap to court a different suitor.

Although both Leap and MetroPCS saw a lot of growth early in 2009 through prepaid subscribers—as did Deutsche Telekom owned T-Mobile US—the new customers tended to be credit-challenged, pay-as-you-go users, known as "sub-prime." These consumers tend to migrate to the lowest price, and show less loyalty to a device or carrier. With lower operating costs than most major carriers, Leap and MetroPCS have been able to stay focused on keeping their pricing competitive. However, with the impending popularity of mobile broadband Leap no doubt needs a 4G network strategy, especially as mobile broadband device prices decline and penetrate carriers' portfolios.
Leap's network was never the value proposition for its users, who were primarily based in densely populated urban areas. Unlike AT&T''s highly mobile road warriors and enterprise customers or Verizon's post-paid families, Leap's customers are less likely to notice gaps in their coverage maps because prepaid users often are young and or have a lower income. Upgrading and expanding that network, though may pose the biggest complication for a major carrier interested in purchasing the scrappy prepaid provider.
For a while, companies like Disney, Amp'd, Helio, and Virgin tried to attract young, no-contract customers with a combination of prepaid plans, other people's networks, and youthful branding. But the mobile virtual network operator (MVNO) model did not enable any of those companies to remain as standalone businesses, with Disney, Amp'd, and Helio folding and Virgin selling to Sprint.
Nonetheless, it's possible that the dark horse to purchase Leap might come from outside the wireless industry. With the introduction of branded mobile services and growing sales from mobile devices, wireless retailer Best Buy could be considered a viable candidate to buy Leap. In addition, the newly re-branded Radio Shack, now called The Shack, has also made some strong moves in the wireless arena lately and has been a popular seller of pre-paid wireless products due to its strong base of value shoppers.
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Now a quick Google search on "Leap Wireless for Sale" brought up over 100,000 pages containing this phrase. After going through the first 20 pages of links, it appears to me that Cricket is trying to find a buyer to sale off its shares and merge as one company with.....drum roll please....either Verizon or AT&T, at least that is what is sighted in many of the links Google provided.
I am now glad that when our store closed, I decided to work for the dealer and NOT continue with Cricket Communications. Very interesting stuff.
*(Not to my friends who still work for Cricket and for any corporate person that might read this note...every link contained in this note is public information and available to all. Nothing in this note breaks company confidentiality policies nor any binding confidentiality agreement entered into during my employment with Cricket.)*

Boy news travels fast!!!! Not even an hour after my posting...I learn this information...
Sources from inside Leap Wireless have revealed that Cricket is strongly considering a merger with Metro PCS. Back in 2007, Metro offered anywhere between $4.7 billion and $5.3 billion to merge the two companies. It seems that those talks are now back on the table. Will update more when more information is made public.

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