July 30, 2009 / 6:26 PM / 8 years ago

UPDATE 2-MetroPCS, Leap shares fall on competition worries

3 Min Read

* MetroPCS shares fall 11 pct, Leap 8 pct

* Baird downgrades MetroPCS, Leap stocks

* MetroPCS adds new features to existing plans (Recasts; adds analyst comment, details)

BANGALORE, July 30 (Reuters) - Shares of low-cost wireless carriers MetroPCS Communications Inc PCS.N and Leap Wireless International Inc LEAP.O dropped after concerns over intensifying competition resurfaced on Wall Street with an analyst downgrading the two stocks.

The shares were pulled down further as MetroPCS moved to offer additional features on its existing plans, which an analyst said sparked investor fears of slowing growth at the wireless carrier.

MetroPCS, Leap and Sprint Nextel Corp's (S.N) Boost Mobile are locked in an intense battle for new prepaid users who opt for unlimited plans, which don't require a monthly contract. The space has been growing in the downturn as customers keep a closer eye on cost savings.

Robert W. Baird & Co downgraded MetroPCS and Leap to "neutral" from "outperform," citing intensifying competition and operating risks.

"With Sprint's Boost Unlimited and Tracfone's Straight Talk products both gaining traction, operating risks appear to be increasing," analyst William Power said in a note to clients.

On Wednesday, Sprint said it added 777,000 prepaid users in the second quarter, helped by its Boost Mobile service that includes unlimited calls and texting for a set monthly fee. [ID:nN29312040]

On Thursday, MetroPCS said it was adding new features to some of its existing service plans.

The market is concerned that the move could indicate that growth was slowing, Soleil/Nelson Alpha Research analyst Michael Nelson said.

"The concerns are that competition is increasing and may make it more difficult for MetroPCS and Leap to attract incremental subscribers," Nelson said.

But Nelson said the worries were overblown as the unlimited prepaid segment was expanding with enough room for multiple players to grow.

On July 1, shares of Leap, MetroPCS and Sprint fell on competition fears as Tracfone Wireless advertised a new rival service plan.

MetroPCS and Leap are expected to report quarterly results on August 6.

MetroPCS shares were down 10 percent at $11.65, while Leap was down 6 percent at $23.88 in afternoon trade. Sprint fell 1 percent to $4.00. (Reporting by Sakshi A Mattoo, S. John Tilak in Bangalore; Editing by Gopakumar Warrier, Vinu Pilakkott)

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