Leap Wireless International (LEAP)

competitive offerings could adversely affect our ability to maintain our pricing and increase or maintain our market penetration and may have a material adverse effect on our financial results.

 

We may also face additional competition from new entrants in the wireless marketplace, many of whom may have significantly more resources than we do. The FCC is pursuing policies designed to increase the number of wireless licenses and spectrum available for the provision of wireless voice and data services in each of our markets. For example, the FCC has adopted rules that allow the partitioning, disaggregation or leasing of wireless licenses, which may increase the number of our competitors. The FCC has also in recent years allowed satellite operators to use portions of their spectrum for ancillary terrestrial use and also permitted the offering of broadband services over power lines. In addition, the auction and licensing of new spectrum for wireless service may result in new competitors and/or allow existing competitors to acquire additional spectrum, which could allow them to offer services that we may not technologically or cost effectively be able to offer with the licenses we hold or to which we have access.

 

Our ability to remain competitive will depend, in part, on our ability to anticipate and respond to various competitive factors and to keep our costs low.

 

We believe that we are strategically positioned to compete with other communications technologies that now exist. Continuing technological advances in telecommunications and FCC policies that encourage the development of new spectrum-based technologies make it difficult, however, to predict the extent of future competition.

 

 

The telecommunications industry is very competitive. In general,
we compete with national facilities-based wireless providers and
their prepaid affiliates or brands, local and regional carriers,
non-facilities-based mobile virtual network operators, or MVNOs,
voice-over-internet-protocol,
or VoIP, service providers and traditional landline service
providers, including telephone and cable companies.

 

Many of these competitors have greater name and brand
recognition, access to greater amounts of capital and
established relationships with a larger base of current and
potential customers. Because of their size and bargaining power,
our larger competitors may be able to purchase equipment,
supplies and services at lower prices than we can. In addition,
some of our competitors are able to offer their customers
roaming services at lower rates. As consolidation in the
industry creates even larger competitors, any purchasing
advantages our competitors have, as well as their bargaining
power as wholesale providers of roaming services, may increase.
For example, in connection with the offering of our nationwide
roaming service, we have encountered problems with certain large
wireless carriers in negotiating terms for roaming arrangements
that we believe are reasonable, and we believe that
consolidation has contributed significantly to such
carriers’ control over the terms and conditions of
wholesale roaming services.

 

These competitors may also offer potential customers more
features and options in their service plans than those currently
provided by Cricket, as well as new technologies
and/or
alternative delivery plans.

 

Some of our competitors offer rate plans substantially similar
to Cricket’s service plans or products that customers may
perceive to be similar to Cricket’s service plans in
markets in which we offer wireless service. For example,
AT&T, Sprint Nextel,
T-Mobile and
Verizon Wireless each offer flat-rate unlimited service
offerings, and Sprint Nextel offers a less expensive flat-rate
unlimited service offering under its Boost Unlimited brand,
which is very similar to our Cricket Wireless service. These
service offerings may present additional strong competition in
our markets. Sprint Nextel recently re-launched its Boost
Unlimited brand with new products and services that are
competitively priced. Sprint Nextel has expanded and may further
expand its Boost Unlimited service offering into certain markets
in which we provide service and could further expand service
into other markets in which we provide service or in which we
plan to expand, and this service offering may present additional
strong competition in markets in which our offerings overlap.
The competitive pressures of the wireless telecommunications
market have also caused other carriers to offer service plans
with unlimited service offerings or large bundles of minutes of
use at low prices, which are competing with the predictable and
unlimited Cricket Wireless calling plans. Some competitors also
offer prepaid wireless plans that are being advertised heavily
to demographic segments in our current markets and in markets in
which we may expand that are strongly represented in
Cricket’s customer base. For example,
T-Mobile
offers a FlexPay plan which permits customers to pay in advance
for its post-pay plans and avoid overage charges, and an
internet-based service upgrade which permits wireless customers
to make unlimited local and long-distance calls from their home
phone in place of a traditional landline phone service. These

competitive offerings could adversely affect our ability to
maintain our pricing and increase or maintain our market
penetration and may have a material adverse effect on our
financial results.

