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

To: Pierre who wrote (1842)	3/31/2002 7:50:26 PM
From: pcstel	Read Replies (3) \| Respond to of 2737

Pierre: Have you new concerns about the business model based on the footnotes you've referenced? Has LWIN given up too much to the vendors in exchange for the roll over, in your opinion? Well, let's say I am surprised at the difficulty (costs and restrictions) that (what I would consider) minor modifications to the loan covenants. We were talking 90 day extensions in some cases.! Leap had almost no leverage in these negotiations, and appears would have surely had a "going concern" if they did not comply! LWIN VF providers have been allocating cash to Cricket and away from LWIN as fast as possible in order to grant amendments to the loan covenants. When Cricket sold the spectrum in Salt Lake City. They were required to "invest" most of that money in Cricket, as a requirement of the previous renogiations of the VF Covenants. " The Amendments also include an additional covenant providing that within three business days after the Company completes its previously announced sale of spectrum covering Salt Lake City and Provo, Utah to Cingular Wireless LLC, the Company must make an additional capital contribution of $140 million in cash to Cricket Communications Holdings, Inc., a wholly-owned subsidiary of the Company and the parent company of Cricket (“Cricket Communications Holdings”), and Cricket Communications Holdings must invest an additional $140 million in cash in Cricket. Regardless of whether the Company has completed the sale of spectrum, at least $70 million of the foregoing capital contributions to Cricket Communications Holdings and to Cricket must be made on or before December 15, 2001." In the current amendments, The 10-K states: "In the March 2002 amendments, we agreed to contribute to Cricket Communications and other subsidiaries of Leap that hold wireless licenses used in Cricket Communications business or to set aside at Leap approximately $111 million of additional cash now with an additional $60 million to be contributed or set aside as Leap raises additional cash in the future. We also agreed to pledge as collateral under the vendor financing agreements substantially all of our wireless licenses not previously pledged. On March 27, 2002, the FCC announced that it will refund to Leap approximately $60 million of the $70 million we currently have on deposit with the FCC related to Auction 35. Under the amendments, approximately $25 million of the refunded amount can be retained by Leap to be used for general corporate purposes, and the balance of $35 million must be invested in Cricket and subsidiaries conducting Cricket business. The remaining $25 million of the $60 million obligation is expected to come from activities such as the sale of newly pledged licenses or the sale of Pegaso. We also paid amendment fees of approximately $6.4 million to the lenders." So it appears that the VF providers think that LWIN G/A Expenses are way out of line. And are cutting the cash flow to the Corporate side of things, and are going to force LWIN to cut their G/A expenses.. (Which is good).. In addition the VF providers appear to have cut off potential loop-holes that might allow Cricket from providing cash back to Leap. "In March 2002, Cricket Communications amended its vendor credit agreements with Ericsson, Lucent and Nortel. In connection with the March 2002 amendments, we agreed to contribute cash to Cricket Communications. We are also restricted under the vendor financing facilities from making cash dividend payments from Cricket Communications to Leap. As a result, we may experience a shortage of cash at Leap at a time that Cricket Communications continues to have substantial cash balances. If this occurs we will need to raise additional capital at Leap, reduce expenses at Leap or refinance or amend Cricket Communications' vendor indebtedness So it appears that they are going to FORCE LWIN into reducing G/A Expenses by reducing their access to Cash. As far as Expanded Services goes, the 10-K continues: "We currently plan to expand our wireless service offerings to include information services designed to appeal to a broad segment of the population. We believe that wireless information services, like our innovative Cricket service, need to be simple, easy to use and affordable." As far as Cap Ex goes. "We expect to make capital expenditures during 2002 and 2003 at or near the maximum annual amount permitted by our vendor loan facilities." " (our current plans are to borrow approximately $295 million under these facilities over the 12 month period commencing on January 1, 2002). "Nortel has agreed to accept purchase orders from Cricket Communications in the same manner that it accepts purchase orders from other customers up to a total of $234 million, which is approximately the amount of the cumulative purchase orders that Cricket Communications expects to tender for purchase from Nortel from August 2000 through the end of 2002." So there is your 1X data. I speculate that Toledo, Syracuse, and Buffalo are the only Nortel Voice properties. Close to 100 million in CapEx for those markets. So that would leave about 130 million for 1XEV deployments. It is also interesting that they intend to continue with the NTCH transaction, and have entered into a new agreement to acquire spectrum in Rochester, NY. The Rochester BTA will provide contigious BTA's of in upstate NY with Buffalo, Rochester, Syracuse, Utica, Plattsburgh, NY; Watertown, NY. The Rochester spectrum must be coming from Duetche Telekom/VoiceStream. They have 30Mhz C Block and 10 Mhz D Block in Rochester BTA. (But do not provide coverage!) The other PCS BTA based market holders in Rochester are Northcoast (F Block), and AWE (E Block). It appears that the VF partners are really clipping LWIN's G/A wings! (Which is good!) But, may be causing LWIN to sell licenses held in it's name , that are not in the the COLLATERAL POOL to raise operating cash. PCSTEL