The clock is ticking away for Leap Wireless International Inc. as it awaits Federal Communications
Commission approval to bid in the reauction of C-block personal communications services spectrum.
Five entities
have filed comments or petitions to deny with the FCC protesting Leap’s desire to qualify its wholly owned subsidiary,
Cricket Holdings Inc., as a designated entity, which allows small businesses preferential pricing and payment terms
when acquiring PCS frequency in the C and F blocks.
Applications for the March 23 reauction of C-, D-, E- and F-
block spectrum are due Feb. 12, and the FCC may not make a ruling on Leap’s request by then. Leap is expected to
make a large showing at the auction.
The U.S. Small Business Administration, Western Wireless Corp., Cook Inlet
Region Inc., DigiPH PCS Inc. and Carolina PCS I L.P. filed with the FCC separate comments and petitions to deny
Leap’s request for DE status, which was filed in October.
The companies claim the wireless company, which spun
off from cdmaOne manufacturer Qualcomm Inc. in September, remains too closely tied with Qualcomm to qualify as a
very small business. Some of Leap’s potential competitors claim the possibility of a reauction at firesale prices may
have created an incentive for Qualcomm and other large entities to circumvent DE rules in an attempt to purchase
spectrum at bargain prices.
Leap announced last week intentions to purchase all of the assets of Chase
Telecommunications Holdings Inc., a C-block licensee in Tennessee which launched Code Division Multiple Access
mobile service in Chattanooga in September. Leap already holds 7.2 percent of ChaseTel. In October, Leap announced
plans to purchase all F-block licenses owned by AirGate Wireless L.L.C., which opted to become a Sprint PCS
affiliate. Those licenses cover Charlotte, Greensboro and Hickory, N.C.
The carrier plans to offer a combined
wireless local loop limited mobility service targeted at the mass consumer market using cdmaOne equipment from
Qualcomm.
Some of the commenting parties argued Leap essentially does not qualify as a DE since Qualcomm
holds a warrant to acquire more than 15 percent of Leap’s issued and outstanding common stock anytime within the
next 10 years. DE rules place a 15-percent equity cap on publicly traded companies.
In its response filed with the
FCC last week, Leap said Qualcomm’s potential ownership in the company may never be realized and an express
savings clause included in the warrant stops Qualcomm from ever exercising its warrant if it violates FCC
rules.
The SBA requested the FCC deny Leap’s status as a designated entity, but did not object to the transfer of
licenses from AirGate to Leap. SBA argued that based on the structure of Leap and its contractual relationships with
Qualcomm, no clear break between the companies exist. Other companies expressed concern over contractual
relationships between Leap and Qualcomm as well.
“There are several continuing relationships between
Leap/Cricket and Qualcomm that give rise to the conclusion that the two companies are indeed affiliated, and that
Leap/Cricket is merely Qualcomm’s alter ego,” commented Carolina PCS.
However, Leap argued that certain
credit and equipment purchase agreements pointed out by the commenting parties contain terms commonplace within
the wireless industry that already have been approved by the commission.
The commission previously approved a
relationship between Qualcomm and NextWave Telecom Inc., another designated entity, according to Leap.
