Cricket Wireless 2010 Annual Report Download - page 115

charge of $0.8 million, $0.6 million and $0.2 million during the years ended December 31, 2010, 2009 and 2008,
respectively, to reduce the carrying values of certain non-operating wireless licenses to their estimated fair values.
As more fully described below, the fair value of these non-operating wireless licenses was determined using Level 3
inputs in accordance with the authoritative guidance for fair value measurements.
The valuation method the Company uses to determine the fair value of its wireless licenses is the market
approach. Under this method, the Company determines fair value by comparing its wireless licenses to sales prices
of other wireless licenses of similar size and type that have been recently sold through government auctions and
private transactions. As part of this market-level analysis, the fair value of each wireless license is evaluated and
adjusted for developments or changes in legal, regulatory and technical matters, and for demographic and economic
factors, such as population size, composition, growth rate and density, household and disposable income, and
composition and concentration of the market’s workforce in industry sectors identified as wireless-centric (e.g., real
estate, transportation, professional services, agribusiness, finance and insurance).
As more fully described above, the most significant factor used to determine the fair value of the Company’s
wireless licenses is comparable sales transactions. Other factors used in determining fair value include
developments or changes in legal, regulatory and technical matters as well as demographic and economic
factors. Changes in comparable sales prices would generally result in a corresponding change in fair value. For
example, a 10% decline in comparable sales prices would generally result in a 10% decline in fair value. However, a
decline in comparable sales would likely require further adjustment to fair value to capture more recent macro-
economic changes and changes in the demographic and economic characteristics unique to the Company’s wireless
licenses, such as population size, composition, growth rate and density, household and disposable income, and the
extent of the wireless-centric workforce in the markets covered by the Company’s wireless licenses. Spectrum
auctions and comparable sales transactions in recent periods have resulted in modest increases to the aggregate fair
value of the Company’s and Savary Island’s wireless licenses as increases in fair value in larger markets were
slightly offset by decreases in fair value in markets with lower population densities. In addition, favorable
developments in technical matters such as spectrum clearing and device availability have positively impacted the
fair value of a significant portion of their wireless licenses. Partially offsetting these increases in value were
demographic and economic-related adjustments that were required to capture current economic developments.
These demographic and economic factors resulted in a decline in fair value for certain of the Company’s and Savary
Island’s wireless licenses.
As a result of the valuation analysis discussed above, the fair value of the Company’s wireless licenses
determined in the 2010 annual impairment test increased by approximately 13% from the annual impairment test
performed in 2009 (as adjusted to reflect the effects of the Company’s acquisitions and dispositions of wireless
licenses during the period). As of the Company’s 2010 annual impairment test, the fair value of the Company’s and
Savary Island’s wireless licenses significantly exceeded their carrying value. The aggregate fair value of the
Company’s and Savary Island’s individual wireless licenses was $2,734.7 million, which when compared to their
respective aggregate carrying value of $1,920.0 million, yielded significant excess value.
In connection with the Company’s 2010 annual impairment test, the aggregate fair value and carrying value of
the Company’s and Savary Island’s individual operating wireless licenses were $2,518.2 million and
$1,772.2 million, respectively. If the fair value of the Company’s and Savary Island’s operating wireless
licenses had declined by 10% in such impairment test, it would not have recognized any impairment loss. In
connection with 2010 annual impairment test, the aggregate fair value and carrying value of the Company’s and
Savary Island’s individual non-operating wireless licenses were $216.5 million and $147.8 million, respectively. If
the fair value of the Company’s and Savary Island’s non-operating wireless licenses had each declined by 10%, the
Company would have recognized an impairment loss of approximately $1.0 million.
The Company evaluated whether any triggering events or changes in circumstances occurred subsequent to the
2010 annual impairment test of its wireless licenses which indicate that an impairment condition may exist. This
evaluation included consideration of whether there had been any significant adverse change in legal factors or in the
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LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)