Citigroup 17th Annual Entertainment, Media & Telecommunications Conference. Doug Hutcheson, President & CEO January 2007

Transcription

1 Citigroup 17th Annual Entertainment, Media & Telecommunications Conference Doug Hutcheson, President & CEO January 2007

2 Forward Looking Statements and Non-GAAP Financial Measures Statements made during this presentation that are not historical in nature, including statements about future events and performance, and statements including words like expect, plan intend and similar terms, are forward-looking statements. Our actual results could differ materially from those stated or implied by such forward-looking statements. Factors that could cause actual results to differ from our forward-looking statements are detailed in the section entitled Risk Factors included our Quarterly Report on Form 10-Q for the third quarter of 2006 and in our other publicly filed reports. We undertake no obligation to update or revise any forward-looking statements. Historical financial and operating data reflects the consolidated results of Leap, its subsidiaries and its non-controlled joint ventures Alaska Native Broadband 1, LLC, LCW Wireless, LLC and Denali Spectrum, LLC for the periods indicated. Existing Markets refers to the Company s markets in operation as of 12/31/05. New Markets refers to those markets launched and/or acquired subsequent to 12/31/05, but does not include markets provisionally purchased in Auction 66. For a GAAP reconciliation of non-gaap financial measures, please see the Financial Reports page of the Investor Relations section of Leap s website, p 2

3 Company Highlights Business Has Established a Distinctive Position Within the Wireless Industry High-Quality Networks Low-Cost Provider Strong Prospects for Continued Growth in Existing and New Markets as a Result of Solid Execution Unlimited Flat-Rate Wireless Plans No Long-Term Service Commitments Underserved Customer Demographics Proven Business Model Attractive Expansion Opportunities p 3

4 Meeting the Needs of Underserved Customers Ethnicity Age Income 50% 55% 72% Cricket Other Wireless Brands 25% 15% 21% Non-Caucasian < 35 Years < $35k Cricket s Differentiation Extends Beyond Demographics ~1500 minutes / user / month versus the industry average of ~830 51% of customers use Cricket as their only phone 93% of customers use Cricket as their primary phone Source: Company Research completed 08/2006. p 4

5 Wireless Services for Everyday, Value-Conscious Customers Cricket Rate Plans $35 Unlimited Classic $40 Unlimited Plus $45 Unlimited Access $50 Unlimited Access Plus New! Unlimited anytime minutes Unlimited anytime minutes Unlimited anytime minutes Unlimited anytime minutes Unlimited U.S. long distance (1) Unlimited U.S. long distance (1) Unlimited U.S. long distance (1) Unlimited text, picture and instant messaging Unlimited text, picture and instant messaging Voice mail, caller ID and call waiting Voice mail, caller ID and call waiting Unlimited Mobile Web Unlimited in-network roaming Available Upgrades (2) $5 Voice mail, caller ID and call waiting $5 Unlimited text, picture and instant messaging $5 Unlimited Mobile Web $5/15/25 100/300/550 minutes to Canada and/or Mexico (3) $5/10/15 30/70/120 Travel Time roaming minutes Monthly Flex Bucket purchases for pre-paid services $30 promotional rate plan offered for a limited time only (1) Excludes Alaska. (2) International long distance available to over 100 countries. (3) For landline terminated calls to Mexico p 5

6 Simple and Differentiated Service Comparison of Select Post-Paid Service Plans (1) Plan Name Unlimited Access America s Choice 450 Nation 450 w/rollover Fair & Flexible Get More 1000 Plus (2) Price of Comparative Plan $45.00 $39.99 $39.99 $39.99 $49.99 Anytime Plan Minutes Unlimited ,000 Cost of Overage / Minutes N/A $0.45 $0.45 $0.20 $0.40 Unlimited Text & Picture Messaging Included N/A N/A $15.00 $14.99 Required Service Agreement None 1 year 2 years 2 years 1 year Early Termination Fee None $175 $175 $200 $200 Activation Fee None $35 $36 $36 $35 Source: Company websites and public filings. (1) Based on comparison of service offerings as of December 1, (2) T-Mobile $49.99 plan includes unlimited night and weekend minutes; plan costs $39.99 without night and weekend minutes. p 6

7 High Value Proposition Supported by Low Cost Structure Cost Advantage Positions Leap To Build Share In Existing And New Markets $0.063 Cricket is able to sell its services at ~46% of the average industry selling price per monthly MOU yet achieve comparable margins $0.029 $0.031 $0.013 Industry Average Avg. Monthly MOUs 830 ~1,500 Cost to Provider = Cash Cost per Minute Cost to Customers = Effective Yield per Minute Note: As of 2Q Source: Yankee Group. The Cash Cost per Minute and Effective Yield per Minute are calculated using industry weighted averages. p 7

