Leap completes Denali acquisition

Leap Wireless International Inc.’s subsidiary Cricket Communications Inc. completed its acquisition of Denali Spectrum L.L.C., providing the carrier with “ownership and control” of Denali’s Chicago and southern Wisconsin markets.
Leap (LEAP) had previously announced plans to acquire the 17.5% controlling interest in Denali it did not previously own from Denali Spectrum Manager L.L.C. The acquisition included approximately $53 in cash; a five-year, $45.5 million promissory note and Cricket agreeing to pay approximately $11 million to the Federal Communications Commission in “unjust enrichment payments.”
Just prior to the closing of the acquisition, Denali also completed the contribution of its wireless spectrum outside of its Chicago and Wisconsin markets to Savary Island Wireless L.L.C. in exchange for an 85% non-controlling interest in Savary. The remaining 15% and controlling interest in Savary is in the hands of Ring Island Wireless L.L.C., which contributed an undisclosed amount of cash to the venture.
Leap noted that Savary obtained the licenses as a “very small business” designated entity under FCC rules and has assumed $211.6 million of the outstanding senior secured debt owed by Denali to Cricket. Further tying Savary to Leap, Savary also entered into a management services agreement with Cricket.
Leap backed Denali in the FCC’s 2006 AWS auction in which it won a single Great Lakes regional license covering about 58 million people for $365 million, an amount that was reduced to $274 million after factoring in Denali’s DE credits. The AWS licenses included build out requirements that called for license winners to make a showing of “substantial service” in markets acquired within 15 years of obtaining the licenses.
Leap itself won 99 licenses in the FCC auction covering 121.2 million pops at the cost of $710 million.Leap noted in a government filing after the auction that some of the spectrum it acquired were in areas it did not have any interest in building out and that it would possibly look to partner with other companies to build out those markets or possibly sell that spectrum.