SAN FRANCISCO (AP) ¿ Shares of Leap Wireless International Inc. and MetroPCS Communications Inc. fell Thursday after a JPMorgan analyst downgraded both companies to "Neutral," saying rising competition in the prepaid wireless market presents a challenge for them.

Leap Wireless shares dropped $1.88, or nearly 10 percent, to $17.67, while shares of MetroPCS declined 77 cents, or 8.2 percent, to $8.59.

In a note to clients, JPMorgan analyst Mike McCormack lowered his ratings for the companies from "Overweight" and trimmed his MetroPCS price target by $1 to $10. He holds a $22 price target for Leap Wireless shares.

McCormack said rising competition from Tracfone and Sprint's Boost Mobile brand in particular have forced Leap Wireless and MetroPCS to "operate more and more defensively" and he expects their average revenue per user to erode more over time, to below $40 in the near future. He also said that the companies could have difficulties meeting their long-term margin guidance, which is in the mid-40 percent range.

Sprint Nextel Corp. rolled out a $50-per-month unlimited-calling plan in February called Boost Unlimited, while Tracfone ¿ a unit of Mexico-based America Movil SA that uses Verizon Wireless' network ¿ sells a $45 unlimited plan.

McCormack said that Leap Wireless and MetroPCS have since added more features to their existing offerings without raising prices ¿ moves he thinks were made in response to the competition. MetroPCS, for example, more than doubled its cell phone roaming coverage, he said.

He also pointed out that AT&T is operating a prepaid calling trial in some markets and said T-Mobile could get "more aggressive" in that space, too.

Right now, Leap Wireless and MetroPCS are heading into their two strongest periods of the year ¿ the fourth and first quarters. Still, the analyst said he is "very cautious on long-term fundamentals."

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