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Technology Stocks : Leap Wireless International (LWIN)
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To: Michael Allard who wrote (2101)6/4/2002 11:37:33 AM
From: pcstel  Read Replies (6) of 2737
 
I would suggest they consider "leasing" rather than selling the phones at these discounts, then they could at least put unused phones back in service at no equipment cost to them.

I think this is a bad idea! First of all, leasing a phone would require allot of paperwork, and most surely a credit check. Probably a "co-signer" in many instances!

I believe it would be much more beneficial to just increase the sales price of the phone to cover costs and commissions! Make it a break-even proposition in the INDIRECT channels. This would prevent people from buying a new phone every month. Things would look allot better if Equipment Costs equaled Equipment Revenues! Growth may slow. But, the improvement to EBITDA would be instant. Make the package more appealing by throwing in all of the "extras" (voice-mail, text messaging,.. ) for six months at no additional charge.

As far as addressing the fraud! LWIN claims they are party to 3 types of fraud.

1) the use of stolen credit cards,
2) existing Cricket customers activating service with false information and thereby obtaining a month of free service
3) third party dealers or distributors reporting a handset as sold and activating the service in a fictitious name and/or selling the phone through the gray market.

I believe that each of these is addressable. Number one and two are solved together by verifying the true identity of the subscriber. Sue mentioned that they were now using SSN# data and other database information to corroborate subscriber information provided. I think that they will also require some potential new subscribers whose identity can not be verified via electronic means to visit a "authorization center" like a Cricket store. Which may be one of the reasons why they are trying to reduce the lines at the store locations. If you can increase the reliability of your subscriber information. You can reduce the use of stolen credit cards. Those using stolen credit cards are probably using the phone for more than average long distance usage. LWIN recently implemented technology that can provide "real-time customer demographic information collection for managing account status and revealing usage trends."

Leap Deploys VoiceCue Technologies Platform to Enhance and Expand Long-Distance Services

tools.thestreet.com{79743ACE-646F-436A-8EBC-9B654A0E9549}&symb=lwin&sid=117328&orig=1&timer=

Technology like this will allow for LWIN to quickly focus on potential credit card fraud. In addition, as LWIN launches handsets with GPSOne capability. It may be possible to require indrect subscribers to activate their phone from their home billing address.

I think the dealer fraud is not as easy to get a handle on. But, it appears that LWIN has a grip on the problem. In the recent Soundview report. They indicated that LWIN had terminated three master distributor agents. Again. If you sell a UT for a "zero subsidy" to the indirect market. Then the dealer fraud will become a "non-event". And again, by increasing the reliability of the identity of the subscriber at the “activaton point” will also reduce the indirect distribution chains ability to sell phones and activate it using incorrect data.

Of course. These may/will affect growth. But, the growth it may affect may in fact be growth that you don't really want.

PCSTEL
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