 

We may also face additional competition from new entrants in the
wireless marketplace, many of whom may have significantly more
resources than we do. The FCC is pursuing policies designed to
increase the number of wireless licenses and spectrum available
for the provision of wireless voice and data services in each of
our markets. For example, the FCC has adopted rules that allow
the partitioning, disaggregation or leasing of wireless
licenses, which may increase the number of our competitors. The
FCC has also in recent years allowed satellite operators to use
portions of their spectrum for ancillary terrestrial use and
also permitted the offering of broadband services over power
lines. In addition, the auction and licensing of new spectrum
for wireless service may result in new competitors
and/or allow
existing competitors to acquire additional spectrum, which could
allow them to offer services that we may not technologically or
cost effectively be able to offer with the licenses we hold or
to which we have access.

 

Our ability to remain competitive will depend, in part, on our
ability to anticipate and respond to various competitive factors
and to keep our costs low.

 

We believe that we are strategically positioned to compete with
other communications technologies that now exist. Continuing
technological advances in telecommunications and FCC policies
that encourage the development of new spectrum-based
technologies make it difficult, however, to predict the extent
of future competition.

 

 

The telecommunications industry is very competitive. In general,
we compete with national facilities-based wireless providers and
their prepaid affiliates or brands, local and regional carriers,
non-facilities-based mobile virtual network operators, or MVNOs,
voice-over-internet-protocol,
or VoIP, service providers and traditional landline service
providers, including telephone and cable companies.

 

Many of these competitors have greater name and brand
recognition, access to greater amounts of capital and
established relationships with a larger base of current and
potential customers. Because of their size and bargaining power,
our larger competitors may be able to purchase equipment,
supplies and services at lower prices than we can. In addition,
some of our competitors are able to offer their customers
roaming services at lower rates. As consolidation in the
industry creates even larger competitors, any purchasing
advantages our competitors have, as well as their bargaining
power as wholesale providers of roaming services, may increase.
For example, in connection with the offering of our nationwide
roaming service, we have encountered problems with certain large
wireless carriers in negotiating terms for roaming arrangements
that we believe are reasonable, and we believe that
consolidation has contributed significantly to such
carriers’ control over the terms and conditions of
wholesale roaming services.

 

These competitors may also offer potential customers more
features and options in their service plans than those currently
provided by Cricket, as well as new technologies
and/or
alternative delivery plans.

 

Some of our competitors offer rate plans substantially similar
to Cricket’s service plans or products that customers may
perceive to be similar to Cricket’s service plans in
markets in which we offer wireless service. For example,
AT&T, Sprint Nextel,
T-Mobile and
Verizon Wireless each offer flat-rate unlimited service
offerings, and Sprint Nextel offers a less expensive flat-rate
unlimited service offering under its Boost Unlimited brand,
which is very similar to our Cricket Wireless service. These
service offerings may present additional strong competition in
our markets. Sprint Nextel recently re-launched its Boost
Unlimited brand with new products and services that are
competitively priced. Sprint Nextel has expanded and may further
expand its Boost Unlimited service offering into certain markets
in which we provide service and could further expand service
into other markets in which we provide service or in which we
plan to expand, and this service offering may present additional
strong competition in markets in which our offerings overlap.
The competitive pressures of the wireless telecommunications
market have also caused other carriers to offer service plans
with unlimited service offerings or large bundles of minutes of
use at low prices, which are competing with the predictable and
unlimited Cricket Wireless calling plans. Some competitors also
offer prepaid wireless plans that are being advertised heavily
to demographic segments in our current markets and in markets in
which we may expand that are strongly represented in
Cricket’s customer base. For example,
T-Mobile
offers a FlexPay plan which permits customers to pay in advance
for its post-pay plans and avoid overage charges, and an
internet-based service upgrade which permits wireless customers
to make unlimited local and long-distance calls from their home
phone in place of a traditional landline phone service. These

competitive offerings could adversely affect our ability to
maintain our pricing and increase or maintain our market
penetration and may have a material adverse effect on our
financial results.

 

We may also face additional competition from new entrants in the
wireless marketplace, many of whom may have significantly more
resources than we do. The FCC is pursuing policies designed to
increase the number of wireless licenses and spectrum available
for the provision of wireless voice and data services in each of
our markets. For example, the FCC has adopted rules that allow
the partitioning, disaggregation or leasing of wireless
licenses, which may increase the number of our competitors. The
FCC has also in recent years allowed satellite operators to use
portions of their spectrum for ancillary terrestrial use and
also permitted the offering of broadband services over power
lines. In addition, the auction and licensing of new spectrum
for wireless service may result in new competitors
and/or allow
existing competitors to acquire additional spectrum, which could
allow them to offer services that we may not technologically or
cost effectively be able to offer with the licenses we hold or
to which we have access.

