Focus

We are focused on smart growth.

Cricket has built its business for people who are focused on value. Today we remain committed to our core customer base while targeting consumers we call "real life value seekers" – people who aspire to have the best wireless experience at the best value, no matter where they live or what they earn.

To  reach  them,  we  are  bringing  our  message and our products to more people, including those who might not have considered Cricket before. In  2011,   we  launched  the  strongest   device portfolio   in our  history, innovations like our Muve Music service, a new marketing campaign and a major national retail expansion. The result was a year of smart growth.

Our progress positions us to continue expanding our customer base and increasing penetration. It also allows us to intensify our focus on our strategic goal: creating the best prepaid customer experience in the industry.

Our focus is clear: improving the customer experience, expanding distribution, offering compelling devices and service plans, and broadening our message.
  • A Better Experience Improving customer care

    A better Experience

    We know the customer experience isn't just one thing – it's everything. That is why we are intensifying our customer focus to reduce churn and increase brand consideration. In 2010, we transformed our business by giving customers exactly what they want: smart devices, nationwide 3G coverage and value-rich rate plans that include taxes and fees. Then in 2011, we executed on our strategy across the board, with promising results.

    Meanwhile, we continued to streamline our processes and make each decision to keep customers with us longer. For example, last year we implemented a customer care strategy focused on first call resolution, which allowed us to deliver a better customer experience at a lower cost. It was just one reason we improved churn by 100 basis points year over year, while increasing our customer lifetime value.

    Today we are providing more self-service options and systematically looking at ways to improve each stage in the customer lifecycle – from activation, billing and payment options to upgrades, and every touch point in between.

    Better Experience

    Improving customer care

    In 2011, our care organization made a major shift to focus on first call resolution. This means we reward our call center representatives - not for average handle time - but for resolving customer issues on the very first call. We also began targeted outbound calling programs, which welcome new customers on our higher-value rate plans and make sure people know exactly what to expect from their first bill.

    Overall, we are focused on anticipating our customers' needs and resolving issues faster. As a result, our call centers saw repeat call volume drop, along with the average number of calls per subscriber, at the same time that customer satisfaction scores for calls increased. The end result was better for the customer and better for the bottom line.

  • Higher Penetration Increasing brand awareness

    Higher penetration

    Last year Cricket rolled out a new advertising strategy to establish itself as a national leader in the growing prepaid wireless category. Our integrated marketing campaign launched in November, just before the busy holiday selling season and in tandem with our national retail expansion. We set out to increase penetration by elevating our brand, improving customer awareness on a national scale and making Cricket the clear choice in wireless value among a broader demographic of value seekers.

    In the television spots, we show how Cricket offers everything the competition does and more – including our groundbreaking Muve Music service – at a much better price point. By giving consumers the facts, we put the power of choice and control directly in their hands. Then we ask them to decide – because, as the tagline says, it's "Your Call." So far the message has resonated well with value-seeking consumers.

    View the Cricket TV spot here.

    Increasing brand awareness

    To build awareness and brand preference cost-effectively, we used a mix of radio spots and graphically striking out-of-home, print and digital advertising. We rounded out our strategy with eye-catching retail displays at the point of sale and social media outreach to spread strong word-of-mouth.

  • Broader Reach Expanding distribution and service

    Broader reach

    Last year we reformulated our distribution model to reach a broader economic cross-section of the communities we serve. We targeted areas where value-seeking consumers live, work, play and shop. To make it even easier to choose Cricket, we opened Cricket-branded locations in new neighborhoods and made a big move into national retail.

    National retailers now represent the largest channel for U.S. prepaid wireless carriers industry-wide. Leading with our highly differentiated Muve Music service, we significantly expanded our national retail distribution with Best Buy, Dollar General and Walmart. We also partnered for the first time with multimedia retailer HSN and online with Amazon.com, with good initial uptake.

    In addition, we added more than 400 Cricket-branded locations – most of them premier dealers, which look and feel just like our company-owned stores, but with a much more efficient, variable cost structure. Going forward, we will continue to add distribution both in and out of our network footprint to maximize our customer growth nationwide.

