Cricket Wireless 2012 Annual Report Download - page 119

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LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On November 30, 2011, the Company assigned 10 MHz of unused wireless spectrum in Indianapolis, IN,
Minneapolis, MN and Syracuse, NY to various entities affiliated with T-Mobile as part of a license exchange
transaction. In exchange, the Company received 10 MHz of additional wireless spectrum in seven existing
Cricket markets in Texas, Colorado, Oklahoma and New Mexico. In connection with the closing of this
transaction, the Company recognized a non-cash gain of approximately $20.5 million.
On June 30, 2011, one of the Company’s equity method investees declared a cash dividend and paid the
dividend with funds borrowed under a third-party line of credit. The Company’s share of the dividend based on
its 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, the Company presented the portion of the
dividend equal to its 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
the Company’s original investment.
On February 11, 2011, the Company entered into an agreement with Global Tower, LLC (“GTP”) to sell
certain of the Company’s telecommunications tower assets in one or more closings. During the second and third
quarters of 2011, the Company sold those telecommunications towers and related assets for approximately $25.8
million in cash. The transaction was structured as a sale lease-back financing, in which the Company entered into
a 10-year lease agreement with GTP to continue the Company’s commercial use of the towers. Accordingly, the
Company recorded a capital lease obligation of $25.8 million, which was equal to the proceeds received from
GTP.
STX Wireless Joint Venture
Cricket service is offered in South Texas by the Company’s joint venture STX Operations, which Cricket
controls through a 75.75% membership interest in its parent company STX Wireless. The joint venture was
created in October 2010 through the contribution by the Company and Pocket of substantially all of their
respective wireless spectrum and operating assets in the South Texas region. In exchange for such contributions,
Cricket received a 75.75% controlling membership interest in STX Wireless and Pocket received a 24.25% non-
controlling membership interest. Additionally, in connection with the transaction, the Company made payments
to Pocket of approximately $40.7 million in cash.
The Company accounted for the acquisition of Pocket’s business as a business purchase combination in
accordance with the authoritative guidance for business combinations, with the Company as the acquirer. The
consideration provided to Pocket in exchange for Pocket’s business, was allocated to the tangible and intangible
assets acquired and liabilities assumed by STX Wireless based on their fair values as of October 1, 2010. The
excess of the purchase price over the fair values of the net assets acquired was recorded as goodwill.
Pocket’s 24.25% non-controlling membership interest in STX Wireless was recorded in mezzanine equity as
a component of redeemable non-controlling interests. The non-controlling interest was initially recognized as
part of the purchase accounting in the amount of $51.5 million. The $51.5 million amount comprised the sum of
Pocket’s proportionate share (24.25%) of the fair value in the business contributed to the joint venture by Pocket
plus its proportionate share (24.25%) of the net equity of the business contributed by Cricket.
Cricket controls and manages the joint venture under the terms of the amended and restated limited liability
company agreement (the “STX LLC Agreement”). Under the STX LLC Agreement, Pocket has the right to put,
and the Company has the right to call, all of Pocket’s membership interests in STX Wireless, which rights are
generally exercisable on or after April 1, 2014. In addition, in the event of a change of control of Leap, Pocket is
obligated to sell to the Company all of its membership interests in STX Wireless. The purchase price for Pocket’s
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