LWIN-Russia>
Wednesday September 29, 10:34 pm Eastern Time
Company Press Release
SOURCE: Leap Wireless International
Leap Wireless International to Cease Support of
Operations in Russia
SAN DIEGO, Sept. 29 /PRNewswire/ -- Wireless communications carrier Leap Wireless International, Inc. (Nasdaq: LWIN
- news) today announced that one business operating in Russia has begun a liquidation process and that Leap will cease funding
another. Leap has a non-controlling, minority interest in both businesses.
Leap stated that the boards of directors of one of the businesses, the Transworld Companies, have voted to liquidate those
companies and distribute the assets to the shareholders. In an unrelated development, Leap said that it has ceased funding its
loans to Metrosvyaz, a company that is attempting to establish joint ventures in Russia to operate wireless local loop service.
Leap said it expects that the liquidation of the Transworld Companies and withdrawal of support for Metrosvyaz will result in
write-offs of approximately $17.7 million and $9.6 million for Transworld and Metrosvyaz, respectively. This represents a
write-off of Leap's remaining investment balance in Metrosvyaz. Through holding companies, Leap indirectly owns 35 percent
of Metrosvyaz and 21 percent of the Transworld Companies.
The Transworld Companies are a series of companies that have been seeking to establish a domestic long-distance business in
Russia. In December 1998, the Transworld Companies launched limited long-distance service between Moscow and Perm, a
region of three million people west of Moscow. As Leap previously reported, the Transworld Companies faced a setback
when the satellite on which the business relied failed in April 1999. The Transworld boards have reviewed a series of alternate
business plans, but the combination of the current Russian economic situation and the absence of a unique business opportunity
offered by the original satellite access have led the boards to determine that the proposed plans cannot meet minimum financial
performance criteria necessary to pursue the long-distance business at this time.
Leap said it stopped funding loans to Metrosvyaz because Metrosvyaz has not satisfied certain conditions required for funding
and is now in default under its loan agreement. In addition, Leap has been prevented from securing full reporting and
documentation of performance, results and expenditures of Metrosvyaz in spite of repeated efforts to obtain that information.
Leap said it has begun a detailed special audit of Metrosvyaz's books and contracts. Despite being denied full access to
information, Leap said the normal year-end audit of Metrosvyaz and the preliminary results of the special audit have disclosed
serious financial irregularities, including unaccounted- for funds and questionable contracts and payments. As a result, Leap has
initiated arbitration seeking a full accounting and damages from Metrosvyaz and one of its directors.
''These actions are consistent with the company's commitment to maximize shareholder value and focus on high-growth
opportunities,'' said Harvey P. White, Leap's chairman and CEO. ''We intend to direct our energy and resources to those
projects.''
White said that he believes Russia's demand for wireless communications remains strong, and that the Russian government's
plans to add more than 30 million new phone lines under an initiative called the People's Telephone Program is sound policy
and will be successful, when conditions are appropriate.
''In the meantime, there are a lot of excellent opportunities for growth available to us in other markets,'' White said. ''We
intend to direct our energy and resources to those projects.''
In its first year as an independent, publicly traded company, Leap successfully launched commercial PCS service in Latin
America and the United States through its operating companies. Internationally, Leap's operating company Chilesat PCS
launched nationwide service in Chile, while Leap's joint venture PEGASO PCS began its planned nationwide rollout in Mexico
by introducing service in three of the country's four largest markets - Monterrey, Guadalajara and Tijuana. Domestically, Leap's
affordable, flat-rate Cricket concept was launched in Chattanooga, Tenn., using Chase Telecommunications' infrastructure and
licenses under an agreement that provides that ChaseTel controls the business until Leap's proposed acquisition of ChaseTel is
complete. The Cricket concept has been well received, and Leap plans to expand Cricket to markets across the United States
over the next several years. ''We are pleased with the progress we have made over the past year, in particular with the success
in the Western Hemisphere,'' White said.
About Leap Wireless International, Inc.
Leap Wireless International, Inc., headquartered in San Diego, California, is a wireless communications carrier that deploys,
owns and operates wireless networks in domestic and international markets with strong growth potential. Through its operating
companies, Leap has launched all-digital wireless service in the United States, Mexico and Chile. Leap is dedicated to bringing
the benefits of reliable, cost-effective and high-quality voice and data services to domestic and emerging markets. For more
information, please visit www.leapwireless.com.
This news release contains certain ''forward-looking statements,'' including statements regarding the completion of and the
benefits from the Transworld liquidation and the outcome of the arbitration. Forward-looking statements, which are based upon
certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of
the words ''believe,'' ''expect,'' ''intend,'' ''plan,'' ''anticipate,'' ''estimate,'' ''project'' or similar expressions. The ability of the
Company to predict actual results and other future events is inherently uncertain. Important factors which may cause actual
results to differ materially from the forward- looking statements contained herein or in other public statements by the Company
are described in the section entitled ''Risk Factors'' in the Company's 1998 10-K, and other documents on file with the
Securities and Exchange Commission. Those factors most likely to cause actual results to differ include but are not limited to:
uncertainties of results in dispute resolution and the fact that Leap does not control the businesses involved.
SOURCE: Leap Wireless International
|