    Partners

    Expanding distribution and service

    Cricket dealers remain one of our most productive retail channels – and a key part of our strategy to expand our distribution cost-effectively nationwide. To better serve our growing customer base, last year we introduced a compensation model that we call "premier dealers with service." This provides a new revenue stream to select, high-performing dealers who offer service to our customers. It also shifts service traffic away from company-owned stores, increases dealer productivity and prepares us for further expansion.

Financials

For definitions of financial measures and reconciliations to the most comparable GAAP measures, please visit the Leap Wireless corporate website.

CEO Letter





S. Douglas Hutcheson
President, Chief Executive Officer and Director
Leap Wireless International, Inc.

For Leap, 2011 was a year of execution. We focused on smart growth by delivering smart devices, innovative products like our Muve Music service, and a major expansion in our national retail channel. The result was improved performance across the board.

Smartphone uptake rose dramatically, attracting customers to our higher-value rate plans. By year end, we achieved industry-leading growth in quarterly average revenue per user (ARPU) of nearly $4 year over year, while improving churn by nearly 100 basis points. Together, these changes have increased customer lifetime value, as we predicted. With more than 500,000 customers at year end, Muve Music skyrocketed to become the second-largest digital music subscription service in the United States in less than a year.

Now we are targeting higher penetration by enhancing the customer experience, expanding distribution, refining our device and service plan line-up, and increasing brand awareness. With each initiative, we are building on our strong position to innovate value on a national scale.

+ READ FULL CEO LETTER

Innovate

We innovate value.

Cricket has made its name by innovating value. Time after time, we have brought new innovations to market that start and end with the customer in mind. In 2011 alone, we launched Android smartphones under $100, a suite of international products, and our compelling Muve Music service, and we're not stopping there.

Today, we continue to develop relevant new choices that fit our customers' lives, their aspirations and their budgets.

Most of Cricket customers do not have a landline phone or Internet service at home, so we give them access to what matters most. With each new device, new product and new service, we create an emotional connection with our customers. It is a strategic relationship that we plan to grow and deepen over time.

By developing new wireless choices, we connect people to their world – constantly delivering value that brings us even closer to our customers.
  • Smart Choices Delivering world-class devices

    Smart choices

    In 2011, we attracted customers with our best device lineup yet, dramatically increasing our customer lifetime value in a device-driven world. We delivered a wide range of Android smartphones and Muve Music-enabled devices, along with our first tablet and our first 4G USB modem. We ended the year with 2 million smartphone customers and growing – representing approximately 40 percent of our voice customer base.

    We unveiled the Huawei Mercury, a high-end device that PC Magazine called the best prepaid smartphone in America. It was just one of the iconic devices we launched with leading manufacturers, from Huawei and ZTE to Samsung, Kyocera, LG and PCD.

    In 2012, we are partnering with a host of vendors to deliver what customers want: bigger screens, faster processors and better cameras. By implementing a "good, better, best" device strategy, we will offer a full range of quality handsets at different price points so customers can upgrade and stay with us as their needs evolve over time.

    Delivering world-class devices

    To keep standards high, we worked with our vendors' design and development teams to bring proven, world-class device platforms to our customers at the lowest possible cost. We even delivered what some said couldn't be done: smartphones priced below $100 for the holidays, while securing vendor support to keep subsidy levels manageable. Going forward, we will continue using global sourcing and scale to bring more choices, quality and mobile operating systems to our device portfolio.

  • Global Value Making international calls affordable

    Global value

    With our diverse customer base, we are always looking for ways to keep people connected globally. Last year we launched a new suite of unique international calling products designed to do just that, while increasing penetration, generating revenue and building loyalty.

    With our Cricket Local Number product, customers can set up a local number in one of more than 40 different countries. This means when friends and family call the in-country number, they are charged only for a local call, and the call then rings through to the customer's Cricket phone.

    We also introduced Mexico and global rate plans, which offer the features of our other Cricket plans along with a bucket of voice minutes to make calls in the country of your choice. In addition, we unveiled unlimited global messaging, which lets customers send unlimited text, picture and video messages across the United States and around the globe.

