Leap Wireless offers iPhones on pre-paid, no-contract deals

Leap Wireless is changing its smartphone strategy by dealing with Apple to offer iPhones to low-income customers without the need for a contract.

Leap Wireless International Inc., parent company of the Cricket mobile phone service, said this week it will become the first mainland service to offer iPhones on a pre-paid, no-contract basis to American customers.

The San Diego-based company's market focuses on cell phone services for low-income households that do not require contract.

The proposed iPhone offer will only be compatible with certain parts of Leap's network, including New York, Houston, Austin, Texas; Denver and Salt Lake City.

Leap said the proposal will be able to cater for approximately 70 percent of its customers. However, as iPhones are expensive, the company does not expect more than 10 percent of their clients to sign up for the new deal.

The 16GB iPhone 4S and 8GB iPhone 4 will be on offer in June. The wireless plan will be $55 per month.

The phones will be sold at a price more expensive than competitors - the iPhone 4S for $499.99 and iPhone 4 for $399.99, roughly $150 - 300 more than its rivals, but Leap hopes that by offering smaller monthly service charges, not having to sign a contract will make the service attractive to its customer base.

The "unlimited" data usage service Leap implements is also known as 'data throttling' -- after 2.3GB of data has been spent since the beginning of a monthly cycle, it slows down to prevent unbridled use.

In order to secure the deal, Leap has a three-year contract with Apple that includes an agreement to bulk-buy iPhone models in bulk to the amount of $900 million. Leap plans to offer more devices and data plans in the next few months.

Leap shares rose to $6.14 during the Nasdaq session, and slid to $5.77 at market close on Thursday.

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