*Pages 1--5 from Microsoft Word - 34565* PUBLIC NOTICE FEDERAL COMMUNICATIONS COMMISSION 445 TWELFTH STREET, S. W. WASHINGTON, D. C. 20554 DA 03- 4099 News media information 202/ 418- 0500 Fax- On- Demand 202/ 418- 2830 Internet: http:// www. fcc. gov ftp. fcc. gov Released: December 24, 2003 LEAP WIRELESS INTERNATIONAL, INC., DEBTOR- IN- POSSESSION, SEEKS FCC CONSENT FOR THE ASSIGNMENT OF BROADBAND PERSONAL COMMUNICATIONS SERVICES LICENSES TO LEAP WIRELESS INTERNATIONAL, INC. WT Docket No. 03- 263 PLEADING CYCLE ESTABLISHED Petitions to Deny Due: January 23, 2004 Oppositions Due: February 2, 2004 Replies Due: February 9, 2004 Leap Wireless International, Inc., Debtor- in- Possession, and certain of its subsidiaries, as debtors in possession (collectively, “Leap DIP”), 1 have filed a series of applications pursuant to Section 310( d) of the Communications Act of 1934, as amended. 2 In these applications, the parties seek Commission consent to assign broadband Personal Communications Services (“ PCS”) authorizations from Leap DIP to the reorganized Leap Wireless International, Inc. (“ Reorganized Leap”) and certain of its subsidiaries (“ Reorganized Subsidiaries”). I. THE TRANSACTION Leap is one of the original Entrepreneur’s Block PCS providers. Leap provides mobile telephony service, marketed under the Cricket brand name, to approximately 1.5 million customers. On April 13, 2003, Leap Wireless International, Inc. (“ Leap”) and certain subsidiaries filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of California in San Diego, California (“ Bankruptcy Court”). 3 In accordance with the Commission’s rules, Leap filed applications notifying the Commission of the involuntary assignment and transfer of control of its licenses to Leap DIP. 4 The Bankruptcy Court has confirmed the plan of reorganization pursuant to which Leap DIP will be reorganized and emerge from bankruptcy. 1 For a list of the Leap DIP subsidiaries involved in this transaction, see infra Part III. 2 47 U. S. C. § 310( d). 3 Leap Wireless International, Inc., Cricket Communications, Inc., et al., Chap. 11 Case nos. 03- 3470, 03- 3535 (Bankr. S. D. Ca. 2003). 4 See ULS File Nos. 0001288952, 0001288949, 0001288938, 0001288919, 0001288915, 0001288909, 0001288894, 0001288888, 0001288884, 0001288873, 0001288866, 0001288853, 0001288855, 0001288849, 1 2 Upon its emergence from bankruptcy, all authorized and issued shares of Leap and Leap subsidiary common stock will be canceled, and Reorganized Leap and the Reorganized Subsidiaries will authorize new common stock. Post- reorganization, Reorganized Leap will indirectly own all of the issued and outstanding shares each Reorganized Subsidiary. 5 Reorganized Leap’s common stock will be distributed to Leap’s creditors – 96.5 percent of Reorganized Leap’s shares of common stock will be issued to certain Leap secured debt holders and the remaining 3.5 percent of issued and outstanding shares of Reorganized Leap’s common stock will be transferred to a trust for the benefit of Leap’s general unsecured creditors (“ Creditor Trust”). Additional Leap assets, including some Commission licenses, 6 also will be transferred to the Creditor Trust. The common stock of Reorganized Leap, which will be a publicly- traded company, will be widely dispersed among over 100 investors. The parties state that only three entities will hold more than 10 percent of the outstanding equity: Mark H. Rachesky, The Capital Group Companies, and Highland Capital. The parties allege that no shareholder or group of shareholders will be able to exercise control over Reorganized Leap’s operations or determine the composition of the board of directors. The parties thus conclude that the officers and board of directors will be vested with actual control of Reorganized Leap. II. SECTION 310( d) APPLICATIONS The following applications seek consent for the assignment of PCS licenses that were granted pursuant to Part 24 of the Commission’s rules. The applications have been assigned the file numbers indicated below: File Number Licensee Lead Call Sign 0001546977 7 Leap Wireless International, Inc., Debtor- in- Possession KNLF520 0001527351 Cricket Licensee I, Inc., Debtor- in- Possession KNLF488 0001527457 Cricket Licensee II, Inc., Debtor- in- Possession KNLF898 0001527482 Cricket Licensee IV, Inc., Debtor- in- Possession KNLG970 0001527498 Cricket Licensee XI, Inc., Debtor- in- Possession WPOK587 0001527512 Cricket Licensee XIV, Inc., Debtor- in- Possession KNLG280 0001527547 Cricket Licensee XV, Inc., Debtor- in- Possession KNLF459 0001527566 Cricket Licensee XVI, Inc., Debtor- in- Possession KNLF469 0001527585 Cricket Licensee XVII, Inc., Debtor- in- Possession KNLF467 0001527595 Cricket Licensee XVIII, Inc., Debtor- in- Possession KNLF466 0001527533 Cricket Licensee XIX, Inc., Debtor- in- Possession KNLF460 0001527604 Cricket Licensee XX, Inc., Debtor- in- Possession KNLG684 0001288845, 0001288841, 0001288793, 0001288834, 0001469522, 0001469511, 0001469533. 