By Thomas Gryta and Mia Lamar
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Leap Wireless International Inc. (LEAP) will start selling Apple Inc.'s (AAPL) iPhone next month, making it the first prepaid carrier to offer the popular device in the U.S.
Leap shares jumped 2.4% to $5.91 in premarket trade following the disclosure. The stock was down 66% in the past year as of Wednesday's close.
The addition of the iPhone increases the reach of the popular device for Apple and brings a marquee product to Leap's Cricket service, which has been seeing customer growth slow.
The San Diego company will offer the iPhone 4S and iPhone 4 with its $55 per month wireless plan beginning on June 22. It will sell the 16-gigabyte iPhone 4S for $499.99 and the older 8-gigabyte iPhone 4 for $399.99.
Those prices are higher than offered by other larger carriers that require customers to sign a two-year contract in exchange for the subsidy that covers a portion of the phone's cost. AT&T Inc. (T) offers a comparable iPhone 4 for $99.99 and Verizon Wireless sells a similar iPhone 4S for $199.99, according to the carrier's websites.
JPMorgan analyst Philip Cusick estimates that Leap will subsidize each iPhone by about $100 to $125, which is above its typical $50 to $100 smartphone subsidy.
Cusick said the impact of carrying the iPhone is unknown, partly because such expensive phones are "nearly irrelevant" to prepaid customers who aren't likely to shell out so much cash at one time.
"However, we do believe that the iPhone could benefit Cricket in terms of driving traffic to the store, with most customers choosing a more reasonably priced device instead. Given the launch is in the slow summer months, it could be a nice traffic driver in 3Q," Cusick said.
The iPhones will come with a $55-per month unlimited talk, text and data plan, but full-speed data will only be available up to a threshold of 2.3 gigabytes a month, after which the data speed will be slowed.
Verizon Wireless is a venture between Verizon Communications Inc. (VZ) and Vodafone Group PLC (VOD). The company was the first to break AT&T's iPhone exclusivity last year, followed by Sprint Nextel Corp. (S) in October.
-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; email@example.com
-Mia Lamar, Dow Jones Newswires; 212-416-3207; firstname.lastname@example.org
(END) Dow Jones Newswires
May 31, 2012 09:24 ET (13:24 GMT)
Copyright (c) 2012 Dow Jones & Company, Inc.