Cricket Wireless 2010 Annual Report Download - page 28

costs. In August 2010, we introduced a number of new initiatives to respond to the evolving competitive landscape,
including revising the features of a number of our Cricket service offerings, offering “all-inclusive” service plans,
eliminating certain late fees we previously charged to customers who reinstated their service after having failed to
pay their monthly bill on time, entering into a new wholesale agreement and nationwide data roaming agreement,
and introducing “smartphones” and other new handsets and devices. These more recent initiatives are significant
undertakings, which have resulted in increased costs, including equipment subsidy for new and upgrading
customers, sales and marketing expenses and other costs. The extent to which our new initiatives will be
successful and impact our future financial and operating results will depend upon customer acceptance of our
new product and service offerings and our ability to retain these customers. The evolving competitive landscape
may result in more competitive pricing, slower growth, higher costs and increased customer turnover. Any of these
results or actions could have a material adverse effect on our business, financial condition and operating results.
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. Market and
economic conditions have been unprecedented and challenging in recent years. Continued concerns about the
systemic impact of a long-term downturn, high unemployment, high energy costs, the availability and cost of credit
and unstable housing and mortgage markets have contributed to increased market volatility and economic
uncertainty. Concern about the stability of the financial markets and the strength of counterparties has led
many lenders and institutional investors to reduce or cease to provide credit to businesses and consumers, and
less liquid credit markets have adversely affected the cost and availability of credit. These factors have led to a
decrease in spending in recent years by businesses and consumers alike.
Continued market turbulence and weak economic 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 and may be attractive to a market segment that
is more vulnerable to weak economic conditions. As a result, during general economic downturns, we may have
greater difficulty in gaining new customers within this base for our services and existing customers may be more
likely to terminate service due to an inability to pay. For example, high unemployment levels have impacted our
customer base, especially the lower-income segment of our customer base, by decreasing their discretionary
income, which has resulted in higher levels of churn. Continued weak economic conditions and tight credit
conditions may also adversely impact our vendors and dealers, some of which have filed for or may be considering
bankruptcy, or may experience cash flow or liquidity problems, any of which could adversely impact our ability to
distribute, market or sell our products and services. For example, in 2009, Nortel Networks, which has provided a
significant amount of our network infrastructure, entered into bankruptcy reorganization and sold substantially all
of its network infrastructure business to Ericsson. Sustained difficult, or worsening, general economic conditions
could have a material adverse effect on our business, financial condition and results of operations.
In addition, U.S. credit markets have in recent years 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 unavailability of some forms of debt financing. Uncertainty in the credit or capital
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, combined with intensified competition
in the wireless telecommunications industry and other factors, have also adversely affected the trading prices of
equity securities of many U.S. companies, including Leap, which could significantly limit our ability to raise
additional capital through the issuance of common stock, preferred stock or other equity securities. 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.
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