Cricket Wireless 2010 Annual Report Download - page 13

use third party providers for long distance services and for backhaul services carrying traffic between our cell sites
and switching centers.
In addition to our Cricket network footprint, we have entered into roaming relationships with other wireless
carriers that provide our customers with nationwide voice and data roaming services over an extended service area
covering approximately 285 million POPs. We have also entered into a wholesale agreement which permits us to
offer Cricket services outside of our current network footprint. These arrangements enable us to offer enhanced
Cricket products and services, continue to strengthen our growing retail presence in our existing markets and further
expand our distribution nationwide.
Some of the licenses we and Savary Island hold include large regional areas covering both rural and
metropolitan communities. We believe that a significant portion of the POPs included within these licenses
may not currently be well-suited for Cricket service. Therefore, among other things, we and/or Savary Island may
seek to partner with others, sell some of this spectrum or pursue alternative products or services to utilize or benefit
from the spectrum not otherwise currently used for Cricket service.
Cricket Joint Ventures and Designated Entities
LCW Wireless
Cricket service is offered in Oregon by LCW Operations. LCW Operations and its parent company, LCW
Wireless, are wholly-owned subsidiaries of Cricket. We originally acquired a 73.3% non-controlling membership
interest in LCW Wireless in 2006. LCW Wireless was formed as a “very small business” designated entity under
FCC regulations. On March 30, 2010, we acquired an additional 23.9% membership interest in LCW Wireless from
CSM Wireless, LLC, or CSM, following CSM’s exercise of its option to sell its interest in LCW Wireless to us for
$21.0 million, which increased our non-controlling membership interest in LCW Wireless to 94.6%. On August 25,
2010, Cricket acquired the remaining 5.4% of the membership interests in LCW Wireless following the exercise by
WLPCS Management, LLC, or WLPCS, of its option to sell its entire controlling membership interest in LCW
Wireless to us for $3.2 million and the exercise by us of our option to acquire all of the membership interests held by
employees of LCW Wireless.
Denali and Savary Island
Cricket service is offered in the upper Midwest by Denali Operations. Denali Operations and its parent
company, Denali, are wholly-owned subsidiaries of Cricket. We originally acquired an 82.5% non-controlling
membership interest in Denali in 2006. Denali was formed as a “very small business” designated entity under FCC
regulations and purchased a wireless license in the FCC’s auction for Advanced Wireless Services spectrum, or
Auction #66, covering the upper Midwest portion of the U.S. On December 27, 2010, we purchased the remaining
17.5% controlling membership interest that we did not previously own in Denali for $53.5 million in cash and a five-
year $45.5 million promissory note. Interest on the outstanding principal balance of the note varies from
year-to-year at rates ranging from approximately 5.0% to 8.3% and compounds annually. Under the note, we
are required to make principal payments of $8.5 million per year, with the remaining principal balance and all
accrued interest payable at maturity. Our obligations under the note are secured on a first-lien basis by certain assets
of Savary Island. In connection with the acquisition, we also paid $11 million to the FCC in unjust enrichment
payments. Effective as of the closing of our acquisition of the remaining membership interest in Denali, the
management services agreement, senior secured credit agreement and related agreements among Cricket and
Denali and its subsidiaries were terminated and all remaining outstanding indebtedness (including accrued interest)
under the Denali senior secured credit agreement (other than indebtedness assumed by Savary Island, see below)
was cancelled.
Immediately prior to our purchase of the remaining membership interest in Denali, Denali contributed all of its
wireless spectrum outside of its Chicago and Southern Wisconsin operating markets and a related spectrum lease to
Savary Island, a newly formed venture, in exchange for an 85% non-controlling membership interest. Savary Island
acquired this spectrum as a “very small business” designated entity under FCC regulations. Ring Island Wireless,
LLC, or Ring Island, contributed $5.1 million of cash to Savary Island in exchange for a 15% controlling
7