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Wednesday April 14, 4:41 pm Eastern Time
Company Press Release
SOURCE: Leap Wireless International, Inc.
Leap Wireless International Reports Results for Second Quarter - Cricket and PEGASO Launches Exceeding Initial Expectations -
SAN DIEGO, April 14 /PRNewswire/ -- Wireless communications carrier Leap Wireless International, Inc. (Nasdaq: LWIN - news) today reported substantial progress in network deployment and subscriber growth during the second quarter of fiscal year 1999, ended February 28, 1999. By the end of the quarter, Leap's Mexican operating company, PEGASO PCS, had launched service and Leap's operating companies in the U.S. and Chile had reached approximately 32,000 subscribers. Leap's equity share is approximately 13,500 subscribers. Subscribers at Chilesat PCS, Leap's Chilean operation, grew by 59% during the second quarter to 27,000 subscribers, despite funding issues related to the financial condition of Telex-Chile, Leap's former partner in the operating company. Subscriber numbers do not include PEGASO PCS, which launched commercial service in Tijuana on February 25, 1999.
In January 1999, Leap announced its planned acquisition of Chase Telecommunications, Inc. (ChaseTel), which launched service in Chattanooga, Tenn. last fall. Leap currently owns 7.2% of Chase Telecommunications Holdings, Inc., the parent corporation of ChaseTel. On February 1, 1999, in anticipation of the re-launch of wireless service in conjunction with Leap under the Cricket brand name, ChaseTel ceased selling conventional PCS service. ChaseTel had approximately 4,900 subscribers at that time.
In March, Leap and ChaseTel launched Cricket service in Chattanooga using the ChaseTel infrastructure and under an agreement that provides that ChaseTel's management controls the business until Leap's proposed acquisition of ChaseTel is complete. Targeted to the mass consumer market, Cricket lets customers make unlimited local calls for one low, flat monthly rate. The monthly rate, payable in advance, covers unlimited local calls, a voice mailbox and caller ID.
''The initial consumer response in Chattanooga to Cricket's simple, worry-free wireless service has substantially exceeded our expectations and tells us that we have a product that is in high demand and that we want to expand as quickly as possible. We hope to launch the Cricket concept in a second market by the fall of 1999,'' stated Harvey White, chairman and CEO of Leap.
Pending approval from the Federal Communications Commission (FCC), Leap will acquire ChaseTel licenses in Tennessee and AirGate licenses in North and South Carolina that will enable Leap to offer Cricket service in other markets. Leap is currently bidding in the federal government's re-auction of PCS spectrum and is exploring the possibility of acquiring additional U.S. spectrum outside of the auction process.
Subsequent to the end of the quarter, PEGASO announced that it had obtained a commitment for a $100 million working capital facility, bringing its total commitments to $1.1 billion in equity, debt and vendor financing. The facility is expected to complete the financing necessary to build out and launch PEGASO's network in Mexico's four largest cities -- Tijuana, Mexico City, Monterrey, and Guadalajara.
''Launching commercial service in Mexico was a major milestone for Leap. We believe that PEGASO's 100% digital network, innovative service offerings, and strong marketing and distribution channels make it uniquely positioned to compete aggressively in the Mexican market,'' White said. ''We are excited about the initial reaction in the market to PEGASO's service and expect the third quarter to be marked by strong subscriber growth in Tijuana and continued progress on the build-out of the network into Mexico City, Monterrey, and Guadalajara,'' Mr. White continued.
Also subsequent to the end of the quarter, Leap announced that it has signed an agreement to increase its ownership of Chilesat Telefonia Personal S.A. (Chilesat PCS) from 50% to 100%. In a $50 million transaction, Leap will purchase the remaining 50% of Chilesat PCS from Telex-Chile, a Chilean telecommunications company, and its affiliate, Chilesat S.A. Leap's purchase of Telex-Chile's interest resolves key issues for Chilesat PCS, which was experiencing short-term funding problems related to Telex-Chile's financial condition.
Upon completion of the acquisition, Leap will take steps to recapitalize Chilesat PCS, increase marketing efforts, and aggressively grow the business. The transaction is subject to certain conditions and is expected to close within a week.
Orrengrove Investments is Leap's operating company which owns interests in several related companies (the ''Transworld Companies'') that together intend to provide long distance service in Russia. In its quarterly filing, Leap also disclosed that subsequent to the end of the quarter, Orrengrove was notified that the satellite previously providing relay services had experienced a thermal-related performance problem. The initial prognosis indicates that operational status will not be restored. Although the provider of the satellite capacity has contractually guaranteed the satellite's performance, the outcome at this time remains uncertain. The Transworld Companies have already identified and put into operation a short-term terrestrial transmission solution; however, longer-term alternative transmission sources are being explored.