 

Our ability to remain competitive will depend, in part, on our
ability to anticipate and respond to various competitive factors
and to keep our costs low.

 

We believe that we are strategically positioned to compete with
other communications technologies that now exist. Continuing
technological advances in telecommunications and FCC policies
that encourage the development of new spectrum-based
technologies make it difficult, however, to predict the extent
of future competition.

 

 

The telecommunications industry is very competitive. In general,
we compete with national facilities-based wireless providers and
their prepaid affiliates or brands, local and regional carriers,
non-facilities-based mobile virtual network operators, or MVNOs,
voice-over-internet-protocol,
or VoIP, service providers and traditional landline service
providers, including telephone and cable companies.

 

Many of these competitors have greater name and brand
recognition, access to greater amounts of capital and
established relationships with a larger base of current and
potential customers. Because of their size and bargaining power,
our larger competitors may be able to purchase equipment,
supplies and services at lower prices than we can. In addition,
some of our competitors are able to offer their customers
roaming services at lower rates. As consolidation in the
industry creates even larger competitors, any purchasing
advantages our competitors have, as well as their bargaining
power as wholesale providers of roaming services, may increase.
For example, in connection with the offering of our nationwide
roaming service, we have encountered problems with certain large
wireless carriers in negotiating terms for roaming arrangements
that we believe are reasonable, and we believe that
consolidation has contributed significantly to such
carriers’ control over the terms and conditions of
wholesale roaming services.

 

These competitors may also offer potential customers more
features and options in their service plans than those currently
provided by Cricket, as well as new technologies
and/or
alternative delivery plans.

 

Some of our competitors offer rate plans substantially similar
to Cricket’s service plans or products that customers may
perceive to be similar to Cricket’s service plans in
markets in which we offer wireless service. For example,
AT&T, Sprint Nextel,
T-Mobile and
Verizon Wireless each offer flat-rate unlimited service
offerings, and Sprint Nextel offers a less expensive flat-rate
unlimited service offering under its Boost Unlimited brand,
which is very similar to our Cricket Wireless service. These
service offerings may present additional strong competition in
our markets. Sprint Nextel recently re-launched its Boost
Unlimited brand with new products and services that are
competitively priced. Sprint Nextel has expanded and may further
expand its Boost Unlimited service offering into certain markets
in which we provide service and could further expand service
into other markets in which we provide service or in which we
plan to expand, and this service offering may present additional
strong competition in markets in which our offerings overlap.
The competitive pressures of the wireless telecommunications
market have also caused other carriers to offer service plans
with unlimited service offerings or large bundles of minutes of
use at low prices, which are competing with the predictable and
unlimited Cricket Wireless calling plans. Some competitors also
offer prepaid wireless plans that are being advertised heavily
to demographic segments in our current markets and in markets in
which we may expand that are strongly represented in
Cricket’s customer base. For example,
T-Mobile
offers a FlexPay plan which permits customers to pay in advance
for its post-pay plans and avoid overage charges, and an
internet-based service upgrade which permits wireless customers
to make unlimited local and long-distance calls from their home
phone in place of a traditional landline phone service. These

competitive offerings could adversely affect our ability to
maintain our pricing and increase or maintain our market
penetration and may have a material adverse effect on our
financial results.

 

We may also face additional competition from new entrants in the
wireless marketplace, many of whom may have significantly more
resources than we do. The FCC is pursuing policies designed to
increase the number of wireless licenses and spectrum available
for the provision of wireless voice and data services in each of
our markets. For example, the FCC has adopted rules that allow
the partitioning, disaggregation or leasing of wireless
licenses, which may increase the number of our competitors. The
FCC has also in recent years allowed satellite operators to use
portions of their spectrum for ancillary terrestrial use and
also permitted the offering of broadband services over power
lines. In addition, the auction and licensing of new spectrum
for wireless service may result in new competitors
and/or allow
existing competitors to acquire additional spectrum, which could
allow them to offer services that we may not technologically or
cost effectively be able to offer with the licenses we hold or
to which we have access.

 

Our ability to remain competitive will depend, in part, on our
ability to anticipate and respond to various competitive factors
and to keep our costs low.

 

We believe that we are strategically positioned to compete with
other communications technologies that now exist. Continuing
technological advances in telecommunications and FCC policies
that encourage the development of new spectrum-based
technologies make it difficult, however, to predict the extent
of future competition.

