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

To: Maurice Winn who wrote (2058)	5/22/2002 2:12:18 AM
From: Jon Koplik	Read Replies (1) \| Respond to of 2737

WSJ (from lunchtime) -- Leap Wireless Dn 18%; UBS Says Could Break Loan Covenants. May 21, 2002 Leap Wireless Dn 18%; UBS Says Could Break Loan Covenants DOW JONES NEWSWIRES By Nick Baker Of DOW JONES NEWSWIRES NEW YORK -- Leap Wireless International Inc. (LWIN) shares fell as much as 24% Tuesday after UBS Warburg cut its investment opinion on the stock to hold from strong buy and drastically cut its 12-month price target - to $6 from $32. UBS Warburg analyst Colette Fleming said she believes Leap Wireless is in danger of breaking some terms of its funding agreements with its vendors, specifically its "consolidated EBITDA to cash interest expense covenant" during the first quarter of 2003. The reason, Fleming wrote, is that Leap Wireless simply didn't have as many customers as it thought it did at the end of March, and it likely won't add as many subscribers in future quarters as it had projected. Spokesmen at Leap Wireless confirmed that the firm will reduce its subscriber count, noting that the company said in its first-quarter conference call that as many as 5% of its subscribers didn't exist. Leap renegotiated its financing arrangements with Nortel Networks Corp. (NT), Lucent Technologies Inc. (LU) and L.M. Ericsson Telephone Co. (ERICY) in March. Leap shares are trading below the 52-week low of $3.75 set Monday. They recently changed hands at $3.35, down 64 cents, or 16%. Volume was 4.6 million shares, versus the daily average of 2.1 million. Leap operates wireless-communications networks, selling service to customers under its Cricket brand. In its first-quarter report, filed with the Securities and Exchange Commission May 14, Leap noted that during the quarter, it observed a "significant increase in the occurrence of fraud ... over that experienced in the preceding year." Leap said fraud includes people using its service under a false name as well as third-party dealers reporting wireless phones as sold and then activating them under a false name or selling phones to people not eligible to use Leap's service. "We (are) going to take aggressive steps to scrub the system" of fraud, Leap spokesman Dan Pegg said, adding that this is an industrywide problem, not something specific to Leap. Another spokesman, Jim Seines, said the firm wasn't aware of the extent of the fraud when it amended its financing arrangements with Nortel, Ericsson and Lucent in March. Pegg wouldn't comment on UBS Warburg's theory that the pending reduction in Leap's subscriber count puts these financing arrangements at risk. Pegg said, however, that "our expectation is during the second quarter we won't see as much (subscriber) growth as forecast. ... We anticipate that fraud will have an impact on net (customer) additions." Updated May 21, 2002 12:09 p.m. EDT