8 Drives Attractive Customer Economics Cricket s Low Cost Structure Allows For Delivery Of Superior Value ARPU Driving Customer Profitability $44.39 $40.22 $36.87 $36.97 $20.74 CCU $19.52 $22.04 $18.38 Churn Adjusted (1) CPGA $6.35 $6.25 $7.57 Calculated Contribution Per User $6.12 $8.71 $12.24 $14.45 $16.08 Includes cost impact associated with New Market launches 3Q03 3Q04 3Q05 3Q06 Contribution per user has nearly doubled since 2003 (1) Churn-adjusted CPGA is defined as CPGA multiplied by churn. p 8

9 Attractive Market Presence Spokane Substantial spectrum portfolio: Portland Salem Eugene Boise Rochester Buffalo Syracuse ~2mm customers as of 3Q06 Operations in 22 states serving ~46mm covered POPs Reno Modesto/Merced Fresno Visalia San Diego Salt Lake City Phoenix Tucson Denver Pueblo Northern Colorado Las Cruces El Paso Colorado Springs Santa Fe Albuquerque Wichita Tulsa Temple/Killeen Bryan Austin Houston San Antonio Omaha Lincoln Kansas City Fort Smith Central Arkansas Dayton Cincinnati Louiville NW Arkansas Nashville Jonesboro Columbus Lexington Greensboro Knoxville Charlotte Memphis Chattanooga Macon Pittsburgh Raleigh 70mm licensed POPs in existing markets Leap Markets in Operation Coming Soon Joint Ventures (1) JV Markets in Operation Note: As of January Source: 2006 POPs estimate provided by Claritas, Inc. (1) Joint ventures include: Alaska Native Broadband 1, LLC (ANB) and LCW Wireless, LLC (LCW). Alaska Native Broadband, LLC is the controlling entity and sole manager of ANB. The two members of ANB are Alaska Native Broadband, LLC and Cricket Communications, Inc. WLPCS Management, LLC is the controlling entity of LCW. The three members of LCW are WLPCS Management, LLC, CSM Wireless LLC, and Cricket Communications, Inc. For accounting purposes, ANB s and LCW s results are consolidated within Leap s results. p 9

10 p 10 Building Our Future

11 Business Progress Allows Strategy To Evolve Execute 2006 Optimize 2007 Expand 2008 Grew in our existing markets Completed planned launch of 14 new markets Added scale potential with Auction 66 markets Developed attractive capital structure Drive next round of product evolution Consolidate and optimize launched footprint Begin A66 round of activities Expand product portfolio Actively launch new A66 markets Incorporate new technologies p 11

12 Execute 2006 Products Optimize 2007 Expand 2008 Another Year Of Attractive Progress Added new higher-value unlimited rate plans Expanded role of data in product offerings Increased focus on roaming and product bundling Distribution 39 new direct Cricket stores 605 new premier dealers Aligned dealer incentives to improve customer support over lifetime Technical Leadership Completed transition of long distance services to VoIP networks Built data Superhighway consolidating our markets Substantial progress made with EV-DO Rev Ø technology upgrade Deployed largest distributed antenna system in U.S. Footprint Expansion & Optimization Launched 14 new markets, adding ~20m covered POPs Continued implementation of market clustering strategy Enhanced use of spectrum assets through swaps, sales and partnerships Total of ~46m covered POPs p 12

13 Company Has Executed A Strategy To Optimize Footprint Existing Markets ~26mm covered POPs Generated ~39% OIBDA margins in 3Q06 ~$331 Estimated Existing Market Adjusted OIBDA LTM at end of 3Q 2006 (1) Footprint Expansion & Optimization ~20mm new covered POPs at YE2006, projected to grow to ~23mm by mid 2007 New Market launches on time and on budget Positive contribution to Adjusted Consolidated OIBDA expected for 2007 Auction 66 Market Opportunity Expect to complete purchase of licenses covering more than 100mm new POPs (2) Fully-funded plan to build-out ~24mm covered POPs, expected to be substantially complete by the end of 2009 Fresno Launch El Paso/Las Cruces, Colorado Springs Launch San Antonio, Houston, Bryan / College Station, Cincinnati Launch Kansas City Launch San Diego, Portland Launch 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 Fresno OIBDA Break-Even El Paso/Las Cruces OIBDA Break-Even Colorado Springs OIBDA Break-Even Projected Houston OIBDA Break-Even Note: As used in this presentation, Existing Markets refers to the Company s markets in operation as of 12/31/05. New Markets refers to those markets launched and/or acquired subsequent 12/31/05, but does not include markets provisionally purchased in Auction 66. Auction 66 Markets refers to those markets for which Leap or Denali Spectrum License was the provisional winning bidder at the close of Auction 66. (1) Estimated Adjusted Existing Market OIBDA includes all corporate overhead expenses. (2) Based on Leap Auction 66 spectrum purchases and provisional winning bid of Denali Spectrum in Auction 66. Denali Spectrum license grants subject to FCC approval. p 13

