Cricket Wireless 2010 Annual Report Download - page 55

and devices. We believe that these new service plans, products and other changes will be attractive to customers and
help improve our competitive positioning in the marketplace.
We have designed our unlimited Cricket products and services to appeal to customers who are seeking
increased value from their wireless services. According to the December 2010 Yankee Group North American
Mobile Device Forecast, U.S. wireless penetration was approximately 95% at December 31, 2010. The majority of
wireless customers in the U.S. have traditionally subscribed to post-pay services that may require credit approval
and a contractual commitment from the subscriber for a period of at least one year and may include overage charges
for call volumes in excess of a specified maximum. We believe that many wireless customers are increasingly price-
sensitive and prefer not to enter into fixed-term contracts. As a result, we believe our services appeal strongly to this
customer segment. Our customers have tended to be younger, have lower incomes and include a greater percentage
of ethnic minorities. Our internal customer surveys indicate that approximately three-quarters of our Cricket
Wireless customers use our service as their sole phone service and a substantial percentage of our Cricket Wireless
customers use our service as their primary phone service. For the year ended December 31, 2010, our customers
used our Cricket Wireless service for an average of approximately 1,500 minutes per month, which was
substantially above the U.S. wireless national carrier customer average. We believe that we are able to cost-
effectively attract and serve customers seeking increased value because of our high-quality network and low
customer acquisition and operating costs.
As a result of the attractive value proposition we offer to customers, we have pursued opportunities within
recent years to continue to strengthen and expand our business. These activities have included the broadening of our
portfolio of products and services, including through the introduction of our Cricket Broadband and Cricket PAYGo
services, our new “all-inclusive” rate plans and our new Muve Music service. We have also pursued activities to
strengthen and expand the available network service area for Cricket products and services. In recent years, new
Cricket markets were launched in Chicago, Philadelphia, Washington, D.C. and Lake Charles covering
approximately 24.2 million POPs, and we enhanced network coverage and capacity in our existing markets. In
addition, as discussed above, we have entered into agreements with other wireless carriers to provide Cricket
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. We also currently plan to deploy next-generation LTE network technology
over the next few years, with a commercial trial market scheduled to be launched in late 2011. Other future business
expansion activities could include the launch of additional new product and service offerings, the acquisition of
additional spectrum through private transactions or FCC auctions, the build out and launch of new markets, entering
into partnerships with others or the acquisition of other wireless communications companies or complementary
businesses. We expect to continue to look for opportunities to optimize the value of our spectrum portfolio. Because
some of the licenses that we and Savary Island hold include large regional areas covering both rural and
metropolitan communities, we and 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. We intend to be disciplined as we pursue any expansion efforts and to remain focused on our
position as a low-cost leader in wireless telecommunications.
Our customer activity is influenced by seasonal effects related to traditional retail selling periods and other
factors that arise or in connection with our target customer base. Based on historical results, we generally expect
new sales activity to be highest in the first and fourth quarters, and customer turnover, or churn, to be highest in the
third quarter and lowest in the first quarter. Sales activity and churn, however, can be strongly affected by other
factors, including changes in service plan pricing, promotional activity, device availability, economic conditions,
high unemployment (particularly in the lower-income segment of our customer base) and competitive actions, any
of which may have the ability to either offset or magnify certain seasonal effects or the relative amount of time a
market has been in operation. From time to time, we have experienced inventory shortages, most notably with
certain of our strongest-selling devices, including shortages we experienced during the second quarter of 2009 and
again in the second and third quarters of 2010. These shortages have had the effect of limiting the customer activity
that would otherwise have been expected based on seasonal trends. From time to time, we also offer programs to
help promote customer activity for our wireless services which may similarly affect seasonal trends. For example,
we utilize a program which allows existing customers to activate an additional line of voice service on a previously
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