    Global Value

    Making international calls affordable

    For a small monthly fee, Cricket customers can choose from two options: Mexico Local Number or Global Local Number. Either way, they can set up a local phone number in another country that forwards calls to their Cricket phone. The calling feature gives Cricket customers unlimited calls to select cities in the country of their choice. Meanwhile, since friends and family are calling a local number in their country, they save on expensive international phone charges.

  • Growing volume Pioneering Muve Music

    Growing volume

    Launched in early 2011, our Muve Music is the first digital music experience designed specifically for the mobile phone – with no synching, no computers and no cords needed. By pioneering the first wireless plan to include unlimited music, we delivered an exceptional customer experience and added a key differentiator to our portfolio. This unique service is moving business metrics in meaningful ways and contributing significantly to higher customer lifetime value.

    Available on our higher-value rate plans, Muve Music quickly became the lead product in our national retail expansion starting last September. By year end it had surpassed 500,000 customers, exceeding our expectations and making it the nation's second-largest digital music subscription service in less than a year. Approximately half of Muve Music customers were new to Cricket, demonstrating its broad appeal. Best of all, its customer satisfaction and engagement were off the charts – giving us "sticky" customers who are likely to stay with us longer. In 2012, we expect to explore opportunities to expand Muve Music with other carriers internationally.

    Unique services

    Pioneering Muve Music

    Each month, the average Muve Music customer listens to 40 hours of music on their phone and downloads roughly 300 songs over Cricket's 3G network. The service has the highest customer satisfaction scores of any new product in our company's history, and 95 percent of Muve Music customers would recommend the service to a friend. Last year Muve Music helped us deliver higher ARPU and lower churn, while attracting a new set of customers to Cricket. At the end of 2011, Muve Music was available on two feature phones and three Android smartphones and sold through Best Buy, HSN and Amazon.com, along with Cricket-branded stores and MyCricket.com.

Corporate Information

Board of Directors


Mark H. Rachesky, M.D.
Chairman of the Board
Chairman, Co-Founder and President

MHR Fund Management, LLC

John D. Harkey, Jr.
Director
Chairman and Chief Executive Officer

Consolidated Restaurant Companies, Inc.

S. Douglas Hutcheson
Director
President and Chief Executive Officer

Leap Wireless International, Inc.

Ronald J. Kramer
Director
Chief Executive Officer

Griffon Corporation

Robert V. LaPenta
Director
Chairman, Chief Executive Officer and Founder

Aston Capital, LLC

Mark A. Leavitt
Director
Managing Director

Piper Jaffray

Richard R. Roscitt
Director

Robert E. Switz
Director

Michael B. Targoff
Director
Chief Executive Officer

Loral Space & Communications Inc.

Senior Management Team

S. Douglas Hutcheson
President and Chief Executive Officer

William D. Ingram
Executive Vice President, Strategy and
Acting Chief Financial Officer


Raymond J. Roman
Executive Vice President and
Chief Operating Officer


Robert A. Strickland
Executive Vice President and
Chief Technology Officer


Robert A. Young
Executive Vice President,
Field Operations
David B. Davis
Senior Vice President and
Area President, South


Glen W. Flowers
Senior Vice President and
Area President, East


Erik D. Gerson
Senior Vice President,
Customer Experience


Colin E. Holland
Senior Vice President,
Engineering and
Technical Operations


Robert J. Irving, Jr.
Senior Vice President and
General Counsel


Annette M. Jacobs
Senior Vice President and
Area President, West


Aaron P. Maddox
Senior Vice President,
Financial Planning and Analytics


Jeffrey E. Nachbor
Senior Vice President,
Financial Operations and
Chief Accounting Officer
Thomas J. Stack
Senior Vice President,
Supply Chain Management


Leonard C. Stephens
Senior Vice President,
Human Resources


Matthew P. Stoiber
Senior Vice President, Devices

Jeffrey H. Toig
Senior Vice President, Muve Music

R. Tyler Wallis
Senior Vice President,
Product and Marketing

Corporate Headquarters

5887 Copley Drive
San Diego, CA 92111
T: (858) 882-6000
F: (858) 882-6070

Auditors

PricewaterhouseCoopers LLP
San Diego, CA

Investor Relations

Amy Wakeham
Vice President, Investor Relations and
Corporate Communication

Wendy Kelley
Senior Manager, Investor Relations

Leap Wireless International, Inc.
Investor Relations
5887 Copley Drive
San Diego, CA 92111
T: (858) 882-9876
F: (858) 882-6010

You may also contact us by sending an e-mail to IR@leapwireless.com or by visiting the Investor Relations section of the Company's website at www.leapwireless.com. The Company's publicly filed reports, including financial statements, are available on the Securities and Exchange Commission's EDGAR system.

