Cricket Wireless 2012 Annual Report Download - page 47

rulemaking proceeding to re-evaluate, among other things, its wireless license renewal showings and standards and
may in this or other proceedings promulgate changes or additional substantial requirements or conditions to its
renewal rules, including revising license build-out requirements. We cannot assure you that the FCC will renew our
wireless licenses upon their expiration. If any of our wireless licenses were to be revoked or not renewed upon
expiration, we would not be permitted to provide services under that license, which could have a material adverse
effect on our business, results of operations and financial condition.
Our recently-purchased 700 MHz A block license in Chicago is subject to a December 13, 2013 interim
construction deadline. While we have been engaged in the first stages of development of this license to
supplement our existing wireless capacity in this market, we must coordinate with the incumbent broadcaster on
DTV Channel 51 in order to commence operations, and we may be delayed in our ultimate ability to construct
facilities and operate on this spectrum. We thus expect to seek relief from the FCC from the interim construction
benchmark and/or ask the FCC for relief from DTV interference protection requirements. If we are required to
seek these types of relief from the FCC, it could delay or impede our ability to expand our service capacity in the
Chicago market.
Wireless Licenses Comprise a Significant Portion of our Assets; Future Declines in the Fair Value of Our
Licenses Could Result in Impairment Charges.
As of December 31, 2012, the carrying value of our wireless licenses (excluding assets held for sale) was
approximately $1.9 billion. These assets by their nature, however, may not be readily saleable or, if saleable,
there may be substantial delays in their liquidation. For example, prior FCC approval is required in order for us
to sell, or for any remedies to be exercised by our lenders with respect to, our wireless licenses, and obtaining
such approval could result in significant delays and reduce the proceeds obtained from the sale or other
disposition of our wireless licenses. In addition, the amount that we could realize upon any sale of our wireless
licenses could materially differ from their carrying value. Valuation swings could occur for a variety of reasons
relating to supply and demand, including consolidation in the wireless industry that allows or requires carriers to
sell significant portions of their spectrum holdings, a sudden, large sale of spectrum by one or more carriers, or a
decline in market prices as a result of the sale prices in FCC auctions.
We assess potential impairments to our indefinite-lived intangible assets, including our wireless licenses,
annually during the third quarter of each year. 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. We estimate the fair value of our wireless licenses primarily on available market
prices, including successful bid prices in FCC auctions and selling prices observed in wireless license
transactions, pricing trends among historical wireless license transactions, our spectrum holdings within a given
market relative to other carriers’ holdings and qualitative demographic and economic information concerning the
areas that comprise our markets. During the years ended December 31, 2011 and 2010, we recorded impairment
charges of $0.4 million and $0.8 million, respectively, with respect to our wireless licenses. A significant
impairment loss in any future period could have a material adverse effect on our operating income and on the
carrying value of our wireless licenses on our balance sheet.
We Are Subject to Numerous Surcharges, Taxes and Fees from Federal, State and Local Governments,
and the Applicability and Amount of These Fees Can Be Uncertain.
We calculate and remit surcharges, taxes and fees to numerous federal, state and local jurisdictions in
connection with the services we provide. These fees include federal USF fees and common carrier regulatory
fees. In addition, many state and local governments impose various surcharges, taxes and fees on our activities,
including with respect to sales of our products and services and to our purchases of telecommunications services
from various carriers. In many cases, the applicability and method of calculating these surcharges, taxes and fees
may be uncertain, and our calculation, assessment and remittance of these amounts may be contested. In the
event that we have incorrectly assessed and remitted amounts that were due, we could be subject to fines and
penalties, which could materially impact our financial condition. In addition, although we remit applicable
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