This filing is made pursuant
to Rule 424(b)(3) under the
Securities Act of 1993 in
connection with Registration
No. 333-162510.

 

PROSPECTUS

 

Cricket Communications, Inc.

Offer to exchange its 7.75% Senior Secured Notes due 2016, which have been registered under the

Securities Act of 1933, for any and all of its outstanding 7.75% Senior Secured Notes due 2016

 

The exchange offer and withdrawal rights will expire at 5:00 p.m.,

New York City time, on December 9, 2009, unless extended.

 

 

 

 

We are offering to exchange up to $1,100,000,000 aggregate principal amount of our new 7.75% Senior Secured Notes due 2016, which have been registered under the Securities Act of 1933, referred to in this prospectus as the “new notes,” for any and all of our outstanding unregistered 7.75% Senior Secured Notes due 2016, referred to in this prospectus as the “old notes.” We issued the old notes on June 5, 2009 in a transaction not requiring registration under the Securities Act of 1933. We are offering you new notes, with terms substantially identical to those of the old notes, in exchange for old notes in order to satisfy our registration obligations from that previous transaction. The new notes and the old notes are collectively referred to in this prospectus as the “notes.”

 

See “Risk Factors” starting on page 19 of this prospectus for a discussion of risks associated with investing in the new notes and with the exchange of old notes for the new notes offered hereby.

 

We will exchange new notes for all old notes that are validly tendered and not withdrawn before expiration of the exchange offer. You may withdraw tenders of old notes at any time prior to the expiration of the exchange offer. The exchange procedure is more fully described in “The Exchange Offer — Procedures for Tendering.” If you fail to tender your old notes, you will continue to hold unregistered notes that you will not be able to transfer freely.

 

The terms of the new notes are identical in all material respects to those of the old notes, except that the transfer restrictions and registration rights applicable to the old notes do not apply to the new notes. See “Description of New Notes” for more details on the terms of the new notes. We will not receive any proceeds from the exchange offer.

 

There is no established trading market for the new notes or the old notes. The exchange of old notes for new notes in the exchange offer will not be a taxable transaction for United States federal income tax purposes. See “Material U.S. Federal Income Tax Considerations.” All broker-dealers must comply with the registration and prospectus delivery requirements of the Securities Act. See “Plan of Distribution.”

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. We are not asking you for a proxy and you are requested not to send us a proxy.

 

The date of this prospectus is November 9, 2009

 

 

 

 

Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal delivered with this prospectus states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933, as amended, or the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for outstanding old notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date of the exchange offer and ending on the close of business one year after such expiration date, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

 

We have not authorized any dealer, salesman or other person to give any information or to make any representation other than those contained or incorporated by reference in this prospectus. You must not rely upon any information or representation not contained or incorporated by reference in this prospectus as if we had authorized it. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the registered securities to which it relates, nor does this prospectus constitute an offer to sell or a solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.

 

TABLE OF CONTENTS

 

 

About this Prospectus

 

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or the SEC. We may add, update or change in a prospectus supplement any information contained in this prospectus. You should read this prospectus and any accompanying prospectus supplement, as well as any post-effective amendments to the registration statement of which this prospectus is a part, together with the additional information described under “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” before you make any investment decision.

 

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to exchange old notes for new notes only in jurisdictions where such offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any actual exchange of old notes for new notes.

 

We have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to the new notes offered hereby. This prospectus, which is a part of the registration statement, does not contain all of the information set forth in the registration statement, as amended, or the exhibits and schedules filed therewith. For further information with respect to us and the new notes offered hereby, please see the registration statement, as amended, and the exhibits and schedules filed with the registration statement. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. A copy of the registration statement, as amended, and the exhibits and schedules filed with the registration statement may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, D.C. 20549, and copies of all or any part of the registration statement may be obtained from such offices upon the payment of the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains an internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

 

We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, in accordance therewith, we file annual, quarterly and periodic reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at www.leapwireless.com. You may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The reference to our web address does not constitute incorporation by reference of the information contained at such site.

 

 

This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. The information incorporated by reference is considered to be part of this prospectus, except for any information superseded by information that we file later with the SEC. This prospectus incorporates by reference the documents set forth below that have previously been filed with the SEC:

 

 

 

We are also incorporating by reference additional documents that we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial registration statement of which this prospectus is a part and prior to effectiveness of the registration statement, as well as after the date of this prospectus. We are not, however, incorporating by reference any documents or portions thereof, whether specifically listed above or filed in the future, that are not deemed “filed” with the SEC, including our compensation committee report and performance graph or any information furnished pursuant to Items 2.02 or 7.01 of Form 8-K or certain exhibits furnished pursuant to Item 9.01 of Form 8-K.

 

We will provide at no cost to each person, including any beneficial owner, to whom this prospectus is delivered, upon oral or written request of such person, a copy of any or all of the reports or documents that have been incorporated by reference in this prospectus, but not delivered therewith. Requests for such copies should be directed to:

 

Leap Wireless International, Inc.

Attn: Director of Investor Relations

5887 Copley Drive

San Diego, California 92111

(858) 882-6000

 

These documents may also be accessed through our website at www.leapwireless.com or as described under the heading “Where You Can Find More Information” in this prospectus. The information contained in, or that can be accessed through, our website is not a part of this prospectus. Exhibits to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference into this prospectus. To obtain timely delivery of any copies of filings requested, please write or telephone no later than December 2, 2009, five business days prior to the expiration of the exchange offer.

 

This exchange offer is not being made to, nor will we accept surrenders for exchange from, holders of outstanding old notes in any jurisdiction in which this exchange offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction.

 

Except for the historical information contained herein, this prospectus contains or incorporates by reference “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management’s current forecast of certain aspects of our future. You can generally identify forward-looking statements by forward-looking words such as “believe,” “think,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” and similar expressions in this prospectus. Such statements are based on currently available operating, financial and competitive information and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by our forward-looking statements. Such risks, uncertainties and assumptions include, among other things:

 

 

All future written and oral forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this section or elsewhere in, or incorporated by reference into, this prospectus. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in, or incorporated by reference into, this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Accordingly, users of this prospectus are cautioned not to place undue reliance on the forward-looking statements.

 

PROSPECTUS SUMMARY

(a)		Guarantor of the notes and of Cricket’s outstanding $1.4 billion in aggregate principal amount of unsecured senior notes.
(b)		Of the remaining 26.7% interest, a 2.0% controlling interest is owned by WLPCS Management, LLC and a 24.7% interest is owned by CSM Wireless, LLC. Neither LCW Wireless nor any of its subsidiaries is in the “Restricted Group” or a “Subsidiary” under the indenture governing the notes or the indentures governing Cricket’s outstanding $1.4 billion in aggregate principal amount of unsecured senior notes. Effective as of August 31, 2009, CSM Wireless, LLC exercised its option to put its entire membership interest of 24.7% in LCW Wireless to Cricket in exchange for cash, Leap common stock or a combination thereof, as determined by Cricket at its discretion. Completion of this transaction is subject to customary closing conditions.
(c)		The remaining 17.5% controlling interest is owned by Denali Spectrum Manager, LLC. Neither Denali nor any of its subsidiaries is in the “Restricted Group” or a “Subsidiary” under the indenture governing the notes or the indentures governing Cricket’s outstanding $1.4 billion in aggregate principal amount of unsecured senior notes.

Old Notes		7.75% Senior Secured Notes due 2016.
New Notes		Notes of the same series, the issuance of which has been registered under the Securities Act. The terms of the new notes are identical in all material respects to those of the old notes, except that the transfer restrictions, registration rights and additional interest provisions relating to the old notes do not apply to the new notes.
Terms of the Offer		We are offering to exchange a like amount of new notes for our old notes in denominations of $2,000 and integral multiples of $1,000 in excess thereof. In order to be exchanged, an old note must be properly tendered and accepted. All old notes that are validly tendered and not withdrawn will be exchanged. As of the date of this prospectus, there is $1,100 million aggregate principal amount of 7.75% Senior Secured Notes due 2016 outstanding. We will issue new notes promptly after the expiration of the exchange offer.
Expiration Time		The exchange offer will expire at 5:00 p.m., New York City time, on December 9, 2009, unless extended.
Procedures for Tendering		To tender old notes, you must complete and sign a letter of transmittal in accordance with the instructions contained in the letter and forward it by mail, facsimile or hand delivery, together with any other documents required by the letter of transmittal, to the exchange agent, either with the old notes to be tendered or in compliance with the specified procedures for guaranteed delivery of old notes. Certain brokers, dealers, commercial banks, trust companies and other nominees may also effect tenders by book-entry transfer. Holders of old notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender old notes pursuant to the exchange offer. See “The Exchange Offer — Procedures for Tendering.”
		Letters of transmittal and certificates representing old notes should not be sent to us. Such documents should only be sent to the exchange agent. Questions regarding how to tender old notes and requests for information should be directed to the exchange agent. See “The Exchange Offer — Exchange Agent.”
Acceptance of Old Notes for Exchange; Issuance of New Notes		Subject to the conditions stated in “The Exchange Offer — Conditions to the Exchange Offer,” we will accept for exchange any and all old notes which are properly tendered in the exchange offer before the expiration time. The new notes will be delivered promptly after the expiration time.
Interest Payments on the New Notes		The new notes will bear interest from the date of original issuance of the old notes or, if interest has already been paid on the old notes, from the date interest was most recently paid. If your old notes are accepted for exchange, then you will receive interest on the new notes

		(including any accrued but unpaid additional interest on the old notes) and not on the old notes.
Withdrawal Rights		You may withdraw your tender of old notes at any time before the expiration time.
Conditions to the Exchange Offer		The exchange offer is subject to customary conditions. We may assert or waive these conditions in our sole discretion. If we materially change the terms of the exchange offer, we will resolicit tenders of the old notes. See “The Exchange Offer — Conditions to the Exchange Offer” for more information.
Resales of New Notes		Based on interpretations by the staff of the SEC, as detailed in a series of no-action letters issued by the SEC to third parties, we believe that the new notes issued in the exchange offer may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery requirements of the Securities Act as long as:
		• you are acquiring the new notes in the ordinary course of your business;
		• you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in a distribution of the new notes;
		• you are not an “affiliate” of ours; and
		• you are not a broker-dealer that acquired any of its old notes directly from us.
		If you fail to satisfy any of the foregoing conditions, you will not be permitted to tender your old notes in the exchange offer and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of your old notes unless such sale is made pursuant to an exemption from such requirements.
		Each broker or dealer that receives new notes for its own account in exchange for old notes that were acquired as a result of market-making or other trading activities must acknowledge that it will comply with the registration and prospectus delivery requirements of the Securities Act in connection with any offer to resell, resale or other transfer of the new notes issued in the exchange offer, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of the new notes. See “The Exchange Offer — Resales of New Notes.”
Exchange Agent		Wilmington Trust FSB is serving as the exchange agent in connection with the exchange offer. The address and telephone and facsimile numbers of the exchange agent are listed under the heading “The Exchange Offer — Exchange Agent.”
Use of Proceeds		We will not receive any proceeds from the issuance of new notes in the exchange offer. We will pay all expenses incident to the exchange offer. See “Use of Proceeds” and “The Exchange Offer — Fees and Expenses.”

Issuer		Cricket Communications, Inc.
Securities		Up to $1,100 million aggregate principal amount of 7.75% Senior Secured Notes due 2016. The terms of the new notes are identical in all material respects to those of the old notes, except that the transfer restrictions, registration rights and additional interest provisions relating to the old notes do not apply to the new notes.
Maturity		May 15, 2016
Interest		Annual rate: 7.75%. The new notes will pay interest semi-annually in cash in arrears on May 15 and November 15 of each year.
Guarantees		The new notes will be guaranteed by our parent, Leap Wireless International, Inc., and by each of Leap’s direct and indirect existing domestic restricted subsidiaries (other than Cricket) and any future wholly owned domestic restricted subsidiary that guarantees any indebtedness of Cricket or a guarantor of the new notes.
Ranking		The new notes and guarantees:
		• will be our and the guarantors’ senior secured obligations;
		• will be effectively junior to all of our and the guarantors’ obligations under any permitted debt that may be incurred in the future (up to the lesser of 0.30 times our consolidated cash flow for the prior four fiscal quarters and $300 million in aggregate principal amount outstanding) which may be secured by liens on the collateral that rank senior to the liens securing the new notes and the guarantees (which we refer to in this prospectus as permitted priority debt);
		• will be secured on a pari passu basis with all of our and the guarantors’ obligations under any permitted debt that may be incurred in the future that is secured by liens on the collateral that rank equally with the liens on the collateral securing the new notes and the guarantees (which we refer to in this prospectus as parity lien debt);
		• will be effectively senior to all of our and the guarantors’ obligations under any permitted debt that may be incurred in the future that is secured by liens on the collateral that rank junior to the liens on the collateral securing the new notes and the guarantees (which we refer to in this prospectus as junior lien debt);
		• will be effectively senior to all of our and the guarantors’ existing and future unsecured indebtedness, including Cricket’s $1.4 billion aggregate principal amount of unsecured senior notes and, in the case of Leap, Leap’s $250 million aggregate principal amount of convertible senior notes, to the extent of the value of the collateral securing the new notes and guarantees (after taking into consideration the application of proceeds of such collateral to satisfy any debt that may be issued in the future that is secured by liens on the collateral that either rank senior to (including permitted priority debt), or on parity with (including parity lien debt), the liens securing the new notes and the guarantees);

		• will be equal in right of payment with all of our and the guarantors’ existing and future unsubordinated indebtedness, including Cricket’s $1.4 billion aggregate principal amount of unsecured senior notes and, in the case of Leap, Leap’s $250 million aggregate principal amount of convertible senior notes;
		• will be senior in right of payment to any of our and the guarantors’ future subordinated indebtedness; and
		• will be effectively junior to existing and future liabilities of our subsidiaries that are not guarantors and of our designated entities to the extent of the value of the assets of such entities.
Collateral		The new notes and the guarantees will be secured on a first-priority basis, equally and ratably with all parity lien debt, by liens on substantially all of the tangible and intangible personal property of Leap, Cricket and the subsidiary guarantors (subject to permitted liens, including liens on the collateral securing up to the lesser of 0.30 times our consolidated cash flow for the prior four fiscal quarters and $300 million in aggregate principal amount of permitted priority debt that may be incurred in the future). See “Description of New Notes — Collateral.”
Collateral Trust Agreement		We and the guarantors have entered into a collateral trust agreement with the trustee under the indenture governing the new notes and a collateral trustee, which sets forth the terms on which the collateral trustee will receive, hold, administer, maintain, enforce and distribute the proceeds of all liens on the collateral securing the new notes and the guarantees, any other parity lien debt and any junior lien debt. The material terms of the collateral trust agreement are set forth under “Description of New Notes — Collateral Trust Agreement.”
Intercreditor Agreement		We and the guarantors may in the future enter into an intercreditor agreement with the collateral trustee and an agent acting on behalf of holders of up to the lesser of 0.30 times our consolidated cash flow for the prior four fiscal quarters and $300 million in aggregate principal amount of permitted priority debt that may be incurred in the future which would govern the relationship between, and set forth the provisions related to the respective rights of, such agent (on behalf of the holders of such permitted priority debt) and the collateral trustee (on behalf of the holders of the notes and the guarantees, and the holders of any other parity lien debt or junior lien debt). The material terms of the form of intercreditor agreement are set forth under “Description of New Notes — Collateral and the Intercreditor Agreement.”
Optional Redemption		The new notes may be redeemed, in whole or in part, at any time on or after May 15, 2012, at the redemption prices described in this prospectus, plus accrued and unpaid interest. See “Description of New Notes — Optional Redemption.” Prior to May 15, 2012, we may redeem the new notes, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus the applicable premium, plus accrued and unpaid interest and any additional interest as described in “Description of New Notes — Optional Redemption.”

