Leap Wireless International Inc. continued its climb back to financial solvency. The San Diego-based company said its bankruptcy court approved a disclosure statement Leap filed in connection with its reorganization plan.
Leap said the court approval, which was granted by the U.S. Bankruptcy Court for the Southern District of California, will allow it to begin soliciting votes from its creditors to confirm Leap’s reorganization plan and move one step closer to emerging from the Chapter 11 bankruptcy protection it filed for last April.
Leap’s management said last week that they are confident the company’s creditors would approve the reorganization plan during a confirmation hearing scheduled for the week of Sept. 29.
“The court’s approval of our disclosure statement and setting of the confirmation hearing date underscore the progress we have made in this process,” said Harvey White, chairman and chief executive officer of Leap. “The support we have received from our creditor committees for our proposed plan of reorganization gives us the confidence in an expedient conclusion to the company’s restructuring.”
Doug Hutcheson, Leap’s vice president and chief financial officer, added that Leap has trimmed its debt load from $2.5 billion to $300 million since filing for bankruptcy protection.
While Leap said it expects to emerge from bankruptcy a leaner and stronger company, analysts continue to question the carrier’s ability to compete in the wireless market, which has seen the introduction of similar unlimited local calling plans that epitomize Leap and its inability to provide roaming service outside of its disparate markets.
Hutcheson explained that Leap is still actively signing up customers in its markets, and the carrier also owns a number of spectrum licenses in markets attractive for possible expansion or which could be sold to generate additional cash flow.
Leap’s positive financial news was tempered by an announcement that its plans to shutter its Hickory, N.C., network by the end of September, leaving the carrier one short of its often-talked-about 40-market plan. The carrier said the decision to discontinue its Cricket offering in its Hickory market, which was launched in June 2001, was based on a performance evaluation that found the market underperforming compared with Leap’s other operations.
Hutcheson noted the Hickory market was one of Leap’s smallest markets and served one of the company’s smallest customer bases, adding that the extended calling area feature offered in connection with the nearby Charlotte market has also generated little interest.
While Leap said there would be no reduction in force as a result of the action, Hutcheson admitted that the carrier would close one Cricket store in Hickory. The carrier also said it plans to re-deploy network infrastructure from its Hickory market to its other markets but would continue to meet Federal Communications Commission buildout requirements in Hickory until it decides what to do with the spectrum.
“The decision to close this market was not easy,” said Susan Swenson, president and chief operating officer of Leap. “We are confident, however, that this move is a necessary step for the long-term health of the overall business.”
Hutcheson added that Leap recently sent out letters to its customers in Hickory informing them of the impending closure and is working with those customers to transition them to a different wireless carrier. Leap also said Hickory customers would receive free Cricket service and features until the network is turned off.
On the same day Leap announced the bankruptcy court approval, rural telecommunications provider Ntelos Inc., which filed for Chapter 11-bankruptcy protection March 4, reported its reorganization plan was approved by its debtholders. The company filed the final voting report with the U.S. Bankruptcy Court for the Eastern District of Virginia, which scheduled a confirmation hearing for Aug. 11.