 

 

The telecommunications industry is very competitive. In general,
we compete with national facilities-based wireless providers and
their prepaid affiliates or brands, local and regional carriers,
non-facilities-based mobile virtual network operators, or MVNOs,
voice-over-internet-protocol,
or VoIP, service providers and traditional landline service
providers, including telephone and cable companies.

 

Many of these competitors have greater name and brand
recognition, access to greater amounts of capital and
established relationships with a larger base of current and
potential customers. Because of their size and bargaining power,
our larger competitors may be able to purchase equipment,
supplies and services at lower prices than we can. In addition,
some of our competitors are able to offer their customers
roaming services at lower rates. As consolidation in the
industry creates even larger competitors, any purchasing
advantages our competitors have, as well as their bargaining
power as wholesale providers of roaming services, may increase.
For example, in connection with the offering of our nationwide
roaming service, we have encountered problems with certain large
wireless carriers in negotiating terms for roaming arrangements
that we believe are reasonable, and we believe that
consolidation has contributed significantly to such
carriers’ control over the terms and conditions of
wholesale roaming services.

 

These competitors may also offer potential customers more
features and options in their service plans than those currently
provided by Cricket, as well as new technologies
and/or
alternative delivery plans.

 

Some of our competitors offer rate plans substantially similar
to Cricket’s service plans or products that customers may
perceive to be similar to Cricket’s service plans in
markets in which we offer wireless service. For example,
AT&T, Sprint Nextel,
T-Mobile and
Verizon Wireless each offer flat-rate unlimited service
offerings, and Sprint Nextel offers a less expensive flat-rate
unlimited service offering under its Boost Unlimited brand,
which is very similar to our Cricket Wireless service. These
service offerings may present additional strong competition in
our markets. Sprint Nextel recently re-launched its Boost
Unlimited brand with new products and services that are
competitively priced. Sprint Nextel has expanded and may further
expand its Boost Unlimited service offering into certain markets
in which we provide service and could further expand service
into other markets in which we provide service or in which we
plan to expand, and this service offering may present additional
strong competition in markets in which our offerings overlap.
The competitive pressures of the wireless telecommunications
market have also caused other carriers to offer service plans
with unlimited service offerings or large bundles of minutes of
use at low prices, which are competing with the predictable and
unlimited Cricket Wireless calling plans. Some competitors also
offer prepaid wireless plans that are being advertised heavily
to demographic segments in our current markets and in markets in
which we may expand that are strongly represented in
Cricket’s customer base. For example,
T-Mobile
offers a FlexPay plan which permits customers to pay in advance
for its post-pay plans and avoid overage charges, and an
internet-based service upgrade which permits wireless customers
to make unlimited local and long-distance calls from their home
phone in place of a traditional landline phone service. These

competitive offerings could adversely affect our ability to
maintain our pricing and increase or maintain our market
penetration and may have a material adverse effect on our
financial results.

 

We may also face additional competition from new entrants in the
wireless marketplace, many of whom may have significantly more
resources than we do. The FCC is pursuing policies designed to
increase the number of wireless licenses and spectrum available
for the provision of wireless voice and data services in each of
our markets. For example, the FCC has adopted rules that allow
the partitioning, disaggregation or leasing of wireless
licenses, which may increase the number of our competitors. The
FCC has also in recent years allowed satellite operators to use
portions of their spectrum for ancillary terrestrial use and
also permitted the offering of broadband services over power
lines. In addition, the auction and licensing of new spectrum
for wireless service may result in new competitors
and/or allow
existing competitors to acquire additional spectrum, which could
allow them to offer services that we may not technologically or
cost effectively be able to offer with the licenses we hold or
to which we have access.

 

Our ability to remain competitive will depend, in part, on our
ability to anticipate and respond to various competitive factors
and to keep our costs low.

 

We believe that we are strategically positioned to compete with
other communications technologies that now exist. Continuing
technological advances in telecommunications and FCC policies
that encourage the development of new spectrum-based
technologies make it difficult, however, to predict the extent
of future competition.

 

and Verizon Wireless have each recently announced flat-rate unlimited service offerings. In addition, Sprint Nextel offers a flat-rate unlimited service offering under its Boost Unlimited brand, which is very similar to the Cricket service. Sprint Nextel has expanded and may further expand its Boost Unlimited service offering into certain markets in which we provide service or in which we plan to expand, and this service offering may present additional strong competition to Cricket service in markets in which our service offerings overlap. The competitive pressures of the wireless telecommunications market have also caused other carriers to offer service plans with unlimited service offerings or large bundles of minutes of use at low prices which are competing with the predictable and unlimited Cricket calling plans. Some competitors also offer prepaid wireless plans that are being advertised heavily to demographic segments in our current markets and in markets in which we may expand that are strongly represented in Cricket’s customer base. For example, T-Mobile has introduced a FlexPay plan which permits customers to pay in advance for its post-pay plans and avoid overage charges. These competitive offerings could adversely affect our ability to maintain our pricing and increase or maintain our market penetration and may have a material adverse effect on our financial results.

