Cricket Wireless 2011 Annual Report Download - page 91

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.
Also on November 3, 2011, we entered into license purchase agreements to acquire 12 MHz of 700 MHz A
block spectrum in Chicago from Verizon Wireless for $204 million and to sell excess PCS and AWS spectrum in
various markets across the U.S to Verizon Wireless for $188 million. The additional spectrum in the Chicago
area will supplement the 10 MHz of spectrum we currently operate in Chicago. The closing of both transactions
is subject to customary closing conditions, including the consent of the FCC. We currently anticipate that both
transactions will close simultaneously. The wireless licenses to be sold by us to Verizon Wireless have been
classified as assets held for sale at their carrying value of $119.1 million in our consolidated balance sheet as of
December 31, 2011. As a result of the closing of these two license purchase transactions, and the one between
Savary Island and Verizon Wireless described above, we expect to receive aggregate net cash proceeds of more
than $100 million (after deducting related expenses and the repayment in full of our non-negotiable promissory
note due 2015). However, the closings under these license purchase agreements are not conditioned upon one
another, and we cannot assure you that any or all of these transactions will be consummated.
On June 30, 2011, one of our equity method investees declared a cash dividend and paid the dividend with
funds borrowed under a third-party line of credit. Our share of the dividend based on our ownership percentage
was $18.2 million and was received in full on July 1, 2011. In the consolidated statement of cash flows for the
year ended December 31, 2011, we presented the portion of the dividend equal to our share of accumulated
profits (approximately $6.6 million) as cash from operating activities and the remainder (approximately $11.6
million) as cash from investing activities, as it represented a return of our original investment.
On February 11, 2011, we entered into an agreement with Global Tower, LLC or GTP, to sell certain of our
telecommunications tower assets in one or more closings. During the second and third quarters of 2011, we sold
those telecommunications towers and related assets for approximately $25.8 million. The transaction was
structured as a sale lease-back financing, in which we entered into a 10-year lease agreement with GTP to
continue our commercial use of the towers. Accordingly, we recorded a capital lease obligation of $25.8 million,
which was equal to the proceeds received from GTP.
Wholesale Agreement
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.
The initial term of the wholesale agreement runs until December 31, 2015, and automatically renews for
successive one-year periods unless either party provides 180-day advance notice to the other. Under the
agreement, we will pay Sprint a specified amount per month for each subscriber activated on its network, subject
to periodic market-based adjustments. We have agreed to provide Sprint with a minimum of $300 million of
revenue under the agreement, as amended, over the 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 provided
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
2011, we utilized services from Sprint at levels which substantially satisfied our $20 million minimum revenue
commitment.
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