		Prior to May 15, 2012, we may redeem up to 35% of the aggregate principal amount of the new notes with the net cash proceeds from specified equity offerings at a redemption price set forth in “Description of New Notes — Optional Redemption.” We may, however, only make these redemptions if at least 50% of the aggregate principal amount of the new notes issued under the indenture remains outstanding after the redemptions.
Change of Control		If a change of control occurs, each holder of new notes may require us to repurchase all of the holder’s new notes at a purchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest. See “Description of New Notes — Repurchase at the Option of Holders — Change of Control.”
Certain Covenants		The indenture governing the new notes, among other things, limits our ability to:
		• incur additional indebtedness;
		• create liens or other encumbrances;
		• place limitations on distributions from restricted subsidiaries;
		• pay dividends, make investments, prepay subordinated indebtedness or make other restricted payments;
		• issue or sell capital stock of restricted subsidiaries;
		• issue guarantees;
		• sell or otherwise dispose of all or substantially all of our assets;
		• enter into transactions with our affiliates; and
		• make acquisitions or merge or consolidate with another entity.
		The covenants are subject to a number of important qualifications and exceptions that are described in the section of this prospectus entitled “Description of New Notes — Certain Covenants.”
Use of Proceeds		We will not receive proceeds from the issuance of the new notes offered hereby. In consideration for issuing the new notes in exchange for old notes as described in this prospectus, we will receive old notes of like principal amount. The old notes surrendered in exchange for the new notes will be retired and canceled.
Original Issue Discount		The new notes will be issued with original issue discount (“OID”) for U.S. federal income tax purposes. Accordingly, U.S. holders will generally be required to include such OID in their income as it accrues for U.S. federal income tax purposes in advance of receipt of any payment on the new notes to which the income is attributable. See “Material U.S. Federal Income Tax Considerations — U.S. Holders — Original Issue Discount.”

 

Summary Consolidated Financial Data and Other Data

		Predecessor
		Company				Successor Company
		Seven				Five
		Months				Months
		Ended				Ended																				Six Months Ended
		July 31,				December 31,				Year Ended December 31,																June 30,
		2004				2004				2005				2006				2007				2008				2008				2009
		(Unaudited and in thousands, except per share data)
Statement of Operations Data(1)
Revenues:
Service revenues		$	405,850			$	289,355			$	768,916			$	956,365			$	1,395,667			$	1,709,101			$	816,072			$	1,055,590
Equipment revenues			86,906				61,492				188,855				210,822				235,136				249,761				127,170				128,805
Total revenues			492,756				350,847				957,771				1,167,187				1,630,803				1,958,862				943,242				1,184,395
Operating expenses:
Cost of service (exclusive of items shown separately below)			(114,628	)			(80,286	)			(203,548	)			(264,162	)			(384,128	)			(488,298	)			(230,027	)			(298,911	)
Cost of equipment			(101,441	)			(85,460	)			(230,520	)			(310,834	)			(405,997	)			(465,422	)			(219,348	)			(285,571	)
Selling and marketing			(51,997	)			(39,938	)			(100,042	)			(159,257	)			(206,213	)			(294,917	)			(132,376	)			(200,211	)
General and administrative			(81,514	)			(57,110	)			(159,741	)			(196,604	)			(271,536	)			(331,691	)			(153,140	)			(187,115	)
Depreciation and amortization			(178,120	)			(75,324	)			(195,462	)			(226,747	)			(302,201	)			(331,448	)			(168,806	)			(189,354	)
Impairment of assets			—				—				(12,043	)			(7,912	)			(1,368	)			(177	)			—				—
Total operating expenses			(527,700	)			(338,118	)			(901,356	)			(1,165,516	)			(1,571,443	)			(1,911,953	)			(903,697	)			(1,161,162	)
Gain (loss) on sale or disposal of assets			532				—				14,587				22,054				902				(209	)			961				2,027
Operating income (loss)			(34,412	)			12,729				71,002				23,725				60,262				46,700				40,506				25,260
Equity in net income (loss) of investee			—				—				—				—				(2,309	)			(298	)			(1,357	)			1,994
Interest income			—				1,812				9,957				23,063				28,939				14,571				7,367				1,587
Interest expense			(4,195	)			(16,594	)			(30,051	)			(61,334	)			(121,231	)			(158,259	)			(63,758	)			(90,911	)
Other income (expense), net			(293	)			(117	)			1,392				(3,089	)			(6,182	)			(7,125	)			(4,343	)			(109	)
Loss on extinguishment of debt			—				—				—				—				—				—				—				(26,310	)
Income (loss) before reorganization items, income taxes and cumulative effect of change in accounting principle			(38,900	)			(2,170	)			52,300				(17,635	)			(40,521	)			(104,411	)			(21,585	)			(88,489	)
Reorganization items, net			962,444				—				—				—				—				—				—				—

		Predecessor
		Company				Successor Company
		Seven				Five
		Months				Months
		Ended				Ended																				Six Months Ended
		July 31,				December 31,				Year Ended December 31,																June 30,
		2004				2004				2005				2006				2007				2008				2008				2009
		(Unaudited and in thousands, except per share data)
Income (loss) before income taxes and cumulative effect of change in accounting principle			923,544				(2,170	)			52,300				(17,635	)			(40,521	)			(104,411	)			(21,585	)			(88,489	)
Income tax expense			(4,166	)			(3,930	)			(21,615	)			(8,469	)			(35,924	)			(38,960	)			(19,957	)			(20,054	)
Income (loss) before cumulative effect of change in accounting principle			919,378				(6,100	)			30,685				(26,104	)			(76,445	)			(143,371	)			(41,542	)			(108,543	)
Cumulative effect of change in accounting principle			—				—				—				623				—				—				—				—
Net income (loss)			919,378				(6,100	)			30,685				(25,481	)			(76,445	)			(143,371	)			(41,542	)			(108,543	)
Accretion of redeemable noncontrolling interests, net of tax			—				—				—				(1,321	)			(3,854	)			(6,819	)			(3,833	)			(4,504	)
Net income (loss) attributable to common stockholders		$	919,378			$	(6,100	)		$	30,685			$	(26,802	)		$	(80,299	)		$	(150,190	)		$	(45,375	)		$	(113,047	)
Basic earnings (loss) per share attributable to common stockholders(2):
Earnings (loss) before cumulative effect of change in accounting principle and after accretion of redeemable noncontrolling interests, net of tax		$	15.68			$	(0.10	)		$	0.51			$	(0.44	)		$	(1.20	)		$	(2.21	)		$	(0.67	)		$	(1.63	)
Cumulative effect of change in accounting principle			—				—				—				0.01				—				—				—				—
Basic earnings (loss) per share attributable to common stockholders		$	15.68			$	(0.10	)		$	0.51			$	(0.43	)		$	(1.20	)		$	(2.21	)		$	(0.67	)		$	(1.63	)
Diluted earnings (loss) per share attributable to common stockholders(2):
Earnings (loss) before cumulative effect of change in accounting principle and after accretion of redeemable noncontrolling interests, net of tax		$	15.68			$	(0.10	)		$	0.50			$	(0.44	)		$	(1.20	)		$	(2.21	)		$	(0.67	)		$	(1.63	)
Cumulative effect of change in accounting principle			—				—				—				0.01				—				—				—				—
Diluted earnings (loss) per share attributable to common stockholders		$	15.68			$	(0.10	)		$	0.50			$	(0.43	)		$	(1.20	)		$	(2.21	)		$	(0.67	)		$	(1.63	)
Shares used in per share calculations(2):
Basic			58,623				60,000				60,135				61,645				67,100				68,021				67,963				69,371
Diluted			58,623				60,000				61,003				61,645				67,100				68,021				67,963				69,371

		As of December 31,																				As of June 30,
		2004				2005				2006				2007				2008				2009
		(Unaudited and in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments		$	254,224			$	384,054			$	439,212			$	612,570			$	595,851			$	713,760
Working capital			150,868				245,366				185,191				380,384				278,576				402,715
Restricted cash, cash equivalents and short-term investments(3)			31,427				13,759				13,581				15,550				4,780				3,248
Total assets			2,213,312				2,499,946				4,084,947				4,432,998				5,052,857				5,429,095
Capital leases			—				—				—				53,283				13,993				13,242
Long-term debt			371,355				588,333				1,676,500				2,033,902				2,566,025				2,754,253
Total stockholders’ equity			1,472,347				1,517,601				1,769,348				1,717,505				1,612,676				1,794,162

		Three Months Ended
		March 31,				June 30,				September 30,				December 31,				March 31,				June 30,				September 30,				December 31,				March 31,				June 30,
		2007				2007				2007				2007				2008				2008				2008				2008				2009				2009
		(Unaudited)
Operating Data:
Number of subscribers at end of period(4)			2,548,172				2,674,963				2,711,447				2,863,519				3,093,581				3,305,251				3,460,140				3,844,660				4,337,426				4,540,180
Net customer additions(4)			318,346				126,791				36,484				152,072				230,062				171,171				155,779				385,292				492,753				202,767
ARPU(5)		$	44.81			$	44.75			$	44.51			$	45.57			$	44.98			$	43.97			$	42.95			$	42.44			$	42.21			$	40.73
CPGA(6)		$	166			$	182			$	199			$	178			$	159			$	205			$	201			$	182			$	195			$	201
CCU(7)		$	21.27			$	19.87			$	21.24			$	21.00			$	21.73			$	21.01			$	21.50			$	20.55			$	20.03			$	18.42
Churn(8)			3.4	%			4.3	%			5.2	%			4.2	%			3.6	%			3.8	%			4.2	%			3.8	%			3.3	%			4.4	%

		Predecessor
		Company				Successor Company
		Seven				Five
		Months				Months
		Ended				Ended
		July 31,				December 31,				Year Ended December 31,																Six Months Ended June 30,
		2004				2004				2005				2006				2007				2008				2008				2009
		(Unaudited and in thousands, except for ratios and percentages)
Other Financial Data:
Adjusted OIBDA(9)		$	142,339			$	88,053			$	276,399			$	256,055			$	392,268			$	413,749			$	225,387			$	234,649
Adjusted OIBDA margin(10)			35	%			30	%			36	%			27	%			28	%			24	%			28	%			22	%
Existing business adjusted OIBDA(9)		$	142,339			$	88,053			$	276,399			$	256,055			$	392,268			$	585,780			$	289,439			$	355,884
Existing business adjusted OIBDA margin(10)			35	%			30	%			36	%			27	%			28	%			36	%			36	%			40	%
Capital expenditures		$	34,456			$	49,043			$	208,808			$	591,295			$	504,770			$	795,678			$	338,287			$	425,926
Statement of Cash Flow data:
Net cash provided by operating activities		$	120,623			$	69,752			$	308,280			$	289,871			$	316,181			$	350,646			$	181,590			$	143,764
Net cash used in investing activities		$	(50,299	)		$	(46,278	)		$	(332,112	)		$	(1,550,624	)		$	(622,728	)		$	(909,978	)		$	(491,646	)		$	(600,482	)
Net cash provided by (used in) financing activities		$	—			$	(36,727	)		$	175,764			$	1,340,492			$	367,072			$	483,703			$	522,884			$	428,735
Ratio of earnings to fixed charges(11)			63.6	x			—				1.7	x			—				—				—				—				—

(1)		The consolidated financial information for the Successor Company has been adjusted retrospectively to give effect to Leap’s adoption on January 1, 2009 of Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51,” or SFAS 160. The cumulative impact to our financial statements as a result of the adoption of SFAS 160 resulted in a $9.2 million reduction to stockholders’ equity, a $5.8 million reduction to deferred tax liabilities and a $15.0 million increase to redeemable noncontrolling interests (formerly referred to as minority interests) as of December 31, 2008. We have retrospectively applied SFAS 160 to all prior periods.
(2)		Refer to Notes 2 and 5 to our annual consolidated financial statements, and to Note 4 to our condensed consolidated financial statements for the six months ended June 30, 2009, incorporated by reference in this prospectus for an explanation of the calculation of basic and diluted earnings (loss) per share.
(3)		Restricted cash, cash equivalents and short-term investments consist primarily of amounts that we have set aside to satisfy certain contractual obligations. From 2004 to 2007, restricted cash, cash equivalents and short-term investments primarily consisted of amounts we had set aside to satisfy remaining allowed administrative claims and allowed priority claims against Leap and Cricket following their emergence from bankruptcy.
(4)		We recognize a gross customer addition for each Cricket Wireless, Cricket Broadband and Cricket PAYGo line of service activated by a customer. Includes subscribers and net customer additions for Cricket services offered by Cricket, Alaska Native Broadband 1 License, LLC (which entity was merged into Cricket on December 31, 2007), LCW Operations and Denali Operations. Net customer additions for the three months ended June 30, 2008 and September 30, 2008 exclude customers in the Hargray Wireless markets in South Carolina and Georgia that we acquired in April 2008. We completed the upgrade of the Hargray Wireless networks and introduced Cricket service in these markets in October 2008, and net customer additions for the three months ended December 31, 2008, March 31, 2009 and June 30, 2009 include customers in the former Hargray Wireless markets.
(5)		ARPU is service revenue divided by the weighted-average number of customers, divided by the number of months during the period being measured. Management uses ARPU to identify average revenue per customer, to track changes in average customer revenues over time, to help evaluate how changes in our business, including changes in our service offerings and fees, affect average revenue per customer, and to forecast future service revenue. In addition, ARPU provides management with a useful measure to compare our subscriber revenue to that of other wireless communications providers. We do not recognize service revenue until payment has been received and services have been provided to the customer. In addition, customers of our Cricket Wireless and Cricket Broadband service are generally disconnected from service approximately 30 days after failing to pay a monthly bill. Customers of our Cricket PAYGo service are generally disconnected from service if they have not replenished or “topped up” their account within 60 days after the end of their current term of service. Therefore, because our calculation of weighted-average number of customers includes customers who have not paid their last bill and have yet to disconnect service, ARPU may appear lower during periods in which we have significant disconnect activity. We believe investors use ARPU primarily as a tool to track changes in our average revenue per customer and to compare our per customer service revenues to those of other wireless communications providers. Other companies may calculate this measure differently.
(6)		CPGA is selling and marketing costs (excluding applicable share-based compensation expense included in selling and marketing expense), and equipment subsidy (generally defined as cost of equipment less equipment revenue), less the net loss on equipment transactions unrelated to initial customer acquisition, divided by the total number of gross new customer additions during the period being measured. The net loss on equipment transactions unrelated to initial customer acquisition includes the revenues and costs associated with the sale of handsets to existing customers as well as costs associated with handset replacements and repairs (other than warranty costs which are the responsibility of the handset manufacturers). We deduct customers who do not pay their first monthly bill from our gross customer additions, which tends to increase CPGA because we incur the costs associated with this customer without receiving the benefit of a gross customer addition. Management uses CPGA to measure the efficiency of our customer acquisition efforts, to track changes in our average cost of acquiring new subscribers over time, and to help evaluate how changes in our sales and distribution strategies affect the cost-efficiency of our customer acquisition efforts. In addition,

