Cricket Wireless 2010 Annual Report Download - page 121

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licenses transferred to MetroPCS under the spectrum exchange agreement were $45.6 million, and the Company
recognized a net gain of approximately $4.4 million upon the closing of the transaction.
Wholesale Agreement
On August 2, 2010, the Company entered into a wholesale agreement with an affiliate of Sprint Nextel which
permits the Company to offer Cricket wireless services outside the Company’s current wireless footprint using
Sprint’s network.
The initial term of the wholesale agreement is until December 31, 2015, and the agreement renews for
successive one-year periods unless either party provides 180-day advance notice to the other. Under the agreement,
the Company will pay Sprint a specified amount per month for each subscriber activated on its network, subject to
periodic market-based adjustments. The Company has agreed to provide Sprint with a minimum of $300 million of
aggregate revenue over the initial five-year term of the agreement (against which the Company can credit up to
$100 million of service revenue under other existing commercial arrangements between the companies), with a
minimum of $25 million of revenue to be provided in 2011, a minimum of $75 million of revenue to be provided in
each of 2012, 2013 and 2014, and a minimum of $50 million of revenue to be provided in 2015. Any revenue
provided by the Company in a given year above the minimum revenue commitment for that particular year will be
credited to the next succeeding year.
In the event Leap is involved in a change-of-control transaction with another facilities-based wireless carrier
with annual revenues of at least $500 million in the fiscal year preceding the date of the change of control agreement
(other than MetroPCS), either Sprint or the Company (or its successor in interest) may terminate the agreement
within 60 days following the closing of such a transaction. In connection with any such termination, the Company
(or its successor in interest) would be required to pay to Sprint a specified percentage of the remaining aggregate
minimum revenue commitment, with the percentage to be paid depending on the year in which the change of control
agreement was entered into, beginning at 40% for any such agreement entered into in or before 2011, 30% for any
such agreement entered into in 2012, 20% for any such agreement entered into in 2013 and 10% for any such
agreement entered into in 2014 or 2015.
In the event that Leap is involved in a change-of-control transaction with MetroPCS during the term of the
wholesale agreement, then the agreement would continue in full force and effect, subject to certain revisions,
including, without limitation, an increase to the total minimum revenue commitment to $350 million, taking into
account any revenue contributed by Cricket prior to the date thereof.
In the event Sprint is involved in a change-of-control transaction, the agreement would bind Sprint’s
successor-in-interest.
Note 8. Arrangements with Variable Interest Entities and Joint Ventures
On January 1, 2009, the Company adopted the provisions of the authoritative guidance for non-controlling
interests. The guidance changed the accounting treatment and classification with respect to certain ownership
interests held by the Company, at that time, in LCW Wireless and Denali. As a result of the adoption of the guidance,
the Company did not allocate losses to certain of its minority partners, but rather recorded accretion (or
mark-to-market) charges to bring its minority partners’ interests to their estimated redemption values at each
reporting period. In addition, the Company classified these accretion charges as a component of consolidated net
income (loss) available to its common stockholders rather than as a component of net income (loss). Although the
accounting treatment for certain of these interests has been modified, the Company continued to classify these non-
controlling interests in the mezzanine section of the consolidated balance sheets in accordance with the
authoritative guidance for distinguishing liabilities from equity. The cumulative impact to the Company’s
consolidated financial statements as a result of the adoption of the guidance for non-controlling interests
resulted in a $9.2 million reduction to stockholders equity, a $5.8 million reduction to deferred tax liabilities
115
LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)