Cricket Wireless 2011 Annual Report Download - page 17

Download and view the complete annual report

Please find page 17 of the 2011 Cricket Wireless annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 164

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164

Cricket Joint Ventures and Designated Entities
Savary Island Venture
Cricket owns an 85% non-controlling membership interest in Savary Island, which holds wireless spectrum
in the upper Midwest portion of the U.S. and which leases a portion of that spectrum to us. Cricket service was
previously offered in greater Chicago and Southern Wisconsin by Denali Spectrum, LLC, or Denali, an entity in
which we owned an 82.5% non-controlling membership interest. On December 27, 2010, immediately prior to
Cricket’s purchase of the remaining 17.5% controlling membership interest in Denali that it did not previously
own, Denali contributed all of its wireless spectrum outside of its Chicago and Southern Wisconsin operating
markets and a related spectrum lease to Savary Island, a newly formed venture, in exchange for an 85%
non-controlling membership interest. Savary Island acquired this spectrum as a “very small business” designated
entity under FCC regulations. Ring Island Wireless, LLC, or Ring Island, contributed $5.1 million of cash to
Savary Island in exchange for a 15% controlling membership interest. On March 31, 2011, Denali and its
subsidiaries were merged with and into Cricket, with Cricket as the surviving entity.
On November 3, 2011, Savary Island entered into a license purchase agreement with Cellco Partnership
d/b/a Verizon Wireless, or Verizon Wireless, to sell Advanced Wireless Services, or AWS, spectrum in various
markets to Verizon Wireless for $172 million. Savary Island has agreed to use substantially all of the proceeds
from this sale to prepay a portion of indebtedness owed to Cricket at the closing of the transaction. The closing of
the transaction is subject to customary 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 our consolidated balance sheet as of December 31, 2011.
For more information regarding our ownership in and arrangements with Savary Island, as well as the
license purchase agreement it has entered into with Verizon Wireless, see “Part II — Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital
Resources — Capital Expenditures, Significant Acquisitions and Other Transactions.”
STX Wireless
Cricket service is offered in South Texas by our joint venture STX Operations. Cricket controls STX
Operations through a 75.75% controlling membership interest in its parent company STX Wireless. In October
2010, we and various entities doing business as Pocket Communications, or Pocket, contributed substantially all
of our 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. The joint venture strengthens our presence and competitive positioning in
the South Texas region and has a network footprint covering approximately 4.4 million POPs.
For more information regarding our ownership in and arrangements with STX Wireless, see
“Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity and Capital Resources — Capital Expenditures, Significant Acquisitions and Other
Transactions.”
Competition
The wireless telecommunications industry is very competitive. In general, we compete with national
facilities-based wireless providers and their prepaid affiliates or brands, local and regional carriers, non-facilities-
based mobile virtual network operators, or MVNOs, voice-over-internet-protocol service providers, traditional
landline service providers, cable companies, and mobile satellite service providers.
Many of our competitors have greater name and brand recognition, larger spectrum holdings, larger
footprints, access to greater amounts of capital, greater technical, sales, marketing and distribution resources and
7