 

We also face competition from resellers or mobile virtual network operators, or MVNOs, such as Virgin Mobile USA, TracFone Wireless, and others, which provide wireless services to customers but do not hold FCC licenses or own network facilities. These resellers purchase bulk wireless telephone services and capacity from wireless providers and resell to the public under their own brand name generally through mass market retail outlets. Wireless providers are also increasingly competing in the provision of both voice and non-voice services. Non-voice services, including data transmission, text messaging, e-mail and internet access, are now available from personal communications service providers and enhanced specialized mobile radio carriers. In many cases, non-voice services are offered in conjunction with or as adjuncts to voice services.

 

In the future, we may also face competition from entities providing similar services using different technologies, including Wi-Fi, WiMax, and Voice over Internet Protocol, or VoIP. Additionally, some of the major internet search engines and service providers have entered the mobile service market, or announced plans or intentions to enter the mobile service market, by providing free internet and voice access through a fixed mobile network in partnership with some major municipalities in the U.S. As wireless service is becoming a viable alternative to traditional landline phone service, we are also increasingly competing directly with traditional landline telephone companies for customers. Competition is also increasing from local and long distance wireline carriers who have begun to aggressively advertise in the face of increasing competition from wireless carriers, cable operators and other competitors. Cable operators are providing telecommunications services to the home, and some of these carriers are providing local and long distance voice services using VoIP. In particular circumstances, these carriers may be able to avoid payment of access charges to local exchange carriers for the use of their networks on long distance calls. Cost savings for these carriers could result in lower prices to customers and increased competition for wireless services. Some of our competitors offer these other services together with their wireless communications service, which may make their services more attractive to customers. In the future, we may also face competition from mobile satellite service, or MSS, providers, as well as from resellers of these services. The FCC has granted, or may grant, MSS providers the flexibility to deploy an ancillary terrestrial component to their satellite services. This added flexibility may enhance MSS providers’ ability to offer more competitive mobile services.

 

There has also been an increasing trend towards consolidation of wireless service providers through joint ventures, reorganizations and acquisitions. These consolidated carriers may have substantially larger service areas, more capacity and greater financial resources and bargaining power than we do. As consolidation creates even larger competitors, the advantages our competitors have may increase. For example, in connection with the offering of our roaming service, we have encountered problems with certain large wireless carriers in negotiating reasonable terms for roaming arrangements, and believe that consolidation has contributed significantly to such carriers’ control over the terms and conditions of wholesale roaming services. Additionally, these agreements can be terminated by the carriers.

 

The telecommunications industry is experiencing significant technological changes, as evidenced by the increasing pace of improvements in the capacity and quality of digital technology, shorter cycles for new products and enhancements and changes in consumer preferences and expectations. Accordingly, we expect competition in the wireless telecommunications industry to be dynamic and intense as a result of competitors and the development of new technologies, products and services. We compete for customers based on numerous factors, including

wireless system coverage and quality, service value proposition (minutes and features relative to price), local market presence, digital voice and features, customer service, distribution strength, and brand name recognition. Some competitors also market other services, such as landline local exchange and internet access services, with their wireless service offerings. For example, T-Mobile has introduced an internet-based service upgrade which permits wireless customers to make unlimited local and long-distance calls from their home phone in place of a traditional landline phone service. Competition has caused, and we anticipate it will continue to cause, market prices for two-way wireless products and services to decline. Our ability to compete successfully will depend, in part, on our ability to distinguish our Cricket service from competitors through marketing and through our ability to anticipate and respond to other competitive factors affecting the industry, including new services that may be introduced, changes in consumer preferences, demographic trends, economic conditions, and competitors’ discount pricing and bundling strategies, all of which could adversely affect our operating margins, market penetration and customer retention. Because many of the wireless operators in our markets have substantially greater financial resources than we do, they may be able to offer prospective customers discounts or equipment subsidies that are substantially greater than those we could offer. In addition, to the extent that products or services that we offer, such as roaming capability, may depend upon negotiations with other wireless operators, discriminatory behavior by such operators or their refusal to negotiate with us could adversely affect our business. While we believe that our cost structure, combined with the differentiated value proposition that our Cricket service represents in the wireless marketplace, provides us with the means to react effectively to price competition, we cannot predict the effect that the market forces or the conduct of other operators in the industry will have on our business.

