"Leap says its ARPU was $38.4. Calculated ARPU from Q1 2002 is $33.5."
Should we look at this from the other end? Leap's statement is that its billed ARPU was $38.40.
During the first quarter it looks to me like ARPU is $33.85, dividing service revenues of $128,020 by 3 months, divided by 1,260,679 weighted average subscribers. So, a $17.2 million revenue shortfall, compared to a "normal" credit loss of what, 2% of revenues? (That last bit is a SWAG, need to compare to Sprint, which also goes after credit-challenged customers.)
I thought I heard Sue Swenson say during the conference call that fraud did not affect the number of reported subscribers, just revenues and CPGA. If so, the $17.2 million discrepancy between billed and collected ARPU should tell us the size of the fraud last quarter, roughly 520,000 handsets if all revenue fraud was limited to the first month of use. Given lax controls, this number seems out of line, as someone who is willing to defraud Leap out of one month's service should be equally willing to defraud it (us) out of two months, then three, etc.
I thought I heard some comments on the conference call about a $14 million estimate for the cost of fraud related to handset subsidies. Maybe this can be related to the breakout between dealer fraud and credit card fraud, which probably are being committed by an overlapping group of people.
Unfortunately, I don't have answers, but I sure could use them to see if the business model is viable. |
