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Article by DailyStocks_admin    (10-22-08 04:12 AM)

Filed with the SEC from Oct 9 to Oct 15:

Leap Wireless International (LEAP)
Hedge-fund Harbinger Capital Partners said that it expects to talk with Leap Wireless executives about how to maximize shareholder value. In December, Harbinger and its affiliates reported holding a passive stake in the San Diego-based provider of wireless-communications services. Harbinger's chief, Philip Falconne, controls 10.23 million Leap shares (14.8%).

BUSINESS OVERVIEW

Overview

We are a wireless communications carrier that offers digital wireless service in the U.S. under the “Cricket ® ” brand. Our Cricket service offers customers unlimited wireless service for a flat monthly rate without requiring a fixed-term contract or credit check.

Cricket service is offered by Cricket, a wholly owned subsidiary of Leap, and is also offered in Oregon by LCW Wireless Operations, LLC, or LCW Operations, a designated entity under FCC regulations. Cricket owns an indirect 73.3% non-controlling interest in LCW Operations through a 73.3% non-controlling interest in LCW Wireless, LLC, or LCW Wireless. Cricket also owns an 82.5% non-controlling interest in Denali Spectrum, LLC, or Denali, which purchased a wireless license in Auction #66 covering the upper mid-west portion of the U.S. as a designated entity through its wholly owned subsidiary, Denali Spectrum License, LLC, or Denali License. We consolidate our interests in LCW Wireless and Denali in accordance with Financial Accounting Standards Board Interpretation No., or FIN, 46(R), “Consolidation of Variable Interest Entities,” because these entities are variable interest entities and we will absorb a majority of their expected losses.

Leap was formed as a Delaware corporation in 1998. Leap’s shares began trading publicly in September 1998 and we launched our innovative Cricket service in March 1999. On April 13, 2003, we filed voluntary petitions for relief under Chapter 11 in federal bankruptcy court. On August 16, 2004, our plan of reorganization became effective and we emerged from Chapter 11 bankruptcy. On that date, a new board of directors of Leap was appointed, Leap’s previously existing stock, options and warrants were cancelled, and Leap issued 60 million shares of new Leap common stock for distribution to two classes of creditors. See “— Chapter 11 Proceedings Under the Bankruptcy Code” below. On June 29, 2005, Leap’s common stock became listed for trading on the NASDAQ National Market (now known as the NASDAQ Global Market) under the symbol “LEAP.” Effective July 1, 2006, Leap’s common stock became listed for trading on the NASDAQ Global Select Market, also under the symbol “LEAP.” Leap conducts operations through its subsidiaries and has no independent operations or sources of operating revenue other than through dividends, if any, from its subsidiaries.

Cricket Business Overview

Cricket Service

At December 31, 2007, Cricket service was offered in 23 states and had approximately 2.9 million customers. As of December 31, 2007, we, LCW License, LLC, or LCW License (a wholly owned subsidiary of LCW Wireless), and Denali License owned wireless licenses covering an aggregate of 186.5 million POPs (adjusted to eliminate duplication from overlapping licenses). The combined network footprint in our operating markets covered approximately 54 million POPs at the end of 2007, which includes new markets launched in 2007 and incremental POPs attributed to ongoing footprint expansion. The licenses we and Denali License purchased in Auction #66, together with the existing licenses we own, provide 20 MHz of coverage and the opportunity to offer enhanced data services in almost all markets in which we currently operate or are building out, assuming Denali License were to make available to us certain of its spectrum.

In addition to the approximately 54 million POPs we covered at the end of 2007 with our combined network footprint, we estimate that we and Denali License hold licenses in markets that cover up to approximately 85 million additional POPs that are suitable for Cricket service, and we and Denali License have already begun the build-out of some of our Auction #66 markets. We and Denali License expect to cover up to an additional 12 to 28 million POPs by the end of 2008, bringing total covered POPs to between 66 and 82 million by the end of 2008. We and Denali License may also develop some of the licenses covering these additional POPs through partnerships with others.

The AWS spectrum that was auctioned in Auction #66 currently is used by U.S. federal government and/or incumbent commercial licensees. Several federal government agencies have cleared or announced plans to promptly clear spectrum covered by licenses we and Denali License purchased in Auction #66. Other agencies, however, have not yet finalized plans to relocate their use to alternative spectrum. If these agencies do not relocate to alternative spectrum within the next several months, their continued use of the spectrum covered by licenses we and Denali License purchased in Auction #66 could delay the launch of certain markets.

We continue to seek additional opportunities to enhance our current market clusters and expand into new geographic markets by participating in FCC spectrum auctions, by acquiring spectrum and related assets from third parties, and/or by participating in new partnerships or joint ventures. We also expect to continue to look for opportunities to optimize the value of our spectrum portfolio. Because some of the licenses that we and Denali License hold include large regional areas covering both rural and metropolitan communities, we and Denali License may sell some of this spectrum and pursue the deployment of alternative products or services in portions of this spectrum.

We expect that we will continue to build out and launch new markets and pursue other strategic expansion activities for the next several years. We intend to be disciplined as we pursue these expansion efforts and to remain focused on our position as a low-cost leader in wireless telecommunications. We expect to achieve increased revenues and incur higher operating expenses as our existing business grows and as we build out and after we launch service in new markets. Large-scale construction projects for the build-out of our new markets will require significant capital expenditures and may suffer cost overruns. Any such significant capital expenditures or increased operating expenses would decrease earnings, operating income before depreciation and amortization, or OIBDA, and free cash flow for the periods in which we incur such costs. However, we are willing to incur such expenditures because we expect our expansion activities will be beneficial to our business and create additional value for our stockholders.

We believe that our business model is different from most other wireless companies. Our services primarily target market segments underserved by traditional communications companies: our customers tend to be younger, have lower incomes and include a greater percentage of ethnic minorities. We have designed the Cricket service to appeal to customers who value unlimited mobile calling with a predictable monthly bill and who make the majority of their calls from within Cricket service areas. Our internal customer surveys indicate that approximately 65% of our customers use our service as their sole phone service and approximately 90% as their primary phone service. For the year ended December 31, 2007, our customers used our Cricket service for an average of approximately 1,450 minutes per month, which we believe was substantially above the U.S. wireless national carrier customer average.

The majority of wireless customers in the U.S. subscribe to post-pay services that may require credit approval and a contractual commitment from the subscriber for a period of at least one year, and include overage charges for call volumes in excess of a specified maximum. According to International Data Corporation, U.S. wireless penetration was approximately 80% at December 31, 2007. We believe that a large portion of the remaining growth potential in the U.S. wireless market consists of customers who are price-sensitive, who have lower credit scores or who prefer not to enter into fixed-term contracts. We believe our services appeal strongly to these customer segments. We believe that we are able to serve these customers and generate significant OIBDA because of our high-quality network and low customer acquisition and operating costs.

We believe that our business model is scalable and can be expanded successfully into adjacent and new markets because we offer a differentiated service and an attractive value proposition to our customers at costs significantly lower than most of our competitors. As part of this expansion strategy, for example:


• We increased our combined network footprint by approximately 6 million POPs during 2007. We and Denali License expect to cover up to an additional 12 to 28 million POPs by the end of 2008, and expect to cover up to an additional 28 to 50 million POPs by the end of 2010.

• In January 2008, we agreed to exchange an aggregate of 20 MHz of disaggregated spectrum under certain of our existing PCS licenses in Tennessee, Georgia and Arkansas for an aggregate of 30 MHz of disaggregated and partitioned spectrum in New Jersey and Mississippi under certain of Sprint Nextel’s existing wireless licenses. Completion of this transaction is subject to customary closing conditions, including FCC approval.

• In April 2007, Denali License was awarded a wireless license covering 59.9 million POPs (which includes markets covering 5.8 million POPs which overlap with certain licenses we purchased in Auction #66).

• In December 2006, we purchased 99 wireless licenses in Auction #66 covering 124.9 million POPs (adjusted to eliminate duplication among certain overlapping Auction #66 licenses).

• In November 2006, we completed the purchase of 13 wireless licenses in the Carolinas for an aggregate purchase price of $31.8 million. During 2007, we launched Cricket service in select new markets in North and South Carolina, adding approximately 1.9 million POPs to our network footprint.

• In August 2006, we exchanged our wireless license in Grand Rapids, Michigan for a wireless license in Rochester, New York to form a new market cluster with our existing Buffalo and Syracuse markets in upstate New York. In June 2007, we launched Cricket service in Rochester, New York, resulting in an expanded regional network footprint covering 2.4 million POPs.

• In July 2006, we acquired a non-controlling membership interest in LCW Wireless, which held a license for the Portland, Oregon market and to which we contributed, among other things, our existing Eugene and Salem, Oregon markets. LCW Wireless launched Cricket service in the Portland, Oregon market in December 2006, creating a new expanded network footprint in Oregon covering 2.7 million POPs.