		CPGA provides management with a useful measure to compare our per customer acquisition costs with those of other wireless communications providers. We believe investors use CPGA primarily as a tool to track changes in our average cost of acquiring new customers and to compare our per customer acquisition costs to those of other wireless communications providers. Other companies may calculate this measure differently. See “Reconciliation of Non-GAAP Financial Measures” below.
(7)		CCU is cost of service and general and administrative costs (excluding applicable share-based compensation expense included in cost of service and general and administrative expense) plus net loss on equipment transactions unrelated to initial customer acquisition (which includes the gain or loss on the sale of handsets to existing customers and costs associated with handset replacements and repairs (other than warranty costs which are the responsibility of the handset manufacturers)), divided by the weighted-average number of customers, divided by the number of months during the period being measured. CCU does not include any depreciation and amortization expense. Management uses CCU as a tool to evaluate the non-selling cash expenses associated with ongoing business operations on a per customer basis, to track changes in these non-selling cash costs over time, and to help evaluate how changes in our business operations affect non-selling cash costs per customer. In addition, CCU provides management with a useful measure to compare our non-selling cash costs per customer with those of other wireless communications providers. We believe investors use CCU primarily as a tool to track changes in our non-selling cash costs over time and to compare our non-selling cash costs to those of other wireless communications providers. Other companies may calculate this measure differently. See “Reconciliation of Non-GAAP Financial Measures” below.
(8)		Churn, which measures customer turnover, is calculated as the net number of customers that disconnect from our service divided by the weighted-average number of customers divided by the number of months during the period being measured. Customers who do not pay their first monthly bill are deducted from our gross customer additions in the month in which they are disconnected; as a result, these customers are not included in churn. Customers of our Cricket Wireless and Cricket Broadband service are generally disconnected from service approximately 30 days after failing to pay a monthly bill, and pay-in-advance customers who ask to terminate their service are disconnected when their paid service period ends. Customers for our Cricket PAYGo service are generally disconnected from service if they have not replenished or “topped up” their account within 60 days after the end of their current term of service. Management uses churn to measure our retention of customers, to measure changes in customer retention over time, and to help evaluate how changes in our business affect customer retention. In addition, churn provides management with a useful measure to compare our customer turnover activity to that of other wireless communications providers. We believe investors use churn primarily as a tool to track changes in our customer retention over time and to compare our customer retention to that of other wireless communications providers. Other companies may calculate this measure differently. Churn for the three months ended June 30, 2008 and September 30, 2008 excludes customers in the Hargray Wireless markets in South Carolina and Georgia that we acquired in April 2008. We completed the upgrade of the Hargray Wireless networks and introduced Cricket service in these markets in October 2008, and churn for the three months ended December 31, 2008, March 31, 2009 and June 30, 2009 includes customers in the former Hargray Wireless markets.
(9)		Adjusted OIBDA is defined as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of: gain/loss on sale/disposal of assets; impairment of assets; and share-based compensation expense (benefit). Existing business adjusted OIBDA further adjusts adjusted OIBDA to exclude total revenues attributable to our business operations in markets launched after December 31, 2007 and our Cricket Broadband service offering that were included in total revenues, and to add back operating expenses attributable to such activities that were included in total operating expenses (other than depreciation and amortization and share-based compensation expense, which have already been added back to adjusted OIBDA). Generally, for purposes of calculating these measures, corporate-level and regional-level overhead expenses are allocated to our markets based on gross customer additions and weighted-average customers by market.

		Adjusted OIBDA and existing business adjusted OIBDA are non-GAAP financial measures. Adjusted OIBDA and existing business adjusted OIBDA should not be construed as alternatives to operating income or net income as determined in accordance with GAAP, as alternatives to cash flows from operating activities as determined in accordance with GAAP or as measures of liquidity.

		In a capital-intensive industry such as wireless telecommunications, management believes that adjusted OIBDA and existing business adjusted OIBDA, as well as the associated percentage margin calculations, are meaningful measures of our operating performance. We use adjusted OIBDA and existing business adjusted OIBDA as supplemental performance measures because management believes they facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of other companies by backing out potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the items described above for which additional adjustments were made. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Because adjusted OIBDA and existing business adjusted OIBDA facilitate internal comparisons of our historical operating performance, management also uses these metrics for business planning purposes and to measure our performance relative to that of our competitors. In addition, we believe that adjusted OIBDA, existing business adjusted OIBDA, and similar measures are widely used by investors, financial analysts and credit rating agencies as measures of our financial performance over time and to compare our financial performance with that of other companies in our industry.
		Adjusted OIBDA and existing business adjusted OIBDA have limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations include:
		• they do not reflect capital expenditures;
		• although they do not include depreciation and amortization, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted OIBDA and existing business adjusted OIBDA do not reflect cash requirements for such replacements;
		• they do not reflect costs associated with share-based awards exchanged for employee services;
		• they do not reflect the interest expense necessary to service interest or principal payments on current future indebtedness;
		• they do not reflect expenses incurred for the payment of income taxes and other taxes; and
		• other companies, including companies in our industry, may calculate these measures differently than we do, limiting their usefulness as comparative measures.
		Management understands these limitations and considers adjusted OIBDA and existing business adjusted OIBDA as financial performance measures that supplement but do not replace the information provided to management by our GAAP results. See “Reconciliation of Non-GAAP Financial Measures” below.

(10)		Adjusted OIBDA margin is calculated by dividing adjusted OIBDA by service revenues. Existing business adjusted OIBDA margin is calculated by dividing existing business adjusted OIBDA by existing business service revenues. The term “existing business” refers to our and our consolidated joint ventures’ business operations in markets in service on or prior to December 31, 2007, excluding any effects of our Cricket Broadband service. See “Reconciliation of Non-GAAP Financial Measures” below.
(11)		For purposes of calculating the ratio of earnings to fixed charges, earnings represent income (loss) before income taxes, cumulative effect of change in accounting principle, accretion of redeemable noncontrolling interests, net of tax, and equity in net (income) loss of investee plus fixed charges and amortization of capitalized interest, less interest capitalized. “Fixed charges” consist of interest expense, whether expensed or capitalized, and the interest portion of rental expense inherent in our operating leases. The portion of total rental expense that represents the interest factor is estimated to be 33%. Our earnings were inadequate to cover fixed charges for the six months ended June 30, 2009 and 2008 by $101.2 million and $40.9 million, respectively, for the years ended December 31, 2008, 2007 and 2006 by $147.7 million, $77.2 million and $31.4 million, respectively, and for the five months ended December 31, 2004 by $2.2 million.

		Three Months Ended
		Mar. 31,				Jun. 30,				Sep. 30,				Dec. 31,				Mar. 31,				Jun. 30,				Sep. 30,				Dec. 31,				Mar. 31,				Jun. 30,
		2007				2007				2007				2007				2008				2008				2008				2008				2009				2009
Selling and marketing expense		$	48,769			$	47,011			$	54,265			$	56,168			$	58,100			$	74,276			$	77,407			$	85,134			$	103,523			$	96,688
Less share-based compensation expense included in selling and marketing expense			(1,001	)			(560	)			(843	)			(926	)			(1,356	)			(1,179	)			(871	)			(1,174	)			(1,583	)			(1,466	)
Plus cost of equipment			122,665				90,818				97,218				95,296				114,221				105,127				113,057				133,017				157,796				127,775
Less equipment revenue			(71,734	)			(50,661	)			(55,161	)			(57,580	)			(69,455	)			(57,715	)			(62,174	)			(60,417	)			(72,982	)			(55,823	)
Less net loss on equipment transactions unrelated to initial customer acquisition			(4,762	)			(2,591	)			(5,747	)			(4,766	)			(14,020	)			(9,389	)			(7,880	)			(10,885	)			(13,448	)			(8,392	)
Total costs used in the calculation of CPGA		$	93,937			$	84,017			$	89,732			$	88,192			$	87,490			$	111,120			$	119,539			$	145,675			$	173,306			$	158,782
Gross customer additions			565,055				462,434				450,954				496,061				550,520				542,005				593,619				801,436				889,911				790,933
CPGA		$	166			$	182			$	199			$	178			$	159			$	205			$	201			$	182			$	195			$	201

		Three Months Ended
		Mar. 31,				Jun. 30,				Sep. 30,				Dec. 31,				Mar. 31,				Jun. 30,				Sep. 30,				Dec. 31,				Mar. 31,				Jun. 30,
		2007				2007				2007				2007				2008				2008				2008				2008				2009				2009
Cost of service		$	90,440			$	90,559			$	100,907			$	102,222			$	111,170			$	118,857			$	129,708			$	128,563			$	144,344			$	154,567
Plus general and administrative expense			65,234				66,407				68,686				71,209				75,907				77,233				87,522				91,029				96,177				90,938
Less share-based compensation expense included in cost of service and general and administrative expense			(7,742	)			(5,335	)			(6,231	)			(6,701	)			(8,346	)			(6,155	)			(7,595	)			(8,539	)			(10,072	)			(8,941	)
Plus net loss on equipment transactions unrelated to initial customer acquisition			4,762				2,591				5,747				4,766				14,020				9,389				7,880				10,885				13,448				8,392
Total costs used in the calculation of CCU		$	152,694			$	154,222			$	169,109			$	171,496			$	192,751			$	199,324			$	217,515			$	221,938			$	243,897			$	244,956
Weighted-average number of customers			2,393,161				2,586,900				2,654,555				2,722,631				2,956,477				3,162,028				3,371,932				3,600,393				4,058,819				4,432,381
CCU		$	21.27			$	19.87			$	21.24			$	21.00			$	21.73			$	21.01			$	21.50			$	20.55			$	20.03			$	18.42

		Predecessor
		Company				Successor Company
		Seven				Five
		Months				Months
		Ended				Ended				Year Ended																Six Months Ended
		July 31,				December 31,				December 31,																June 30,
		2004				2004				2005				2006				2007				2008				2008				2009
Operating income (loss)		$	(34,412	)		$	12,729			$	71,002			$	23,725			$	60,262			$	46,700			$	40,506			$	25,260
Plus depreciation and amortization			178,120				75,324				195,462				226,747				302,201				331,448				168,806				189,354
OIBDA		$	143,708			$	88,053			$	266,464			$	250,472			$	362,463			$	378,148			$	209,312			$	214,614
Less (gain) loss on sale or disposal of assets			(532	)			—				(14,587	)			(22,054	)			(902	)			209				(961	)			(2,027	)
Plus impairment of assets			—				—				12,043				7,912				1,368				177				—				—
Plus share-based compensation expense (benefit)			(837	)			—				12,479				19,725				29,339				35,215				17,036				22,062
Adjusted OIBDA		$	142,339			$	88,053			$	276,399			$	256,055			$	392,268			$	413,749			$	225,387			$	234,649
Plus net operating expense attributable to markets launched after December 31, 2007 and the Cricket Broadband service included in total operating expenses			—				—				—				—				—				172,031				64,052				121,235
Existing business adjusted OIBDA		$	142,339			$	88,053			$	276,399			$	256,055			$	392,268			$	585,780			$	289,439			$	355,884
Adjusted OIBDA and existing business OIBDA margin:
Service revenues		$	405,850			$	289,355			$	768,916			$	956,365			$	1,395,667			$	1,709,101			$	816,072			$	1,055,590
Adjusted OIBDA margin			35	%			30	%			36	%			27	%			28	%			24	%			28	%			22	%
Existing business service revenues		$	405,850			$	289,355			$	768,916			$	956,365			$	1,395,667			$	1,629,164			$	805,905			$	883,876
Existing business adjusted OIBDA margin			35	%			30	%			36	%			27	%			28	%			36	%			36	%			40	%

 

You should carefully consider the risk factors set forth below, as well as the other information contained or incorporated by reference in this prospectus, before exchanging your old notes for new notes pursuant to this prospectus. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. Any of the following risks could materially adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your original investment.

 

Risks Related to Our Business and Industry

 

We Have Experienced Net Losses, and We May Not Be Profitable in the Future.

 

We experienced net losses of $61.2 million and $108.5 million for the three and six months ended June 30, 2009, respectively, and $143.4 million, $76.4 million and $25.5 million for the years ended December 31, 2008, 2007 and 2006, respectively. We may not generate profits in the future on a consistent basis or at all. Our strategic objectives depend on our ability to operate our existing and newly launched markets and customer acceptance of our Cricket product offerings. We will experience higher operating expenses after we have launched business expansion efforts, including activities to broaden our product portfolio and to expand and improve our network coverage and capacity. If we fail to achieve consistent profitability, that failure could have a negative effect on our financial condition.

 

We May Not Be Successful in Increasing Our Customer Base Which Would Negatively Affect Our Business Plans and Financial Outlook.

 

Our growth on a quarter-by-quarter basis has varied substantially in the past. We believe that this uneven growth generally reflects seasonal trends in customer activity, promotional activity, competition in the wireless telecommunications market, our pace of new market launches, and varying national economic conditions. Our current business plans assume that we will continue to increase our customer base over time, providing us with increased economies of scale. Our ability to continue to grow our customer base and achieve the customer penetration levels we currently believe are possible in our markets is subject to a number of risks, including, among other things, increased competition from existing or new competitors, higher than anticipated churn, our inability to increase our network capacity to meet increasing customer demand, unfavorable economic conditions (which may have a disproportionate negative impact on portions of our customer base), changes in the demographics of our markets, adverse changes in the legislative and regulatory environment and other factors that may limit our ability to grow our customer base. If we are unable to attract and retain a growing customer base, our current business plans and financial outlook may be harmed.

 

General Economic Conditions May Adversely Affect Our Business, Financial Performance or Ability to Obtain Debt or Equity Financing on Reasonable Terms or at All.

 

Our business and financial performance are sensitive to changes in general economic conditions, including changes in interest rates, consumer credit conditions, consumer debt levels, consumer confidence, rates of inflation (or concerns about deflation), unemployment rates, energy costs and other macro-economic factors. Recent market and economic conditions have been unprecedented and challenging, with tighter credit conditions and economic recession continuing in 2009. Continued concerns about the systemic impact of potential long-term and widespread economic recession, high energy costs, geopolitical issues, the availability and cost of credit and unstable housing and mortgage markets have contributed to increased market volatility and diminished expectations for the economy. In addition, uncertainty and instability in the capital and credit markets and federal government interventions in the U.S. financial system, combined with volatile energy prices, declining business and consumer confidence and increased unemployment, have contributed to significant economic volatility. As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Concern about the stability of the markets and the strength of counterparties has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. These factors have led to a decrease in spending by businesses and consumers alike.

Continued market turbulence and recessionary conditions may materially adversely affect our business and financial performance in a number of ways. Because we do not require customers to sign fixed-term contracts or pass a credit check, our service is available to a broad customer base. As a result, during general economic downturns, including periods of decreased consumer confidence or high unemployment, we may have greater difficulty in gaining new customers within this base for our services and some of our existing customers may be more likely to terminate service due to an inability to pay than the average industry customer. In addition, continued recessionary conditions and tight credit conditions may adversely impact our vendors, some of which have filed for or may be considering bankruptcy, as well as suppliers and third-party dealers who could experience cash flow or liquidity problems, which could adversely impact our ability to distribute, market or sell our products and services. For example, during the second quarter of 2009, Nortel Networks, which has provided a significant amount of our network infrastructure, agreed to sell substantially all of its network operations to Ericsson. We also maintain investments in commercial paper and short-term investments in obligations of the U.S. government and government agencies. Volatility and uncertainty in the financial markets could result in losses in these investments. As a result, sustained difficult, or worsening, general economic conditions could have a material adverse effect on our business, financial condition and results of operations.

 

In addition, general economic conditions have significantly affected the ability of many companies to raise additional funding in the capital markets. For example, U.S. credit markets have experienced significant dislocations and liquidity disruptions which have caused the spreads on prospective debt financings to widen considerably. These circumstances materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive and resulting in the general unavailability of many forms of debt financing. Although conditions in the U.S. credit markets have recently improved, continued uncertainty in the credit markets could negatively impact our ability to access additional debt financing or to refinance existing indebtedness in the future on favorable terms or at all. These general economic conditions have also adversely affected the trading prices of equity securities of many U.S. companies, including Leap, and could significantly limit our ability to raise additional capital through the issuance of common stock, preferred stock or other equity securities. If we require additional capital to fund any activities we elect to pursue in addition to our current business expansion efforts and were unable to obtain such capital on terms that we found acceptable or at all, we would likely reduce our investments in such activities or re-direct capital otherwise available for our business expansion efforts. Any of these risks could impair our ability to fund our operations or limit our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations.

