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Technology Stocks : Leap Wireless International (LWIN) -- Ignore unavailable to you. Want to Upgrade?

To: Robert J. Irvin who wrote (1780)	3/19/2002 2:07:25 PM
From: Pierre	Read Replies (2) \| Respond to of 2737

Some Q & A's from Mark Kelly's Orlando appearance. You'll note the appearance of several of the usual suspects - both issues and people <g>. Arun Gera, Central, NJ: Leap claims that it is competing with landline providers. What are the steps Leap needs to take or has taken to encourage landline replacement for residential and small business consumers? Realistically, is the coverage and quality of service inside buildings comparable to landline services inside buildings? Mark Kelley: Well, our support of number portability is a good example (from the previous question). That will allow wireline customers to take their number with them - especially important for business customers. We also focus on trying to provide in-building coverage in our markets since our service is used in all areas of our subscriber's lives. Of course, you cannot have perfect in-building coverage everywhere, and office buildings (with special windows and steel frame construction) are harder to "penetrate" than homes. Our predictions and tests are focused to achieve such coverage in an econimcally feasible manner. slacker711 Chicago, IL: Qualcomm has talked about sub-$100 wholesale prices for 1x handsets based on ZIF. When do you expect to be selling these types of handsets? Mark Kelley: I believe the 6000 series ASICS will become available next year (or late this year). I suspect the handsets will shortly follow Bruce Hamilton: Will LEAP launch "Flat rate" Internet connections in any of their markets? Bruce Hamilton Leap Shareholder Mark Kelley: Flat rate is certainly the way to go with any type of service due to its simplicity. Data services can be a huge draw on network resources if not properly planned and thought through, and we are in a cost focused business. The key will be to identify the proper MOBILE applications and price that in such a way that it is "comfortable" for consumers. John McClulan, Houston, TX: What's Leap's strategy for 2002? Will 3G services be available? Where? Mark Kelley: Life after launch! We are going to focus on growing our Cricket business, executing on our 40 market plan, and, continuing to find every opportunity to enhance our cost-leadership position in the industry. Regarding 3G, one of the wonderful aspects of CDMA2000 is that you get nearly a 2X increase in voice capacity in addition to high speed data. We are deploying CDMA2000 1XRTT to increase our voice capacity, and exploring how best to offer wireless data services that are fun...and comfortable! Pierre - San Diego, CA: "The key will be to identify the proper MOBILE applications and price that in such a way that it is "comfortable" for consumers." You say you want to compete with land line. Your current land line replacement rate is 7%. Number portability is a big if, and a long way off in any event. How do you expect people to unplug their land line when you can't offer an alternative to dial up internet access. Doesn't ix ev-do give you an opoportunity to offer dial up or better wireless internet access for the home at competative flat rates without over taxing the system? You're CapEx projections seem to suggest you've got more planned than simple voice enhancement. Mark Kelley: As I mentioned - we are actually seeing that 61% of our customers use Cricket as their primary phone. Even more impressive is that 32% of our cricket subs don't subscribe to landline service. What we are finding is that many of our subs have two telecom services - Cricket and cable. They get their TV and broadband internet service on the cable, and we are their voice and mobile service. We have looked at using 1XEV-DO for fixed services, and continue to evaluate the busines case for how it would best fit Leap's products. 1XEV-DO is a phenomenal technology, and a big breakthrough for the industry.

To: Robert J. Irvin who wrote (1780)	3/25/2002 11:46:14 AM
From: pcstel	Read Replies (4) \| Respond to of 2737

Robert: Sorry to be delayed in posting back, but I was a little busy last week. Thank you for the time you spent going over the debt service issues. More immediately, all three Credit Agreements have a Consolidated EBITDA to Cash Interest Expense test that starts Dec 31, 2002, looking back four quarters for EBITDA, in other words, starting this quarter. Given guidance of negative $78 million for 2002 EBITDA, this test can't be met. If this covenant isn't renegotiated by March 31, I would expect that Leap's auditors would be unable to give an opinion on its financial statements without a "going concern" qualification, not a great thing for the stock price. I think Harvey did his best to bring forth these issues at the last CC. And I agree, that without a re-qualification of guidance, that a "going concern" may be in the offering on the 10-K. (Which would not be a good thing for the stock price as you noted). At this point, I think Lucent wants out of the VF agreement, and may be unwilling to grant any further covenant modifications, without imposing additional tightening of the repayment terms. As far as ERICY and NT goes, The Cash Interest Expense on thier VF is a much smaller amount, so those are not as much of an issue. The road block appears to be with Lucent. However, assuming that the Lucent covenant was relaxed by 1 Quarter as requested. Given Harvey's 78 million EBITDA loss in FY02. The EBITDA to Cash Interest Expense Covenant from Q2/CY02 to Q2/CY03 would still be in doubt of being achievable! Here is guidance EBITDA according to my spread sheet! (All of these figures keep Equipment Costs at about $180 over the period. However, we know that the KYO 1135 voice only just came out, and that the ZIF sub $100 1X handset will be out in Q4. All of these cheaper 1X handsets will create downward pricing pressure on the NOK 5170i and dramatically decrease subsidies, and Equipment costs. ---Q1---------Q2---------Q3---------Q4--------Q1--------Q2 (47.95).....(24.42).....(7.75).....+2.60......+56.39.....+82.7 4 month trailing EBITDA ........(77.5)......+20.9.....+103.6 So if the test starts Jan. 1 then they are (108.0), if it start March 1, then they are (11.0) on the test date! However, if you only factor in the expected decrease in UT's pricing over the next 4 quarters. I think it is possible that they can make the covenants as they stand! It would be close and require EBITDA positive of 19 million in Q3. ---Q1---------Q2---------Q3---------Q4-------- (27.95).......(2.5).......+19.2.....+46.20...... 4 month trailing EBITDA ........+35.0...... All the above figures assume 40 million per Quarter G/A And approx. 37 million per quarter in Sales and Marketing, and a declining cost of equipment down to $90 in Q4. (Assuming the 5170i would wholesale $10 less than a sub $100 voice only ZIF based phone!) I would still like to see the covenants amended and a 10-K without a "going concern" stapled to it! PCSTEL