5 For further details regarding the transaction, see ULS File No. 0001546977. 6 Call Signs KNLG967 (BTA037 – Bemidji, MN), KNLG968 (BTA054 – Brainerd, MN), KNLG972 (BTA132 – Escaraba, MI), WPOK596 (BTA366 – Pueblo, CO), WPOK599 (BTA395 – Salem, OR), WPOK576 (BTA053 – Bozeman, MT), WPOK577 (BTA069 – Casper, WY), WPOK588 (BTA250 – Lewiston, ID); WPOK597 (BTA371 – Redding, CA). These authorizations are not included in the applications that are the subject of this public notice. 7 ULS File No. 0001546977 has been designated as the lead application, and all pleadings and other submissions filed in this matter that pertain generally to the transaction and not to a particular application will be available through this file number. 2 3 0001536587 Cricket Licensee (Albany), Inc. – fka Zuma/ Albany, WPOJ838 Debtor- in- Possession 0001536565 Cricket Licensee (Columbus), Inc. – fka Zuma/ Columbus, WPOJ839 Debtor- in- Possession 0001526967 Cricket Licensee (Denver), Inc., Debtor- in- Possession KNLG213 0001527061 Cricket Licensee (Lakeland), Inc., Debtor- in- Possession KNLF741 0001536572 Cricket Licensee (Macon), Inc. – fka Zuma/ Macon, WPOJ841 Debtor- in- Possession 0001527176 Cricket Licensee (North Carolina), Inc., Debtor- in- Possession KNLF653 0001527268 Cricket Licensee (Pittsburgh), Inc., Debtor- in- Possession KNLH427 0001527331 Cricket Licensee (Reauction), Inc., Debtor- in- Possession KNLF487 III. DESIGNATED ENTITY AND ENTREPRENEURIAL ELIGIBILITY ISSUES AND WAIVER AND CONFIDENTIALITY REQUESTS The proposed transaction includes the assignment of C and F Block PCS licenses to Reorganized Leap. The parties state that the licenses to be assigned include closed bidding and entrepreneurial licenses that are subject to transfer restrictions. 8 Additionally, the parties are assigning some licenses that were issued with bidding credits and subject to installment payment financing. Leap claims that its total assets and gross revenues allow it to continue to hold its existing portfolio of restricted C and F block PCS licenses and avoid installment payment and bidding credit unjust enrichment, because its assets and revenues are a product of “natural growth” and are excluded from the caps on such assets and revenues. 9 The parties acknowledge that Reorganized Leap exceeds the $125 million and the $500 million caps on assets and gross revenues, respectively. 10 The parties allege, however, that these assets and revenues are the product of operation, business development or expanding services, or normal projected growth excludable under section 24.709( a)( 2) of the Commission’s rules. 11 The parties claim that Reorganized Leap’s officers and board of directors will have actual control and will be the identifiable controlling interests of Reorganized Leap. 12 The parties acknowledge that the Directors of Reorganized Leap have attributable interests in business entities that could disqualify Reorganized Leap from its entrepreneur and designated entity status. The parties request that the Commission grant a limited waiver of its attribution rules to allow Reorganized Leap to exclude the assets and revenues of the business entities controlled by the members of Reorganized Leap’s Board of 8 The Commission’s Rules state that “[ n] o assignment or transfer of control of a license for frequency Block C or frequency Block F won in closed bidding pursuant to the eligibility requirements of § 24.709 will be granted,” except when, among other things, “[ t] he application for assignment . . . if filed after five years from the date of the initial license grant,” 47 C. F. R. § 24.839( a)( 1), “[ t] he propsed assignee . . . meets the eligibility criteria of or it hold other licenses for frequency blocks C and F,” id. § 24.839( a)( 2), and “[ t] he application for assignment or transfer of control is filed on or after the date the licensee has notified the Commission pursuant to § 24.203( c) that its five- year construction requirement has been satisfied.” id. § 24.839( a)( 6). The parties state that some of the C and F block licenses implicated in the assignment applications are within five years of the initial grant and the five-year build- out notifications have been filed for some, but not all, of these licenses. 9 47 C. F. R. § 24.709( a)( 2). 10 Id. § 24.709( a)( 1). 11 Id. § 24.709( a)( 2); Implementation of Section 309( j) of the Communications Act – Competitive Bidding, Fifth Memorandum Opinion and Order, 10 FCC Rcd. 403, 419- 20 (1994). 12 47 C. F. R §§ 1.2110( b), 24.709( b)( 2). 3