Cricket Business Strategy


• Target Underserved Customer Segments. Our services are targeted primarily toward market segments underserved by traditional communications companies. On average, our customers tend to be younger and have lower incomes than the customers of other wireless carriers. Moreover, our customer base also reflects a greater percentage of ethnic minorities than those of the national carriers. We believe these underserved market segments are among the fastest growing population segments in the U.S.

• Continue to Develop and Evolve Products and Services. We continue to develop and evolve our product and service offerings to better meet the needs of our target customer segments. For example, during the last two years, we began to offer unlimited wireless broadband internet, added unlimited mobile web access to our product portfolio, and introduced new higher-priced, higher-value rate plans that allow unlimited calling from any Cricket calling area. With the completion of our deployment of CDMA2000 ® 1xEV-DO, or EvDO, technology across all of our existing and new markets, we are able to offer an expanded array of services to our customers, including high-demand wireless data services such as mobile content and high quality music downloads at speeds of up to 2.4 Megabits per second. We believe these and other enhanced data offerings will be attractive to many of our existing customers and will enhance our appeal to new data-centric customers. We expect to continue to develop our voice and data product and service offerings in 2008 and beyond.

• Build Our Brand and Strengthen Our Distribution. We are focused on building our brand awareness in our markets and improving the productivity of our distribution system. Since our target customer base is diversified geographically, ethnically and demographically, we have decentralized our marketing programs to support local customization and better target our advertising expenses. We have redesigned and re-merchandized our stores and introduced a new sales process aimed at improving both the customer experience and our revenue per user. We have also established our premier dealer program, and we are in the process of enabling our premier dealers and other indirect dealers to provide greater customer support services. We expect these changes will enhance the customer experience and improve customer satisfaction.

• Maintain Industry Leading Cost Structure. Our networks and business model are designed to provide service to our customers at a significantly lower cost than many of our competitors. As we continue to build out new markets, we expect to continue to spread our fixed costs over a growing customer base. We seek to maintain low customer acquisition costs through focused sales and marketing initiatives and cost-effective distribution strategies.

• Enhance Established Existing Markets. We continue to expand our network coverage and capacity in many of our existing established markets by deploying additional cell sites, allowing us to offer our customers a larger local calling area. During 2007, we deployed approximately 300 new cell sites in our established existing markets, thereby adding approximately 2 million POPs to our network footprint in these markets. For example, in Arizona we significantly expanded our network footprint in our Phoenix and Tucson markets and are joining these two markets into a single, contiguous local calling area for the first time. We expect to deploy approximately 250 cell sites in our established existing markets during 2008.


• Develop Market Clusters and Expand Into Attractive Strategic Markets. We continue to seek additional opportunities to develop and enhance our market clusters and expand into new geographic markets by participating in FCC spectrum auctions, by acquiring spectrum and related assets from third parties, or by participating in new partnerships or joint ventures. An example of our market cluster strategy is the Rochester, New York market we launched in 2007 to create a new market cluster in upstate New York by connecting our existing Buffalo and Syracuse markets. Examples of our strategic market expansion include the central Texas market cluster (including Houston, Austin and San Antonio) and the San Diego, California market that we acquired and launched in 2006. All of these markets meet our internally developed criteria concerning customer demographics and population density which we believe enable us to offer Cricket service on a cost-competitive basis in these markets. We also anticipate that the licenses we and Denali License purchased in Auction #66 will provide the opportunity to substantially enhance our coverage area and allow us and Denali License to launch Cricket service in numerous new markets over time, with new market launches expected to begin in 2008.

Cricket Business Operations

Products and Services

Cricket Service Plans. Our service plans are designed to attract customers by offering simple, predictable and affordable wireless services that are a competitive alternative to traditional wireless and wireline services. Unlike traditional wireless services, we offer service on a flat-rate, unlimited usage basis, without requiring fixed-term contracts, early termination fees or credit checks. Our service plans allow our customers to place unlimited calls within Cricket service areas and receive unlimited calls from anywhere in the world.

In April 2007, we launched a new suite of Cricket rate plans, which all include unlimited wireless services, the foundation of our business. Our new premium plans offer unlimited local and U.S. long distance service from any Cricket service area and unlimited use of multiple calling features and messaging services, bundled with specified roaming minutes in the continental U.S. (previously only available a la carte) or unlimited mobile web access and directory assistance. Our most popular plan combines unlimited local and U.S. long distance service from any Cricket service area with unlimited use of multiple calling features and messaging services. In addition, we offer basic service plans that allow customers to make unlimited calls within their Cricket service area and receive unlimited calls from any area, combined with unlimited messaging and unlimited U.S. long distance service options. We have also launched a new weekly rate plan, Cricket By Week, and a flexible payment option, BridgePay, which give our customers greater flexibility in the use and payment of wireless service and which we believe will help us to improve customer retention.

With the completion of our deployment of EvDO technology across all of our existing and new markets, we are able to offer an expanded array of services to our customers, including high-demand wireless data services such as mobile content and high quality music downloads at speeds of up to 2.4 Megabits per second. We expect to continue to develop our product and service offerings in 2008 and beyond to better meet our customers’ needs.

Cricket Plan Upgrades. We continue to evaluate new product and service offerings in order to enhance customer satisfaction and attract new customers. Examples of services that customers can add to their plans include: packages of international calling minutes to Canada and/or Mexico; roaming service packages, which allow our customers to use their Cricket phones outside of their Cricket service areas on a prepaid basis; and Cricket Flex Bucket ® service, which allows our customers to pre-purchase services (including additional directory assistance calls, roaming services, domestic and international long distance, ring tones, premium short message service (SMS) and text messaging to wireless users) and applications (including customized ring tones, wallpapers, photos, greeting cards, games and news and entertainment message deliveries) on a prepaid basis.

Handsets. Our handsets range from high-end to budget low-cost models, and include models that provide mobile web browsers, picture-enabled caller ID, color screens, high-resolution cameras with digital zoom and flash, integrated FM radio and MP3 stereo, USB, infrared and Bluetooth connectivity, over 20MB of on-board memory, and other features to facilitate digital data transmission. Currently, all of the handsets that we offer use CDMA2000 1xRTT, or CDMA 1xRTT, technology. In addition, we occasionally offer selective handset upgrade incentives for customers who meet certain criteria.

Handset Replacement and Returns. We facilitate warranty exchanges between our customers and the handset manufacturers for handset issues that occur during the applicable warranty period, and we work with a third party who provides our customers with an extended handset warranty/insurance program. Customers have limited rights to return handsets and accessories based on the time elapsed since purchase and usage. Returns of handsets and accessories have historically been negligible.

Cricket Wireless Internet Service. In September 2007, we introduced our first unlimited wireless broadband service in select markets. Like our Cricket unlimited service plans, this service allows customers to access the internet through their laptops for one low, flat rate with no long-term commitments or credit checks, and brings low-cost broadband data capability to the unlimited wireless segment. During 2008, we expect to expand the availability of our unlimited wireless broadband service.

Jump ® Mobile. Our per-minute prepaid service, Jump Mobile, brings Cricket’s attractive value proposition to customers who prefer active control over their wireless usage and allows us to better target the urban youth market. Our Jump Mobile plan allows our customers to receive unlimited calls from anywhere in the world at any time, and to place calls to any place in the U.S. (excluding Alaska) at a flat rate of $0.10 per minute, provided they have sufficient funds in their account. In addition, our Jump Mobile customers receive free unlimited inbound and outbound text messaging, provided they have a credit balance in their account, as well as access to roaming service (for $0.69 per minute), international long distance service, and other services and applications.

Customer Care and Billing

Customer Care. We outsource our call center operations to multiple call center vendors and strive to take advantage of call centers in the U.S. and abroad to continuously improve the quality of our customer care and reduce the cost of providing care to our customers. One of our international call centers is located in Central America, which facilitates the efficient provision of customer support to our large and growing Spanish-speaking customer segment.

Billing and Support Systems. We outsource our billing, provisioning, and payment systems with external vendors and also contract out our bill presentment, distribution and fulfillment services to external vendors.

CEO BACKGROUND

S. Douglas Hutcheson was appointed as our chief executive officer, or CEO, and president in February 2005, and has served as a member of our board of directors since then, and has also served as our acting chief financial officer, or CFO, since September 2007, having previously served as our president and CFO from January 2005 to February 2005, as our executive vice president and CFO from January 2004 to January 2005, as our senior vice president and CFO from August 2002 to January 2004, as our senior vice president and chief strategy officer from March 2002 to August 2002, as our senior vice president, product development and strategic planning from July 2000 to March 2002, as our senior vice president, business development from March 1999 to July 2000 and as our vice president, business development from September 1998 to March 1999. From February 1995 to September 1998, Mr. Hutcheson served as vice president, marketing in the Wireless Infrastructure Division at Qualcomm Incorporated. Mr. Hutcheson is on the board of directors of the Children’s Museum of San Diego and of San Diego’s Regional Economic Development Corporation. Mr. Hutcheson holds a B.S. in mechanical engineering from California Polytechnic University and an M.B.A. from University of California, Irvine.

