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Technology Stocks : Leap Wireless International (LWIN)
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To: pcstel who wrote (1891)4/11/2002 11:36:46 PM
From: arun gera  Read Replies (1) of 2737
 
Operating Expenses Components

I looked at the normalized operating expense components (Expense/month/average sub)for Year 2001 and beyond. In 2001, Equipment Subsidy was the biggest expense component followed by G&A. In 2002, Equipment Subsidy will still be the biggest. In 2003 and 2004, G&A and Cost of Service will be the biggest (about the same).

So, Equipment Subsidy affects the overall profits the most during 2002. Hope that Leap can luck out with some cheap Nokia and Motorola phones this year. Next year Leap can afford to pay more for subsidies to acquire customers.

If Leap can reduce the subsidy to $115 in Q2 from $160 in Q4 2001, we may have EBITDA positive in Q2 2002.

The biggest component of G&A is customer care. Reduction of customer care costs is the top priority for Leap. Sue talked about an Interactive Response System that would bring those costs down.

Arun
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