14 Execute 2006 Products Optimize Expand Leveraging Investments Made In 2006 To Improve Planned Performance Introduce first EV-DO based products In 2007 Add data capabilities such as Google to product offering Expand products for off-network calling Introduce additional Cricket service payment options Technical Leadership Complete roll-out of EV-DO Rev Ø networks upgrade to Rev A when appropriate Develop improved access products Adopt single stage dialing for roaming products Cost Leadership Continue development of system enhancements and processes Capture increased supply chain efficiencies Pursue cost reduction methods for off-network calls Capture inherent scale advantages from expansion launches Footprint Expansion & Optimization Continue coverage expansion in existing markets through clustering strategy Complete two additional market launches by mid-2007 serving an additional 3-4m covered POPs Prepare for Auction 66 market launches principally in 2008 and beyond Consider collaboration to enhance coverage p 14

15 Business Outlook 2007 Adjusted Consolidated OIBDA Capital Expenditures $380M - $450M $240M - $310M Company Company expected expected to to be be at at or or near near levered levered free free cash cash flow flow break-even break-even in in 2007, 2007, before before any any significant significant Auction Auction launch launch expenses expenses This slide reports previously issued guidance. Company guidance is updated and reaffirmed only through explicit press releases and public filings. p 15

16 Execute 2006 Expand Optimize Next Wave Of Planned Expansion Products Add multi-band handsets to portfolio Expand data services with AWS spectrum Integrate enhanced footprint into rate plans Technical Leadership Begin migration to IP-based network, wireless VoIP handsets Complete upgrade of billing systems Introduce integrated network structure with Auction 66 market roll-outs Cost Leadership Capture expected benefits from enhanced systems Build on potential cost advantages from integrated VoIP and data networks Footprint Expansion & Optimization Continue optimizing footprint through market clusters Adjust velocity of Auction 66 market launches based on expected early successes p 16

17 Auction 66: New Opportunities to Plant Our Flag Seattle Acquisition of 110mm new licensed POPs through Auction 66 pending (1) Las Vegas Minneapolis Oklahoma City Milwaukee St. Louis Chicago Philadelphia Wilmington Baltimore Washington, D.C. Richmond Norfolk Addition of new market clusters and ability to provide greater depth of service Expanded spectrum holdings in existing markets ~ 24 million new covered POPs planned with fully-funded first phase of expansion Savannah Leap Beaumont Corpus Christi Biloxi Baton Rouge New Orleans Markets in Operation Coming Soon Joint Ventures JV Markets in Operation Provisionally Winning Bids Of Leap And Denali Include 35 Of The Top 50 U.S. Markets Source: 2006 POP estimate provided by Claritas, Inc. (1) Denali spectrum license grants subject to FCC approval. (2) Denali Spectrum License, LLC is an entity in which we own an indirect 82.5% non-controlling interest; remaining 17.5% controlling interest owned by Denali Spectrum Manager, LLC. Auction 66 Winning Bids in Auction 66, including Denali Spectrum (2) winning bids p 17

18 Leap: A Strong Growth Story Proven, scalable business model Robust operating performance Solid cash flows from Existing Markets support growth and drive deleveraging over time New Market launches expected to further enhance cash flow Disciplined, fully-funded Auction 66 initial expansion plan (1) Existing markets refers to the Company s markets in operation as of 12/31/05. p 18

19 p 19 Appendix: Financial Performance

20 3Q06: Solid Year-Over-Year Results Reflect Business Expansion 3Q05 3Q06 % Change Gross Additions 233, ,178 73% Net Customer Additions 23, ,688 NA Churn 4.4% 4.3% (2%) ARPU $40.22 $ % Total Revenue $231M $288M 25% Operating Income $28M $17M (39%) Adjusted Consolidated OIBDA $67M $61M (9%) Estimated Existing Market Adjusted OIBDA '' $88M 31% p 20

21 A Closer Look at YTD Performance Net Customer Additions Adjusted OIBDA (thousands) ($ in millions) 236 $211 ~$267 $ Q05 YTD 3Q06 YTD 3Q05 YTD 3Q06 YTD Net Additions in Existing Markets Net Additions in New Markets Consolidated Markets Y-o-Y Growth: 361% Existing Markets Y-o-Y Growth: 30% Consolidated Est. Existing Market Adjusted OIBDA (1) Consolidated Markets Y-o-Y Growth: 3% Existing Markets Y-o-Y Growth: 26% Note: Existing markets defined as markets in operation as of 12/31/05. (1) Est. Existing Market Adjusted OIBDA includes all corporate overhead expenses. p 21

22 Proven Model, Attractive Growth End of Period Subscribers Adjusted Consolidated OIBDA (1) (thousands) 3Q06 ~161K Net Adds 1,966 ($ millions) ~$84 ~$94 ~$88 1,538 1,615 1,779 1,547 1,618 1,836 1,540 1,623 1,570 1,668 $53 $70 $79 $74 $78 $61 $57 $67 $61 $51 $64 $22 $20 $9 $16 $2 $29 $17 $5 $11 1Q 2Q Q Q ($22) 1Q ($15) 2Q Adjusted OIBDA Operating Income Est. Existing Market Adj. OIBDA 3Q 4Q p 22

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