Albin F. Moschner has served as our executive vice president and chief marketing officer since January 2005, having previously served as senior vice president, marketing from September 2004 to January 2005. Prior to this, Mr. Moschner was president of Verizon Card Services from December 2000 to November 2003. Prior to joining Verizon, Mr. Moschner was president and chief executive officer of OnePoint Services, Inc., a telecommunications company that he founded and that was acquired by Verizon in December 2000. Mr. Moschner also was a principal and the vice chairman of Diba, Inc., a development stage internet software company, and served as senior vice president of operations, a member of the board of directors and ultimately president and chief executive officer of Zenith Electronics from October 1991 to July 1996. Mr. Moschner holds a master’s degree in electrical engineering from Syracuse University and a B.E. in electrical engineering from the City College of New York.

Glenn T. Umetsu has served as our executive vice president and chief technical officer since January 2005, having previously served as our executive vice president and chief operating officer from January 2004 to January 2005, as our senior vice president, engineering operations and launch deployment from June 2002 to January 2004, and as vice president, engineering operations and launch development from April 2000 to June 2002. From September 1996 to April 2000, Mr. Umetsu served as vice president, engineering and technical operations for Cellular One in the San Francisco Bay Area. Before Cellular One, Mr. Umetsu served in various telecommunications operations roles for 24 years with AT&T Wireless, McCaw Communications, RAM Mobile Data, Honolulu Cellular, PacTel Cellular, AT&T Advanced Mobile Phone Service, Northwestern Bell and the United States Air Force. Mr. Umetsu holds a B.A. in mathematics and economics from Brown University.

William Ingram has served as our senior vice president, financial operations and strategy since February 2008, having previously served as a consultant to us since August 2007. Prior to joining us, Mr. Ingram served as vice president and general manager of AudioCodes, Inc., a telecommunications equipment company from July 2006 to March 2007. Prior to that, Mr. Ingram served as the president and chief executive officer of Nuera Communications, Inc., a provider of VoIP infrastructure solutions, from September 1996 until it was acquired by AudioCodes, Inc. in July 2006. Prior to joining Nuera Communications in 1996, Mr. Ingram served as the chief operating officer of the clarity products division of Pacific Communication Sciences, Inc. a provider of wireless data communications products, as president of Ivie Industries, Inc. a computer security and hardware manufacturer, and as president of KevTon, Inc. an electronics manufacturing company. Mr. Ingram holds an A.B. in economics from Stanford University and an M.B.A. from Harvard Business School.

Robert J. Irving, Jr. has served as our senior vice president, general counsel and secretary since May 2003, having previously served as our vice president, legal from August 2002 to May 2003, and as our senior legal counsel from September 1998 to August 2002. Previously, Mr. Irving served as administrative counsel for Rohr, Inc., a corporation that designed and manufactured aerospace products from 1991 to 1998, and prior to that served as vice president, general counsel and secretary for IRT Corporation, a corporation that designed and manufactured x-ray inspection equipment. Before joining IRT Corporation, Mr. Irving was an attorney at Gibson, Dunn & Crutcher. Mr. Irving was admitted to the California Bar Association in 1982. Mr. Irving holds a B.A. from Stanford University, an M.P.P. from The John F. Kennedy School of Government of Harvard University and a J.D. from Harvard Law School, where he graduated cum laude.

Steven R. Martin has served as our acting chief accounting officer since February 2008, having previously served as an accounting consultant to us and our Audit Committee since October 2007. From July 2005 to September 2007, Mr. Martin served as vice president and chief financial officer of Stratagene Corporation, a publicly traded life sciences company, and served as director of finance of Stratagene Corporation from May 2004 to July 2005. From March 2001 to May 2003, Mr. Martin served as controller of Gen-Probe Incorporated, a publicly traded life sciences company. Prior to Gen-Probe, Mr. Martin held various senior finance positions at two other international manufacturing companies and was a senior audit manager at the public accounting firm of Deloitte & Touche. Mr. Martin is a certified public accountant and holds a B.S. in accounting from San Diego State University.

Leonard C. Stephens has served as our senior vice president, human resources since our formation in June 1998. From December 1995 to September 1998, Mr. Stephens was vice president, human resources operations for Qualcomm Incorporated. Before joining Qualcomm Incorporated, Mr. Stephens was employed by Pfizer Inc., where he served in a number of human resources positions over a 14-year period. Mr. Stephens holds a B.A. from Howard University.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a wireless communications carrier that offers digital wireless service in the U.S. under the “Cricket” brand. Our Cricket service offers customers unlimited wireless service for a flat monthly rate without requiring a fixed-term contract or credit check. Cricket service is offered by Cricket, a wholly owned subsidiary of Leap, and is also offered in Oregon by LCW Operations, a designated entity under FCC regulations. Cricket owns an indirect 73.3% non-controlling interest in LCW Operations through a 73.3% non-controlling interest in LCW Wireless. Cricket also owns an 82.5% non-controlling interest in Denali, which purchased a wireless license in Auction #66 covering the upper mid-west portion of the U.S. as a designated entity through its wholly owned subsidiary, Denali License. We consolidate our interests in LCW Wireless and Denali in accordance with FIN 46-R, “Consolidation of Variable Interest Entities,” because these entities are variable interest entities and we will absorb a majority of their expected losses.

At December 31, 2007, Cricket service was offered in 23 states and had approximately 2.9 million customers. As of December 31, 2007, we, LCW License (a wholly owned subsidiary of LCW Operations) and Denali License owned wireless licenses covering an aggregate of 186.5 million POPs (adjusted to eliminate duplication from overlapping licenses). The combined network footprint in our operating markets covered approximately 54 million POPs at the end of 2007, which includes new markets launched in 2007 and incremental POPs attributed to ongoing footprint expansion. The licenses we and Denali License purchased in Auction #66, together with the existing licenses we own, provide 20 MHz of coverage and the opportunity to offer enhanced data services in almost all markets in which we currently operate or are building out, assuming Denali License were to make available to us certain of its spectrum.

In addition to the approximately 54 million POPs we covered at the end of 2007 with our combined network footprint, we estimate that we and Denali License hold licenses in markets that cover up to approximately 85 million additional POPs that are suitable for Cricket service, and we and Denali License have already begun the build-out of some of our Auction #66 markets. We and Denali License expect to cover up to an additional 12 to 28 million POPs by the end of 2008, bringing total covered POPs to between 66 and 82 million by the end of 2008. We and Denali License may also develop some of the licenses covering these additional POPs through partnerships with others.

The AWS spectrum that was auctioned in Auction #66 currently is used by U.S. federal government and/or incumbent commercial licensees. Several federal government agencies have cleared or announced plans to promptly clear spectrum covered by licenses we and Denali License purchased in Auction #66. Other agencies, however, have not yet finalized plans to relocate their use to alternative spectrum. If these agencies do not relocate to alternative spectrum within the next several months, their continued use of the spectrum covered by licenses we and Denali License purchased in Auction #66 could delay the launch of certain markets.

Our Cricket rate plans are based on providing unlimited wireless services to customers, and the value of unlimited wireless services is the foundation of our business. Our premium rate plans offer unlimited local and U.S. long distance service from any Cricket service area and unlimited use of multiple calling features and messaging services, bundled with specified roaming minutes in the continental U.S. or unlimited mobile web access and directory assistance. Our most popular plan combines unlimited local and U.S. long distance service from any Cricket service area with unlimited use of multiple calling features and messaging services. In addition, we offer basic service plans that allow customers to make unlimited calls within their Cricket service area and receive unlimited calls from any area, combined with unlimited messaging and unlimited U.S. long distance service options. We have also launched a new weekly rate plan, Cricket By Week, and a flexible payment option, BridgePay, which give our customers greater flexibility in the use and payment of wireless service and which we believe will help us to improve customer retention. In September 2007, we introduced our first unlimited wireless broadband service in select markets, which allows customers to access the internet through their laptops for one low, flat rate with no long-term commitments or credit checks. Our per-minute prepaid service, Jump Mobile, brings Cricket’s attractive value proposition to customers who prefer to actively control their wireless usage and to allow us to better target the urban youth market. We expect to continue to broaden our voice and data product and service offerings in 2008 and beyond.

