Cricket Wireless 2012 Annual Report Download - page 42

reporting) are vulnerable to damage and disruption from technology failures, power surges or outages, system or
equipment failures, natural disasters, fires, human error, hacking and cyber attacks, computer viruses, terrorism,
intentional wrongdoing and similar events. In particular, cyber attacks on companies have increased in
frequency, scope and potential harm in recent years. Any such failure, damage or disruption could affect the
quality of our services, cause network service interruptions and result in material remediation costs, litigation,
higher churn, reduced revenue, increased costs and lost market share. Unauthorized access to or use of customer
or account information, including credit card or other personal data, could also result in harm to our customers
and legal actions against us, and could damage our reputation. In addition, earthquakes, floods, hurricanes, fires
and other unforeseen natural disasters or events could materially disrupt our business operations or the provision
of Cricket service in one or more markets. In the past, our operations in certain markets have been adversely
affected by hurricanes and related weather systems. Costs we incur to restore, repair or replace our network or IT
infrastructure, as well as costs associated with detecting, monitoring or reducing the incidence of unauthorized
use and other security breaches, may be substantial and increase our cost of providing service. Any failure in,
damage to or disruption of our or our vendors’ network and IT infrastructure could also materially impact our
ability to timely and accurately record, process and report information important to our business. While we
maintain insurance coverage for some of the above events, the potential liabilities associated with these events
could exceed the insurance coverage we maintain. If any of the above events were to occur, we could experience
higher churn, reduced revenues, increased costs and reputational harm, any of which could have a material
adverse effect on our business, financial condition or results of operations.
We Have Upgraded a Number of Significant Business Systems, Including Our Customer Billing System,
and Any Unanticipated Difficulties, Delays or Interruptions Could Negatively Impact Our Business.
During recent years, we have upgraded a number of our significant, internal business systems, including
implementing a new customer billing system, a new inventory management system and a new point-of-sale
system.
The implementation of significant new systems often involves delays and disruptions in connection with the
transition to and operation of the new systems. From time to time after the launch of our customer billing system
in the second quarter of 2011, we experienced intermittent disruptions with certain aspects of the system, which
limited our ability to activate new customers and to provide account services to current customers. We believe
that these system issues had the effect of reducing our gross customer additions and increasing churn. Although
we believe that we largely identified and remedied the causes of these disruptions, we cannot assure you that we
will not experience additional disruptions with our customer billing system in the future. Future significant
difficulties in operating our customer billing system or other new systems could materially impact our ability to
attract and retain customers or to timely and accurately record, process and report information that is important to
our business. If any of the above events were to occur, we could experience decreased gross customer additions,
higher churn, reduced revenues and increased costs or could suffer a material weaknesses in our internal control
over financial reporting, any of which could harm our reputation and have a material adverse effect on our
business, financial condition or results of operations.
In addition, we cannot guarantee that our new systems will improve our business operations, including our
ability to manage and control device inventories. We implemented the inventory management system to assist us
with the planning, purchasing and fulfillment of handsets and other devices. Prior to entering into this
arrangement, we experienced inventory shortages from time to time, most notably with certain of our strongest-
selling devices, and these shortages had the effect of limiting customer activity. There can be no assurance that
this new agreement will improve device inventory management or that we will not experience inventory
shortages in the future. Any failure to effectively manage and control our device inventories could adversely
affect our ability to gain new customers and have a material adverse effect on our business, financial condition
and results of operations.
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