Cricket Wireless 2010 Annual Report Download - page 116

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Company’s business climate, adverse action or assessment by a regulator, unanticipated competition, loss of key
personnel or likely sale or disposal of all or a significant portion of an asset group. Based upon this evaluation, the
Company concluded that no triggering events or changes in circumstances had occurred.
Note 7. Significant Acquisitions and Other Agreements
STX Wireless Joint Venture
Cricket service is offered in South Texas by its joint venture STX Operations. Cricket controls STX Operations
through a 75.75% controlling membership interest in its parent company STX Wireless. On October 1, 2010, the
Company and Pocket contributed substantially all of their respective wireless spectrum and operating assets in the
South Texas region to STX Wireless to create a joint venture to provide Cricket service in the South Texas region. In
exchange for such contributions, Cricket received a 75.75% controlling membership interest in STX Wireless and
Pocket received a 24.25% non-controlling membership interest. Additionally, in connection with the transaction,
the Company made payments to Pocket of approximately $40.7 million in cash.
The joint venture strengthens the Company’s presence and competitive positioning in the South Texas region.
Commencing October 1, 2010, STX Operations began providing Cricket service to approximately 700,000
customers, of which approximately 323,000 were contributed by Pocket, with a network footprint covering
approximately 4.4 million POPs.
The Company accounted for the acquisition of Pocket’s business as a business purchase combination in
accordance with the authoritative guidance for business combinations, with the Company as the acquirer. The
consideration provided to Pocket, in exchange for Pocket’s business, was as follows (in thousands):
Cash ............................................................... $ 40,730
Fair value of Cricket’s business contributed to STX Wireless at 24.25% .............. 65,793
Fair value of Pocket business contributed to STX Wireless at 24.25% ............... 34,101
Total consideration ..................................................... $140,624
The fair values of the contributions to STX Wireless were determined using internally developed discounted
cash flow models corroborated by third party valuation firms.
The consideration was allocated to the net tangible and intangible assets acquired and liabilities assumed by
STX Wireless based on their fair values as of October 1, 2010. The excess of the purchase price over the fair values
of the net assets acquired was recorded as goodwill. While the Company does not anticipate significant changes to
the purchase price allocation, some items such as certain post-closing purchase price adjustments are preliminary
and subject to change.
110
LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)