Cricket Wireless 2011 Annual Report Download - page 33

We May Not Realize the Expected Benefits from or Meet the Revenue Commitments under Our Wholesale
Agreement or Any Other Agreements We May Enter into.
In August 2010, we entered into a wholesale agreement with an affiliate of Sprint Nextel which we use to
offer Cricket services in nationwide retailers outside of our current network footprint. We and Sprint amended
the agreement in July 2011 to, among other things, revise the amount of the annual minimum revenue
commitments for the years 2011 and 2013. We have agreed, among other things, to provide a minimum of $300
million of revenue under the agreement, as amended, 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 $20 million of revenue to be provided in 2011, a minimum of $75 million of revenue to be
provided in 2012, a minimum of $80 million of revenue to be provided in 2013, a minimum of $75 million of
revenue to be provided in 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. However, to the extent our revenues were to fall beneath the applicable commitment
amount for any given year, excess revenues from a subsequent year could not be carried back to offset such
shortfall.
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 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. In 2011, we utilized services from Sprint at levels which
substantially satisfied our $20 million minimum revenue commitment. However, in the future we may be unable
to expand our retail distribution to the extent that we have planned, and customers may not accept our products
and service offerings at the levels we expect.
As we continue to expand the size and scope of our business, we may enter into agreements with other
vendors that contain significant purchase or revenue commitments to enable us to obtain more favorable overall
terms and conditions for attractive products and services. However, we cannot guarantee that we will be able to
generate sufficient revenue to satisfy the annual and aggregate minimum revenue commitments under the
wholesale agreement or any future agreement or that prices for wireless services will not decline to levels below
what we have negotiated to pay. We also cannot guarantee that we will be able to renew the wholesale agreement
or any future agreement on terms that will be acceptable to us. If we are unable to attract new wireless customers
and increase our distribution, our ability to derive benefits from our wholesale agreement or any future
agreement we enter into could be limited, which could materially adversely affect our business, financial
condition and results of operations.
Our Business and Stock Price May Be Adversely Affected if Our Internal Controls Are Not Effective.
Section 404 of the Sarbanes-Oxley Act of 2002 requires companies to conduct a comprehensive evaluation
of their internal control over financial reporting. To comply with this statute, each year we are required to
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