 

If We Experience Low Rates of Customer Acquisition or High Rates of Customer Turnover, Our Ability to Become Profitable Will Decrease.

 

Our rates of customer acquisition and turnover are affected by a number of competitive factors, in addition to the macro-economic factors described above, including the size of our calling areas, network performance and reliability issues, our handset and service offerings (including the ability of customers to cost-effectively roam onto other wireless networks), customer perceptions of our services, customer care quality, wireless number portability and higher deactivation rates among less-tenured customers we gained as a result of our new market launches. We have also experienced an increasing trend of current customers upgrading their handset by buying a new phone, activating a new line of service, and letting their existing service lapse, which trend has resulted in a higher churn rate as these customers are counted as having disconnected service but have actually been retained. Managing these factors and customers’ expectations is essential in attracting and retaining customers. Although we have implemented programs to attract new customers and address customer turnover, we cannot assure you that these programs or our strategies to address customer acquisition and turnover will be successful. In addition, we and Denali Operations launched a significant number of new Cricket markets in 2008 and through the first half of 2009. In newly launched markets, we expect to initially experience a greater degree of customer turnover due to the number of customers new to Cricket service, although we generally expect that churn will gradually improve as the average tenure of customers in such markets increases. A high rate of customer turnover or low rate of new customer acquisition would reduce revenues and increase the total marketing expenditures required to attract the minimum number of customers required to sustain our business plan which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

We Have Made Significant Investment, and May Continue to Invest, in Joint Ventures That We Do Not Control.

 

We own a 73.3% non-controlling interest in LCW Wireless, which was awarded a wireless license for the Portland, Oregon market in Auction #58 and to which we contributed, among other things, two wireless licenses in Eugene and Salem, Oregon and related operating assets. We also own an 82.5% non-controlling interest in Denali, an entity which acquired a wireless license covering the upper mid-west portion of the U.S. in Auction #66 through a wholly owned subsidiary. LCW Wireless and Denali acquired their wireless licenses as “very small business” designated entities under FCC regulations. Our participation in these joint ventures is structured as a non-controlling interest in order to comply with FCC rules and regulations. We have agreements with our joint venture partners in LCW Wireless and Denali that are intended to allow us to actively participate to a limited extent in the development of the business through the joint venture. However, these agreements do not provide us with control over the business strategy, financial goals, build-out plans or other operational aspects of the joint venture. The FCC’s rules restrict our ability to acquire controlling interests in such entities during the period that such entities must maintain their eligibility as a designated entity, as defined by the FCC. The entities or persons that control the joint ventures may have interests and goals that are inconsistent or different from ours which could result in the joint venture taking actions that negatively impact our business or financial condition. In addition, if any of the other members of a joint venture files for bankruptcy or otherwise fails to perform its obligations or does not manage the joint venture effectively, we may lose our equity investment in, and any present or future opportunity to acquire the assets (including wireless licenses) of, such entity.

 

The FCC has implemented rule changes aimed at addressing alleged abuses of its designated entity program. While we do not believe that these recent rule changes materially affect our joint ventures with LCW Wireless and Denali, the scope and applicability of these rule changes to these designated entity structures remain in flux, and the changes remain subject to administrative and judicial review. On March 26, 2009, the United States Court of Appeals for the District of Columbia Circuit rejected one of the pending judicial challenges to the designated entity rules. Another appeal of these rules remains pending in the United States Court of Appeals for the Third Circuit and seeks to overturn the results of the AWS and 700 MHz auctions. We cannot predict the degree to which rule changes, judicial review of the designated entity rules or increased regulatory scrutiny that may follow from these proceedings will affect our current or future business ventures, licenses acquired in the challenged auctions, or our participation in future FCC spectrum auctions.

 

We Face Increasing Competition Which Could Have a Material Adverse Effect on Demand for Cricket Service.

 

The telecommunications industry is very competitive. In general, we compete with national facilities-based wireless providers and their prepaid affiliates or brands, local and regional carriers, non-facilities-based mobile virtual network operators, or MVNOs, voice-over-internet-protocol, service providers and traditional landline service providers, including telephone and cable companies. Some of these competitors are able to offer bundled service offerings which package wireless service offerings with additional service offerings, such as landline phone service, cable or satellite television, media and internet, that we may not be able to duplicate at competitive prices.

 

Many of these competitors have greater name and brand recognition, larger spectrum holdings, larger footprints, access to greater amounts of capital, greater technical, sales, marketing and distribution resources and established relationships with a larger base of current and potential customers. These advantages may allow our competitors to provide service offerings with better or more extensive features or options than those we currently provide, offer the latest and most popular handsets through exclusive vendor arrangements, market to broader customer segments, offer service over larger geographic areas, or purchase equipment, supplies, handsets and services at lower prices than we can. As handset selection and pricing become increasingly important to customers, our inability to offer customers the latest and most popular handsets as a result of exclusive dealings between handset manufacturers and our larger competitors could put us at a significant competitive disadvantage and make it more difficult for us to attract and retain customers. In addition, some of our competitors are able to offer their customers roaming services at lower rates. As consolidation in the industry creates even larger competitors, advantages that our competitors may have, as well as their bargaining power as wholesale providers of roaming services, may increase. For example, in connection with the offering of our nationwide roaming service, we have

encountered problems with certain large wireless carriers in negotiating terms for roaming arrangements that we believe are reasonable, and we believe that consolidation has contributed significantly to such carriers’ control over the terms and conditions of wholesale roaming services.

 

The competitive pressures of the wireless telecommunications market have also caused other carriers to offer service plans with unlimited service offerings or increasingly large bundles of minutes of use at increasingly lower prices, which are competing with the predictable and unlimited Cricket Wireless service plans. Some of our competitors offer rate plans substantially similar to Cricket’s service plans or products that customers may perceive to be similar to Cricket’s service plans in markets in which we offer wireless service. For example, AT&T, Sprint Nextel, T-Mobile and Verizon Wireless each offer flat-rate unlimited service offerings. Sprint Nextel also offers a competitively-priced flat-rate unlimited service offering under its Boost Unlimited brand, which is very similar to our Cricket Wireless service. In addition, T-Mobile recently introduced an unlimited postpaid plan for certain of its current customers that is competitively priced with our Cricket Wireless service. In addition, a number of MVNOs offer or have recently introduced competitively-priced service offerings. For example, Tracfone Wireless recently introduced a wireless offering under its “Straight Talk” brand using Verizon’s wireless network. In addition, Virgin Mobile offers a wireless offering using Sprint Nextel’s network, and Sprint Nextel recently announced plans to acquire the company. Some competitors also offer prepaid wireless plans that are being advertised heavily to demographic segments in our current markets and in markets in which we may expand that are strongly represented in Cricket’s customer base. For example, T-Mobile offers a FlexPay plan which permits customers to pay in advance for its post-pay plans and avoid overage charges, and an internet-based service upgrade which permits wireless customers to make unlimited local and long-distance calls from their home phone in place of a traditional landline phone service. These various service offerings described above have presented additional strong competition in markets in which our offerings overlap.

 

We may also face additional competition from new entrants in the wireless marketplace, many of whom may have significantly more resources than we do. The FCC is pursuing policies designed to increase the number of wireless licenses and spectrum available for the provision of wireless voice and data services in each of our markets. For example, the FCC has adopted rules that allow the partitioning, disaggregation or leasing of wireless licenses, which may increase the number of our competitors. The FCC has also in recent years allowed satellite operators to use portions of their spectrum for ancillary terrestrial use, and also permitted the offering of broadband services over power lines. In addition, the auction and licensing of new spectrum may result in new competitors and/or allow existing competitors to acquire additional spectrum, which could allow them to offer services that we may not technologically or cost effectively be able to offer with the licenses we hold or to which we have access.

 

Our ability to remain competitive will depend, in part, on our ability to anticipate and respond to various competitive factors and to keep our costs low. We recently revised a number of our Cricket Wireless service plans to provide additional features previously only available in our higher-priced plans. Depending on customer acceptance for our revised plans, these changes could impact our overall service plan product mix and result in lower average monthly revenue per customer. In addition, we recently revised certain features of our dealer compensation. The evolving competitive landscape has impacted our financial and operating results, and we expect that the continuing evolution of competition in our industry may result in more competitive pricing, slower growth, higher costs and increased customer turnover, as well as the possibility of requiring us to further modify our service plans, increase our handset subsidies or increase our dealer compensation in response to competition. Any of these results or actions could have a material adverse effect on our business, financial condition and operating results.

 

We May Be Unable to Obtain the Roaming Services We Need From Other Carriers to Remain Competitive.

 

We believe that our customers prefer that we offer roaming services that allow them to make calls automatically using the networks of other carriers when they are outside of their Cricket service area. Many of our competitors have regional or national networks which enable them to offer automatic roaming services to their subscribers at a lower cost than we can offer. We do not have a national network, and we must pay fees to other carriers who provide roaming services to us. We currently rely on roaming agreements with several carriers for the majority of our roaming services. Our roaming agreements generally cover voice but not data services and some of these agreements may be terminated on relatively short notice. In addition, we believe that the rates charged to us by some of these carriers are higher than the rates they charge to certain other roaming partners.

The FCC has adopted a report and order clarifying that commercial mobile radio service providers are required to provide automatic roaming for voice and SMS text-messaging services on just, reasonable and non-discriminatory terms. The FCC order, however, does not address roaming for data services nor does it provide or mandate any specific mechanism for determining the reasonableness of roaming rates for voice or SMS text messaging services, and so our ability to obtain roaming services from other carriers at attractive rates remains uncertain. In addition, the FCC order indicates that a host carrier is not required to provide roaming services to another carrier in areas in which that other carrier holds wireless licenses or usage rights that could be used to provide wireless services. Because we and Denali License Sub hold a significant number of spectrum licenses for markets in which service has not yet been launched, we believe that this “in-market” roaming restriction could significantly and adversely affect our ability to receive roaming services in areas where we hold licenses. We and other wireless carriers have filed petitions with the FCC, asking that the agency reconsider this in-market exception to its roaming order. However, we can provide no assurances as to whether the FCC will reconsider this exception or the timeframe in which it might do so.

 

In light of the current FCC order, we cannot provide assurances that we will be able to continue to provide roaming services for our customers across the nation or that we will be able to provide such services on a cost-effective basis. We may be unable to enter into or maintain roaming arrangements for voice services at reasonable rates, including in areas in which we hold wireless licenses or have usage rights but have not yet constructed wireless facilities, and we may be unable to secure reasonable roaming arrangements for our data services. Our inability to obtain these roaming services on a cost-effective basis may limit our ability to compete effectively for wireless customers, which may increase our churn and decrease our revenues, which in turn could materially adversely affect our business, financial condition and results of operations.

 

We Restated Certain of Our Prior Consolidated Financial Statements, Which Has Led to Additional Risks and Uncertainties, Including Shareholder Litigation.

 

As discussed in Note 2 to our consolidated financial statements included in “Part II — Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2006, filed with the SEC on December 26, 2007, we restated our consolidated financial statements as of and for the years ended December 31, 2006 and 2005 (including interim periods therein), for the period from August 1, 2004 to December 31, 2004 and for the period from January 1, 2004 to July 31, 2004. In addition, we restated our condensed consolidated financial statements as of and for the quarterly periods ended June 30, 2007 and March 31, 2007. The determination to restate these consolidated financial statements and quarterly condensed consolidated financial statements was made by Leap’s Audit Committee upon management’s recommendation following the identification of errors related to (i) the timing and recognition of certain service revenues and operating expenses, (ii) the recognition of service revenues for certain customers that voluntarily disconnected service, (iii) the classification of certain components of service revenues, equipment revenues and operating expenses and (iv) the determination of a tax valuation allowance during the second quarter of 2007.

 

As a result of these events, we became subject to a number of additional risks and uncertainties, including substantial unanticipated costs for accounting and legal fees in connection with or related to the restatement. In particular, two shareholder derivative actions are currently pending, and we are party to a consolidated securities class action lawsuit. The plaintiffs in these lawsuits may make additional claims, expand existing claims and/or expand the time periods covered by the complaints. Other plaintiffs may bring additional actions with other claims based on the restatement. We have incurred and may incur substantial additional defense costs with respect to these claims, regardless of their outcome. Likewise, these claims might cause a diversion of our management’s time and attention. If we do not prevail in any such actions, we could be required to pay substantial damages or settlement costs, which could materially adversely affect our business, financial condition and results of operations.

 

Our Business and Stock Price May Be Adversely Affected If Our Internal Controls Are Not Effective.

 

Section 404 of the Sarbanes-Oxley Act of 2002 requires companies to conduct a comprehensive evaluation of their internal control over financial reporting. To comply with this statute, each year we are required to document and test our internal control over financial reporting; our management is required to assess and issue a report concerning our internal control over financial reporting; and our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting.

In our quarterly and annual reports (as amended) for the periods ended from December 31, 2006 through September 30, 2008, we reported a material weakness in our internal control over financial reporting which related to the design of controls over the preparation and review of the account reconciliations and analysis of revenues, cost of revenue and deferred revenues, and ineffective testing of changes made to our revenue and billing systems in connection with the introduction or modification of service offerings. As described in “Part II — Item 9A. Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on February 27, 2009, we have taken a number of actions to remediate this material weakness, which include reviewing and designing enhancements to certain of our systems and processes relating to revenue recognition and user acceptance testing and hiring and promoting additional accounting personnel with the appropriate skills, training and experience in these areas. Based upon the remediation actions described in “Part II — Item 9A. Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on February 27, 2009, management concluded that the material weakness described above was remediated as of December 31, 2008.

 

In addition, we previously reported that certain material weaknesses in our internal control over financial reporting existed at various times during the period from September 30, 2004 through September 30, 2006. These material weaknesses included excessive turnover and inadequate staffing levels in our accounting, financial reporting and tax departments, weaknesses in the preparation of our income tax provision, and weaknesses in our application of lease-related accounting principles, fresh-start reporting oversight, and account reconciliation procedures.

 

Although we believe we have taken appropriate actions to remediate the control deficiencies we have identified and to strengthen our internal control over financial reporting, we cannot assure you that we will not discover other material weaknesses in the future. The existence of one or more material weaknesses could result in errors in our financial statements, and substantial costs and resources may be required to rectify these or other internal control deficiencies. If we cannot produce reliable financial reports, investors could lose confidence in our reported financial information, the market price of Leap common stock could decline significantly, we may be unable to obtain additional financing to operate and expand our business, and our business and financial condition could be harmed.

 

Our Primary Business Strategy May Not Succeed in the Long Term.

 

A major element of our business strategy is to offer consumers service plans that allow unlimited wireless service from within a Cricket service area for a flat rate without entering into a fixed-term contract or passing a credit check. However, unlike national wireless carriers, we do not currently provide ubiquitous coverage across the U.S. or all major metropolitan centers, and instead have a network footprint covering only the principal population centers of our various markets. This strategy may not prove to be successful in the long term. Some companies that have offered this type of service in the past have been unsuccessful. From time to time, we also evaluate our product and service offerings and the demands of our target customers and may modify, change, adjust or discontinue our product and service offerings or offer new products and services on a permanent, trial or promotional basis. We cannot assure you that these product or service offerings will be successful or prove to be profitable.

 

We May Incur Substantial Costs in Connection With Any Build-Out of New Markets, and Any Delays or Cost Increases in the Build-Out of Our New Markets Could Adversely Affect Our Business.