 

The FCC is currently pursuing policies designed to increase the number of wireless licenses available and new wireless provider competition. For example, the FCC has adopted rules that allow Personal Communications Service, or PCS, and other wireless licenses to be partitioned, disaggregated and leased. The FCC also continues to allocate and auction additional spectrum that can be used for wireless services. In February 2005, the FCC completed Auction #58, in which additional PCS spectrum was auctioned in numerous markets, including many markets where we currently provide service. In addition, the FCC in 2006 auctioned an additional 90 MHz of nationwide spectrum in the 1700 MHz to 2100 MHz band for AWS in Auction #66, and in January 2008 began an auction of 62 MHz of additional spectrum in the 700 MHz band (referred to in this report as Auctions #73 and #76). New companies, such as cable television operators or satellite operators, have purchased or may purchase licenses and begin offering wireless services. In addition, because the FCC has recently permitted the offering of broadband services over power lines, it is possible that utility companies will begin competing against us.

 

We believe that we are strategically positioned to compete with other communications technologies that now exist. Continuing technological advances in telecommunications and FCC policies that encourage the development of new spectrum-based technologies make it difficult, however, to predict the extent of future competition.

 

 

The telecommunications industry is very competitive. We believe
that our primary competition in the U.S. wireless market is
with national and regional wireless service providers including
Alltel, AT&T, Sprint Nextel (and Sprint Nextel affiliates),
T-Mobile,
U.S. Cellular and Verizon Wireless. AT&T, Sprint
Nextel,
T-Mobile

and Verizon Wireless have each recently announced flat-rate
unlimited service offerings. In addition, Sprint Nextel offers a
flat-rate
unlimited service offering under its Boost Unlimited brand,
which is very similar to the Cricket service. Sprint Nextel has
expanded and may further expand its Boost Unlimited service
offering into certain markets in which we provide service or in
which we plan to expand, and this service offering may present
additional strong competition to Cricket service in markets in
which our service offerings overlap. The competitive pressures
of the wireless telecommunications market have also caused other
carriers to offer service plans with unlimited service offerings
or large bundles of minutes of use at low prices which are
competing with the predictable and unlimited Cricket calling
plans. Some competitors also offer prepaid wireless plans that
are being advertised heavily to demographic segments in our
current markets and in markets in which we may expand that are
strongly represented in Cricket’s customer base. For
example,
T-Mobile has
introduced a FlexPay plan which permits customers to pay in
advance for its post-pay plans and avoid overage charges. These
competitive offerings could adversely affect our ability to
maintain our pricing and increase or maintain our market
penetration and may have a material adverse effect on our
financial results.

 

We also face competition from resellers or mobile virtual
network operators, or MVNOs, such as Virgin Mobile USA, TracFone
Wireless, and others, which provide wireless services to
customers but do not hold FCC licenses or own network
facilities. These resellers purchase bulk wireless telephone
services and capacity from wireless providers and resell to the
public under their own brand name generally through mass market
retail outlets. Wireless providers are also increasingly
competing in the provision of both voice and non-voice services.
Non-voice services, including data transmission, text messaging,
e-mail and
internet access, are now available from personal communications
service providers and enhanced specialized mobile radio
carriers. In many cases, non-voice services are offered in
conjunction with or as adjuncts to voice services.

 

In the future, we may also face competition from entities
providing similar services using different technologies,
including Wi-Fi, WiMax, and Voice over Internet Protocol, or
VoIP. Additionally, some of the major internet search engines
and service providers have entered the mobile service market, or
announced plans or intentions to enter the mobile service
market, by providing free internet and voice access through a
fixed mobile network in partnership with some major
municipalities in the U.S. As wireless service is becoming
a viable alternative to traditional landline phone service, we
are also increasingly competing directly with traditional
landline telephone companies for customers. Competition is also
increasing from local and long distance wireline carriers who
have begun to aggressively advertise in the face of increasing
competition from wireless carriers, cable operators and other
competitors. Cable operators are providing telecommunications
services to the home, and some of these carriers are providing
local and long distance voice services using VoIP. In particular
circumstances, these carriers may be able to avoid payment of
access charges to local exchange carriers for the use of their
networks on long distance calls. Cost savings for these carriers
could result in lower prices to customers and increased
competition for wireless services. Some of our competitors offer
these other services together with their wireless communications
service, which may make their services more attractive to
customers. In the future, we may also face competition from
mobile satellite service, or MSS, providers, as well as from
resellers of these services. The FCC has granted, or may grant,
MSS providers the flexibility to deploy an ancillary terrestrial
component to their satellite services. This added flexibility
may enhance MSS providers’ ability to offer more
competitive mobile services.