The condensed financial information for the Leap Wireless unconsolidated operating companies accounted for under the equity method is as follows: revenues for Leap Wireless operating companies for the second quarter were $1.1 million compared to no revenues in the second quarter of 1998. Operating expenses for Leap Wireless operating companies for the second quarter were $36.2 million compared to operating expenses of $3.6 million in the second quarter of 1998. Other income, net was $1.9 million compared to $0.8 million in the second quarter of 1998. Foreign currency losses were $4.4 million compared to no losses in the second quarter of 1998. Net losses for Leap Wireless operating companies for the second quarter were $38.7 million compared to net losses of $2.8 million in the second quarter of 1998. The results of Leap's unconsolidated operating companies are as of and for the three months ended December 31, 1999, a two-month lag.
Leap's share of the net losses of the operating companies was $18.3 million compared to $2.0 million in the second quarter of 1998. The significant increase consisted primarily of increased network development and launch preparation activities at PEGASO.
Leap's consolidated net loss for the second quarter was $19.5 million or $1.10 per share compared to a net loss of $3.4 million for the same period in 1998. This includes both Leap's share of the losses incurred by the operating companies and general and administrative expenses incurred directly by Leap.
Headquartered in San Diego, California, Leap Wireless International is a wireless communications carrier that deploys, owns, and operates networks in domestic and international markets with strong growth potential. Through its operating companies, Leap has launched all-digital wireless networks in Chile, Mexico, and the U.S. and plans to offer service in Russia and Australia. Leap's operating companies have licenses covering 162 million potential customers, of which Leap's equity share is approximately 62 million (including pending U.S. spectrum acquisitions). For more information about Leap Wireless, please call Investor Relations at 1-619-882-6111 or visit the company's web site at www.leapwireless.com.
This news release contains certain ''forward-looking statements,'' including statements regarding the future scope of Leap Wireless networks. Forward-looking statements, which are based upon certain assumptions and describe future plans and expectations of Leap, are generally identifiable by use of the words ''believe,'' ''expect,'' ''intend,'' ''plan,'' ''anticipate,'' ''project'' or similar expressions. The ability of the Company to predict actual results and future events is inherently uncertain. Important factors which may cause actual results to differ materially from the forward-looking statements contained herein are described in the section entitled ''Risk Factors'' in the Company's fiscal year 1998 10-K and other documents filed with the Securities and Exchange Commission. Factors that could cause actual results to differ include but are not limited to: the risks associated with international emerging markets, uncertainties regarding Leap's ability to access capital markets, the delayed build-out of Leap's operating company networks, failure of a system to perform according to expectations, and increased competitive pressures that could affect market demand for the services of Leap's operating companies.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
February 28, 1999 August 31, 1998
ASSETS
Cash and cash equivalents $6,072 $--
Loans receivable from unconsolidated
wireless operating company - current -- 25,227
Other current assets 344 --
Total current assets 6,416 25,227
Property and equipment - net 2,733 -
Investments in unconsolidated wireless
operating companies 181,209 101,719
Loans receivable from unconsolidated
wireless operating companies 61,945 40,076
Other assets 12,906 6,838
Total assets $265,209 $173,860
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $4,022 $5,789
Loans payable to banks 16,201 9,000
Total current liabilities 20,223 14,789
Long-term debt 20,636 --
Other liabilities 606 --
Total liabilities 41,465 14,789
Stockholders' equity:
Preferred stock - authorized
10,000,000 shares $.0001 par value,
no shares issued and outstanding -- --
Common stock - authorized 75,000,000 shares;
$.0001 par value, 17,823,619 shares issued
and outstanding 2 --
Additional paid-in capital 293,359 --
Former parent capital -- 197,598
Deficit accumulated during the
development stage (67,103) (36,175)
Accumulated other comprehensive
income (loss) (2,514) (2,352)
Total stockholders' equity 223,744 159,071
Total liabilities and stockholders'
equity $265,209 $173,860
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
For the Period
Three Months Six Months Sept. 1, 1995
Ended Feb. 28, Ended Feb. 28, (Inception) to
1999 1998 1999 1998 Feb. 28, 1999
Equity in net loss
of unconsolidated wireless
operating companies $(18,301) $(2,013) $(25,845) $(2,980) $(37,218)
General and administrative
expenses (4,185) (1,432) (8,549) (2,169) (34,194)
Interest income 3,853 -- 5,379 -- 6,222
Interest expense (862) -- (1,913) -- (1,913)
Net loss $(19,495) $(3,445) $(30,928) $(5,149) $(67,103)
Net loss per common share $(1.10) -- $(1.75) -- --
Weighted average common
shares outstanding 17,770,465 --17,717,486 -- --
SOURCE: Leap Wireless International, Inc.
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