Leap Wireless Closes Cricket Stores, Cuts 180 Employees

Amid considerable speculation about a potential merger, San Diego’s Leap Wireless (NASDAQ: LEAP) has trimmed about 4 percent of its workforce and closed or transferred 38 of its Cricket Communications storefronts.

Leap spokesman Greg Lund confirms that the flat-rate wireless service provider laid off a total of 180 employees nationwide on March 1 as part of a cost-cutting review, which the company did not announce. The cutbacks occurred after Leap reported its fourth-quarter and 2009 financial results on Feb. 25 . The company posted a bigger-than-expected loss of $64 million, or 82 cents a share, for the fourth quarter, on revenue of $547 million.

The 12-year-old company has been the subject of merger rumors since reports surfaced in January that Leap had hired Goldman Sachs as a strategic adviser in a possible sale of the business. Kansas City-based Sprint and Dallas-based MetroPCS are two companies most frequently mentioned as potential buyout partners. MetroPCS made an unsolicited bid in 2007 for Leap, but a deal never materialized.

Two weeks ago, Leap announced that it is forming a joint venture with Pocket Communications of San Antonio, TX, to provide pre-paid wireless services to customers of both companies in South Texas. Under terms of the deal, Leap holds a controlling 76-percent interest in the joint venture, and Pocket’s 24-percent stake becomes available after 3½ years.

Whether Leap is taking these steps in preparations for a corporate merger is another matter. Lund says the recent cutbacks were made as part of a two-prong financial review of the company operations. He says Leap has eliminated 90 positions in its corporate structure, including 45 at its San Diego headquarters and 45 at its Denver, CO, operating facility. Leap eliminated another 90 jobs as part of its decision to close 27 Cricket storefronts and to convert 11 company-owned stores into independently owned and operated stores. The company has about 4,200 employees and 242 company-owned stores remaining, Lund says.

The Leap spokesman characterized the cuts as regrettable, but part of a routine assessment of Leap’s operations and how best to use its resources. “One of the reasons we can offer the prices that we do is because we operate a pretty Spartan and low-cost operation,” Lund says.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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