 

Our ability to achieve our strategic objectives depends, in part, on the successful, timely and cost-effective build-out of the networks associated with newly acquired FCC licenses, including the licenses that we and Denali acquired in Auction #66 and any licenses that we may acquire from third parties. During the six months ended June 30, 2009, we and Denali Operations launched new markets in Chicago, Philadelphia, Washington, D.C. and Baltimore covering approximately 24 million additional POPs. In addition, we have identified new markets covering approximately 16 million additional POPs that we could elect to launch with Cricket service in the future using our wireless licenses.

 

Large-scale construction projects for the build-out of any new markets will require significant capital expenditures and may suffer cost overruns. In addition, we expect to incur higher operating expenses as our existing business grows and as we build out and after we launch service in new markets. Significant capital

expenditures and increased operating expenses, including in connection with the build-out and launch of new markets, decrease OIBDA and free cash flow for the periods in which we incur such costs. If we are unable to fund the build-out of any new markets that we determine to launch with our existing cash and our cash generated from operations, we may be required to defer the build-out of certain markets or to raise additional equity capital or incur further indebtedness, which we cannot guarantee would be available to us on acceptable terms or at all. In addition, the build-out of any new markets may be delayed or adversely affected by a variety of factors, uncertainties and contingencies, such as natural disasters, difficulties in obtaining zoning permits or other regulatory approvals, our relationships with our joint venture partners, and the timely performance by third parties of their contractual obligations to construct portions of the networks.

 

Portions of the AWS spectrum that we and Denali License Sub hold are currently used by U.S. federal government and/or incumbent commercial licensees. FCC rules require winning bidders to avoid interfering with these existing users or to clear the incumbent users from the spectrum through specified relocation procedures. We and Denali considered the estimated cost and time-frame required to clear the spectrum prior to placing bids in Auction #66. However, the actual cost of clearing the spectrum in any new markets could exceed our estimated costs. Furthermore, delays in the provision of federal funds to relocate government users, or difficulties in negotiating with incumbent government and commercial licensees, may extend the date by which the auctioned spectrum can be cleared of existing operations, and thus may also delay the date on which we could launch commercial services in any new markets we elect to launch. In addition, to the extent that we or Denali Operations are operating on AWS spectrum and a federal government agency believes that our planned or ongoing operations interfere with its current uses, we may be required to immediately cease using the spectrum in that particular market for a period of time until the interference is resolved. Any temporary or extended shutdown of one of our or Denali Operations’ wireless networks in a launched market could materially and adversely affect our competitive position and results of operations.

 

Any failure to complete the build-out of any new markets on budget or on time could delay the implementation of our clustering and expansion strategies, and could have a material adverse effect on our business, financial condition and results of operations.

 

If We Are Unable to Manage Our Planned Growth, Our Operations Could Be Adversely Impacted.

 

We have experienced substantial growth in a relatively short period of time, and we expect to continue to experience growth in the future in our existing and new markets. During the six months ended June 30, 2009, we and Denali Operations launched new markets in Chicago, Philadelphia, Washington, D.C. and Baltimore covering approximately 24 million additional POPs. In addition, we have identified new markets covering approximately 16 million additional POPs that we could elect to launch with Cricket service in the future using our wireless licenses. The management of our growth will require, among other things, continued development of our financial and management controls and management information systems, stringent control of costs, diligent management of our network infrastructure and its growth, increased spending associated with marketing activities and acquisition of new customers, the ability to attract and retain qualified management personnel and the training of new personnel. Furthermore, the implementation of new or expanded systems or platforms to accommodate our growth, and the transition to such systems or platforms from our existing infrastructure, could result in unpredictable technological or other difficulties. Failure to successfully manage our expected growth and development, to effectively manage large market launches, to enhance our processes and management systems or to timely and adequately resolve any such difficulties could have a material adverse effect on our business, financial condition and results of operations.

 

In addition, our rapid growth and the launch of new markets will require continued management and control of our handset inventories. From time to time, we have experienced inventory shortages, most notably with certain of our strongest-selling handsets, including shortages we experienced during the second quarter of 2009. While we have been addressing these shortages, there can be no assurance that we will not experience inventory shortages in the future. Any failure to effectively manage and control our handset inventories could adversely affect our ability to gain new customers and have a material adverse effect on our business, financial condition and results of operations.

The Wireless Industry is Experiencing Rapid Technological Change, Which May Require Us to Significantly Increase Capital Investment, and We May Lose Customers If We Fail to Keep Up With These Changes.

 

The wireless communications industry continues to experience significant technological change, as evidenced by the ongoing improvements in the capacity and quality of digital technology, the development and commercial acceptance of wireless data services, shorter development cycles for new products and enhancements and changes in end-user requirements and preferences. Our continued success will depend, in part, on our ability to anticipate or adapt to technological changes and to offer, on a timely basis, services that meet customer demands.

 

In the future, competitors may seek to provide competing wireless telecommunications service through the use of developing 4G technologies, such as WiMax and Long Term Evolution, or LTE. We currently expect to conduct a limited trial of LTE technology later this year. We cannot predict, however, which of many possible future technologies, products or services will be important to maintain our competitive position or what expenditures we will be required to make in order to develop and provide these technologies, products and services. The cost of implementing or competing against future technological innovations may be prohibitive to us, and we may lose customers if we fail to keep up with these changes. For example, we have expended a substantial amount of capital to upgrade our network with EvDO technology to offer advanced data services. In addition, we may be required to acquire additional spectrum to deploy these new technologies, which we cannot guarantee would be available to us at a reasonable cost, on a timely basis or at all. There are also risks that current or future versions of the wireless technologies and evolutionary path that we have selected or may select may not be demanded by customers or provide the advantages that we expect. If such upgrades, technologies or services do not become commercially acceptable, our revenues and competitive position could be materially and adversely affected. We cannot assure you that there will be widespread demand for advanced data services or that this demand will develop at a level that will allow us to earn a reasonable return on our investment. In addition, there are risks that other wireless carriers on whose networks our customers roam may change their technology to other technologies that are incompatible with ours. As a result, the ability of our customers to roam on such carriers’ wireless networks could be adversely affected. If these risks materialize, our business, financial condition or results of operations could be materially adversely affected.

 

In addition, CDMA2000-based infrastructure networks serve a relatively small minority of wireless users worldwide and could become less popular in the future, which could raise the cost to us of network equipment and handsets that use that technology relative to the cost of handsets and network equipment that utilize other technologies.

 

The Loss of Key Personnel and Difficulty Attracting and Retaining Qualified Personnel Could Harm Our Business.

 

We believe our success depends heavily on the contributions of our employees and on attracting, motivating and retaining our officers and other management and technical personnel. We do not, however, generally provide employment contracts to our employees. If we are unable to attract and retain the qualified employees that we need, our business may be harmed.

 

We have experienced higher than normal employee turnover in the past, in part because of our bankruptcy, including turnover of individuals at the most senior management levels. In addition, our business is managed by a small number of key executive officers, including our CEO, S. Douglas Hutcheson. In September 2007, Amin Khalifa resigned as our executive vice president and CFO, and the board of directors appointed Mr. Hutcheson to serve as acting CFO as we searched for a successor to Mr. Khalifa. We announced the appointment of Walter Z. Berger as our executive vice president and CFO in June 2008. In February 2008, Grant Burton, who had served as chief accounting officer and controller since June 2005, assumed a new role as vice president, financial systems and processes. Jeffrey E. Nachbor, joined the company in April 2008 as our senior vice president, financial operations, and was appointed as our chief accounting officer in May 2008. As a result, several members of our senior management, including those responsible for our finance and accounting functions, have either been hired or appointed to new positions over a relatively short period of time, and it may take time to fully integrate these individuals into their new roles. The loss of key individuals in the future may have a material adverse impact on our ability to effectively manage and operate our business. In addition, we may have difficulty attracting and retaining key personnel in future periods, particularly if we were to experience poor operating or financial performance.

Risks Associated With Wireless Handsets Could Pose Product Liability, Health and Safety Risks That Could Adversely Affect Our Business.

 

We do not manufacture handsets or other equipment sold by us and generally rely on our suppliers to provide us with safe equipment. Our suppliers are required by applicable law to manufacture their handsets to meet certain governmentally imposed safety criteria. However, even if the handsets we sell meet the regulatory safety criteria, we could be held liable with the equipment manufacturers and suppliers for any harm caused by products we sell if such products are later found to have design or manufacturing defects. We generally have indemnification agreements with the manufacturers who supply us with handsets to protect us from direct losses associated with product liability, but we cannot guarantee that we will be fully protected against all losses associated with a product that is found to be defective.

 

Media reports have suggested that the use of wireless handsets may be linked to various health concerns, including cancer, and may interfere with various electronic medical devices, including hearing aids and pacemakers. Certain class action lawsuits have been filed in the industry claiming damages for alleged health problems arising from the use of wireless handsets. In addition, interest groups have requested that the FCC investigate claims that wireless technologies pose health concerns and cause interference with airbags, hearing aids and other medical devices. The media has also reported incidents of handset battery malfunction, including reports of batteries that have overheated. Malfunctions have caused at least one major handset manufacturer to recall certain batteries used in its handsets, including batteries in a handset sold by Cricket and other wireless providers.

 

Concerns over possible health and safety risks associated with radio frequency emissions and defective products may discourage the use of wireless handsets, which could decrease demand for our services, or result in regulatory restrictions or increased requirements on the location and operation of cell sites, which could increase our operating expenses. Concerns over possible safety risks could decrease the demand for our services. For example, in early 2008, a technical defect was discovered in one of our manufacturer’s handsets which appeared to prevent a portion of 911 calls from being heard by the operator. After learning of the defect, we instructed our retail locations to temporarily cease selling the handsets, notified our customers of the matter and directed them to bring their handsets into our retail locations to receive correcting software. If one or more Cricket customers were harmed by a defective product provided to us by a manufacturer and subsequently sold in connection with our services, our ability to add and maintain customers for Cricket service could be materially adversely affected by negative public reactions.

 

There also are some safety risks associated with the use of wireless handsets while driving. Concerns over these safety risks and the effect of any legislation that has been and may be adopted in response to these risks could limit our ability to sell our wireless service.

 

We Rely Heavily on Third Parties to Provide Specialized Services; a Failure by Such Parties to Provide the Agreed Upon Products or Services Could Materially Adversely Affect Our Business, Results of Operations and Financial Condition.

 

We depend heavily on suppliers and contractors with specialized expertise in order for us to efficiently operate our business. In the past, our suppliers, contractors and third-party retailers have not always performed at the levels we expect or at the levels required by their contracts. If key suppliers, contractors, service providers or third-party retailers fail to comply with their contracts, fail to meet our performance expectations or refuse or are unable to supply or provide services to us in the future, our business could be severely disrupted. Generally, there are multiple sources for the types of products and services we purchase or use. However, some suppliers and contractors are the exclusive sources of specific products and services that we rely upon for billing, customer care, sales, accounting and other areas in our business. For example, in December 2008 we entered into a long-term, exclusive services agreement with Convergys Corporation for the implementation and ongoing management of a new billing system. In addition, we currently rely on a limited number of third-party vendors to provide customer care services, and we intend to transition those services to multiple vendors later in 2009. We also use a limited number of vendors to provide payment processing services, and in a significant number of our markets, the majority of these services may be provided by a single vendor. In addition, a limited number of vendors currently provide a majority of our voice and data communications transport services. Because of the costs and time lags that can be associated with transitioning from one supplier or service provider to another, our business could be substantially disrupted if we

were required to replace the products or services of one or more major suppliers or service providers with products or services from another source, especially if the replacement became necessary on short notice. Any such disruption could have a material adverse effect on our business, results of operations and financial condition.

 

System Failures, Security Breaches, Business Disruptions and Unauthorized Use or Interference with our Network Could Result in Higher Churn, Reduced Revenue and Increased Costs, and Could Harm Our Reputation.

 

Our technical infrastructure (including our network infrastructure and ancillary functions supporting our network such as service activation, billing and customer care) is vulnerable to damage or interruption from technology failures, power surges or outages, natural disasters, fires, human error, terrorism, intentional wrongdoing or similar events. Unanticipated problems at our facilities or with our technical infrastructure, system or equipment failures, hardware or software failures or defects, computer viruses or hacker attacks could affect the quality of our services and cause network service interruptions. Unauthorized access to or use of customer or account information, including credit card or other personal data, could result in harm to our customers and legal actions against us, and could damage our reputation. In addition, earthquakes, floods, hurricanes, fires and other unforeseen natural disasters or events could materially disrupt our business operations or the provision of Cricket service in one or more markets. During the third quarter of 2008, our customer acquisitions, cost of service and revenues in certain markets were adversely affected by Hurricane Ike and related weather systems. Our business operations in markets near the Mexican border or elsewhere could be impacted if the April 2009 outbreak of H1N1 Flu, or “swine flu,” were to worsen and potentially cause us or any of our dealers or other distributors to temporarily close retail outlets, which could potentially affect the volume of customer traffic. Any costs we incur to restore, repair or replace our network or technical infrastructure, and any costs associated with detecting, monitoring or reducing the incidence of unauthorized use, may be substantial and increase our cost of providing service. In addition, we are in the process of upgrading some of our internal business systems, and we cannot assure you that we will not experience delays or interruptions while we transition our data and existing systems onto our new systems. In December 2008, we entered into a long-term, exclusive services agreement with Convergys Corporation for the implementation and ongoing management of a new billing system. To help facilitate the transition of customer billing from our current vendor, VeriSign, Inc., to Convergys, we acquired VeriSign’s billing system software and simultaneously entered into a transition services agreement to enable Convergys to provide us with billing services using the existing VeriSign software until the conversion to the new system is complete. We also intend to implement a new inventory management system. Any failure in or interruption of systems that we or third parties maintain to support ancillary functions, such as billing, point of sale, inventory management, customer care and financial reporting, could materially impact our ability to timely and accurately record, process and report information important to our business. If any of the above events were to occur, we could experience higher churn, reduced revenues and increased costs, any of which could harm our reputation and have a material adverse effect on our business, financial condition or results of operations.

 

We May Not Be Successful in Protecting and Enforcing Our Intellectual Property Rights.

 

We rely on a combination of patent, service mark, trademark, and trade secret laws and contractual restrictions to establish and protect our proprietary rights, all of which only offer limited protection. We endeavor to enter into agreements with our employees and contractors and agreements with parties with whom we do business in order to limit access to and disclosure of our proprietary information. Despite our efforts, the steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary rights. Moreover, others may independently develop processes and technologies that are competitive to ours. The enforcement of our intellectual property rights may depend on any legal actions that we undertake against such infringers being successful, but we cannot be sure that any such actions will be successful, even when our rights have been infringed.

 

We cannot assure you that our pending, or any future, patent applications will be granted, that any existing or future patents will not be challenged, invalidated or circumvented, that any existing or future patents will be enforceable, or that the rights granted under any patent that may issue will provide us with any competitive advantages.

 

In addition, we cannot assure you that any trademark or service mark registrations will be issued with respect to pending or future applications or that any registered trademarks or service marks will be enforceable or provide

adequate protection of our brands. Our inability to secure trademark or service mark protection with respect to our brands could have a material adverse effect on our business, financial condition and results of operations.

 

We and Our Suppliers May Be Subject to Claims of Infringement Regarding Telecommunications Technologies That Are Protected By Patents and Other Intellectual Property Rights.

 

Telecommunications technologies are protected by a wide array of patents and other intellectual property rights. As a result, third parties have asserted and may in the future assert infringement claims against us or our suppliers based on our or their general business operations, the equipment, software or services that we or they use or provide, or the specific operation of our wireless networks. For example, see “Part II — Item 1. Legal Proceedings — Patent Litigation” of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, which is incorporated by reference herein, for a description of certain patent infringement lawsuits that have been brought against us. Due in part to the growth and expansion of our business operations, we have become subject to increased amounts of litigation, including disputes alleging patent infringement. If plaintiffs in any patent litigation matters brought against us were to prevail, we could be required to pay substantial damages or settlement costs, which could have a material adverse effect on our business, financial condition and results of operations.

