Leap Wireless International, Inc. (LEAP), T MOBILE US INC (TMUS): Can These Partnerships Help Prepaid Wireless Carriers?

A Mexican tycoon’s investment in a British company may seem like it wouldn’t have a large impact on American consumers. But when the app is as popular as Shazam and the investor is the head honcho of the largest prepaid wireless carrier, America takes note.

Why América Móvil S.A.B de C.V. (INDEXNYSEGIS:AMX1)?

With this investment, Carlos Slim’s América Móvil S.A.B de C.V. (INDEXNYSEGIS:AMX1) has infused  $40 million into the popular app Shazam, which allows users to use a smartphone to find out the title and artist of a song currently playing. América Móvil S.A.B de C.V. (INDEXNYSEGIS:AMX1) is Latin America’s largest telecom company, but in America it is known by subsidiaries TracFone, NET10 Wireless, Straight Talk, SIMPLE Mobile, and Tel America. In other words, if you own a prepaid wireless phone, chances are América Móvil S.A.B de C.V. (INDEXNYSEGIS:AMX1) is behind it.

It’s a smart move for América Móvil S.A.B de C.V. (INDEXNYSEGIS:AMX1), since the company reported a 17% profit loss in its most recent quarter. The company attributed the decline to expenses related to creating phones with internet capabilities in order to compete. Consumers are demanding text and data capabilities on prepaid wireless phones, just as they’d have from competing smartphones on traditional wireless plans. Since América Móvil S.A.B de C.V. (INDEXNYSEGIS:AMX1)’s deal includes a strategic business collaboration, it’s likely Shazam will be a large part of América Móvil’s attempt to attract prepaid wireless owners from competitors Cricket and T MOBILE US INC (NYSE:TMUS).

Leap Wireless International, Inc. (NASDAQ:LEAP)

iPhone Goes Prepaid

In recent years, Shazam has become closely linked with Apple devices, only gaining notice after the iTunes Store was created in 2006. While Shazam is also available for Android, it is a staple of many iPhone owners’ app collections, leading to natural speculation that América Móvil is planning a strategic move. Like Cricket and T-Mobile, América Móvil’s Straight Talk recently launched a prepaid version of the iPhone, sold through popular retailer Wal-Mart. To continue to compete with the overcrowded prepaid market, América Móvil needs to set itself apart.

Leap Wireless International, Inc. (NASDAQ:LEAP), owner of Cricket Wireless, is aggressively marketing its iPhone plan, dropping the monthly price to $50, which includes unlimited data. Since Straight Talk is currently offering the same plan for $45 in Wal-Mart stores, Cricket has only its reputation. Additionally, the fact that Leap Wireless International, Inc. (NASDAQ:LEAP) competitor T MOBILE US INC (NYSE:TMUS) recently merged with MetroPCS leaves many analysts noting that Leap Wireless International, Inc. (NASDAQ:LEAP) is conspicuously absent from the partnerships its competitors are forming. A partnership could be just what Leap Wireless International, Inc. (NASDAQ:LEAP) needs to remain competitive.