We believe that our business model is scalable and can be expanded successfully into adjacent and new markets because we offer a differentiated service and an attractive value proposition to our customers at costs significantly lower than most of our competitors. We continue to seek additional opportunities to enhance our current market clusters and expand into new geographic markets by participating in FCC spectrum auctions, acquiring spectrum and related assets from third parties, and/or participating in new partnerships or joint ventures. We also expect to continue to look for opportunities to optimize the value of our spectrum portfolio. Because some of the licenses that we and Denali License hold include large regional areas covering both rural and metropolitan communities, we and Denali License may sell some of this spectrum and pursue the deployment of alternative products or services in portions of this spectrum.

Our principal sources of liquidity are our existing unrestricted cash, cash equivalents and short-term investments, cash generated from operations, and cash available from borrowings under our $200 million revolving credit facility (which was undrawn at December 31, 2007). From time to time, we may also generate additional liquidity through capital markets transactions or by selling assets that are not material to or are not required for our ongoing business operations. See “Liquidity and Capital Resources” below.

Among the most significant factors affecting our financial condition and performance from period to period are our new market expansions and growth in customers, the impacts of which are reflected in our revenues and operating expenses. Throughout 2006 and 2007, we and our joint ventures continued expanding existing market footprints and expanded into 20 new markets, increasing the number of potential customers covered by our networks from approximately 28 million covered POPs as of December 31, 2005, to approximately 48 million covered POPs as of December 31, 2006, to approximately 54 million covered POPs as of December 31, 2007. This network expansion, together with organic customer growth in our existing markets, has resulted in substantial additions of new customers, as our total end-of-period customers increased from 1.67 million customers as of December 31, 2005, to 2.23 million customers as of December 31, 2006, to 2.86 million customers as of December 31, 2007. In addition, our total revenues have increased from $957.8 million for fiscal 2005, to $1.17 billion for fiscal 2006, to $1.63 billion for fiscal 2007. During the past two years, we also introduced several higher-priced, higher-value service plans which have helped increase average revenue per user per month over time, as customer acceptance of the higher-priced plans has been favorable.

As our business activities have expanded, our operating expenses have also grown, including increases in cost of service reflecting: the increase in customers and the broader variety of products and services provided to such customers; increased depreciation expense related to our expanded networks; and increased selling and marketing expenses and general and administrative expenses generally attributable to expansion into new markets, selling and marketing to a broader potential customer base, and expenses required to support the administration of our growing business. In particular, total operating expenses increased from $901.4 million for fiscal 2005, to $1.17 billion for fiscal 2006, to $1.57 billion for fiscal 2007. We also incurred substantial additional indebtedness to finance the costs of our business expansion and acquisitions of additional wireless licenses in 2006 and 2007. As a result, our interest expense has increased from $30.1 million for fiscal 2005, to $61.3 million for fiscal 2006, to $121.2 million for fiscal 2007. Also, during the third quarter of 2007, we changed our tax accounting method for amortizing wireless licenses, contributing substantially to our income tax expense of $37.4 million for the year ended December 31, 2007, compared to an income tax expense of $9.3 million for the year ended December 31, 2006.

Primarily as a result of the factors described above, our net income of $30.7 million for fiscal 2005 decreased to a net loss of $24.4 million for fiscal 2006. Our net loss increased to $75.9 million for the year ended December 31, 2007.

We expect that we will continue to build out and launch new markets and pursue other strategic expansion activities for the next several years. We intend to be disciplined as we pursue these expansion efforts and to remain focused on our position as a low-cost leader in wireless telecommunications. We expect to achieve increased revenues and incur higher operating expenses as our existing business grows and as we build out and after we launch service in new markets. Large-scale construction projects for the build-out of our new markets will require significant capital expenditures and may suffer cost overruns. Any such significant capital expenditures or increased operating expenses would decrease earnings, operating income before depreciation and amortization, or OIBDA, and free cash flow for the periods in which we incur such costs. However, we are willing to incur such expenditures because we expect our expansion activities will be beneficial to our business and create additional value for our stockholders.

Critical Accounting Policies and Estimates

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. These principles require us to make estimates and judgments that affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities, and our reported amounts of revenues and expenses. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition and the valuation of deferred tax assets, long-lived assets and indefinite-lived intangible assets. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates.

We believe that the following critical accounting policies and estimates involve a higher degree of judgment or complexity than others used in the preparation of our consolidated financial statements.

Principles of Consolidation

The consolidated financial statements include the accounts of Leap and its wholly owned subsidiaries as well as the accounts of LCW Wireless and Denali and their wholly owned subsidiaries. We consolidate our interests in LCW Wireless and Denali in accordance with FIN 46(R), “Consolidation of Variable Interest Entities,” because these entities are variable interest entities and we will absorb a majority of their expected losses. Prior to March 2007, we consolidated our interests in ANB 1 and its wholly owned subsidiary ANB 1 License in accordance with FIN 46(R). We acquired the remaining interests in ANB 1 in March 2007 and merged ANB 1 and ANB 1 License into Cricket in December 2007. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Revenues

Cricket’s business revenues principally arise from the sale of wireless services, handsets and accessories. Wireless services are generally provided on a month-to-month basis. New and reactivating customers are required to pay for their service in advance, and generally, customers who activated their service prior to May 2006 pay in arrears. We do not require any of our customers to sign fixed-term service commitments or submit to a credit check. These terms generally appeal to less affluent customers who are considered more likely to terminate service for inability to pay than wireless customers in general. Consequently, we have concluded that collectibility of our revenues is not reasonably assured until payment has been received. Accordingly, service revenues are recognized only after services have been rendered and payment has been received.

When we activate a new customer, we frequently sell that customer a handset and the first month of service in a bundled transaction. Under the provisions of Emerging Issues Task Force, or EITF, Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” the sale of a handset along with a month of wireless service constitutes a multiple element arrangement. Under EITF Issue No. 00-21, once a company has determined the fair value of the elements in the sales transaction, the total consideration received from the customer must be allocated among those elements on a relative fair value basis. Applying EITF Issue No. 00-21 to these transactions results in our recognition of the total consideration received, less one month of wireless service revenue (at the customer’s stated rate plan), as equipment revenue.

Equipment revenues and related costs from the sale of handsets are recognized when service is activated by customers. Revenues and related costs from the sale of accessories are recognized at the point of sale. The costs of handsets and accessories sold are recorded in cost of equipment. In addition to handsets that we sell directly to our customers at Cricket-owned stores, we also sell handsets to third-party dealers. These dealers then sell the handsets to the ultimate Cricket customer, and that customer also receives the first month of service in a bundled transaction (identical to the sale made at a Cricket-owned store). Sales of handsets to third-party dealers are recognized as equipment revenues only when service is activated by customers, since the level of price reductions ultimately available to such dealers is not reliably estimable until the handsets are sold by such dealers to customers. Thus, handsets sold to third-party dealers are recorded as consigned inventory and deferred equipment revenue until they are sold to, and service is activated by, customers.

Through a third-party provider, our customers may elect to participate in an extended handset warranty/insurance program. We recognize revenue on replacement handsets sold to our customers under the program when the customer purchases a replacement handset.

Sales incentives offered without charge to customers and volume-based incentives paid to our third-party dealers are recognized as a reduction of revenue and as a liability when the related service or equipment revenue is recognized. Customers have limited rights to return handsets and accessories based on time and/or usage; as a result, customer returns of handsets and accessories have historically been negligible.

Amounts billed by us in advance of customers’ wireless service periods are not reflected in accounts receivable or deferred revenue as collectibility of such amounts is not reasonably assured. Deferred revenue consists primarily of cash received from customers in advance of their service period and deferred equipment revenue related to handsets and accessories sold to third-party dealers.

Results of Operations

Operating Items

Service Revenues

Service revenues increased $439.3 million, or 45.9%, for the year ended December 31, 2007 compared to the corresponding period of the prior year. This increase resulted from a 39.1% increase in average total customers due to new market launches and existing market customer growth and a 4.9% increase in average monthly revenues per customer. The increase in average monthly revenues per customer was due primarily to the continued increase in customer adoption of our higher-end service plans and value added services.

Service revenues increased $187.4 million, or 24.4%, for the year ended December 31, 2006 compared to the corresponding period of the prior year. This increase resulted from the 15.6% increase in average total customers and a 7.6% increase in average revenues per customer. The increase in average revenues per customer was due primarily to the continued increase in customer adoption of our higher-end service plans and value-added services.

Equipment Revenues

Equipment revenues increased $24.3 million, or 11.5%, for the year ended December 31, 2007 compared to the corresponding period of the prior year. An increase of 36.4% in handset sales volume was largely offset by increases in promotional incentives for customers and an increased shift in handset sales to our exclusive indirect distribution channel, to which handsets are sold at lower prices.