 

There has also been an increasing trend towards consolidation of
wireless service providers through joint ventures,
reorganizations and acquisitions. These consolidated carriers
may have substantially larger service areas, more capacity and
greater financial resources and bargaining power than we do. As
consolidation creates even larger competitors, the advantages
our competitors have may increase. For example, in connection
with the offering of our roaming service, we have encountered
problems with certain large wireless carriers in negotiating
reasonable terms for roaming arrangements, and believe that
consolidation has contributed significantly to such
carriers’ control over the terms and conditions of
wholesale roaming services. Additionally, these agreements can
be terminated by the carriers.

 

The telecommunications industry is experiencing significant
technological changes, as evidenced by the increasing pace of
improvements in the capacity and quality of digital technology,
shorter cycles for new products and enhancements and changes in
consumer preferences and expectations. Accordingly, we expect
competition in the wireless telecommunications industry to be
dynamic and intense as a result of competitors and the
development of new technologies, products and services. We
compete for customers based on numerous factors, including

wireless system coverage and quality, service value proposition
(minutes and features relative to price), local market presence,
digital voice and features, customer service, distribution
strength, and brand name recognition. Some competitors also
market other services, such as landline local exchange and
internet access services, with their wireless service offerings.
For example, T-Mobile has introduced an internet-based service
upgrade which permits wireless customers to make unlimited local
and long-distance calls from their home phone in place of a
traditional landline phone service. Competition has caused, and
we anticipate it will continue to cause, market prices for
two-way wireless products and services to decline. Our ability
to compete successfully will depend, in part, on our ability to
distinguish our Cricket service from competitors through
marketing and through our ability to anticipate and respond to
other competitive factors affecting the industry, including new
services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions, and
competitors’ discount pricing and bundling strategies, all
of which could adversely affect our operating margins, market
penetration and customer retention. Because many of the wireless
operators in our markets have substantially greater financial
resources than we do, they may be able to offer prospective
customers discounts or equipment subsidies that are
substantially greater than those we could offer. In addition, to
the extent that products or services that we offer, such as
roaming capability, may depend upon negotiations with other
wireless operators, discriminatory behavior by such operators or
their refusal to negotiate with us could adversely affect our
business. While we believe that our cost structure, combined
with the differentiated value proposition that our Cricket
service represents in the wireless marketplace, provides us with
the means to react effectively to price competition, we cannot
predict the effect that the market forces or the conduct of
other operators in the industry will have on our business.

 

The FCC is currently pursuing policies designed to increase the
number of wireless licenses available and new wireless provider
competition. For example, the FCC has adopted rules that allow
Personal Communications Service, or PCS, and other wireless
licenses to be partitioned, disaggregated and leased. The FCC
also continues to allocate and auction additional spectrum that
can be used for wireless services. In February 2005, the FCC
completed Auction #58, in which additional PCS spectrum was
auctioned in numerous markets, including many markets where we
currently provide service. In addition, the FCC in 2006
auctioned an additional 90 MHz of nationwide spectrum in
the 1700 MHz to 2100 MHz band for AWS in
Auction #66, and in January 2008 began an auction of
62 MHz of additional spectrum in the 700 MHz band
(referred to in this report as Auctions #73 and #76).
New companies, such as cable television operators or satellite
operators, have purchased or may purchase licenses and begin
offering wireless services. In addition, because the FCC has
recently permitted the offering of broadband services over power
lines, it is possible that utility companies will begin
competing against us.

 

We believe that we are strategically positioned to compete with
other communications technologies that now exist. Continuing
technological advances in telecommunications and FCC policies
that encourage the development of new spectrum-based
technologies make it difficult, however, to predict the extent
of future competition.

