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Technology Stocks : Leap Wireless International (LWIN) -- Ignore unavailable to you. Want to Upgrade?

To: arun gera who wrote (1958)	4/28/2002 4:07:43 PM
From: Robert J. Irvin	Read Replies (1) \| Respond to of 2737

Arun: That is a typical Analyst analysis. I can guess where the $14 million came from. The unit cost of equipment went up from about $180 to $215 (Q1 2002). That is $35 per handset. About 400,000 gross adds. And you have $14 million. But what about the fraud that was included in the $180 unit price? Right. I listened to the replay again and the comment was from Ned Zachary (sp?) of Thomas Weisel Partners at about 01:28:40 of the call. Harvey responded that the largest component of the $14 million was fraud, but that the number also included the cost of new handsets to existing customers and higher end handsets. Leap's cost of equipment minus equipment revenue, divided by gross adds, rose from $145 to $184 between September 30 and March 31. Surely there is a base level of fraud that is tolerated as a cost of doing business. How much of the increase is due to fraud, taking into account falling or rising(?) handset prices, and how much to other factors? Without knowing, take Harvey's response and ballpark it to $10 million for the quarter? For me, the picture is clearer in comparing the difference between billed ARPU and calculated ARPU, which rose from $2.96 to $3.34 to $4.55 over the last three quarters. Falling calculated ARPU from December to March. Ugly. Surely the difference between December and March, a decline of $0.81 in calculated ARPU, must be fraud. When I divide the difference between billed and calculated ARPU by billed ARPU, to get a percentage revenue loss from customer fraud, the percentage shows a steady uptrend, 8.00%, 8.79% and 11.85% from September to December to March. If we adjust to 8% of billings as a base level of fraud, then the lost revenue is about $5.6 million for the March quarter, but the extra cost to the system probably is half that, counting administrative costs, since you're not likely to convert fraudsters to good, paying customers. $3 million? Beats me. I would love to see some updated models, and thinking, that address these imponderables.