Equipment revenues increased $22.0 million, or 11.6%, for the year ended December 31, 2006 compared to the corresponding period of the prior year. An increase of 58.5% in handset sales volume was largely offset by lower net revenues per handset sold as a result of bundling the first month of service with the initial handset price, eliminating activation fees for new customers purchasing equipment and a larger proportion of total handset sales being activated through our indirect channel partners.

Cost of Service

Cost of service increased $120.0 million, or 45.4%, for the year ended December 31, 2007 compared to the corresponding period of the prior year. As a percentage of service revenues, cost of service decreased to 27.5% from 27.6% in the prior year period. Variable product costs increased by 1.9% as a percentage of service revenues due to increased customer usage of our value-added services. This increase was offset by a 0.9% decrease in network infrastructure costs as a percentage of service revenues and a 1.0% decrease in labor and related costs as a percentage of service revenues due to the increase in service revenues and consequent benefits of scale.

Cost of service increased $60.6 million, or 29.8%, for the year ended December 31, 2006 compared to the corresponding period of the prior year. As a percentage of service revenues, cost of service increased to 27.6% from 26.5% in the prior year period. Variable product costs increased by 0.6% of service revenues due to increased customer usage of our value-added services. In addition, labor and related costs increased by 0.4% of service revenues due to new market launches during 2006. The increased fixed network infrastructure costs associated with the new market launches offset the benefits of scale we would generally expect to experience with increasing customers and service revenues.

Cost of Equipment

Cost of equipment increased $95.2 million, or 30.6%, for the year ended December 31, 2007 compared to the corresponding period of the prior year. This increase was primarily attributable to a 36.4% increase in handset sales volume.

Cost of equipment increased $80.3 million, or 34.8%, for the year ended December 31, 2006 compared to the corresponding period of the prior year. This increase was primarily attributable to the 58.5% increase in handset sales volume, partially offset by reductions in costs to support our handset replacement programs for existing customers.

Selling and Marketing Expenses

Selling and marketing expenses increased $47.0 million, or 29.5%, for the year ended December 31, 2007 compared to the corresponding period of the prior year. As a percentage of service revenues, such expenses decreased to 14.8% from 16.7% in the prior year period. This decrease was primarily attributable to a 0.7% decrease in store and staffing and related costs as a percentage of services revenues due to the increase in service revenues and consequent benefits of scale and a 1.2% decrease in media and advertising costs as a percentage of service revenues reflecting large new market launches in the prior year and consequent benefits of scale.

Selling and marketing expenses increased $59.2 million, or 59.2%, for the year ended December 31, 2006 compared to the corresponding period of the prior year. As a percentage of service revenues, such expenses increased to 16.7% from 13.0% in the prior year period. This increase was primarily due to increased media and advertising costs and labor and related costs of 2.4% and 0.9% of service revenues, respectively, which were primarily attributable to our new market launches.

General and Administrative Expenses

General and administrative expenses increased $74.9 million, or 38.1%, for the year ended December 31, 2007 compared to the corresponding period of the prior year. As a percentage of service revenues, such expenses decreased to 19.5% from 20.6% in the prior year period. Customer care expenses decreased by 0.5% as a percentage of service revenues and employee related costs decreased by 0.8% as a percentage of service revenues both due to the increase in service revenues and consequent benefits of scale. These decreases were partially offset by a 0.4%

increase in professional services fees and other expenses as a percentage of service revenues due to costs incurred in connection with the unsolicited merger proposal received from MetroPCS during 2007 and other strategic merger and acquisition activities. During the three months ended December 31, 2007, we amended the contract for our primary customer billing and activation system. The amended contract has been accounted for as a capital lease and, accordingly, amounts related to the leased elements were classified as amortization expense and interest expense, rather than as a general and administrative expense under the previous contract. These amounts approximated $4 million during the fourth quarter of 2007 and will approximate $14 million per year from 2008 to 2010.

General and administrative expenses increased $36.9 million, or 23.1%, for the year ended December 31, 2006 compared to the corresponding period of the prior year. As a percentage of service revenues, such expenses decreased to 20.6% from 20.8% in the prior year period. Customer care expenses decreased by 1.7% as a percentage of service revenues due to decreases in call center and other customer care-related program costs. Professional services fees and other expenses decreased by 0.5% as a percentage of service revenues in the aggregate due to the increase in service revenues and consequent benefits in scale. Partially offsetting these decreases were increases in labor and related costs of 1.6% as a percentage of service revenues due primarily to new employee additions necessary to support our growth and the increase in share-based compensation expense of 0.4% as a percentage of service revenues due partially to our adoption of SFAS 123(R) in 2006.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations

Operating Items

Three and Six Months Ended June 30, 2008 Compared to Three and Six Months Ended June 30, 2007

Service Revenues

Service revenues increased $69.9 million, or 20.1%, for the three months ended June 30, 2008 compared to the corresponding period of the prior year. This increase resulted from a 22.2% increase in average total customers due to new market launches and existing market customer growth and was offset by a 1.7% decline in average monthly revenues per customer. Average monthly revenues per customer reflected customer acceptance of new rate plans offered during the quarter and greater customer deactivations and reactivations during the quarter as compared to the corresponding period of the prior year.

Service revenues increased $147.1 million, or 22.0%, for the six months ended June 30, 2008 compared to the corresponding period of the prior year. This increase resulted from a 22.9% increase in average total customers due to new market launches and existing market customer growth and a 0.7% decline in average monthly revenues per customer. Average monthly revenues per customer reflected customer acceptance of new rate plans offered during the first six months of 2008 and greater customer deactivations and reactivations during the first six months of 2008 as compared to the corresponding period of the prior year.

Equipment Revenues

Equipment revenues increased $7.1 million, or 13.9%, for the three months ended June 30, 2008 compared to the corresponding period of the prior year. This increase was primarily due to an increase of 12% in handset sales volume.

Equipment revenues increased $4.8 million, or 3.9%, for the six months ended June 30, 2008 compared to the corresponding period of the prior year. An increase of 6% in handset sales volume was partially offset by a reduction in the average revenue per handset sold primarily due to the volume of sales of our new low-cost handset that was launched in February 2008.

Cost of Service

Cost of service increased $28.3 million, or 31.2%, for the three months ended June 30, 2008 compared to the corresponding period of the prior year. As a percentage of service revenues, cost of service increased to 28.5% from 26.1% in the prior year period. Network infrastructure costs increased by 4% as a percentage of service revenues primarily due to costs associated with new market launches and EvDO-related network costs. In addition, during the three months ended June 30, 2007, we negotiated amendments to agreements that reduced our liability for the removal of equipment on certain cell sites at the end of the lease term, which resulted in a net gain of $6.1 million and which resulted in lower network infrastructure costs during that period. The increase in network infrastructure costs in the second quarter of 2008 was partially offset by a 1.6% decrease in variable product costs as a percentage of service revenues due to an improved product cost structure and a shift in customer usage of certain value-added services to lower-cost products that yield higher margins.

Cost of service increased $49.0 million, or 27.1%, for the six months ended June 30, 2008 compared to the corresponding period of the prior year. As a percentage of service revenues, cost of service increased to 28.2% from 27.1% in the prior year period. Network infrastructure costs increased by 1.9% as a percentage of service revenues primarily due to costs associated with new market launches and EvDO-related network costs. In addition, during the six months ended June 30, 2007, we negotiated amendments to agreements that reduced our liability for the removal of equipment on certain cell sites at the end of the lease term, which resulted in a net gain of $6.1 million and which resulted in lower network infrastructure costs during that period. The increase in network infrastructure costs in the first six months of 2008 was partially offset by a 0.8% decrease in variable product costs as a percentage of service revenues due to an improved product cost structure and a shift in customer usage of certain value-added services to lower-cost products that yield higher margins.

Cost of Equipment

Cost of equipment increased $14.3 million, or 15.8%, for the three months ended June 30, 2008 compared to the corresponding period of the prior year. An increase of 12% in handset sales volume and an increase in handset replacement-related costs were partially offset by a reduction in the average cost per handset sold primarily due to the volume of sales of our new low-cost handset that was launched in February 2008.

Cost of equipment increased $5.9 million, or 2.7%, for the six months ended June 30, 2008 compared to the corresponding period of the prior year. An increase of 6% in handset sales volume and an increase in handset replacement-related costs were partially offset by a reduction in the average cost per handset sold primarily due to the volume of sales of our new low-cost handset that was launched in February 2008.

Selling and Marketing Expenses

Selling and marketing expenses increased $27.3 million, or 58.0%, for the three months ended June 30, 2008 compared to the corresponding period of the prior year. As a percentage of service revenues, such expenses increased to 17.8% from 13.5% in the prior year period. This percentage increase was largely attributed to a 2.1% increase in media and advertising costs as a percentage of service revenues reflecting a greater number of new market launches in the current year period and the advertising costs associated with those launches. In addition, there was a 2.1% increase in store and staffing costs as a percentage of service revenues due to the launch of new markets and incremental distribution to support our footprint expansion effort in select existing markets.