Transfer Agent

Computershare Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310-1900
(800) 263-5209

TDD for Hearing Impaired: (800) 231-5469
Foreign Shareholders: (201) 680-6578TDD
Foreign Shareholders: (201) 680-6610
www.bnymellon.com/shareowner/isd

Stock Information and Dividend Policy

The common stock of the Company is traded on the NASDAQ Global Select Market under the symbol "LEAP." To date the Company has not paid cash dividends and does not anticipate paying cash dividends in the foreseeable future. Copyright © 2012 Leap Wireless International, Inc. All rights reserved. Leap is a registered trademark and the Leap logo design is a trademark of Leap Wireless International, Inc. Cricket, the Cricket "K" and Muve Music are registered trademarks of Cricket Communications, Inc. All related Cricket product or service names, design marks and slogans are the trademarks and service marks of Cricket Communications, Inc. All other trademarks and service marks are the property of their respective owners.

USE OF NON-GAAP AND OTHER FINANCIAL MEASURES & FORWARD-LOOKING STATEMENTS

Use of Non-GAAP and Other Financial Measures
This annual report includes financial information prepared in accordance with accounting principles generally accepted in the United States, or GAAP, as well as other financial measures referred to as non-GAAP. These non-GAAP financial measures should be considered in addition to, but not as substitutes for, the most comparable GAAP measures. For definitions of such terms and reconciliations to the most comparable GAAP measures, please see the information under the heading "Reconciliation of Non-GAAP Financial Measures" in the Annual Report on Form 10-K or under the heading "Financial Reports-Non-GAAP Financial Measures" in the Investor Relations section of the Leap Wireless corporate website.

Forward-looking Statements
This annual report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect 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 about planned product and service plan developments, competitiveness, and expected financial and operational performance, and are generally identified with words such as "believe," "expect," "intend," "plan," "could," "may" and similar expressions. Actual events or results can differ materially from those expressed or implied. Please refer to the information set forth under the captions "Risk Factors" and "Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2011 and other reports and documents that we file from time to time with the Securities and Exchange Commission for some of the factors that may cause actual results to differ materially from the forward-looking statements. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to update any forward-looking statement.

Grow

We are growing on a national scale.

Our 2011 performance shows that we have the right devices, the right service plans and the right network in place. We also made significant progress on a growth plan to increase our penetration and scale nationwide.

We grew our distribution with both Cricket-branded locations and national retail partners. We enhanced our device lineup, improved customer awareness and expanded Muve Music nationwide. We also implemented a new billing platform, completing the last in a series of major back-office transitions to enhance our service and support systems.

Overall, we laid the foundation for further growth. Our operational and financial performance shows we continue to advance our competitive position as we expand nationwide.

In a year of solid execution, we implemented initiatives designed to drive further growth, penetration and ultimately, stockholder value.
  • National Expansion Growing in and out of our footprint

    National expansion

    Last year we began to reap the benefits of our nationwide wholesale agreement with Sprint. In the near term, our national coverage enabled our major expansion in national retail, backed by a national advertising campaign. That, in turn, gave us key advantages in both existing and new markets -- from preferential shelf space to the marketing muscle of our retail partners.

    Meanwhile, our growing volumes let us negotiate better pricing on everything from devices to packaging, giving us cost efficiencies and opening doors to partner with leading vendors.

    Longer term, our wholesale agreement positions us for continued growth as a national carrier – both in and out of our footprint. Going forward, we are positioned to attract customers outside our footprint without the considerable capital expense of buying spectrum and building networks. By keeping our capital costs low and expanding our distribution cost effectively, we plan to bring Cricket's value-rich products and services to even more customers across the country.

