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Leap Wireless facing $100 million worth of unsold iPhones as customers head elsewhere

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iPhone 5 bokeh stock 1020
iPhone 5 bokeh stock 1020

Leap Wireless is having a tough time selling through the stock of iPhones it committed to purchasing from Apple, reports The Wall Street Journal. Just last week, the company’s COO Jerry Elliott told analysts that Leap (which offers prepaid cellular service through its Cricket Wireless subsidiary) was "not concerned about… meeting the Apple commitment," but it sounds like maybe it should be, since it’s only on track to sell through half of the volume it committed to this year. Under its three-year agreement with Apple, Leap is required to purchase an approximate $800 million worth of iPhones, weighted toward the second and third years. At the time, Leap expected the number would only make up "10% or less of the total" number of handsets it would sell over the period. Cricket became the first prepaid carrier to carry Apple's iPhone devices in June of 2012.

The catch is that Cricket's phones are locked to its network

So why aren’t the phones selling? On the one hand, Cricket offers a good deal — you can get an iPhone 5 with no contract starting at $499.99 (a saving of $200 over buying straight from Apple), and service is only $55 a month for an "unlimited" 2.5GB data plan. The catch is that Cricket’s phones are locked to its network, preventing buyers from shopping around for service. In fact, most of Leap’s iPhone problem is likely due to weaker sales overall; according to its 10-K, Leap lost some 637,000 subscribers in 2012, resulting from a 22 percent decrease in customer additions. The company cited increased competition and "overall softness" in the wireless industry as reasons for the decline.