Leap Wireless shares tumble after sharp drop in subscribers

Leap Wireless International Inc.’s shares fell as much as 22 percent after its net customer losses almost tripled to 289,270 last quarter, a sign the company is struggling to keep up with larger carriers.

The shares tumbled 21 percent to $4.38 Tuesday morning, following Leap’s second-quarter earnings Monday. The stock, already down more than 40 percent this year, fell as low as $4.28 earlier in today’s session, the biggest intraday decline in more than three months.

Leap, whose market value has slid to $346 million, said yesterday that it’s evaluating “all options” to squeeze more value from its assets. Leap’s wireless spectrum alone is worth $3 billion, Chief Financial Officer Jerry Elliott said on a conference call. While the comments signal that the company is looking for a buyer, that isn’t enough to impress investors, said Michael Mahoney, a senior managing director at Falcon Point Capital LLC in San Francisco.

“People say, ‘Why should I believe it’s going to happen now?’” he said. “The time to have done a deal at the best price went by a long time ago.”

The pay-as-you-go wireless carrier also is saddled with $3.2 billion in long-term debt, outweighing the value of its spectrum. Mahoney figures shareholders would be well served if San Diego-based Leap gets a 15 percent premium on its enterprise value – between $3.5 billion and $4 billion for the spectrum and the business.

Leap, which fired Chief Operating Officer Raymond Roman last month, started selling Apple Inc.’s iPhone in June. While the company is counting on the device to steal market share from AT&T Inc. and Verizon Wireless, Leap is selling the iPhone without the same subsidies as its rivals. The challenge is finding customers undaunted by the price tag, said James Ratcliffe, an analyst at Barclays Plc.

“The iPhone’s impact is not going to be very much, because it’s a very high-priced product,” Ratcliffe said. “The environment remains a challenge.”

Leap’s shares have risen and fallen this year on takeover speculation, with analysts ruling out potential acquirers. Collins Stewart LLC said in February it was “highly unlikely” that AT&T would buy Leap, despite reports of talks between the two companies. A deal with MetroPCS Communications Inc., meanwhile, would be “fraught with challenges,” Sanford C. Bernstein & Co. said in March.

Leap remains an attractive acquisition target, though a deal is more likely to happen in the second half of 2013, Timothy Horan, an analyst at Oppenheimer & Co. in New York, said today in a report. Sprint Nextel Corp. and AT&T, the most likely buyers, have other strategic priorities right now, he said.