Selling and marketing expenses increased $36.6 million, or 38.2%, for the six months ended June 30, 2008 compared to the corresponding period of the prior year. As a percentage of service revenues, such expenses increased to 16.2% from 14.3% in the prior year period. This percentage increase was largely attributed to a 1.0% increase in store and staffing costs as a percentage of service revenues due to the launch of new markets and incremental distribution to support our footprint expansion effort in select existing markets. In addition, there was a 0.8% increase in media and advertising costs as a percentage of service revenues reflecting a greater number of new market launches in the current year period and the advertising costs associated with those launches.

General and Administrative Expenses

General and administrative expenses increased $10.8 million, or 16.3%, for the three months ended June 30, 2008 compared to the corresponding period of the prior year. As a percentage of service revenues, such expenses decreased to 18.5% from 19.1% in the prior year period due to the increase in service revenues and consequent benefits of scale.

General and administrative expenses increased $21.5 million, or 16.3%, for the six months ended June 30, 2008 compared to the corresponding period of the prior year. As a percentage of service revenues, such expenses decreased to 18.8% from 19.7% in the prior year period due to the increase in service revenues and consequent benefits of scale.

Depreciation and Amortization

Depreciation and amortization expense increased $13.8 million, or 19.0%, for the three months ended June 30, 2008 compared to the corresponding period of the prior year. The increase in depreciation and amortization expense was due primarily to an increase in property, plant and equipment in connection with the build-out and launch of our new markets throughout 2007 and during the first six months of 2008 and the improvement and expansion of our existing markets. Such expenses decreased slightly as a percentage of service revenues compared to the corresponding period of the prior year.

Depreciation and amortization expense increased $27.6 million, or 19.5%, for the six months ended June 30, 2008 compared to the corresponding period of the prior year. The increase in depreciation and amortization expense was due primarily to an increase in property, plant and equipment in connection with the build-out and launch of our new markets throughout 2007 and during the first six months of 2008 and the improvement and expansion of our existing markets. Such expenses decreased slightly as a percentage of service revenues compared to the corresponding period of the prior year.

CONF CALL

Amy Wakeham

This call is being recorded and will be available for playback in the United States through the close of business on August 19 by calling 1-888-286-8010. Callers from outside the U.S. will need to dial 1-617-801-6888. The pass code for both calls is 56923116.

This conference call, with accompanying presentation, is also being webcast live and will be available for replay on the Investor Relations section of our website at Investor.LeapWireless.com shortly after the completion of our live call.

Joining me on the call today to discuss our second quarter results are Doug Hutcheson, our President and Chief Executive Officer, Al Moschner, our Executive Vice President and Chief Operating Officer, and Walter Berger our Executive Vice President and Chief Financial Officer.

Following our prepared remarks, Katina will come back on the line with instructions for the question-and-answer portion of the call. Glenn Umetsu, our Executive Vice President and Chief Technology Officer, will join Doug, Al and Walter for the question-and-answer session.

Turning to Slide 3, the results and data we discuss today, including customer information, reflects the consolidated results of Leap, its subsidiaries and its non-controlled joint ventures, LCW Wireless and Denali Spectrum, LLC, for the periods indicated, as well as the results and data of Hargray Wireless, which we acquired in the second quarter of 2008.

Also, as used in today’s conference call and accompanying presentation, the term new initiatives refers to the company’s new market launch activity and its mobile broadband offering. The term existing business refers to the company’s markets and operation and associated services in those markets as of December 31, 2007.

During our call today we will discuss some non-GAAP financial measures. For a GAAP reconciliation of nonGAAP financial measures I would like to refer you to the notes to the financial statements contained in today’s earnings release and also to the financial reports page of the Investor Relations section of Leap’s website at Investor.LeapWireless.com.

Turning to our forward statements slide, I would like to remind you that statements made today that are not historical in nature, including statements about future events and performance, such as our plans to offer services to additional covered POPs and expectations regarding future growth, spending, results of operations and customer penetration, are forward-looking statements. Our actual results could differ materially from those stated or implied by such forward-looking statements.

Factors that could cause actual results to differ from our forward-looking statements are detailed in the section entitled Risk Factors included in our annual report on Form 10-K for the year ended December 31, 2007 and in our other publicly filed reports, including our Form 10-Q for the quarter ended June 30, 2008 which we plan to file shortly.

For anyone listening to a taped or webcast replay or viewing a written transcript of our second quarter call, please note that all information presented is current only as of today’s date, August 5, 2008. The company disclaims any duty or obligation to update any forward-looking information, whether as a result of new information, future events or otherwise.

With that, I would now like to turn the call over to Doug.

S. Doug Hutcheson

Three years ago we established a goal to double the size of our business. We’re pleased to share with you our continuing success in achieving this goal. In addition during this time period we’ve also assembled the capability to double the size of our business yet again. Today we’ll outline our progress and plans to double this business once again.

As we look at covered POPs over the past three years, we’ve added nearly 35 million new covered POPs since the second quarter of 2005, an increase of 130% and well on our way to potentially 100 million total covered POPs. Also we’ve introduced our mobile broadband product as of the end of the quarter to 23 million potential subscribers on the back of our success and the upgraded networks that we’ve developed over this time period.

Lastly, we added nearly 1.7 net new customers, an increase of 104% from our voice, mobile, broadband and recent acquisitions. This results in a three-year customer CAGR of 27%. So even as we've grown we’ve been improving our margins and our existing business and are well on the way to demonstrating success with our new initiatives.

The quarterly service revenue growth over three years has been $225 million, an increase of 117%. In addition, we’re now pleased to begin reporting on the service revenues of both our expansion markets and our broadband initiatives, which during the quarter added an additional $10 million.

Our operating income in our existing business was strong, offset by the $48 million negative OIBDA investment associated with our new initiatives. OIBDA growth in our existing business increased by nearly $80 million, an increase of over 100%. Existing business margins increased to 38%, showing the continuing success we are achieving in increasing our operating leverage.

The new initiative spend lays the foundation for our next doubling over the coming years, and today we’ll share our plans and our progress. Al, our recently named COO, will discuss our operating performance for the second quarter. With this call, we’d like to welcome Walter Berger, who joined the company during second quarter as our CFO and will discuss our financial results. After I return to discuss our future growth plans, we’ll have a Q&A session, where Glenn Umetsu, our CTO, will also join us.

Albin F. Moschner

Overall, we are pleased with net subscriber performance for the quarter, achieving 171,000 or a 29% year-over-year increase. Performance in our existing business was consistent with seasonality and the maturing of markets launched in 2007, resulting in 44,000 new net subscribers.

We also saw strong customer acceptance in our expansion markets, resulting in 116,000 new net subscribers. In fact, initial AWS market performance exceeded that of Auction 58’s initial performance, demonstrating the effectiveness of launching markets with high market level scores and with larger footprints.

Also, we achieved a stronger than anticipated broadband success, adding 11,000 new broadband customers, ending the period with 14,000 subscribers or a 40% increase above our guidance of last quarter. We expect the second half of '08 to continue this customer growth.

Our existing business will reflect seasonal trends, with early results of new growth programs primarily in distribution, and we’re seeing a stronger than anticipated July performance activity. We expect our expansion markets to continue to strengthen and further expansion of our broadband initiative as we plan to expand to more markets over time. However, as always, customer activity may be affected by gas prices, tax rebates and other macroeconomic conditions.

Overall churn performance was as expected, with total company churn at 3.8%. In our existing business, churn performed at 3.9% compared to 4.3% in the second quarter of '07. There are three factors that contributed to this result - the tenure effects of pre-2008 launch activity was abated, as anticipated, year-over-year upgrade activity, that pressure is normalized, in fact, decreased in the quarter, and we are experiencing the expected benefits from our footprint expansion, which we’ve completed over the past 12 months.

However, we did experience greater volatility in the quarter in both our deactivations and reactivations, which generally offset each other in the period. We’ll talk more about that as it did affect some of our ARPU performance.

As expected, early churn performance in new markets reduced total company churn by 0.1%. These new markets, as expected, will follow the previous new market tenure experience in upcoming quarters, whereas we experience positives effect from the early quarters and additional churn over normal periods as the tenure of these markets mature.

We expect the second half churn to reflect our seasonal trends, similar to our 2005-2006 curves, but early second half '08 strength could be impacted by macroeconomic factors, as seen in the second quarter.

