S&P: Leap Wireless, MetroPCS prospects debatable

The long-term prospects for Leap Wireless International Inc.'s (B- with stable outlook) and MetroPCS Communications Inc.'s (B- with stable outlook) fast-growing niche wireless business are debatable because of the market's unique characteristics, S&P said it said in a report.

Both companies, along with unrated SunWest Wireless, have established themselves as the main providers of no-contract, pay-in-advance, flat-rate, unlimited local-calling wireless service to the youth or credit-challenged customer. Their strategy differs significantly from the traditional wireless model of postpaid services provided on a price-per-minute basis with hefty handset subsidies and contractual commitments, the agency said.

The estimated $2.5 billion niche Leap Wireless and MetroPCS have enjoyed over the past few years could be eroded by competitive factors, including the entry of new players, S&P said. What is clear is that the two companies have comparable financial risk profiles and similar prospects for success, the agency said.

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