    Growing in and out of our footprint

    Our wholesale agreements give us national voice and 3G data coverage and a wide range of strategic benefits, both over the near and long term. It has allowed us to expand our distribution in the highly productive national retail channel, while building and leveraging a nationwide brand. It gives us efficiencies of scale, with more purchasing power and better access to best-selling and exclusive devices. It lets us manage our capital efficiently, giving us the flexibility to offload 3G and voice traffic as needed in existing markets to facilitate our transition to 4G LTE technology. Because coverage provided outside of Cricket's footprint requires almost no capital investment, it gives us speed to market – allowing us to enter potential new markets without significant upfront capital expenditures.

    Coverage Map
  • Fast Connections Sourcing competitive 4G devices

    Fast connections

    Our owned and operated 3G data networks give us a distinct competitive advantage over other prepaid providers and a strategic path for growth. Last year we continued to reap the rewards of our infrastructure investment, which supported strong smartphone adoption, the demand for high-speed data services and the growing popularity of our Muve Music service.

    Today we continue to ride the current 3G wave. At the same time, we have begun a multi-year transition to 4G technology, which delivers speeds up to 10 times faster than 3G. In December 2011 we launched our first LTE network in Tucson, Arizona. Through a prudent roll out designed to minimize capital expenditures, we plan to deploy 4G networks covering up to 25 million potential customers (POPs) in 2012, representing more than a quarter of our current network footprint. Over the next two to three years, we expect to deploy LTE technology to about two-thirds of our network footprint.

    Cricket 4G LTE

    Sourcing competitive 4G devices

    The Huawei Boltz is Cricket's first 4G LTE modem for our mobile broadband customers. Cricket's LTE device roadmap is expected to grow steadily from modems to smartphones and ultimately to other devices such as tablets, as they become available from vendors at more affordable price points over time.

    4G Devices
  • Stronger Position Improving our performance

    Stronger position

    In 2011, strong results gave us a stronger position. We capitalized on new opportunities to increase our penetration – by growing our retail presence, enhancing our lineup of smart devices, broadening our message to value-seeking consumers, and expanding our differentiated Muve Music service nationwide.

    Year over year, we increased net additions by 67 percent, lowered churn and improved ARPU by nearly $4, an industry-leading accomplishment. At the same time we significantly grew our service revenues and cash flow, while aggressively managing our balance sheet for the future. Thanks to our strong cost management and cash generation, we ended 2011 with approximately $750 million in unrestricted cash and short-term investments. In addition, we and our Savary Island venture entered into spectrum transactions with Verizon that we expect to increase our bandwidth in a key market – Chicago – while adding more than $100 million in cash to our balance sheet.

    Stronger Position

    Improving our performance

    Driven by new customer growth, the migration to smart devices and our industry-leading improvement in ARPU, we generated service revenues of $2.8 billion in 2011, up 14 percent year over year. We achieved adjusted operating income before debt and amortization (adjusted OIBDA) of $562.6 million for the year, up 7.1 percent from 2010. In addition, we generated an operating loss of $25.4 million.

    Improving Performance

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USE OF NON-GAAP AND OTHER FINANCIAL MEASURES
This annual report includes financial information prepared in accordance with accounting principles generally accepted in the United States, or GAAP, as well as other financial measures referred to as non-GAAP. These non-GAAP financial measures should be considered in addition to, but not as substitutes for, the most comparable GAAP measures. For definitions of such terms and reconciliations to the most comparable GAAP measures, please see the information under the heading "Reconciliation of Non-GAAP Financial Measures" in the Annual Report on Form 10-K or under the heading "Financial Reports-Non-GAAP Financial Measures" in the Investor Relations section of the Leap Wireless corporate website.

FORWARD-LOOKING STATEMENTS
This annual report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect 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 about planned product and service plan developments, competitiveness, and expected financial and operational performance, and are generally identified with words such as "believe," "expect," "intend," "plan," "could," "may" and similar expressions. Actual events or results can differ materially from those expressed or implied. Please refer to the information set forth under the captions "Risk Factors" and "Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2011 and other reports and documents that we file from time to time with the Securities and Exchange Commission for some of the factors that may cause actual results to differ materially from the forward-looking statements. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to update any forward-looking statement.