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Monday July 26 1:27 PM ET
Leap Wireless Wins FCC Approval For Licenses
WASHINGTON (Reuters) - Leap Wireless International Inc. (Nasdaq:LWIN - news) can acquire
licenses to offer digital cellular telephone service in dozens of U.S. cities after the Federal
Communications Commission last week quietly confirmed the company's status as a newcomer to the
industry.
The decision clears the way for San Diego-based Leap to acquire wireless licenses in North and South Carolina from Airgate
Wireless LLC as well as 36 licenses scattered around the country that it bought at an April FCC auction.
To gain FCC approval, Leap agreed to cut some of its ties to wireless phone maker Qualcomm Inc. (Nasdaq:QCOM - news),
which created Leap last year by spinning off its wireless service assets.
Leap said the decision should also clear the way for approval of its January 1999 acquisition of 11 wireless licenses covering
markets in Tennessee from Chase Telecommunications Holdings Inc. (Nasdaq:CTEL - news)
''The FCC's decision will allow us to execute a strategy that makes wireless communications comfortable and predictable for
consumers,'' Leap President Sue Swenson said in a statement.
The company offers flat-rate wireless calling plans through its Cricket Communications subsidiary, but with no ability for
customers to roam outside of the company's local regions.
Licenses Leap sought were generally reserved by the FCC for new and small businesses. But the U.S. Small Business
Administration and other carriers including Western Wireless Corp. (Nasdaq:WWCA - news) argued that Leap's ties to
Qualcomm made it ineligible.
Officers and directors of Qualcomm, with revenues of more than $3 billion last year, owned 9 percent of Leap stock and
Qualcomm itself held an option to buy up to 15 percent, opponents noted.
Qualcomm also had agreed to lend Leap up to $265 million, while Leap had agreed to use Qualcomm technology and
equipment through 2004.
Under FCC rules, the licenses Leap was seeking were reserved for companies with revenues in each of the past two years of
less than $125 million and total assets of less than $500 million. If Qualcomm's assets and revenues were included in Leap's
total, the carrier would not be eligible.
Leap sought to qualify under an exception for publicly traded companies that would allow it to exclude Qualcomm's revenues if
no single shareholder owned more than 15 percent of Leap's stock.
The FCC ruled that since Qualcomm directors and officers already owned 9 percent of Leap, Qualcomm could not purchase
more than 6 percent of Leap stock under its option.
Leap also must reduce its borrowings from Qualcomm within 18 months so that Qualcomm holds less than 50 percent of its
debt. Leap also had to end an agreement with Qualcomm to use only Qualcomm technology in its new network.
In April's FCC auction, Leap's $18.7 million of winning bids included licenses for Salt Lake City, Tucson, Ariz., Anchorage,
Alaska and Little Rock, Ark.
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