 

We generally have indemnification agreements with the manufacturers, licensors and suppliers who provide us with the equipment, software and technology that we use in our business to help protect us against possible infringement claims. However, depending on the nature and scope of a possible claim, we may not be entitled to seek indemnification from the manufacturer, vendor or supplier under the terms of the agreement. In addition, to the extent that we may be entitled to seek indemnification under the terms of an agreement, we cannot guarantee that the financial condition of an indemnifying party will be sufficient to protect us against all losses associated with infringement claims or that we would be fully indemnified against all possible losses associated with a possible claim. In addition, our suppliers may be subject to infringement claims that could prevent or make it more expensive for them to supply us with the products and services we require to run our business, which could have the effect of slowing or limiting our ability to introduce products and services to our customers. Moreover, we may be subject to claims that products, software and services provided by different vendors which we combine to offer our services may infringe the rights of third parties, and we may not have any indemnification from our vendors for these claims. Whether or not an infringement claim against us or a supplier is valid or successful, it could materially adversely affect our business, financial condition or results of operations by diverting management attention, involving us in costly and time-consuming litigation, requiring us to enter into royalty or licensing agreements (which may not be available on acceptable terms, or at all) or requiring us to redesign our business operations or systems to avoid claims of infringement. In addition, infringement claims against our suppliers could also require us to purchase products and services at higher prices or from different suppliers and could adversely affect our business by delaying our ability to offer certain products and services to our customers.

 

Regulation by Government Agencies May Increase Our Costs of Providing Service or Require Us to Change Our Services.

 

The FCC regulates the licensing, construction, modification, operation, ownership, sale and interconnection of wireless communications systems, as do some state and local regulatory agencies. We cannot assure you that the FCC or any state or local agencies having jurisdiction over our business will not adopt regulations or take other enforcement or other actions that would adversely affect our business, impose new costs or require changes in current or planned operations. In addition, state regulatory agencies are increasingly focused on the quality of service and support that wireless carriers provide to their customers and several agencies have proposed or enacted new and potentially burdensome regulations in this area.

 

We also cannot assure you that the Communications Act, from which the FCC obtains its authority, will not be further amended in a manner that could be adverse to us. For example, the FCC has implemented rule changes and sought comment on further rule changes focused on addressing alleged abuses of its designated entity program, which gives certain categories of small businesses preferential treatment in FCC spectrum auctions based on size. In that proceeding, the FCC has re-affirmed its goals of ensuring that only legitimate small businesses benefit from the program, and that such small businesses are not controlled or manipulated by larger wireless carriers or other investors that do not meet the small business qualification tests. The scope and applicability of these rule changes to these designated entity structures remain in flux, and the changes remain subject to administrative and judicial

review. On March 26, 2009, the United States Court of Appeals for the District of Columbia Circuit rejected one of the pending judicial challenges to the designated entity rules, and another appeal of these rules remains pending in the United States Court of Appeals for the Third Circuit that seeks to overturn the results of the AWS and 700 MHz auctions. We cannot predict the degree to which rule changes, judicial review of the designated entity rules or increased regulatory scrutiny that may follow from these proceedings will affect our current or future business ventures, licenses acquired in the challenged auctions, or our participation in future FCC spectrum auctions.

 

The Digital Millennium Copyright Act, or DMCA, prohibits the circumvention of technological measures employed to protect a copyrighted work, or access control. However, under the DMCA, the Copyright Office of the Library of Congress, or the Copyright Office, has the authority to exempt for three years certain activities from copyright liability that otherwise might be prohibited by that statute. In November 2006, the Copyright Office granted an exemption to the DMCA to allow circumvention of software locks and other firmware that prohibit a wireless handset from connecting to a wireless network when such circumvention is accomplished for the sole purpose of lawfully connecting the wireless handset to another wireless telephone network. This exemption is effective through October 27, 2009 unless extended by the Copyright Office. The DMCA copyright exemption facilitates our current practice of allowing customers to bring in unlocked, or “reflashed,” phones that they already own and may have used with another wireless carrier, and activate them on our network. We and other carriers have asked the Copyright Office to extend the current or substantially similar exemption for another three-year period. However, we are unable to predict the outcome of the Copyright Office’s determination to continue the exemption or the effect that a Copyright Office decision not to extend the exemption might have on our business. To the extent that the Copyright Office determines not to extend this exemption and this prevents us from activating “reflashed” handsets on our network, this could have a material adverse impact on our business, financial condition and results of operations.

 

Under existing law, no more than 20% of an FCC licensee’s capital stock may be owned, directly or indirectly, or voted by non-U.S. citizens or their representatives, by a foreign government or its representatives or by a foreign corporation. If an FCC licensee is controlled by another entity (as is the case with Leap’s ownership and control of subsidiaries that hold FCC licenses), up to 25% of that entity’s capital stock may be owned or voted by non-U.S. citizens or their representatives, by a foreign government or its representatives or by a foreign corporation. Foreign ownership above the 25% holding company level may be allowed if the FCC finds such higher levels consistent with the public interest. The FCC has ruled that higher levels of foreign ownership, even up to 100%, are presumptively consistent with the public interest with respect to investors from certain nations. If our foreign ownership were to exceed the permitted level, the FCC could revoke our wireless licenses, which would have a material adverse effect on our business, financial condition and results of operations. Although we could seek a declaratory ruling from the FCC allowing the foreign ownership or could take other actions to reduce our foreign ownership percentage in order to avoid the loss of our licenses, we cannot assure you that we would be able to obtain such a ruling or that any other actions we may take would be successful.

 

We also are subject, or potentially subject, to numerous additional rules and requirements, including universal service obligations; number portability requirements; number pooling rules; rules governing billing, subscriber privacy and customer proprietary network information; roaming obligations; rules that require wireless service providers to configure their networks to facilitate electronic surveillance by law enforcement officials; rate averaging and integration requirements; rules governing spam, telemarketing and truth-in-billing; and rules requiring us to offer equipment and services that are accessible to and usable by persons with disabilities, among others. There also pending proceedings exploring the imposition of various types of nondiscrimination and open access obligations on our handsets and networks; the prohibition of handset exclusivity; the possible re-imposition of bright-line spectrum aggregation requirements; further regulation of special access used for wireless backhaul services; and the effects of the siting of communications towers on migratory birds, among others. Some of these requirements and pending proceedings (of which the foregoing examples are not an exhaustive list) pose technical and operational challenges to which we, and the industry as a whole, have not yet developed clear solutions. These requirements generally are the subject of pending FCC or judicial proceedings, and we are unable to predict how they may affect our business, financial condition or results of operations.

 

Our operations are subject to various other laws and regulations, including those regulations promulgated by the Federal Trade Commission, the Federal Aviation Administration, the Environmental Protection Agency, the

Occupational Safety and Health Administration, other federal agencies and state and local regulatory agencies and legislative bodies. Adverse decisions or regulations of these regulatory bodies could negatively impact our operations and costs of doing business. Because of our smaller size, legislation or governmental regulations and orders can significantly increase our costs and affect our competitive position compared to other larger telecommunications providers. We are unable to predict the scope, pace or financial impact of regulations and other policy changes that could be adopted by the various governmental entities that oversee portions of our business.

 

If Call Volume or Wireless Broadband Usage Exceeds Our Expectations, Our Costs of Providing Service Could Increase, Which Could Have a Material Adverse Effect on Our Operating Expenses.

 

Cricket Wireless customers generally use their handsets for voice calls for an average of approximately 1,500 minutes per month, and some markets experience substantially higher call volumes. Our Cricket Wireless service plans bundle certain features, long distance and unlimited service in Cricket calling areas for a fixed monthly fee to more effectively compete with other telecommunications providers. In September 2007, we introduced our unlimited mobile broadband offering, Cricket Broadband, into select markets. As of June 30, 2009, our Cricket Broadband service was available in all of our and our joint ventures’ Cricket markets, and we intend to make the service available in any new Cricket markets that we may launch. In October 2008, we began an introductory launch of Cricket PAYGo, our daily unlimited prepaid wireless service, and in April 2009 we expanded the availability of the service to make Cricket PAYGo available in all of our and our consolidated joint ventures’ Cricket markets.

 

If customers exceed expected usage for our voice or mobile broadband services, we could face capacity problems and our costs of providing the services could increase. Although we own less spectrum in many of our markets than our competitors, we seek to design our network to accommodate our expected high rates of usage of voice and mobile broadband services, and we consistently assess and try to implement technological improvements to increase the efficiency of our wireless spectrum. However, if future wireless use by Cricket customers exceeds the capacity of our network, service quality may suffer. We may be forced to raise the price of our voice or mobile broadband services to reduce volume or otherwise limit the number of new customers, or incur substantial capital expenditures to improve network capacity or quality.

 

We May Be Unable to Acquire Additional Spectrum in the Future at a Reasonable Cost or on a Timely Basis.

 

Because we offer unlimited calling services for a fixed rate, our customers’ average minutes of use per month is substantially above U.S. averages. In addition, customer usage of our Cricket Broadband service has been significant. We intend to meet demand for our wireless services by utilizing spectrally efficient technologies. Despite our recent spectrum purchases, there may come a point where we need to acquire additional spectrum in order to maintain an acceptable grade of service or provide new services to meet increasing customer demands. In the future, we may be required to acquire additional spectrum to deploy new technologies, such as WiMax or LTE. In addition, we also may acquire additional spectrum in order to enter new strategic markets. However, we cannot assure you that we will be able to acquire additional spectrum at auction or in the after-market at a reasonable cost or that additional spectrum would be made available by the FCC on a timely basis. In addition, the FCC may impose conditions on the use of new wireless broadband mobile spectrum, such as heightened build-out requirements or open access requirements, that may make it less attractive or economical for us. If such additional spectrum is not available to us when required on reasonable terms or at a reasonable cost, our business, financial condition and results of operations could be materially adversely affected.

 

Our Wireless Licenses Are Subject to Renewal and May Be Revoked in the Event That We Violate Applicable Laws.

 

Our existing wireless licenses are subject to renewal upon the expiration of the 10-year or 15-year period for which they are granted, which renewal period commenced for some of our PCS wireless licenses in 2006. The FCC will award renewal expectancy to a wireless licensee that timely files a renewal application, has provided substantial service during its past license term and has substantially complied with applicable FCC rules and policies and the Communications Act. Historically, the FCC has approved our license renewal applications. However, the Communications Act provides that licenses may be revoked for cause and license renewal applications denied if the FCC determines that a renewal would not serve the public interest. In addition, if we fail to timely file to renew any

wireless license, or fail to meet any regulatory requirements for renewal, including construction and substantial service requirements, we could be denied a license renewal. Many of our wireless licenses are subject to interim or final construction requirements and there is no guarantee that the FCC will find our construction, or the construction of prior licensees, sufficient to meet the build-out or renewal requirements. FCC rules provide that applications competing with a license renewal application may be considered in comparative hearings, and establish the qualifications for competing applications and the standards to be applied in hearings. We cannot assure you that the FCC will renew our wireless licenses upon their expiration. If any of our wireless licenses were to be revoked or not renewed upon expiration, we would not be permitted to provide services under that license, which could have a material adverse effect on our business, results of operations and financial condition.

 

Future Declines in the Fair Value of Our Wireless Licenses Could Result in Future Impairment Charges.

 

As of June 30, 2009, the carrying value of our wireless licenses and those of Denali License Sub and LCW License was approximately $1.9 billion. During the years ended December 31, 2008, 2007 and 2006, we recorded impairment charges of $0.2 million, $1.0 million and $7.9 million, respectively.

 

The market values of wireless licenses have varied dramatically over the last several years, and may vary significantly in the future. Valuation swings could occur for a variety of reasons relating to supply and demand, including:

 

 

In addition, the price of wireless licenses could decline as a result of the FCC’s pursuit of policies designed to increase the number of wireless licenses available in each of our markets. For example, during the past two years, the FCC auctioned additional spectrum in the 1700 MHz to 2100 MHz band in Auction #66 and the 700 MHz band in Auction #73, and has announced that it intends to auction additional spectrum in the 2.5 GHz band. If the market value of wireless licenses were to decline significantly, the value of our wireless licenses could be subject to noncash impairment charges.

 

We assess potential impairments to our indefinite-lived intangible assets, including wireless licenses, annually and when there is evidence that events or changes in circumstances indicate that an impairment condition may exist. We conduct our annual tests for impairment of our wireless licenses during the third quarter of each year. Estimates of the fair value of our wireless licenses are based primarily on available market prices, including successful bid prices in FCC auctions and selling prices observed in wireless license transactions, pricing trends among historical wireless license transactions, our spectrum holdings within a given market relative to other carriers’ holdings and qualitative demographic and economic information concerning the areas that comprise our markets. A significant impairment loss could have a material adverse effect on our operating income and on the carrying value of our wireless licenses on our balance sheet.

 

Declines in Our Operating Performance Could Ultimately Result in an Impairment of Our Indefinite-Lived Assets, Including Goodwill, or Our Long-Lived Assets, Including Property and Equipment.

 

We assess potential impairments to our long-lived assets, including property and equipment and certain intangible assets, when there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. We assess potential impairments to indefinite-lived intangible assets, including goodwill and wireless licenses, annually and when there is evidence that events or changes in circumstances indicate that an impairment condition may exist. General economic conditions in the U.S. have recently adversely impacted the trading prices of securities of many U.S. companies, including Leap, due to concerns regarding recessionary economic conditions, tighter credit conditions, the subprime lending and financial crisis, volatile energy costs, a substantial slowdown in economic activity, decreased consumer confidence and other factors. In addition, the trading prices of the securities of telecommunications companies have been highly volatile. During the twelve months ended June 30, 2009, the closing price of Leap’s common stock ranged from a high of $48.85 per share to a low of $15.46 per share, and the closing price of Leap’s common stock was $15.24 on October 14, 2009. If the

trading price of Leap common stock were to be adversely affected for a sustained period of time, due to worsening general economic conditions, significant changes in our financial or operating performance, evolving competition or other factors, these events could ultimately result in a non-cash impairment charge related to our long-lived and/or our indefinite-lived intangible assets. A significant impairment loss could have a material adverse effect on our operating results and on the carrying value of our goodwill or wireless licenses and/or our long-lived assets on our balance sheet.

 

We May Incur Higher Than Anticipated Intercarrier Compensation Costs.

 

When our customers use our service to call customers of other carriers, we are required under the current intercarrier compensation scheme to pay the carrier that serves the called party, and any intermediary or transit carrier, for the use of their networks. Similarly, when a customer of another carrier calls one of our customers, that carrier is required to pay us. While in most cases we have been successful in negotiating agreements with other carriers that impose reasonable reciprocal compensation arrangements, some carriers have claimed a right to unilaterally impose what we believe to be unreasonably high charges on us. The FCC is actively considering possible regulatory approaches to address this situation but we cannot assure you that any FCC rules or regulations will be beneficial to us. The enactment of adverse FCC rules or regulations or any FCC inaction could result in carriers successfully collecting higher intercarrier fees from us, which could materially adversely affect our business, financial condition and results of operations.

 

The FCC also is considering making various significant changes to the intercarrier compensation scheme to which we are subject. We cannot predict with any certainty the likely outcome of this FCC proceeding. Some of the alternatives that are under active consideration by the FCC could severely increase the interconnection costs we pay. If we are unable to cost-effectively provide our products and services to customers, our competitive position and business prospects could be materially adversely affected.

