The recent news regarding fortunes of MetroPCS and Leap reminds investors that not even the former leaders of the prepaid business are immune.

On August 6, 2009 the financial wires noted that MetroPCS reported income of $26.2 million, or seven cents a share, down from $50.5 million, or 14 cents a share, a year earlier. MetroPCS revenue rose 27% to $859.6 million. MetroPCS added 205,585 customers in the period, and ended the quarter with 6.3 million customers. The carrier’s turnover rate jumped to 5.8% from 4.5%.

Leap posted a loss of $62.8 million, or 89 cents a share, compared with year-earlier loss of $26.6 million, or 39 cents a share. Its results were hurt by a one-time legal charge of 50 cents a share. Leap’s revenue rose 26% to $597.4 million. Leap added 202,767 net customers to its base of 4.5 million.

MetroPCS's shares fell 29% to $8.99 in 4 p.m. composite trading on the New York Stock Exchange. Leap shares fell 24% to $18.30 in after-hours trading.

I see more strain and pain ahead for these companies. MetroPCS and Leap are now competing with the likes of Verizon, AT&T, and Sprint. Imagine next generation smart phone showing up in the markets of MetroPCS and Leap and all sold by Verizon, AT&T, and Sprint.

We are in a recession. Their distress should not be a surprise anyone.

The natural trend for providing telecommunications services is starting with the whip cream and working your way down to the bottom of the ice cream sundae.

In other words, carriers naturally move down stream the customer value chain. The fact that MetroPCS and Leap are suffering from the recession and competition was expected. It will get worse.

MetroPCS and Leap are now competing with the likes of Verizon, AT&T, and Sprint.  Imagine next generation smart phone showing up in the markets of MetroPCS and Leap and all sold by Verizon, AT&T, and Sprint.

Good luck guys.