Second quarter consolidated ARPU was $43.97. In our existing business, we delivered ARPU of $44.18. We launched some very attractive new rate plans this last quarter, providing a value proposition over a range of price points. The mix of these plans performed as expected, but as I mentioned, we did experience higher deactivation activity offset by an increase in reactivations. This temporary effect did put pressure on ARPU, both in deactivations causing reduced revenue and reactivations - reduced revenue caused by timing of payment of service.

We’re looking at our new initiatives. We expect our ARPU - for those to be affected in the following ways: Our expansion markets are tracking as expected. Hargray ARPU we expect to increase in Q4 as integration proceeds. Broadband build ARPU is performing as expected, but we will be lower than voice and we expect in the mid to high 30s. Overall, we expect 3Q '08 ARPU for Cricket voice services to be flat or slightly higher [to 2008] and fully expect that to continue to be within our voice ARPU objectives, while we expect some dilution from mobile broadband service.

With the launch of our new rate plans in the second quarter, we continue to be the value leader in the industry, as shown, versus our competitors, offering the only real unlimited that saves customers up to $600 a year by offering more value at a lower price.

CPGA performance for the second quarter was $205, reflecting investments for growth in future periods. This comes in two forms. First, in the second quarter of '08 new initiatives spend of $12 reflects costs associated with peak 2008 launch costs related to new market expansion and the launch of nearly 15 million broadband covered POPs. Secondly, we saw a year-over-year increase in existing business CPGA of $11. That was a result of $19 of lower subsidy costs offset by an increase in sales and marketing of $26 in higher store costs as we added 12 new company stores, as disclosed in Q1, to support our footprint expansion.

Adjusted for these two investment efforts, CPGA would have been comparable to '07 levels. As we look at the second half of '08, CPGA will reflect our normal seasonal rhythms in our existing business, higher pre-launch and initial costs related to new market expansion and increasing launch costs related to further expansion of our broadband initiative.

CCU performance continues as expected, with the second quarter achieving a result of $21.01. Our existing business CCU of $18.92 also performed as expected, and from a year-over-year perspective it declined. Adjusted for a material one-time affect, it was $1.74, and this indicated the benefits of scale, which outweighed the costs of associated increased footprint.

New initiatives spend of $2.09 per user reflects costs associated with new markets and mobile broadband. In the second half of '08 we expect consolidated CCU to remain in the low $20 range, reflected continuing expansion of our business, provides scaling to offset a cost of new initiatives.

Finally, the net result of the metrics just reviewed resulted in our existing [capita] per user contribution, or existing markets I should say, a year-over-year increase of 9% or $17.72, demonstrating the company’s ability to grow while maintaining attractive customer performance metrics. Markets that are two years and older typically have contributed greater than $20 of CCPU while less mature markets continue to increase their contribution. On a consolidated basis, including $2.55 of new initiative costs, our calculated contribution per user was $15.52.

Now, I’d like to turn the call over to Walter.

Walter Berger

If you’d turn to Slide 17, one can see that with the exception of the third quarter of 2007, which is essentially a lower OIBDA-generating quarter, we’ve continued to grow total service revenues in existing business adjusted OIBDA for essentially every quarter since the second quarter of 2007.

Service revenues in the second quarter 2008 have increased by about $70 million over the second quarter 2007 or approximately 20%, which includes a $60 million increase in existing business service revenues and approximately $10 million of service revenues contribution from our new initiatives.

Impacting our consolidated adjusted OIBDA results for the quarter is $48 million in net spending for new initiatives. This principally reflects our investment associated with the expansion of our business to new market launches and our continued rollout of Cricket wireless Internet service. Excluding costs associated with new initiatives and excluding the one time $6 million gain recorded in the second quarter of 2007, our existing business adjusted OIBDA increased over $51 million year-over-year, and our existing business adjusted OIBDA margins continue to improve, increasing year-over-year by 8 percentage points or approximately 38% for the second quarter.

As discussed previously by Doug, while adjusted OIBDA margins have declined on a consolidated basis as a result of our investment in new initiatives, the margins of our existing business has continued to improve. Moving to Slide 18, we will provide further details behind the improvements in our existing business operating margins.

Cost of service margins within our existing business have improved year-over-year. The margin associated with the product portion of cost of service has improved year-over-year due to improvements in rate of long distance calling costs and other rate reductions. The margin for non-product portion of cost of service for our existing business has remained essentially flat with the prior year period, even while absorbing the cost associated with expansion of our footprint within our existing business.

The second quarter of 2007 also included a one-time gain related to the renegotiation of lease contracts that reduced our cost of service by approximately $6.1 million. The year-over-year improvement in our net equipment subsidy reflects a couple of things, including the reintroduction of activation fees for new customers which were not charged during the prior year period and the launch of Cricket EZ handset in the first quarter of this year, a low-cost handset which provides competitive pricing opportunities without negatively impacting subsidy.

The year-over-year improvement in sales and marketing margin for existing markets represents the benefit of scale on an expense line that is approximately two-thirds fixed. During the quarter we saw improvements in customer care and billing margins, reflecting expenses essentially flat year-over-year even with a nearly 500,000 increase in average customers in existing markets.

Overall, the company is achieving the margin improvements expected within existing business and believe we will continue to see improvements in our operating margins as a result of both further penetration of our existing markets and our ongoing cost initiatives.

Historically, we’ve demonstrated an ability to deliver adjusted OIBDA margins that exceed 40% over time, and the second quarter results of our existing business indicate that we are well on our way to delivering similar margins within our existing business as we continue to grow and gain additional scale. This increasing scale is also [inaudible] by the incremental 75% contribution margin the business delivered as measured by year-over-year and change in service revenues and existing business adjusted OIBDA.

Turning to Slide 19, as part of our ongoing strategy we continue to invest in new initiatives, and in the second quarter of 2008 we absorbed approximately $48 million of negative adjusted OIBDA associated with our new initiatives which we expect to contribute to the future growth and profitability of the business. Included in net initiative spending for the quarter was approximately $10 million of negative OIBDA associated with our broadband initiative.

This negative burn included approximately $6 million of fixed costs per quarter, which we shared with you last quarter, and an additional $3.5 million of variable costs associated with approximately 23 million covered POPs we’ve launched through the second quarter of 2008, as well as pre-launch spending for additional POPs we expect to launch this year.

For the quarter, we also invested approximately $38 million in expansion markets, including costs associated with our acquisition of Hargray. This includes both the costs associated with the approximately 8.5 million covered POPs launched in the second quarter of 2008 and approximately 8 million of pre-launch costs for POPs we expect to launch in the future.

Now turning to Slide 20, please, net loss in the second quarter of 2008 was $26 million compared to net income of $10 million or $0.14 per diluted share in the second quarter of 2007. However, the second quarter of 2008 net loss per share includes approximately $0.70 per share of negative adjusted OIBDA associated with the company’s new initiatives that we previously discussed.

In addition to the impact of costs associated with the company’s new initiatives, the primary factors contributing to year-over-year change from net income to net loss were an $8 million increase in net interest expense due to a decrease in interest income due to the company’s change in its investment portfolio to primarily cash and treasuries and an increase in the company’s interest expense in the current period primarily related to $350 million of high-yield bonds that were issued midway through the second quarter.

Another factor contributing to the increase of net loss was an $8.5 million increase in income tax expense primarily reflecting the deferred tax of higher amortization of wireless licenses resulting from the change in tax rate for those licenses in the third quarter of 2007, as we’ve discussed in previous quarters. We expect to continue to report income tax expense of approximately $10 million for each quarter through 2008 despite the fact that we’ve reported a full valuation allowance and nearly all of deferred taxes.

Expenses associated with our minority interest in consolidated subsidiaries increased by $2.5 million year-over-year, primarily reflecting increased accretion associated with the redeemable equity held by certain investors in our joint ventures.

Turning to Slide 21, as you know, the company completed several significant capital market transactions in the second quarter which positioned the company for continued growth and investment in new initiatives. These financings were achieved on favorable terms even as the overall credit markets have remained challenged.

First, the company successfully amended its senior secured credit agreements to align the existing agreement with our current operations and future growth plans. We also completed two financings which we believe provide the company additional flexibility and funding for our current new initiatives, including the build-out of our new Auction 66 markets, with continued expansion of our mobile broadband initiative and further enhancement of the footprint within our existing business. Further details regarding these financings, as well as the amendment to our credit facility, can be found within our filings made with the SEC on the closing of these transactions in late June.

Moving to Slide 22, total cash on hand, including short term investments, at the end of the second quarter was approximately $934 million. That’s an increase of $426 from our cash position at the end of the first quarter. The increase is primarily due to net proceeds from approximately $536 million received as a result of the financing activities completed during the second quarter, offset by the company’s usage of approximately $229 million in cash during the quarter.