 

If We Experience High Rates of Credit Card, Subscription or Dealer Fraud, Our Ability to Generate Cash Flow Will Decrease.

 

Our operating costs can increase substantially as a result of customer credit card, subscription or dealer fraud. We have implemented a number of strategies and processes to detect and prevent efforts to defraud us, and we believe that our efforts have substantially reduced the types of fraud we have identified. However, if our strategies are not successful in detecting and controlling fraud, the resulting loss of revenue or increased expenses could have a material adverse impact on our financial condition and results of operations.

 

Our Directors and Affiliated Entities Have Substantial Influence over Our Affairs, and Our Ownership Is Highly Concentrated. Sales of a Significant Number of Shares by Large Stockholders May Adversely Affect the Market Price of Leap Common Stock.

 

Our directors and entities affiliated with them beneficially owned in the aggregate approximately 20.8% of Leap common stock as of July 31, 2009. Moreover, our four largest stockholders and entities affiliated with them beneficially owned in the aggregate approximately 47.9% of Leap common stock as of July 31, 2009. These stockholders have the ability to exert substantial influence over all matters requiring approval by our stockholders. These stockholders will be able to influence the election and removal of directors and any merger, consolidation or sale of all or substantially all of Leap’s assets and other matters. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control or impeding a merger or consolidation, takeover or other business combination.

 

Risks Related to the Exchange Offer

 

You May Have Difficulty Selling the Old Notes You Do Not Exchange.

 

If you do not exchange your old notes for new notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your old notes as described in the legend on the global notes representing the old notes. There are restrictions on transfer of your old notes because we issued the old notes under an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the old notes if they are registered under the Securities Act and applicable state

securities laws or offered and sold under an exemption from, or in a transaction not subject to, these requirements. We do not intend to register any old notes not tendered in the exchange offer and, upon consummation of the exchange offer, you will not be entitled to any rights to have your untendered old notes registered under the Securities Act. In addition, the trading market, if any, for the remaining old notes will be adversely affected depending on the extent to which old notes are tendered and accepted in the exchange offer.

 

Broker-Dealers May Need To Comply With the Registration and Prospectus Delivery Requirements of the Securities Act.

 

Any broker-dealer that (1) exchanges its old notes in the exchange offer for the purpose of participating in a distribution of the new notes or (2) resells new notes that were received by it for its own account in the exchange offer may be deemed to have received restricted securities and will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction by that broker- dealer. Any profit on the resale of the new notes and any commission or concessions received by a broker-dealer may be deemed to be underwriting compensation under the Securities Act.

 

You May Not Receive New Notes in the Exchange Offer if the Exchange Offer Procedure Is Not Followed.

 

We will issue the new notes in exchange for your old notes only if you tender the old notes and deliver a properly completed and duly executed letter of transmittal and other required documents before expiration of the exchange offer. You should allow sufficient time to ensure timely delivery of the necessary documents. Neither the exchange agent nor we are under any duty to give notification of defects or irregularities with respect to the tenders of old notes for exchange. If you are the beneficial holder of old notes that are registered in the name of your broker, dealer, commercial bank, trust company or other nominee, and you wish to tender old notes in the exchange offer, you should promptly contact the person in whose name your old notes are registered and instruct that person to tender your old notes on your behalf.

 

Risks Related to the New Notes

 

The Value of the Collateral May Not Be Sufficient to Repay the Notes in Full.

 

The notes and the guarantees are secured by first-priority liens on the collateral described in this prospectus (subject to certain exceptions and permitted liens, including liens on the collateral securing any permitted priority debt that may be incurred in the future (up to the lesser of 0.30 times our consolidated cash flow for the prior four fiscal quarters and $300 million in aggregate principal amount outstanding)), equally and ratably with all parity lien debt. No independent appraisals of any of the collateral have been prepared by or on behalf of us in connection with the issuance of the notes or this exchange offer. In the event of a foreclosure or liquidation of the collateral securing the notes and the guarantees, the value realized on the collateral will depend upon many factors, including market and economic conditions, the availability of buyers and the condition of the collateral. The value of the collateral could be impaired in the future as a result of changing economic and market conditions, our failure to successfully implement our business strategy, competition and other factors. A significant portion of the collateral may include assets that may only be usable as part of the existing operating business. Additionally, our obligation to make payments on the notes is secured only by the collateral described in this prospectus and, in particular, our leasehold and other real property interests (which are necessary for the current operation of our business) do not constitute collateral for the notes. Accordingly, any sale of the collateral separate from the sale of Cricket or substantially all of the assets of our business as a whole may not be feasible or of any value.

 

Furthermore, by their nature some or all of the collateral may be illiquid and have no readily ascertainable market value. The book value of the collateral should not be relied on as a measure of realizable value for such assets. We cannot assure you that the collateral can be sold in a short period of time or at all or that the proceeds from the sale of the collateral (after payment of expenses of the sale and repayment of indebtedness (including permitted priority debt and parity lien debt and other obligations secured by permitted liens) secured by liens on the collateral which might under applicable law, or otherwise, rank prior to or equally and ratably with the lien on the collateral securing the notes and guarantees) would be sufficient to repay noteholders all amounts owed under the notes. To the extent that the proceeds of the collateral are not sufficient to repay amounts owed under the notes, then holders of the notes would have a general unsecured claim against our remaining assets.

It May Be Difficult to Realize the Value of the Collateral Pledged to Secure the Notes.

 

Our and the guarantors’ obligations under the notes and the guarantees are secured only by the collateral described in this prospectus. The collateral trustee’s ability to foreclose on the collateral on behalf of the holders of the notes may be subject to perfection, the consent of third parties, contractual restrictions (including those contained in the collateral trust agreement and the intercreditor agreement), prior approval by the FCC, priority issues, state law requirements and practical problems associated with the realization of the collateral trustee’s security interest in the collateral, including cure rights, foreclosing on the collateral within the time periods permitted by third parties or prescribed by laws, statutory rights of redemption, and the effect of the order of foreclosure. In particular, the collateral trustee will not be legally permitted to exercise any rights with respect to the collateral upon the occurrence of an event of default if such action would constitute or result in any assignment of any of our wireless licenses or any other form of change of control (whether as a matter of law or fact) of the entity holding any wireless license unless any necessary prior approval of the FCC is obtained. There can be no assurance that any such required approval can be obtained on a timely basis or at all. We cannot assure you that the consents of any other third parties and approvals by other governmental entities will be given when required to facilitate a foreclosure on such assets. These requirements may limit the number of potential bidders for certain items of collateral in any foreclosure and may delay sale, either of which events may have a material adverse effect on the sale price of the collateral. Therefore, the practical value of realizing on the collateral may, without the appropriate consents, prior approval of the FCC and related filings, be limited. Additionally, our obligation to make payments on the notes is secured only by the collateral described in this prospectus and, in particular, our leasehold and other real property interests (which are necessary for the current operation of our business) do not constitute collateral for the notes. Accordingly, we cannot assure you that foreclosure on the collateral will be sufficient to acquire all assets necessary for the operation of our business or to repay the notes in full.

 

In addition, under the Communications Act and the current rules and regulations of the FCC, the FCC does not recognize, will not enforce and will not permit another governmental entity to enforce any pledge, security interest, lien, mortgage, hypothecation, or other encumbrance directly upon any license, permit or authorization issued by the FCC, with the exception of (1) liens and security interests held by the FCC itself and (2) for limited purposes, liens and security interests held by the Rural Utility Service, an agency of the U.S. Department of Agriculture in connection with its financing for the provision of certain rural telecommunication projects. The Communications Act and the current rules and regulations of the FCC also do not accord to a private party a right of “ownership” of the radiofrequency or radiofrequencies used or to be used by such party’s station pursuant to a license, permit or authorization issued by the FCC, nor do the Communications Act and the current rules and regulations of the FCC enable the holder of any such license, permit or authorization to assert a property right in such radiofrequency or radiofrequencies. Consequently the inclusion of our wireless licenses in the collateral described in this prospectus is limited to the extent permitted by applicable law and absent a change in the governing law, does not accord the same rights as exist with regard to the other collateral.

 

Your Right to Receive Payments on the Notes and the Guarantees is Limited by Our and the Guarantors’ Permitted Priority Debt, Parity Lien Debt, Other Obligations Secured by Liens That Are Pari Passu or Senior to the Liens Securing the Notes or Secured by Assets That Are Not Part of the Collateral, and by the Liabilities of Our Designated Entities and Non-Guarantor Subsidiaries.

 

The indenture governing the notes permits the incurrence of permitted priority debt and parity lien debt. The liens securing the notes and the guarantees would be subordinated to the liens securing any permitted priority debt and would be pari passu with the liens securing any parity lien debt. As described in “Description of New Notes — Collateral Trust Agreement” and “Description of New Notes — Provisions of the Indenture Relating to Security,” if, pursuant to the exercise of any default remedies set forth in the collateral trust agreement, the intercreditor agreement or any other security document, any collateral is sold or otherwise realized upon by the collateral trustee or other applicable secured party, the proceeds received by the collateral trustee or such other secured party in respect of the collateral will be distributed to the holders of the permitted priority debt prior to any distribution of such proceeds to the holders of the notes and any other parity lien debt. Furthermore, any proceeds received by the collateral trustee in respect of the collateral for distribution to the holders of the notes and any other parity lien debt will be shared by all such parties on a pro rata basis. After taking into consideration such applications of proceeds in respect of the collateral, the proceeds, if any, available for distribution to the holders of the notes may not be

sufficient to fully repay such holders all amounts owed under the notes. The indenture does not prohibit us from using the proceeds of any asset sale (including sale of collateral) to repay any permitted priority debt prior to any repayment on the notes. See “Description of New Notes — Repurchase at the Option of Holders — Asset Sales.”

 

In addition, the liens securing the notes and the guarantees are junior to certain other liens, including, without limitation, statutory liens, liens securing capital leases and similar obligations and liens securing obligations of businesses or assets we may acquire in the future. If any assets secured by such prior ranking liens are sold or otherwise realized upon following a default or similar event, the holders of any such prior liens will receive any proceeds thereof prior to any distribution to holders of the notes. In addition, some of these liens may be on assets that are not part of the collateral supporting the notes. Our obligations with respect to the notes are effectively subordinated to obligations secured by liens on those assets, to the extent of the value of those assets.

 

Furthermore, not all of our subsidiaries and none of our designated entities (including LCW Wireless, Denali and their respective subsidiaries) guarantee the notes, and the collateral securing the notes and the guarantees excludes all of their respective assets. See “Description of New Notes — Guarantees.” In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries or designated entities, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those entities before any assets are made available for distribution to us. As a result, the notes are effectively subordinated to the prior payment of all of the liabilities of our non-guarantor subsidiaries and designated entities.

 

The Collateral Can Be Released in Certain Circumstances Without Consent of the Holders of the Notes, Which Would Increase the Risks in Bankruptcy or in Other Situations.

 

Under the terms of the indenture governing the notes, the collateral trust agreement and the intercreditor agreement, we will be permitted to sell or transfer the collateral under certain circumstances. Therefore, the collateral available to secure the notes could be reduced in connection with the sales of assets, permitted investments or otherwise, subject to the use of proceeds requirements of the indenture governing the notes and the agreements governing our other permitted indebtedness (including any permitted priority debt and parity lien debt). See “Description of New Notes — Repurchase at the Option of Holders — Asset Sales” and “Description of New Notes — Collateral Trust Agreement — Release of Liens on Collateral.”

 

The Ability of the Collateral Trustee to Foreclose on the Collateral May Be Limited and the Collateral Securing the Notes Could Be Impaired in the Event We Were to File For Bankruptcy.

 

Subject to the rights of the holders of any permitted priority debt under the intercreditor agreement and the rights under the collateral trust agreement of the holders of any parity lien debt or junior lien debt, upon the occurrence of an event of default, the collateral trustee will have certain rights to foreclose upon and sell the collateral. See “Description of New Notes — Collateral Trust Agreement — Release of Liens on Collateral.” The right and ability of the collateral trustee to repossess and dispose of the collateral upon the occurrence of an event of default under the indenture governing the notes is likely to be significantly impaired by applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or against us or a guarantor prior to the collateral trustee having repossessed and disposed of the collateral. Under applicable bankruptcy law, a secured creditor such as the collateral trustee may be prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without bankruptcy court approval, which may not be given. Moreover, the bankruptcy code permits the debtor, subject to bankruptcy court approval, to continue to retain and use collateral (and the proceeds, products, rents or profits of such collateral) even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to circumstances, but it is intended, in general, to protect the value of the secured creditor’s interest in the collateral and may include, if approved by the court, cash payments or the granting of additional security for any diminution in the value of the collateral as a result of the stay of repossession or the disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. A bankruptcy court may determine that a secured creditor may not require compensation for a diminution in the value of its collateral if the value of the collateral exceeds the debt it secures.

 

In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the notes could be delayed following

commencement of a bankruptcy case, whether or when the collateral trustee could repossess or dispose of the collateral, the value of the collateral at the time of the bankruptcy petition, or whether or to what extent holders of the notes would be compensated for any delay in payment or loss of value of the collateral. Further, the holders of the notes may receive in exchange for their claims a recovery that could be substantially less than the amount of their claims (potentially even nothing) and any such recovery could be in the form of cash, new debt instruments or some other security. Furthermore, in the event the bankruptcy court determines that the value of the collateral is not sufficient to repay all amounts due on the notes, the holders of the notes would have “undersecured claims” as to the difference. Applicable federal bankruptcy laws do not permit the payment or accrual of post-petition interest, costs and attorneys’ fees for “undersecured claims” during the debtor’s bankruptcy case.

 

In addition, the collateral trustee’s ability to foreclose on the collateral on behalf of the holders of the notes may be subject to lack of perfection, the consent of third parties, other liens (including liens securing permitted priority debt) and practical problems associated with the enforcement of the collateral trustee’s security interest in the collateral securing the notes.

 

The Value of the Collateral Securing the Notes May Not be Sufficient to Secure Post-Petition Interest or Costs or Attorneys’ Fees During Bankruptcy.

 

In the event a bankruptcy is commenced by or against us, holders of the notes will only be entitled to post-petition interest, costs and attorneys’ fees under the bankruptcy code to the extent that the value of their security interest in the collateral (which would be determined after taking into consideration, among other things, any prior or parity lien claims of permitted priority debt and parity lien debt in the collateral) is greater than their pre-bankruptcy claim. Holders of indebtedness (including the notes) that have a security interest in collateral with a value equal or less than their pre-bankruptcy claim will not be entitled to post-petition interest, costs and attorneys’ fees under the bankruptcy code. We have not conducted appraisals of any of our assets in connection with the issuance of the notes or this exchange offer and cannot assure you that the value of the noteholders’ interest in the collateral equals or exceeds the principal amount of the notes. In addition, the risk that the value of the security interest in the collateral securing the notes will be less than the pre-bankruptcy claim of the holders of the notes will be exacerbated if a bankruptcy court treats the notes, together with any of our other substantial indebtedness as a single class for determining the availability of post-petition interest, costs and attorneys’ fees.

 

Your Right to Receive Payments on the Notes and the Guarantees and to Exercise Remedies Against the Collateral May Be Substantially Limited by the Terms of an Intercreditor Agreement and/or a Collateral Trust Agreement.

