Cricket Wireless 2011 Annual Report Download - page 58

We believe that our introduction of smartphones and “all-inclusive” service plans in August 2010 as well as
our introduction of Muve Music in early 2011 have made our services more attractive to customers, improved
our competitive positioning in the marketplace and improved our financial and operational performance. Since
we introduced these products and services, a significant number of our customers have chosen to upgrade their
handsets, frequently to smartphones or Muve Music devices, and to select more comprehensive service plans,
including plans that offer data and/or music services. These changes have generally led to higher average
monthly revenue per user as customers subscribe to higher-value service plans. In addition, the changes we have
adopted have decreased customer turnover, or churn. These business changes have also affected the way
customers upgrade their handsets, which has also decreased churn. In August 2010, we eliminated the first free
month of service we previously provided new customers and generally equalized the prices that new and existing
customers paid for handsets. Prior to these changes, many existing customers who wished to replace or upgrade
their handset would activate a new line of service to receive a discount on the handset as well as a free month of
service and would then terminate their existing service, which had the effect of increasing our gross customer
additions and churn. Now, customers who wish to replace or upgrade their handset tend to maintain their account
and purchase an upgraded handset, which tends to decrease gross customer additions and churn from what they
may have been without these business changes.
The business changes have also tended to increase cash costs per user due to increased product costs
associated with the more comprehensive service plans customers are selecting, the inclusion of
telecommunications taxes and regulatory fees in the “all-inclusive” service plans we now offer and subsidy costs
associated with device upgrades by existing customers. Further, the changes have tended to increase costs per
gross addition because the fixed portions of our customer acquisition costs, including marketing and retail costs,
have been generally allocated over a smaller number of gross customer additions due to changes in upgrade
activity discussed above. On balance, we believe that the changes we implemented to our product and service
offerings have strengthened our business and are leading to greater lifetime customer value.
During recent years, we have upgraded a number of our significant, internal business systems, including
implementing a new inventory management system, a new point-of-sale system and a new customer billing
system. We believe that these new systems will improve our customers’ experience, increase our efficiency,
enhance our ability to provide products and services, support future scaling of our business and reduce our
operating costs. From time to time since the launch of our customer billing system in the second quarter of 2011,
we have experienced intermittent disruptions with certain aspects of the system, which have limited our ability to
activate new customers and to provide account services to current customers. We believe that these system issues
have had the effect of reducing our gross customer additions and increasing churn, and these system issues could
impact customer additions and churn in the first half of 2012. Although we believe we have largely identified the
cause of these disruptions and are implementing plans to remedy them, we cannot assure you that we will not
experience additional disruptions with our customer billing system in the future.
We are continuing to pursue opportunities to strengthen and expand our business. We currently plan to
deploy next-generation LTE network technology across approximately two-thirds of our current network
footprint over the next two to three years. We successfully launched a commercial trial market in late 2011 and
plan to cover up to approximately 25 million POPs with LTE in 2012. Other current business investment
initiatives include the ongoing maintenance and development of our network and other business assets to allow
us to continue to provide customers with high-quality service. In addition, we plan to continue to strengthen and
expand our distribution, including through the wholesale agreement we have entered into. 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. We may also pursue other activities to build our business, which could be
significant, and could include the launch of additional new product and service offerings, the acquisition of
additional spectrum through private transactions or FCC auctions, the build-out and launch of new markets,
entering into partnerships with others or the acquisition of all or portions of other wireless communications
companies or complementary businesses. We expect to continue to look for opportunities to optimize the value
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