MetroPCS Communications Inc. (PCS) and Leap Wireless Inc. (LEAP) each reported strong subscriber growth as a result of expansion into several key new markets.

MetroPCS and Leap both offer flat-rate pre-paid pricing with regional restrictions, and sit in the sweet spot in the industry as more customers are trading down to cheaper plans and avoiding contracts.

"There's a kind of sea change in consumers looking for greater value," Chief Executive Roger Linquist told Dow Jones Newswires.

But the growth has attracted a lot of players, intensifying the competition in this segment.

That's reflected in lower average revenue per user from both companies, suggesting they had to cut prices and offer promotions to remain contention. Cost cuts, however, helped it to bank higher profits.

MetroPCS shares, however, fell 8% to $16.95. The stock has rallied more than 75% over the past three months, and was up 11% over the past week.

"It's profit-taking," said Romeo Reyes, an analyst at Jefferies & Co. "Overall, the numbers were great."

MetroPCS posted earnings of $44 million, or 12 cents a share, up from $39.5 million, or 11 cents a share, a year earlier. There were 5.2% more shares outstanding in the most recent period. The latest results included about $382,000 in write-downs related to hedging; the prior year had $13.9 million.

Revenue increased 20% to $795.3 million on a 29% jump in services revenue and 34% drop in equipment revenue.

Analysts polled by Thomson Reuters expected earnings of 9 cents a share on revenue of $818 million.

MetroPCS said last month that subscribership rose 51% from a year earlier, marking a third-consecutive quarter of growth and another record increase. Net subscriber additions rose to 684,000 to bring its base to 6 million.

Average revenue per user fell 5%, the company said Thursday. It also said in April that churn, or turnover rate, rose one percentage point to 5%.

MetroPCS backed its estimate for full-year consolidated adjusted earnings before interest, taxes, depreciation and amortization of $900 million to $1.1 billion, as well as subscriber additions of 1.4 million to 1.7 million.

Leap, meanwhile, also saw subscriber growth, but it posted a wider first-quarter loss because it expanded into new markets such as Chicago and Philadelphia.

The carrier posted a loss of $47.4 million, or 74 cents a share, compared with a prior-year loss of $16.9 million, or 28 cents a share. Revenue increased 25% to $587 million.

Analysts polled by Thomson Reuters expected a per-share loss of 69 cents on revenue of $595 million.

Leap added 493,000 net new customers, putting its total base at 4.3 million.

Average revenue per user fell 6.2% to $42.21, while the turnover rate fell to 3.3% from 3.6%.

Leap rose 0.3% to $35.07 in after-hours trading.

Leap and MetroPCS aggressively marketed their services ahead of their launches. MetroPCS blanketed billboards and airwaves in New York and Boston with advertisements ahead of its rollout.

"We painted the town purple," Linquist said. "The rollout is going well."

Threatening their prospects are aggressive offers from rival pre-paid players. Sprint Nextel Corp.'s (S) Boost service offers a flat-rate, all-inclusive $50 plan, and added 764,000 new customers in the first quarter.

Virgin Mobile USA Inc. (VM) has recently cut its plan to $50 a month. National player T-Mobile USA, owned by Deutsche Telekom AG (DT), has also delved into the pre-paid segment.

MetroPCS CEO Linquist, however, said he didn't see much of an impact in areas where MetroPCS operates. He added that Boost still has questions about its economics, since its parent has a much higher cost structure than MetroPCS.

There was little progress on the much-speculated upon merger between MetroPCS and Leap, with Linquist saying the two haven't met on that subject.

"It's kind of in our rearview mirrror," he said.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com