Cricket Wireless 2011 Annual Report Download - page 121

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LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
closing conditions, including the consent of the FCC. The wireless licenses to be sold by Savary Island to
Verizon Wireless have been classified as assets held for sale at their carrying value of $85.2 million in the
consolidated balance sheet as of December 31, 2011.
On February 11, 2011, the Company entered into an agreement with Global Tower, LLC (“GTP”) to sell
certain of the Company’s telecommunications tower assets in one or more closings. During the second and third
quarters of 2011, the Company sold those telecommunications towers and related assets for approximately $25.8
million in cash. The transaction was structured as a sale lease-back financing, in which the Company entered into
a 10-year lease agreement with GTP to continue the Company’s commercial use of the towers. Accordingly, the
Company recorded a capital lease obligation of $25.8 million, which was equal to the proceeds received from
GTP.
STX Wireless Joint Venture
Cricket service is offered in South Texas by the Company’s joint venture STX Operations. Cricket controls
STX Operations through a 75.75% controlling membership interest in its parent company, STX Wireless. On
October 1, 2010, the Company and Pocket contributed substantially all of their respective wireless spectrum and
operating assets in the South Texas region to STX Wireless to create a joint venture to provide Cricket service in
the South Texas region. In exchange for such contributions, Cricket received a 75.75% controlling membership
interest in STX Wireless and Pocket received a 24.25% non-controlling membership interest. Additionally, in
connection with the transaction, the Company made payments to Pocket of approximately $40.7 million in cash.
The joint venture strengthens the Company’s presence and competitive positioning in the South Texas
region. Commencing October 1, 2010, STX Operations began providing Cricket service to approximately
700,000 customers, of which approximately 323,000 were contributed by Pocket, with a network footprint
covering population and potential customers (“POPs”) of approximately 4.4 million.
The Company accounted for the acquisition of Pocket’s business as a business purchase combination in
accordance with the authoritative guidance for business combinations, with the Company as the acquirer. The
consideration provided to Pocket, in exchange for Pocket’s business, was as follows (in thousands):
Cash .................................................................... $ 40,730
Fair value of Cricket’s business contributed to STX Wireless at 24.25% ............... 65,793
Fair value of Pocket business contributed to STX Wireless at 24.25% ................. 34,101
Total consideration ......................................................... $140,624
The fair values of the contributions to STX Wireless were determined using internally developed discounted
cash flow models corroborated by third party valuation firms.
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