Our current cash investments remain invested as disclosed in our first quarter conference call. In general, the company invests its cash with financial institutions and money market funds, short-term U.S. Treasury securities, obligations of U.S. government agencies and other securities, such as prime rate short-term commercial paper and investment grade corporate fixed income securities.

Capex for the quarter was $181 million, which includes capital expenditures in our existing business and ongoing expenditures for the completion of the first phase of our footprint enhancement program. Capital expenditures for the quarter also include Capex related to development of our expansion markets. For the second quarter, capitalized interest associated with the new market expansion was approximately $13 million. Looking ahead, we expect aggregate capital expenditures in our new market build activity to be approximately $25 per covered POP, excluding capitalized interest, reflecting a $1 reduction of our previously provided outlook.

This amount represents required capital expenditures to support our new markets through their first year of operation, and the reduction is the result of lower than anticipated site development expenses. After the first year of operation, annual Capex are expected to be in the mid teens as a percentage of service revenue. Note that any capital investments associated with significant enhancement of the footprint within our existing business is not included in this ongoing capital expenditure number.

Finally, in closing the financial section of today’s call, I’d like to share and reiterate the company’s belief that we’re sufficiently funded between our current cash position and our ability to generate cash from operating activities to meet the operating cash requirements from our current business operations and the expansion of our business through the launch of new markets, the continued expansion of our mobile broadband service, and the further enhancement of the footprint within our existing business.

With that, I’d like to turn the call back over to Doug.

S. Doug Hutcheson

As we look at our opportunity to double the size of the business again, we’ve implemented three primary drivers to achieve that. We believe there’s a series of programs in our existing business that we’ll cover in a little bit more detail that allow our 53 million covered POPs to see deeper penetration as a result of that increased financial performance.

Today I’ll share results with you on our new markets, the initial results - and we believe those markets represent a higher relative growth potential, and we’re well on our way to seeing that - and then the expanding role of mobile broadband.

Turning to our networks, we’ve completed 90% of the first phase of the network expansion that we communicated with you about a year ago, and that network expansion covers about 29 million total POPs. The remaining sites we'll roll out over the second half of this year and perhaps some into next year, but the bulk of the work on this is done.

We also discussed last call the potential of additional activity in this area and we do believe that further work will be done beginning in the second half of 2008. The background on this work, there's a high correlation we see between customer penetration and in building coverage, and we’ve identified priority areas based on specific micro market quality factors and look forward to seeing the results of this in 2009 and beyond.

These additional sites could represent up to an additional 600 sites. We anticipate the costs associated with those sites will be in the $225,000 to $250,000 range and will affect 45 million of the existing 53 million covered POPs. These sites are expected to be completed by year end 2010. The net effect of this work we believe will increase penetration in the affected markets by 0.5% to 1.0% by the end of 2010.

Turning to improvements in the market level, we think we have significant ability to drive further growth. We’re implementing marketing and distribution programs across 31 of our 53 million covered POPs. Those initiatives begin launching in the first half of 2009 and will roll out over the coming quarters.

The drive behind those is further improvements in direct store operations, in strengthening our indirect channel performance, when we have the factors lined up, an increase in market level awareness, and then always dealing in trying to optimize our store location. The expected effect of these initiatives is to increase penetration in the affected markets by 0.7% to 1.25% in the markets over the long term.

We’ve mentioned that the company has invested significant money in our networks to have them be the latest technology, and we see the benefits of that occurring not only in our ability to provide services to our existing voice customers but also with our mobile broadband initiative. We have one full-time EVDO carrier across all of our markets, and we built and all of our networks are connected to a data superhighway.

We’ve invested $165 million over the last three years to support this initiative, and now we’re beginning to see additional benefits as a result. Our new markets are all launched on a rev A basis, both the networks and the handsets, and we expect to upgrade our existing business networks to rev A during 2009.

This network enables us to deliver a series of advanced options, not only the recent announcement we made with a relationship with Fox Interactive but, in addition, other ARPU-enhancing features in 2008 such as the download of video clips, download of music tracks, and other initiatives that will be available, either bundled or on an a la carte basis. We do expect to look at a streaming upgrade in 2009.

So how does all this come together? What does it mean? Well, our markets two years and older have continued to historically penetrate at about 0.5% per year. We have leading markets that are well into the double digit penetration, and those also continue to grow. The previous round of markets that we launched in 2006 and 2007 are tracking to penetration at the end of two years between 0.5% and 0.6%.

When we look at organic growth and the new programs and our penetration impact on it, we believe that our existing business will achieve between 8% and 9% in aggregate by year end 2010. This does not include any effects from our mobile broadband initiative.

Turning to the initial Auction 66 market launches, we’ve completed 8 million covered POPs in the second quarter. We’re pleased to say these initial launches are at or ahead of our penetration expectations and currently performing ahead of our last auction, our Auction 58 market launches. We believe the markets that we see validate that, when we launch in a competitive situation, that it actually expands the pie. And you can see that when you look at the bottom of the chart, where we see in markets where we’ve had multiple low cost competitors substantial penetration as a result of the market level awareness that’s generated. We believe both our new Cricket only and the markets with multiple low-cost competitors will have attractive financial performance over time.

In addition, these recent market launches validate our revised spending profiles that we outlined today. Walter mentioned the lower Capex costs, and today we also increase by $1 our outlook for the cap of the OPEX burn associated with these markets when you look at that on an aggregate cumulative investment. Now, as previously, the peak burn on a market-by-market basis will be slightly higher, and we updated that number to $7.

We have substantial further opportunity in front of us. We expect to be able to launch up to 36 million POPs by the end of the first half of 2009 and up to 50 million POPs by year end 2010. These new markets provide us a substantial opportunity as we purchased those with low relative license costs and focused on markets that had attractive penetration potential and, as a result, we believe we have a good IRR potential in front of us.

The team has made good progress on spectrum clearing, although some risks remain in some of the markets to continue to clear those. But we believe as we look ahead that we'll see continued success.

We're going to launch up to seven new tri-band handsets by the end of 2008. We're continuing to work with our vendors on that and in addition provided the revised Capex buildout expectations we discussed with you.

Turning to the wireless Internet service, I think we're off to a strong start. Our product provides monthly access with speeds comparable to DSL. For those customers that are new to Cricket, which represents about 60% of the customers, that has a $40 cost, and for those customers that have other Cricket services, the product's available at $35.

As we mentioned, we launched a universal devise, a USB device. It works in desktop and laptop computers, and we've seen attractive uptick in our penetration, as we had expected. In addition, as a result of our initial volumes and the volumes that we expect to generate in the second half of 2008, we believe we'll see substantial volume pricing levels achieved with this device in the first quarter of 2009 that will allow this business to continue to move ahead nicely.

During the quarter, as Al mentioned, we added 11,000 customers, bringing our total customers to 14,000 against a 10,000 forecast. We achieved greater than anticipated volume not only in the original 13 million POPs that we outlined that we were going to launch, but got off to a strong support with the additional POPs that we were able to launch as well.

Current usage levels are expected to decline over time. We have programs that tell us that we expect that they'll come in line with what we anticipate. Just as when we've launched other unlimited products, we've been able to manage those products over time to what we would like them to be.

Our [inaudible] performance expectations have been advanced. Certainly a strong customer acceptance is driving us to move ahead more quickly, and we expect a negative OIBDA burn with this program as a result of launching 60 million covered POPs by year end 2008 to peak in the second half of this year. In addition, we expect this program will generate positive OIBDA contributions for the full year.

So as we look at our market level outlook, you see the $0.50 aggregate cost remains unchanged, although we'll remind you of the peak burn on a market by market basis, just as you see on the build-out of the new market, will be higher. And the 6 million fixed costs through the second half of 2009 will continue to run, although the $6 million is included in our positive contribution for the full year 2009.

Market level breakeven is projected within three full quarters after launch, and we expect 100,000 customers by year end 2008. Within one year after market level launch, about a half a point of penetration and customer profitability, as measured by how we calculate the cash calculated contribution per user per month, to be between $10 and $15 per month by year end 2009.

We believe we're delivering a strong continuing growth story. We've delivered business results. Our business has been resilient, making progress even in uncertain times. We've seen attractive customer growth, and we continue to see improvements in our year-over-year financial performance. We've established a significant set of assets - our existing business strength, the brand awareness and customer experience that we deliver through our field personnel and our distribution partners.

We have upgraded networks that are ready to bring new services to our customers and an attractive spectrum portfolio. Our growth opportunities are strong and they're attractive - the growth from our existing business, the doubling of the footprint and the expansion of our mobile broadband.

And, in ending, a team has been assembled that can do this, not only a strong team of dedicated employees, which I thank for their efforts, but a management team that can deliver.

As a result, today the company did update its three-year adjusted CAGR outlook excluding broadband, and we anticipate that our CAGR will be between 35% and 45%.

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