Cricket Wireless 2010 Annual Report Download - page 30

provide national coverage and we must pay fees to other carriers who provide roaming and wholesale services to us.
We currently rely on roaming agreements with several carriers for the majority of our roaming services and
generally on one key carrier for our data roaming services. We have also entered into a wholesale agreement which
permits us to offer Cricket wireless services outside of our current network footprint. Most of our roaming
agreements cover voice but not data services and some of these agreements may be terminated on relatively short
notice. In addition, we believe that the rates charged to us by some of these carriers are higher than the rates they
charge to certain other roaming partners.
The FCC has adopted a report and order and a further order on reconsideration clarifying that commercial
mobile radio service providers are required to provide automatic roaming for voice and SMS text messaging
services on just, reasonable and non-discriminatory terms. The FCC orders, however, do not address roaming for
data services, which are the subject of a further pending proceeding. The orders also do not provide or mandate any
specific mechanism for determining the reasonableness of roaming rates for voice or SMS text messaging services
and require that roaming complaints be resolved on a case-by-case basis, based on a non-exclusive list of factors that
can be taken into account in determining the reasonableness of particular conduct or rates.
In light of the current FCC rules, orders and proceedings, if we were unexpectedly to lose the benefit of one or
more key roaming or wholesale agreements, we may be unable to obtain similar replacement agreements and as a
result may be unable to continue providing nationwide voice and data roaming services for our customers or may be
unable to provide such services on a cost-effective basis. Any such inability to obtain replacement agreements on a
cost-effective basis may limit our ability to compete effectively for wireless customers, which may increase our
churn and decrease our revenues, which in turn could materially adversely affect our business, financial condition
and results of operations.
We May Not Realize the Expected Benefits from Our New Wholesale Arrangement.
On August 2, 2010, we entered into a wholesale agreement with an affiliate of Sprint Nextel which permits us
to offer Cricket wireless services outside our current network footprint using Sprint’s network. We have agreed,
among other things, to provide a minimum of $300 million of revenue under the agreement over its initial five-year
term (against which we 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 we provide in a given year above the minimum revenue
commitment for that particular year will be credited to the next succeeding year.
In addition, in the event we are 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 Communications, Inc., or MetroPCS), either we (or our successor in
interest) or Sprint may terminate the agreement within 60 days following the closing of such a transaction. In
connection with any such termination, we (or our 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 we
are 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.
We entered into this new wholesale agreement to enable us to offer enhanced products and services and to
strengthen and expand our distribution. However, there are risks and uncertainties that could impact our ability to
realize the expected benefits from this arrangement. Customers may not accept our products and service offerings at
the levels we expect and our plans to increase our retail distribution channels may not result in additional customers
or increased revenues. We cannot guarantee that we will be able to generate sufficient revenue to satisfy the annual
and aggregate minimum revenue commitments or that prices for wireless services will not decline to levels below
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