Cricket Wireless 2011 Annual Report Download - page 34

document and test our internal control over financial reporting; our management is required to assess and issue a
report concerning our internal control over financial reporting; and our independent registered public accounting
firm is required to report on the effectiveness of our internal control over financial reporting.
In our quarterly and annual reports (as amended) for the periods ended from December 31, 2006 through
September 30, 2008, we reported a material weakness in our internal control over financial reporting which
related to the design of controls over the preparation and review of the account reconciliations and analysis of
revenues, cost of revenues and deferred revenues, and ineffective testing of changes made to our revenue and
billing systems in connection with the introduction or modification of service offerings. In addition, we
previously reported that certain material weaknesses in our internal control over financial reporting existed at
various times during the period from September 30, 2004 through September 30, 2006. These material
weaknesses included excessive turnover and inadequate staffing levels in our accounting, financial reporting and
tax departments, weaknesses in the preparation of our income tax provision, and weaknesses in our application of
lease-related accounting principles, fresh-start reporting oversight, and account reconciliation procedures.
Although we believe we took appropriate actions to remediate the control deficiencies we identified and to
strengthen our internal control over financial reporting, we cannot assure you that we will not discover other
material weaknesses in the future or that no material weakness will result from any difficulties, errors, delays or
disruptions while we implement and transition to significant new internal systems, including the recent transition
to our new customer billing system. The existence of one or more material weaknesses could result in errors in
our financial statements, and substantial costs and resources may be required to rectify these or other internal
control deficiencies. If we cannot produce reliable financial reports, investors could lose confidence in our
reported financial information, the market price of Leap common stock could decline significantly, we may be
unable to obtain additional financing to operate and expand our business, and our business and financial
condition could be harmed.
Our Primary Business Strategy May Not Succeed in the Long Term.
A major element of our business strategy is to offer consumers unlimited wireless services for a flat rate
without requiring them to enter into a fixed-term contract or pass a credit check. We provide nationwide voice,
data and mobile broadband wireless services through our own Cricket network footprint and through roaming
agreements that we have entered into with other carriers. In addition, we have entered into a wholesale agreement
which we use to offer Cricket services in nationwide retailers outside of our current network footprint. Our
strategy of offering unlimited wireless services nationwide may not prove to be successful in the long term. From
time to time, we also evaluate our product and service offerings and the demands of our target customers and
may modify, change, adjust or discontinue our product and service offerings or offer new products and services
on a permanent, trial or promotional basis. We cannot assure you that these product or service offerings will be
successful or prove to be profitable.
We Are Subject to Numerous Surcharges, Taxes and Fees from Federal, State and Local Governments,
and the Applicability and Amount of These Fees Can Be Uncertain.
We calculate and remit surcharges, taxes and fees to numerous federal, state and local jurisdictions in
connection with the services we provide. These fees include federal USF fees and common carrier regulatory
fees. In addition, many state and local governments impose various surcharges, taxes and fees on our activities,
including with respect to sales of our products and services and to our purchases of telecommunications services
from various carriers. In many cases, the applicability and method of calculating these surcharges, taxes and fees
may be uncertain, and jurisdictions may contest whether we have correctly assessed and remitted those amounts.
In the event that we have incorrectly assessed and remitted amounts that were due, we could be subject to fines
and penalties which could materially impact our financial condition. In addition, although we remit applicable
surcharges, taxes and fees that are due with respect to the services we provide, we do not recover these amounts
(other than sales taxes) as additional charges to customers subscribing to our “all-inclusive” service plans, which
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