Cricket Wireless 2011 Annual Report Download - page 49

Declines in Our Operating or Financial Performance Could Result in an Impairment of Our Indefinite-
Lived Assets, Including Goodwill.
We assess potential impairments to our long-lived assets, including property and equipment and certain
intangible assets, when there is evidence that events or changes in circumstances indicate that the carrying value
may not be recoverable. We also assess potential impairments to indefinite-lived intangible assets, including
goodwill and wireless licenses, annually and when there is evidence that events or changes in circumstances
indicate that an impairment condition may exist. In the third quarter of 2010, in connection with our annual
goodwill impairment test, we recorded an impairment charge of $430.1 million, reducing the carrying amount of
our goodwill at the time to zero.
On October 1, 2010, we and Pocket contributed substantially all of our respective wireless spectrum and
operating assets in the South Texas region to a new joint venture, STX Wireless, with Cricket receiving a 75.75%
controlling membership interest in the venture and Pocket receiving a 24.25% non-controlling membership
interest. The excess purchase price over the fair value of the net assets acquired and the related deferred income
tax effects of the transaction resulted in goodwill of $31.1 million. Additionally, on January 3, 2011, we acquired
Pocket’s customer assistance call center for $850,000. A portion of the purchase price was assigned to property
and equipment and the remaining amount was allocated to goodwill. We accounted for both transactions as
business purchase combinations in accordance with the authoritative guidance for business combinations.
During the third quarter of 2011, we performed our annual assessment of our goodwill and determined that
no impairment existed. We also evaluate on a quarterly basis whether any triggering events or changes in
circumstances have occurred subsequent to the annual impairment test that would indicate an impairment
condition exists. There can be no assurance that impairment conditions will not exist in the future that require
further impairment charges to reduce the carrying amount of our goodwill.
We May Incur Higher Than Anticipated Intercarrier Compensation Costs.
When our customers use our service to call customers of local exchange carriers, we are required under the
current intercarrier compensation scheme to pay the carrier that serves the called party, and any intermediary or
transit carrier, for the use of their networks. While in most cases we have been successful in negotiating
agreements with other carriers that impose reasonable reciprocal compensation arrangements, some local
exchange carriers have claimed a right to unilaterally impose what we believe to be unreasonably high charges on
us. Some of these carriers have threatened to pursue, have initiated, or may in the future initiate, claims against
us to recover these charges, and the outcome of any such claims is uncertain.
The FCC has been considering whether a unified intercarrier compensation regime can or should be
established for all traffic exchanged between carriers, including commercial mobile radio services carriers. The
FCC recently adopted an order which, among other things, institutes a uniform, national bill-and-keep framework
for telecommunications traffic exchanged with a local exchange carrier, which will be phased in under a multi-
year transition period. The order also clarifies certain aspects relating to compensation between wireless carriers
and local exchange carriers in an effort to reduce disputes and address existing ambiguity with respect to these
arrangements. There are also various other pending proceedings in the courts, at the FCC and before state
regulatory bodies that may affect intercarrier compensation. New or modified intercarrier compensation rules,
federal or state proceedings implementing or interpreting those rules and other judicial or regulatory decisions
may increase the charges we are required to pay other carriers for terminating calls or transiting calls over
telecommunications networks, increase the costs of, or make it more difficult to negotiate, new agreements with
carriers, decrease the amount of revenue we receive for terminating calls from other carriers on our network, or
result in significant costs to us for past and future termination charges. Any of these changes could have a
material adverse effect on our business, financial condition and operating results.
We resell third party long distance services in connection with our offering of unlimited international long
distance service. The charges for these services may be subject to change by the terminating or interconnecting
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