May 31, 2012 at 5:31 PM ET
Leap Wireless International said it will become the first U.S. provider of prepaid mobile services to sell the Apple iPhone, starting June 22.
Leap said on Thursday that its contract with Apple would cost it an estimated $900 million over three years as it expects its minimum purchase commitment to represent less than 10 percent of projected total handset sales.
The regional operator, which caters to cost-conscious customers who pay their phone bills in advance, is joining its much bigger national rivals Verizon Wireless, AT&T and Sprint Nextel in selling the popular device.
However, Leap will sell the iPhone at a price two and a half times higher than its bigger rivals, who discount the phone for customers who sign two-year contracts. Leap customers do not have contracts.
Leap will sell the 16-gigabyte iPhone 4S for $499.99, compared with its rivals' $199.99 price tag. Leap will also sell the older 8-gigabyte iPhone 4 model for $399.99.
Leap said it does not expect iPhone sales to have a significant impact on its operating income.
Wells Fargo analyst Jennifer Fritzsche said that while the device should help Leap's customer growth, it may hurt the company's profits.
"Our initial concern is this could hit margins as we expect these users to roam more and use more data," Fritzsche said in a research note.
The No. 4 U.S. mobile operator, T-Mobile USA, which competes with Leap for cost-conscious customers, is the only national network operator that does not sell the iPhone.
T-Mobile USA is a unit of Deutsche Telekom AG. Verizon Wireless is a venture of Verizon Communications Inc and Vodafone Group Plc.
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