SAN DIEGO & SAN ANTONIO--()--Leap Wireless International, Inc. (NASDAQ:LEAP), a leading provider of innovative and value-driven wireless communications services, and Pocket Communications, Texas’ fastest-growing flat-rate wireless company, today announced they have entered into an agreement to form a Leap-controlled and managed joint venture that will provide enhanced mobile communications through Leap’s Cricket® brand to customers in the South Texas region, from San Antonio to Laredo and in the Rio Grande Valley covering more than 4.4 million covered potential (POPs).
“We are pleased to have come to a mutually beneficial agreement with Cricket; the benefits of this transaction are obvious and clearly create a combined value that is significantly more than the individual parts”
Leap, which offers unlimited, pre-paid mobile voice, text and Web, as well as mobile broadband service through Cricket, had approximately 5 million customers across the nation at the end of 2009, including approximately 400,000 in the South Texas region. Pocket Communications, which offers similar unlimited pre-paid services, had approximately 320,000 customers in the South Texas region at the end of 2009.
“Today’s agreement will provide Pocket’s South Texas customers with expanded wireless service in Leap’s Cricket coverage throughout the US and access to an increased range of features and services, including Cricket Broadband and Cricket PAYGo,” said Doug Hutcheson, Leap’s president and chief executive officer. “By combining two strong providers we will continue our commitment to offering South Texas customers great unlimited value and better, more comprehensive coverage. The joint venture is structured to ensure that both Pocket and Leap will benefit from its success. We look forward to working together with the wider Pocket family of companies and management team as we continue to build a great value proposition for our customers and a successful business for our employees and stakeholders. This transaction, which will deliver significant value to our shareholders, is consistent with our strategy of improving our ability to compete by increasing our overall strength and scale, while expanding our offer to customers.”
“We are pleased to have come to a mutually beneficial agreement with Cricket; the benefits of this transaction are obvious and clearly create a combined value that is significantly more than the individual parts,” said Paul Posner, Pocket’s chief executive officer. “As a combined entity, South Texas should continue to be one of Cricket’s best performing regional clusters and we at Pocket are excited to be bringing even more robust offerings to our retail channel partners. These enhanced offerings will allow the combined operations to compete even more effectively against other flat-rate wireless operators in the area. Over the past four years we have seen Cricket improve its operational capability and execution; we value their strategic vision and believe that their spectrum position, coupled with their ability to deliver more advanced service offerings, provide an opportunity to create even more value than continuing to compete on a stand-alone basis.”
At the closing, the joint venture will acquire substantially all of Pocket Communications’ and Cricket’s wireless licenses and operating assets for the South Texas region. Leap will own approximately 76 percent of the joint venture and Pocket Communications will own approximately 24 percent. As one step in the transaction, immediately prior to the closing, Leap will purchase some of Pocket Communications’ South Texas assets for approximately $38 million in cash, which Leap will then contribute to the joint venture together with its own South Texas assets. Pocket will contribute the remainder of its South Texas assets to the joint venture directly. The companies have certain put and call rights on Pocket’s interest in the joint venture which generally commence after 3-1/2 years. In addition, Pocket will be obligated to sell its interest in the joint venture to Cricket in the event of a Leap change of control.
The joint venture is expected to generate significant cost synergies, beginning about twelve months after closing, as a result of efficiencies from improved purchasing, customer care, and broad operational improvements, as well as the elimination of overlapping cost such as coverage redundancies, overlapping distribution, and some customer awareness activities. These joint venture cost synergies, together with the OIBDA contribution from the business Pocket contributes to the joint venture, are expected to result in additional contribution to Leap’s OIBDA in the range of $50-60 million annually within two years after closing. The joint venture is also expected to generate some additional revenue synergies, not included in the above estimates, primarily as a result of the joint venture being a stronger competitor in South Texas region, and reduced churn from customers’ access to a more attractive wireless service footprint.
Completion of the transaction is subject to customary regulatory and other closing conditions, including approval by the Federal Communications Commission. The parties expect the transaction to be completed later this year.
Following the closing, Pocket Communications will continue to provide services under the Pocket brand in New England.
Leap provides innovative, high-value wireless services to a fast-growing, young and ethnically diverse customer base. With the value of unlimited wireless services as the foundation of its business, Leap pioneered its Cricket® service. The Company and its joint ventures operate in 35 states and hold licenses in 35 of the top 50 U.S. markets. Through its affordable, flat-rate service plans, Cricket offers customers a choice of unlimited voice, text, data and mobile Web services. Headquartered in San Diego, Calif., Leap is traded on the NASDAQ Global Select Market under the ticker symbol “LEAP.” For more information, please visit www.leapwireless.com.
About Pocket Communications
Pocket Communications is a regional flat-rate wireless company, with more than 320,000 subscribers in South Texas and New England. The company has more than 120 company owned stores, and has more than 250 independent dealers. Pocket offers reliable wireless service and unlimited talk, text and picture sending starting at $25 per month, with no contract and its first month of service at no charge. Pocket operates its own U.S.-based call centers, delivering quality customer care. For more information, please visit www.pocket.com.
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect Leap management’s current expectations based on currently available operating, financial and competitive information, but are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements. Our forward-looking statements include our discussions regarding future cost, revenue, financial and other synergies expected as a result of the joint venture and our expectations regarding future growth, spending, results of operations and customer penetration, and are generally identified with words such as “believe,” “expect,” “intend,” “plan,” “could,” “may” and similar expressions. Risks, uncertainties and assumptions that could affect our forward-looking statements include, among other things:
All forward-looking statements included in this news release should be considered in the context of these risks. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors and prospective investors are cautioned not to place undue reliance on our forward-looking statements.
Leap is a U.S. registered trademark and the Leap logo is a trademark of Leap. Cricket, Jump, the Cricket “K” and Flex Bucket are U.S. registered trademarks of Cricket. In addition, the following are trademarks or service marks of Cricket: BridgePay, Cricket By Week, Cricket Choice, Cricket Connect, Cricket Nation and Cricket Wireless Internet Service. All other trademarks are the property of their respective owners.