Cricket Wireless 2012 Annual Report Download - page 58

smartphones, enhanced international calling plans, and supplemental data packages, and we enhanced our Muve
Music service, which is now offered for no additional cost in service plans for our Android-based smartphones.
In addition, through a third party we have introduced a device leasing program in certain of our markets to help
customers manage the cost of purchasing a handset, and we plan to expand the availability and type of handset
financing programs we offer in 2013. The extent to which these initiatives and others we may introduce will
positively impact our future financial and operational results will depend upon our continued efforts to enhance
the productivity of our distribution channels, continued customer acceptance of our product and service offerings,
and our ability to retain these customers. The evolving competitive landscape may result in more competitive
pricing, slower growth, higher costs and increased customer turnover. Any of these results or actions could have
a material adverse effect on our business, financial condition and results of operations.
We are continuing to pursue investment initiatives to enhance our network coverage and capacity. We are
exploring cost-effective ways to deliver LTE services to additional customers in our network footprint, including
by deploying facilities-based coverage and by entering into partnerships or joint ventures with other carriers. We
have covered approximately 21 million POPs with next-generation LTE network technology and may cover up to
an additional approximately 10 million POPs in 2013. Other 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. We intend to be disciplined as we pursue any investment initiatives and to
remain focused on our position as a low-cost provider of wireless telecommunications.
Our customer activity is influenced by seasonal effects related to traditional retail selling periods and other
factors that arise in connection with our target customer base. Based on historical results, we generally expect
new sales activity to be highest in the first and fourth quarters, although during 2012 we experienced our lowest
customer activity during the fourth quarter due, in part, to pricing changes we introduced in the third quarter
which reduced the amount of subsidy we provide on devices. Based on historical results, we also generally
expect churn to be highest in the third quarter and lowest in the first quarter. Sales activity and churn, however,
can be strongly affected by other factors, including changes in service plan pricing, device availability, economic
conditions, high unemployment (particularly in the lower-income segment of our customer base) and competitive
actions, any of which may either offset or magnify certain seasonal effects. Customer activity can also be
strongly affected by promotional and retention efforts that we undertake. For example, from time to time, we
lower the price on select smartphones for customers who activate a new line of service and then transfer phone
numbers previously used with other carriers. This type of promotion is intended to drive significant, new
customer activity for our smartphone handsets and their accompanying higher-priced service plans. We also
frequently offer existing customers the opportunity to activate an additional line of voice service on a previously
activated Cricket device not currently in service. Customers accepting this offer receive a free first month of
service on the additional line of service after paying an activation fee. We also utilize retention programs to
encourage existing customers whose service may have been suspended for failure to timely pay to continue
service with us for a reduced or free amount. The design, size and duration of our promotional and retention
programs vary over time in response to changing market conditions. We believe that our promotional and
retention efforts, including those efforts described above, have generally provided and continue to provide
important long-term benefits to us, including by helping us attract new customers for our wireless services or by
extending the period of time over which customers use our services, thus allowing us to obtain additional revenue
from handsets we have already sold. The success of any of these activities depends upon many factors, including
the cost that we incur to attract or retain customers and the length of time these customers continue to use our
services. Sales activity that would otherwise have been expected based on seasonal trends can also be negatively
impacted by factors such as the billing system disruptions we experienced in 2011, promotional and retention
efforts not performing as expected at various times in 2012, device quality issues, and the inventory shortages for
or unavailability of certain of our strongest-selling devices we have experienced at various times.
Our principal sources of liquidity are our existing unrestricted cash, cash equivalents and short-term
investments and cash generated from operations. See “-Liquidity and Capital Resources” below.
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