 

partnership with some major municipalities in the U.S. As wireless service is becoming a viable alternative to traditional landline phone service, we are also increasingly competing directly with traditional landline telephone companies for customers. Competition is also increasing from local and long distance wireline carriers who have begun to aggressively advertise in the face of increasing competition from wireless carriers, cable operators and other competitors. Cable operators are providing telecommunications services to the home, and some of these carriers are providing local and long distance voice services using VoIP. In particular circumstances, these carriers may be able to avoid payment of access charges to local exchange carriers for the use of their networks on long distance calls. Cost savings for these carriers could result in lower prices to customers and increased competition for wireless services. Some of our competitors offer these other services together with their wireless communications service, which may make their services more attractive to customers. In the future, we may also face competition from mobile satellite service, or MSS, providers, as well as from resellers of these services. The FCC has granted, or may grant, MSS providers the flexibility to deploy an ancillary terrestrial component to their satellite services. This added flexibility may enhance MSS providers’ ability to offer more competitive mobile services.

 

There has also been an increasing trend towards consolidation of wireless service providers through joint ventures, reorganizations and acquisitions. These consolidated carriers may have substantially larger service areas, more capacity and greater financial resources and bargaining power than we do. As consolidation creates even larger competitors, the advantages our competitors have may increase. For example, in connection with the offering of our Travel Time roaming service, we have encountered problems with certain large wireless carriers in negotiating reasonable terms for roaming arrangements, and believe that consolidation has contributed significantly to such carriers’ control over the terms and conditions of wholesale roaming services. Additionally, these agreements can be terminated by the carriers. We and a number of other small, rural and regional carriers have asked the FCC in a currently pending FCC proceeding to impose an obligation on all commercial mobile radio services providers to permit automatic roaming by other providers on their networks on a just, reasonable and non-discriminatory basis, but we cannot predict whether or when the FCC will grant the relief requested.

 

The telecommunications industry is experiencing significant technological changes, as evidenced by the increasing pace of improvements in the capacity and quality of digital technology, shorter cycles for new products and enhancements and changes in consumer preferences and expectations. Accordingly, we expect competition in the wireless telecommunications industry to be dynamic and intense as a result of competitors and the development of new technologies, products and services. We compete for customers based on numerous factors, including wireless system coverage and quality, service value proposition (minutes and features relative to price), local market presence, digital voice and features, customer service, distribution strength, and brand name recognition. Some competitors also market other services, such as landline local exchange and Internet access services, with their wireless service offerings. Competition has caused, and we anticipate it will continue to cause, market prices for two-way wireless products and services to decline. In addition, some competitors offer or have announced plans to offer unlimited service plans at rates similar to Cricket’s service plan rates in markets in which we have launched service. Our ability to compete successfully will depend, in part, on our ability to distinguish our Cricket service from competitors through marketing and through our ability to anticipate and respond to other competitive factors affecting the industry, including new services that may be introduced, changes in consumer preferences, demographic trends, economic conditions, and competitors’ discount pricing and bundling strategies, all of which could adversely affect our operating margins, market penetration and customer retention. Because many of the wireless operators in our markets have substantially greater financial resources than we do, they may be able to offer prospective customers discounts or equipment subsidies that are substantially greater than those we could offer. In addition, to the extent that products or services that we offer, such as roaming capability, may depend upon negotiations with other wireless operators, discriminatory behavior by such operators or their refusal to negotiate with us could adversely affect our business. While we believe that our cost structure, combined with the differentiated value proposition that our Cricket service represents in the wireless marketplace, provides us with the means to react effectively to price competition, we cannot predict the effect that the market forces or the conduct of other operators in the industry will have on our business.

 

The FCC is currently pursuing policies designed to increase the number of wireless licenses available and new wireless provider competition. For example, the FCC has adopted rules that allow PCS and other wireless licenses to be partitioned, disaggregated and leased. The FCC also continues to allocate and auction additional spectrum that

can be used for wireless services. In February 2005, the FCC completed Auction #58, in which additional PCS spectrum was auctioned in numerous markets, including many markets where we currently provide service. In addition, the FCC recently completed auctioning an additional 90 MHz of nationwide spectrum in the 1700 MHz to 2100 MHz band for AWS in Auction #66 and has announced that it intends to auction additional spectrum in the 700 MHz band in subsequent auctions. New companies, such as cable television operators or satellite operators, have purchased or may purchase licenses and begin offering wireless services. In addition, because the FCC has recently permitted the offering of broadband services over power lines, it is possible that utility companies will begin competing against us.

 

We believe that we are strategically positioned to compete with other communications technologies that now exist. Continuing technological advances in telecommunications and FCC policies that encourage the development of new spectrum-based technologies make it difficult, however, to predict the extent of future competition.