Cricket Wireless 2010 Annual Report Download - page 43

Future Declines in the Fair Value of Our Wireless Licenses Could Result in Future Impairment
Charges.
As of December 31, 2010, the carrying value of our and Savary Island’s wireless licenses was approximately
$2.0 billion. During the years ended December 31, 2010, 2009 and 2008, we recorded impairment charges of
$0.8 million, $0.6 million and $0.2 million, respectively, with respect to our wireless licenses.
The market values of wireless licenses have varied over the last several years, and may vary significantly in the
future. Valuation swings could occur for a variety of reasons relating to supply and demand, including:
• consolidation in the wireless industry allows or requires carriers to sell significant portions of their wireless
spectrum holdings;
• a sudden large sale of spectrum by one or more wireless providers occurs; or
• market prices decline as a result of the sale prices in FCC auctions.
In addition, the price of wireless licenses could decline as a result of the FCC’s pursuit of policies designed to
increase the number of wireless licenses available in each of our markets. For example, during recent years, the FCC
auctioned additional spectrum in the 1700 MHz to 2100 MHz band in Auction #66 and the 700 MHz band in
Auction #73, and has announced that it intends to auction additional spectrum in the 2.5 GHz band. If the market
value of wireless licenses were to decline significantly, the value of our wireless licenses could be subject to non-
cash impairment charges.
We assess potential impairments to our indefinite-lived intangible assets, including wireless licenses, annually
and when there is evidence that events or changes in circumstances indicate that an impairment condition may exist.
We conduct our annual tests for impairment of our wireless licenses during the third quarter of each year. The fair
value of our wireless licenses is determined primarily based on available market prices, including successful bid
prices in FCC auctions and selling prices observed in wireless license transactions, pricing trends among historical
wireless license transactions, our spectrum holdings within a given market relative to other carriers’ holdings and
qualitative demographic and economic information concerning the areas that comprise our markets. A significant
impairment loss could have a material adverse effect on our operating income (loss) and on the carrying value of our
wireless licenses on our balance sheet.
Declines in Our Operating or Financial Performance Could Result in an Impairment of Our Indefinite-
Lived Assets, Including Goodwill.
We assess potential impairments to our long-lived assets, including property and equipment and certain
intangible assets, when there is evidence that events or changes in circumstances indicate that the carrying value
may not be recoverable. We also assess potential impairments to indefinite-lived intangible assets, including
goodwill and wireless licenses, annually and when there is evidence that events or changes in circumstances
indicate that an impairment condition may exist.
The annual goodwill impairment test is conducted during the third quarter of each year by first comparing the
carrying value of our net assets to our fair value. As of August 31, 2010, the carrying value of our net assets
exceeded the fair value, determined based upon our average market capitalization during the month of August 2010
and applying an assumed control premium of 30%. As a result, we performed the second step of the assessment to
measure the amount of any impairment and subsequently recorded an impairment charge of $430.1 million in the
third quarter of 2010, reducing the carrying amount of our goodwill to zero.
On October 1, 2010, we and Pocket contributed substantially all of our respective wireless spectrum and
operating assets in the South Texas region to a new joint venture, STX Wireless, with Cricket receiving a 75.75%
controlling membership interest in the venture and Pocket receiving a 24.25% non-controlling membership interest.
The excess purchase price over the fair value of the net assets acquired and the related deferred income tax effects of
the transaction resulted in goodwill of $31.1 million. As of December 31, 2010, we evaluated whether any
triggering events or changes in circumstances had occurred subsequent to the 2010 annual impairment test and
related impairment charges that would indicate an impairment condition existed, and we concluded that no further
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