 

In the event that we incur any permitted priority debt, we, the collateral trustee (on behalf of the holders of any parity lien debt (including the notes) and any junior lien debt), the agent (on behalf of the holders of such permitted priority debt), the trustee and the agent or trustee for each other series of parity lien debt and junior lien debt will enter into an intercreditor agreement. Such intercreditor agreement will set forth intercreditor provisions related to the respective rights of the holders of the notes, the other parity lien debt and the junior lien debt, on the one hand, and the rights of the holders of the permitted priority debt, on the other hand. The intercreditor agreement will provide that the holders of any permitted priority debt will have, subject to certain limited exceptions, the exclusive right to manage, perform and enforce the terms of the security documents securing their rights in the collateral, and to exercise and enforce all privileges, rights and remedies thereunder, including to take or retake control or possession of the collateral and to hold or dispose of the collateral. Under the terms of the intercreditor agreement, if an event of default under the permitted priority debt has occurred, the holders of the permitted priority debt will have, subject to certain limited exceptions, the exclusive right to dispose of collateral in connection with the foreclosure or other enforcement of their security interests and liens in the collateral to satisfy obligations with respect to such debt, regardless of whether the proceeds from such disposition are sufficient to satisfy any part of our and the guarantors’ obligations under the notes and the note guarantees. Any collateral subject to such dispositions would cease to act as security for the notes and the note guarantees, as well as our and our guarantors’ obligations under the permitted priority debt and any other indebtedness which is secured by such collateral. Additionally, by virtue of the ability of the holders of the permitted priority debt to direct the administration of the pledges and security interests and the release of the collateral, actions may be taken under the intercreditor agreement that may be adverse to you as a holder of notes. In addition, under the terms of the intercreditor agreement, the holders of the

notes, the other parity lien debt and the junior lien debt will waive certain rights normally accruing to secured creditors, including certain rights in bankruptcy. Certain of the rights of holders of permitted priority debt to control matters governing the exercise of remedies with respect to the collateral, as described above, will no longer apply in the event that the principal amount of funded permitted priority debt obligations plus the aggregate face amount of any letters of credit issued under any permitted priority debt facility and not reimbursed plus the aggregate principal amount of any unfunded commitments under any permitted priority debt facility no longer exceeds $125 million. See “Description of New Notes — Collateral and the Intercreditor Agreement.”

 

We, the trustee and the collateral trustee have entered, and the agents or trustees on behalf of the holders of any future parity lien debt and junior lien debt will enter, into a collateral trust agreement, which sets forth the terms on which the collateral trustee has received and holds the collateral in trust for the benefit of the holders of the notes and the holders of any other parity lien debt and junior lien debt, if any, as well as the intercreditor provisions related to the respective rights of the holders of the notes and any other parity lien debt and junior lien debt. In the event additional parity lien debt is issued in the future, the rights of the holders of the notes with respect to the collateral securing the notes may be substantially limited pursuant to the terms of voting provisions set forth in the collateral trust agreement. Under the terms of the collateral trust agreement, while the holders of parity lien debt (including the notes) generally control all decisions with respect to the collateral, the representative of each series of parity lien debt (including the notes) will vote the total amount of secured debt within that series as a block and the collateral trustee will generally act pursuant to the direction of the holders of a majority in aggregate principal amount of the parity lien debt (including the notes). As such, if parity lien debt in an aggregate principal amount greater than that under the notes at such time is issued in the future, such parity lien debt may be able to direct the collateral trustee with respect to matters related to the collateral (including the commencement and continuance of enforcement proceedings with respect to the collateral) without consent from the holders of the notes. See “Description of New Notes — Collateral Trust Agreement — Voting” and “Description of New Notes — Collateral and the Intercreditor Agreement.”

 

Security Over Certain Collateral on Which a Lien in Favor of the Collateral Trustee is Required Will Not Be in Place on the Issue Date or Will Not Be Perfected on the Issue Date.

 

Certain security interests required under the indenture were not in place on the date of issuance of the old notes or were not perfected on such date, and certain of those security interests may not be in place or perfected on the date of issuance of the new notes. To the extent such security interests were not granted or perfected on the date of issuance of the old notes, we are required to use commercially reasonable efforts to have such security interests thereafter granted and/or perfected, to the extent required by the security documents, promptly following the date of issuance of the old notes, but in no event later than 180 days after the issuance of the old notes. To the extent a security interest in any of the collateral is perfected following the date of issuance of the old notes or the new notes, as applicable, the security interest would remain at risk of having been perfected within 90 days of a bankruptcy filing (in which case it might be voided as a preferential transfer by a trustee in bankruptcy) even after the security interests granted and perfected on the applicable date of issuance were no longer subject to that risk.

 

Rights of Holders of Notes in the Collateral May Be Adversely Affected by the Failure to Perfect Security Interests in Collateral.

 

Applicable law requires that a security interest in certain tangible and intangible assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. The liens on the collateral securing the notes may not be perfected with respect to the claims of the notes if the collateral trustee is not able to or does not take the actions necessary to perfect any of such liens. In addition, applicable law requires that certain property and rights acquired after the grant of a general security interest can only be perfected at the time such property and rights are acquired and identified. There can be no assurance that the collateral trustee will monitor, or that we will inform such collateral trustee of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after-acquired collateral. The collateral trustee has no obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any security interest. Such failure may result in the loss of the security interest in the collateral or the priority of the security interest in favor of the notes against third parties. To the extent that the

security interests created by the security documents with respect to any collateral are not perfected, the collateral trustee’s rights will be equal to the rights of general unsecured creditors in the event of a bankruptcy.

 

The Collateral is Subject to Casualty Risks.

 

We will be obligated to maintain insurance pursuant to the terms of the indenture. However, there are certain losses that may be either uninsurable or not economically insurable, in whole or in part, or against which we may not obtain adequate insurance. As a result, it is possible that insurance proceeds will not compensate us fully for our losses. If there is a total or partial loss of any of the collateral, we cannot assure you that any insurance proceeds received by us will be sufficient to satisfy all of our secured obligations, including the notes.

 

Our Significant Indebtedness Could Adversely Affect Our Financial Health and Prevent Us From Fulfilling Our Obligations.

 

We have now and will continue to have a significant amount of indebtedness. As of June 30, 2009, our total outstanding indebtedness was $2,760.3 million, including $1,100 million of the old notes we are seeking to exchange and $1,650.0 million in unsecured senior indebtedness, which comprised $1,100.0 million of senior notes due 2014, $250.0 million of convertible senior notes due 2014 and $300.0 million of senior notes due 2015.

 

Our significant indebtedness could have material consequences. For example, it could:

 

 

 

 

Any of these risks could impact our ability to fund our operations or limit our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations.

 

Despite Current Indebtedness Levels, We Are Permitted to Incur Additional Indebtedness. This Could Further Increase the Risks Associated With Our Leverage.

 

The terms of the indentures governing Cricket’s senior secured notes (including the new notes) and unsecured senior notes permit us, subject to specified limitations, to incur additional indebtedness, including secured indebtedness. The indenture governing Leap’s convertible senior notes does not limit our ability to incur debt.

 

We may incur additional indebtedness in the future, as market conditions permit, to enhance our liquidity and to provide us with additional flexibility to pursue business expansion efforts, which could consist of debt financing from the public and/or private capital markets. To provide flexibility with respect to any future capital raising alternatives, we have filed a universal shelf registration statement with the SEC to register various debt, equity and other securities, including debt securities, common stock, preferred stock, depository shares, rights and warrants. The securities under this registration statement may be offered from time to time, separately or together, directly by us or through underwriters, at amounts, prices, interest rates and other terms to be determined at the time of any offering.

 

If new indebtedness is added to our current levels of indebtedness, the related risks that we now face could intensify. Furthermore, any significant capital expenditures or increased operating expenses associated with the launch of new product offerings or operating markets will decrease OIBDA and free cash flow for the periods in which we incur such costs, increasing the risk that we may not be able to service our indebtedness.

We May Make Significant Investments in Designated Entities and Other Joint Ventures That Are Not Guarantors of the Notes and Are Not Restricted by the Covenants in the Indentures Governing Cricket’s Senior Secured Notes and Unsecured Senior Notes, and the Collateral Securing the Secured Senior Notes Excludes the Assets of Such Designated Entities and Other Joint Ventures.

 

The terms of the indentures governing Cricket’s senior secured notes (including the new notes) and unsecured senior notes permit us, subject to specified limitations and conditions, to make significant investments in designated entities and other joint venture entities, including additional investments in LCW Wireless and Denali and their respective subsidiaries. These entities are not guarantors of any of the notes and are not restricted by the covenants in such indentures, and the collateral securing the notes does not include any assets of any such entity. Any such investments may affect our ability to satisfy our obligations with respect to the notes.

 

To Service Our Indebtedness and Fund Our Working Capital and Capital Expenditures, We Will Require a Significant Amount of Cash. Our Ability to Generate Cash Depends on Many Factors Beyond Our Control.

 

Our ability to make payments on our indebtedness will depend upon our future operating performance and on our ability to generate cash flow in the future, which are subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations, or that future financing will be available to us, in an amount sufficient to enable us to repay or service our indebtedness or to fund our other liquidity needs or at all. If the cash flow from our operating activities is insufficient for these purposes, we may take actions, such as delaying or reducing capital expenditures (including expenditures to launch new product offerings or build out new markets), attempting to restructure or refinance our indebtedness prior to maturity, selling assets or operations or seeking additional equity capital. Any or all of these actions may be insufficient to allow us to service our debt obligations. Further, we may be unable to take any of these actions on commercially reasonable terms, or at all.

 

We or Our Joint Ventures May Be Unable to Refinance Our Indebtedness.

 

We or our joint ventures may need to refinance all or a portion of our indebtedness before maturity, including indebtedness under the indentures governing Cricket’s senior secured notes (including the new notes) and unsecured senior notes and Leap’s convertible senior notes. Our $1.1 billion aggregate principal amount of 7.75% senior secured notes is due in 2016, our $1.1 billion of 9.375% unsecured senior notes and our $250 million of unsecured convertible senior notes are due in 2014 and our $300 million of 10.0% unsecured senior notes are due in 2015. Outstanding borrowings under LCW Operation’s term loans must be repaid in varying quarterly installments (which commenced in June 2008), with an aggregate final payment of $24.1 million due in June 2011. There can be no assurance that we or our joint ventures will be able to obtain sufficient funds to enable us to repay or refinance any of our indebtedness on commercially reasonable terms or at all.

 

Covenants in Our Indentures and Other Credit Agreements or Indentures That We May Enter Into in the Future May Limit Our Ability to Operate Our Business.

 

The indentures governing Cricket’s senior secured notes (including the new notes) and unsecured senior notes contain covenants that restrict the ability of Leap, Cricket and the subsidiary guarantors to make distributions or other payments to our investors or creditors until we satisfy certain financial tests or other criteria. In addition, these indentures include covenants restricting, among other things, the ability of Leap, Cricket and their restricted subsidiaries to:

 

 

 

The restrictions in the indentures governing Cricket’s senior secured notes (including the new notes) and unsecured senior notes could limit our ability to make borrowings, obtain debt financing, repurchase stock, refinance or pay principal or interest on our outstanding indebtedness, complete acquisitions for cash or debt or react to changes in our operating environment. Any credit agreement or indenture that we may enter into in the future may have similar restrictions.

 

Under the indentures governing the senior secured notes, unsecured senior notes and convertible senior notes, if certain “change of control” events occur, each holder of notes may require us to repurchase all of such holder’s notes at a purchase price equal to 101% of the principal amount of the senior secured notes or the unsecured senior notes, or 100% of the principal amount of our convertible senior notes, plus accrued and unpaid interest.

 

If we default under any of the indentures governing the senior secured notes, unsecured senior notes or convertible senior notes because of a covenant breach or otherwise, all outstanding amounts thereunder could become immediately due and payable. Our failure to timely file our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007 constituted a default under the indenture governing Cricket’s unsecured senior notes due 2014. We cannot assure you that we will be able to obtain a waiver should a default occur in the future. We cannot assure you that we would have sufficient funds to repay all of the outstanding amounts under the indentures governing the senior secured notes, unsecured senior notes and convertible senior notes, and any acceleration of amounts due would have a material adverse effect on our liquidity and financial condition.

 

A Significant Portion of Our Assets Consists of Goodwill and Intangible Assets.

 

As of June 30, 2009, 43.8% of our assets consisted of goodwill, intangible assets and wireless licenses. The value of our assets, and in particular, our intangible assets, will depend on market conditions, the availability of buyers and similar factors. By their nature, our intangible assets may not have a readily ascertainable market value or may not be readily saleable or, if saleable, there may be substantial delays in their liquidation. For example, prior FCC approval is required in order for us to sell, or for any remedies to be exercised under the collateral trust agreement with respect to, our wireless licenses, and obtaining such approval could result in significant delays and reduce the proceeds obtained from the sale or other disposition of our wireless licenses.

 

Leap’s Guarantee Provides Little, If Any, Additional Credit Support For the Notes.

 

Leap’s sole source of operating income and cash flow is currently derived from Cricket and its only material asset is Cricket capital stock. As a result, Leap’s guarantee provides little, if any, additional credit support for the notes.

 

We May Not Have the Ability to Raise the Funds Necessary to Finance the Change of Control Offer Required by the Indentures and, as a Result of a Recent Court Decision, the Ability of Holders of Notes to Require Us to Repurchase Notes as a Result of a Change in the Composition of Our Board of Directors May Be Uncertain.

 

If we experience certain specific kinds of change of control events (which events include the acquisition of beneficial ownership of 35% or more of Leap’s voting securities (other than, in the case of the indenture governing the new notes offered hereby, by a holding company in which no person or group has 35% or more beneficial ownership), a sale of all or substantially all of the assets of Leap and its restricted subsidiaries, and a change in a majority of the members of Leap’s board of directors that is not approved by the board), we will be required to offer to repurchase all of our outstanding unsecured senior notes and convertible senior notes and the notes at 101% of the principal amount of the senior secured notes (including the new notes) and the unsecured senior notes, or 100% of the principal amount of convertible senior notes, plus accrued and unpaid interest and additional interest, if any, thereon, to the date of repurchase. We cannot assure you that we will have available funds sufficient to repurchase the senior secured notes, unsecured senior notes and the convertible senior notes and satisfy other payment obligations that could be triggered upon a change of control. If we do not have sufficient financial resources to effect a change of control offer, we would be required to seek additional financing from outside sources to repurchase the notes. We cannot assure you that financing would be available to us on satisfactory terms, or at all. In addition,

certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a “Change of Control” under the indentures governing our outstanding senior secured notes, unsecured senior notes and convertible senior notes. See “Description of New Notes — Repurchase at the Option of Holders — Change of Control.”

 

The definition of change of control in the indenture governing the new notes offered hereby includes a phrase relating to the direct or indirect sale, transfer, conveyance or other disposition of “all or substantially all” of our and our restricted subsidiaries’ assets, taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of notes to require us to repurchase such notes as a result of a sale, transfer, conveyance or other disposition of less than all of our and our restricted subsidiaries’ assets taken as a whole to another person or group may be uncertain. In addition, a recent Delaware Chancery Court decision raised questions about the enforceability of provisions, which are similar to those in the indenture governing the new notes offered hereby, related to the triggering of a change of control as a result of a change in the composition of a board of directors. Accordingly, the ability of a holder of notes to require us to repurchase notes as a result of a change in the composition of directors on the board of Cricket or Leap may be uncertain.

 

Federal and State Statutes Allow Courts, Under Specific Circumstances, to Void Guarantees and Require Noteholders to Return Payments Received From Us or the Guarantors.

 

Cricket’s creditors or the creditors of the guarantors of the notes could challenge the guarantees as fraudulent conveyances or on other grounds. Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, the delivery of the guarantees could be found to be a fraudulent transfer and declared void if a court determined that the guarantor, at the time it incurred the indebtedness evidenced by its guarantee (1) delivered the guarantee with the intent to hinder, delay or defraud its existing or future creditors; or (2) received less than reasonably equivalent value or did not receive fair consideration for the delivery of the guarantee and any of the following three conditions apply: