Financial Results and Operating Metrics ⁽¹⁾

(Unaudited; in millions, except for customer data, operating metrics and per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2012

2011

Change

2012

2011

Change

Service revenues

$

751.3

$

704.1

6.7%

$

1,525.3

$

1,382.5

10.3%

Total revenues

$

786.8

$

760.5

3.5%

$

1,612.4

$

1,540.5

4.7%

Operating income (loss)

$

31.6

$

12.3

156.9%

$

15.8

$

(5.8)

372.4%

Adjusted OIBDA

$

190.8

$

160.7

18.8%

$

321.3

$

273.2

17.6%

Adjusted OIBDA as a percentage of service revenues

25%

23%

—

21%

20%

—

Net loss

$

(46.0)

$

(58.4)

—

$

(140.3)

$

(144.9)

—

Net loss attributable to common stockholders

$

(41.6)

$

(65.2)

—

$

(140.0)

$

(161.4)

—

Diluted net loss per share attributable to common stockholders

$

(0.54)

$

(0.85)

—

$

(1.82)

$

(2.11)

—

Gross customer additions⁽²⁾

492,720

622,863

(20.9)%

1,352,267

1,475,027

(8.3)%

Net customer additions (loss)

(289,270)

(103,140)

180.5%

(31,210)

227,434

(113.7)%

End of period customers

5,902,803

5,745,613

2.7%

5,902,803

5,745,613

2.7%

Weighted-average customers

5,992,047

5,766,438

3.9%

6,008,737

5,708,394

5.3%

Churn

4.4%

4.2%

—

3.8%

3.6%

—

End of period covered POPS

~95.4

~95.3

—

~95.4

~95.3

—

Average revenue per user (ARPU)

$

41.64

$

40.15

3.7%

$

42.12

$

39.75

6.0%

Cash cost per user (CCU)

$

22.91

$

21.83

4.9%

$

23.73

$

22.43

5.8%

Cost per gross addition (CPGA)

$

296

$

251

17.9%

$

253

$

217

16.6%

Cash purchases of property and equipment

$

119.1

$

93.3

27.7%

$

265.4

$

186.2

42.5%

Unrestricted cash, cash equivalents and short-term investments

$

524.4

$

724.0

(27.6)%

$

524.4

$

724.0

(27.6)%

(1)

For a reconciliation of non-GAAP financial measures, please refer to the section entitled "Definition of Terms and Reconciliation of Non-GAAP Financial Measures" included at the end of this release.  Information relating to population and potential customers (POPs) is based on population estimates provided by Claritas Inc. for the relevant year.

(2)

The Company recognizes a gross customer addition for each Cricket Wireless, Cricket Broadband and Cricket PAYGo™ line of service activated by a customer.

LEAP WIRELESS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS ⁽¹⁾

(In thousands, except share amounts)

June 30,

2012

December 31,

2011

Assets

(Unaudited)

Cash and cash equivalents

$

386,376

$

345,243

Short-term investments

138,002

405,801

Inventories

117,137

116,957

Deferred charges

56,516

57,979

Other current assets

147,173

134,457

Total current assets

845,204

1,060,437

Property and equipment, net

1,946,547

1,957,374

Wireless licenses

1,605,256

1,788,970

Assets held for sale

390,682

204,256

Goodwill

31,886

31,886

Intangible assets, net

32,288

41,477

Other assets

66,796

68,290

Total assets

$

4,918,659

$

5,152,690

Liabilities and Stockholders' Equity

Accounts payable and accrued liabilities

$

362,637

$

460,278

Current maturities of long-term debt

21,911

21,911

Other current liabilities

231,711

256,357

Total current liabilities

616,259

738,546

Long-term debt, net

3,202,472

3,198,749

Deferred tax liabilities

354,459

333,804

Other long-term liabilities

178,058

172,366

Total liabilities

4,351,248

4,443,465

Redeemable non-controlling interests

89,894

95,910

Stockholders' equity:

Preferred stock - authorized 10,000,000 shares, $.0001 par value; no shares issued and outstanding

—

—

Common stock - authorized 160,000,000 shares, $.0001 par value; 79,419,622 and 78,924,049 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

8

8

Additional paid-in capital

2,179,948

2,175,436

Accumulated deficit

(1,701,738)

(1,561,417)

Accumulated other comprehensive loss

(701)

(712)

Total stockholders' equity

477,517

613,315

Total liabilities and stockholders' equity

$

4,918,659

$

5,152,690

LEAP WIRELESS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ⁽¹⁾

(Unaudited and in thousands, except per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2012

2011

2012

2011

Revenues:

Service revenues

$

751,285

$

704,087

$

1,525,283

$

1,382,498

Equipment revenues

35,487

56,451

87,108

157,954

Total revenues

786,772

760,538

1,612,391

1,540,452

Operating expenses:

Cost of service (exclusive of items shown separately below)

256,555

244,870

517,866

480,815

Cost of equipment

171,673

182,677

419,520

412,472

Selling and marketing

77,247

87,161

172,801

197,013

General and administrative

94,892

92,079

184,591

187,488

Depreciation and amortization

154,483

136,137

301,026

262,811

Impairments and other charges

—

631

—

631

Total operating expenses

754,850

743,555

1,595,804

1,541,230

Loss on sale or disposal of assets, net

(333)

(4,646)

(801)

(4,995)

Operating income (loss)

31,589

12,337

15,786

(5,773)

Equity in net income (loss) of investees, net

(59)

1,010

134

2,189

Interest income

28

59

57

123

Interest expense

(66,983)

(61,923)

(134,025)

(120,742)

Other expense, net

—

(32)

—

(32)

Loss before income taxes

(35,425)

(48,549)

(118,048)

(124,235)

Income tax expense

(10,562)

(9,893)

(22,273)

(20,647)

Net loss

(45,987)

(58,442)

(140,321)

(144,882)

Accretion of redeemable non-controlling interests and distributions, net of tax

4,397

(6,769)

292

(16,540)

Net loss attributable to

common stockholders

$

(41,590)

$

(65,211)

$

(140,029)

$

(161,422)

Loss per share attributable to common stockholders:

Basic

$

(0.54)

$

(0.85)

$

(1.82)

$

(2.11)

Diluted

$

(0.54)

$

(0.85)

$

(1.82)

$

(2.11)

Shares used in per share calculations:

Basic

77,206

76,497

77,116

76,436

Diluted

77,206

76,497

77,116

76,436

Other comprehensive loss:

Net loss

$

(45,987)

$

(58,442)

$

(140,321)

$

(144,882)

Net unrealized holding gains on investments, net of tax

10

—

12

9

Comprehensive loss

$

(45,977)

$

(58,442)

$

(140,309)

$

(144,873)

LEAP WIRELESS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ⁽¹⁾

(Unaudited and in thousands)

Six Months Ended June 30,

2012

2011

Operating activities:

Net cash provided by operating activities

$

50,619

$

101,639

Investing activities:

Acquisition of a business

—

(850)

Purchases of property and equipment

(265,412)

(186,186)

Change in prepayments for purchases of

property and equipment

(1,940)

(2,953)

Purchases of wireless licenses and spectrum

clearing costs

(2,712)

(2,845)

Proceeds from sale of wireless licenses

and operating assets

1,420

468

Purchases of investments

(173,141)

(297,430)

Sales and maturities of investments

440,734

149,767

Change in restricted cash

(1,501)

(420)

Net cash used in investing activities

(2,552)

(340,449)

Financing activities:

Proceeds from issuance of long-term debt

—

396,772

Repayment of long-term debt

—

(15,089)

Payment of debt issuance costs

—

(6,680)

Proceeds from issuance of common stock, net

483

712

Proceeds from sale lease-back financing

—

23,891

Distributions made to joint venture partners

(5,230)

(2,268)

Other

(2,187)

(1,199)

Net cash provided by (used in) financing activities

(6,934)

396,139

Net increase in cash and cash equivalents

41,133

157,329

Cash and cash equivalents at beginning of period

345,243

350,790

Cash and cash equivalents at end of period

$

386,376

$

508,119

Supplementary disclosure of cash flow information:

Cash paid for interest

$

(126,747)

$

(102,328)

Cash paid for income taxes

$

(3,943)

$

(2,974)

Explanatory Notes to Financial Statements

(1)

The condensed consolidated financial statements and the tables of results and operating and financial metrics included at the beginning of this release include the operating results and financial position of Leap and its wholly-owned subsidiaries and consolidated joint ventures. The Company consolidates its non-controlling interest in Savary Island Wireless, LLC (Savary Island) in accordance with the authoritative guidance for the consolidation of variable interest entities because Savary Island is a variable interest entity and, among other things, the Company has entered into an agreement with Savary Island's other member which established a specified purchase price when it exercised its right to sell its membership interest to the Company. The Company consolidates STX Wireless, LLC in accordance with the authoritative guidance for consolidations based on the voting interest model. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

The following tables summarize operating data for the Company's consolidated operations for the three and six months ended June 30, 2012 and 2011 (unaudited; in thousands, except percentages):

Three Months Ended June 30,

Change from Prior Year

2012

% of 2012 Service Revenues

2011

% of 2011 Service Revenues

Dollars

Percent

Revenues:

Service revenues

$

751,285

$

704,087

$

47,198

6.7%

Equipment revenues

35,487

56,451

(20,964)

(37.1)%

Total revenues

786,772

760,538

26,234

3.4%

Operating expenses:

Cost of service

256,555

34.1%

244,870

34.8%

11,685

4.8%

Cost of equipment

171,673

22.9%

182,677

25.9%

(11,004)

(6.0)%

Selling and marketing

77,247

10.3%

87,161

12.4%

(9,914)

(11.4)%

General and administrative

94,892

12.6%

92,079

13.1%

2,813

3.1%

Depreciation and amortization

154,483

20.6%

136,137

19.3%

18,346

13.5%

Impairments and other charges

—

—%

631

0.1%

(631)

(100.0)%

Total operating expenses

754,850

100.5%

743,555

105.6%

11,295

1.5%

Loss on sale or disposal of assets, net

(333)

—%

(4,646)

(0.7)%

4,313

(92.8)%

Operating income

$

31,589

4.2%

$

12,337

1.8%

$

19,252

156.1%

Six Months Ended June 30,

Change from Prior Year

2012

% of 2012 Service Revenues

2011

% of 2011 Service Revenues

Dollars

Percent

Revenues:

Service revenues

$

1,525,283

$

1,382,498

$

142,785

10.3%

Equipment revenues

87,108

157,954

(70,846)

(44.9)%

Total revenues

1,612,391

1,540,452

71,939

4.7%

Operating expenses:

Cost of service

517,866

34.0%

480,815

34.8%

37,051

7.7%

Cost of equipment

419,520

27.5%

412,472

29.8%

7,048

1.7%

Selling and marketing

172,801

11.3%

197,013

14.3%

(24,212)

(12.3)%

General and administrative

184,591

12.1%

187,488

13.6%

(2,897)

(1.5)%

Depreciation and amortization

301,026

19.7%

262,811

19.0%

38,215

14.5%

Impairments and other charges

—

—%

631

—%

(631)

(100.0)%

Total operating expenses

1,595,804

104.6%

1,541,230

111.5%

54,574

3.5%

Loss on sale or disposal of assets, net

(801)

(0.1)%

(4,995)

(0.4)%

4,194

(84.0)%

Operating income (loss)

$

15,786

1.0%

$

(5,773)

(0.4)%

$

21,559

373.4%

Definition of Terms and Reconciliation of Non-GAAP Financial Measures

The Company utilizes certain financial measures that are widely used in the telecommunications industry and are not calculated based on GAAP. Certain of these financial measures are considered non-GAAP financial measures within the meaning of Item 10 of Regulation S-K promulgated by the SEC.

(1)

Churn, which measures customer turnover, is calculated as the net number of customers that disconnect from our service divided by the weighted-average number of customers divided by the number of months during the period being measured. Customers who do not pay the first bill they receive following initial activation are deducted from our gross customer additions in the month in which they are disconnected; as a result, these customers are not included in churn. Customers of our Cricket Wireless and Cricket Broadband service are generally disconnected from service approximately 30 days after failing to pay a monthly bill, and pay-in-advance customers who ask to terminate their service are disconnected when their paid service period ends. Cricket PAYGo customers generally have 60 days from the date they activated their account, were charged a daily or monthly access fee for service or last "topped-up" their account (whichever is later) to do so again, or they will have their account suspended for a subsequent 60-day period before being disconnected. Management uses churn to measure our retention of customers, to measure changes in customer retention over time, and to help evaluate how changes in our business affect customer retention. In addition, churn provides management with a useful measure to compare our customer turnover activity to that of other wireless communications providers. We believe investors use churn primarily as a tool to track changes in our customer retention over time and to compare our customer retention to that of other wireless communications providers. Other companies may calculate this measure differently.

(2)

ARPU is service revenues, less pass-through regulatory fees and telecommunications taxes, divided by the weighted-average number of customers, divided by the number of months during the period being measured. Management uses ARPU to identify average revenue per customer, to track changes in average customer revenues over time, to help evaluate how changes in our business, including changes in our service offerings, affect average revenue per customer, and to forecast future service revenue. In addition, ARPU provides management with a useful measure to compare our subscriber revenue to that of other wireless communications providers. Our customers are generally disconnected from service after a specified period following their failure to either pay a monthly bill or replenish, or "top-up," their account. Because our calculation of weighted-average number of customers includes customers who are not currently paying for service but who have not yet been disconnected from service because they have not paid their last bill or have not replenished their account, ARPU may appear lower during periods in which we have significant disconnect activity. We believe investors use ARPU primarily as a tool to track changes in our average revenue per customer and to compare our per customer service revenues to those of other wireless communications providers. Other companies may calculate this measure differently.

The following table reconciles total service revenues used in the calculation of ARPU to service revenues, which we consider to be the most directly comparable GAAP financial measure to ARPU (unaudited; in thousands, except weighted-average number of customers and ARPU):

Three Months Ended

June 30,

Six Months Ended

June 30,

2012

2011

2012

2011

Service revenues

$

751,285

$

704,087

$

1,525,283

$

1,382,498

Less pass-through

regulatory fees and

telecommunications

taxes

(2,678)

(9,455)

(6,815)

(20,914)

Total service revenues

used in the calculation

of ARPU

$

748,607

$

694,632

$

1,518,468

$

1,361,584

Weighted-average number

of customers

5,992,047

5,766,438

6,008,737

5,708,394

ARPU

$

41.64

$

40.15

$

42.12

$

39.75

(3)

CPGA is selling and marketing costs (excluding applicable share-based compensation expense included in selling and marketing expense), and equipment subsidy (generally defined as cost of equipment less equipment revenue), less the net loss on equipment transactions and third-party commissions unrelated to customer acquisition, divided by the total number of gross new customer additions during the period being measured. The net loss on equipment transactions unrelated to customer acquisition includes the revenues and costs associated with the sale of wireless devices to existing customers as well as costs associated with device replacements and repairs (other than warranty costs which are the responsibility of the device manufacturers). Commissions unrelated to customer acquisition are commissions paid to third parties for certain activities related to the continuing service of customers. We deduct customers who do not pay the first bill they receive following initial activation from our gross customer additions in the month in which they are disconnected, which tends to increase CPGA because we incur the costs associated with a new customer without receiving the benefit of a gross customer addition. Management uses CPGA to measure the efficiency of our customer acquisition efforts, to track changes in our average cost of acquiring new subscribers over time, and to help evaluate how changes in our sales and distribution strategies affect the cost-efficiency of our customer acquisition efforts. In addition, CPGA provides management with a useful measure to compare our per customer acquisition costs with those of other wireless communications providers. We believe investors use CPGA primarily as a tool to track changes in our average cost of acquiring new customers and to compare our per customer acquisition costs to those of other wireless communications providers. Other companies may calculate this measure differently.

The following table reconciles total costs used in the calculation of CPGA to selling and marketing expense, which we consider to be the most directly comparable GAAP financial measure to CPGA (unaudited; in thousands, except gross customer additions and CPGA):

Three Months Ended

June 30,

Six Months Ended

June 30,

2012

2011

2012

2011

Selling and

marketing expense

$

77,247

$

87,161

$

172,801

$

197,013

Less share-based

compensation expense

included in selling and

marketing expense

(616)

(261)

(639)

(308)

Plus cost of equipment

171,673

182,677

419,520

412,472

Less equipment revenue

(35,487)

(56,451)

(87,108)

(157,954)

Less net loss on equipment

transactions and third-party

commissions unrelated to

customer acquisition

(66,932)

(56,920)

(163,029)

(131,044)

Total costs used in the

calculation of CPGA

$

145,885

$

156,206

$

341,545

$

320,179

Gross customer additions

492,720

622,863

1,352,267

1,475,027

CPGA

$

296

$

251

$

253

$

217

(4)

CCU is cost of service and general and administrative costs (excluding applicable share-based compensation expense included in cost of service and general and administrative expense) plus net loss on equipment transactions and third-party commissions unrelated to customer acquisition (which includes the gain or loss on the sale of devices to existing customers, costs associated with device replacements and repairs (other than warranty costs which are the responsibility of the device manufacturers) and commissions paid to third parties for certain activities related to the continuing service of customers), less pass-through regulatory fees and telecommunications taxes, divided by the weighted-average number of customers, divided by the number of months during the period being measured. CCU does not include any depreciation and amortization expense. Management uses CCU as a tool to evaluate the non-selling cash expenses associated with ongoing business operations on a per customer basis, to track changes in these non-selling cash costs over time, and to help evaluate how changes in our business operations affect non-selling cash costs per customer. In addition, CCU provides management with a useful measure to compare our non-selling cash costs per customer with those of other wireless communications providers. We believe investors use CCU primarily as a tool to track changes in our non-selling cash costs over time and to compare our non-selling cash costs to those of other wireless communications providers. Other companies may calculate this measure differently.

The following table reconciles total costs used in the calculation of CCU to cost of service, which we consider to be the most directly comparable GAAP financial measure to CCU (unaudited; in thousands, except weighted-average number of customers and CCU):

Three Months Ended

June 30,

Six Months Ended

June 30,

2012

2011

2012

2011

Cost of service

$

256,555

$

244,870

$

517,866

$

480,815

Plus general and

administrative expense

94,892

92,079

184,591

187,488

Less share-based

compensation expense

included in cost of service

and general and administrative

expense

(3,813)

(6,685)

(3,096)

(10,217)

Plus net loss on equipment

transactions and third-party

commissions unrelated to

customer acquisition

66,932

56,920

163,029

131,044

Less pass-through regulatory

fees and telecommunications

taxes

(2,678)

(9,455)

(6,815)

(20,914)

Total costs used in the

calculation of CCU

$

411,888

$

377,729

$

855,575

$

768,216

Weighted-average number of customers

5,992,047

5,766,438

6,008,737

5,708,394

CCU

$

22.91

$

21.83

$

23.73

$

22.43

(5)

Adjusted OIBDA is a non-GAAP financial measure defined as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of: (gain)/loss on sale, exchange or disposal of assets, net; impairments and other charges; and share-based compensation expense. Adjusted OIBDA should not be construed as an alternative to operating income (loss) or net income (loss) as determined in accordance with GAAP, or as an alternative to cash flows from operating activities as determined in accordance with GAAP or as a measure of liquidity.

In a capital-intensive industry such as wireless telecommunications, management believes that adjusted OIBDA, and the associated percentage margin calculations, are meaningful measures of our operating performance. We use adjusted OIBDA as a supplemental performance measure because management believes it facilitates comparisons of our operating performance from period to period and comparisons of our operating performance to that of other companies by backing out potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the items described above for which additional adjustments were made. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Because adjusted OIBDA facilitates internal comparisons of our historical operating performance, management also uses this metric for business planning purposes and to measure our performance relative to that of our competitors. In addition, we believe that adjusted OIBDA and similar measures are widely used by investors, financial analysts and credit rating agencies as measures of our financial performance over time and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:

• it does not reflect capital expenditures;

• although it does not include depreciation and amortization, the assets being depreciated and amortized will often have  to be replaced in the future and adjusted OIBDA does not reflect cash requirements for such replacements;

• it does not reflect costs associated with share-based awards exchanged for employee services;

• it does not reflect the interest expense necessary to service interest or principal payments on indebtedness;

• it does not reflect expenses incurred for the payment of income taxes and other taxes; and

• other companies, including companies in our industry, may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Management understands these limitations and considers adjusted OIBDA as a financial performance measure that supplements but does not replace the information provided to management by our GAAP results.

The following table reconciles adjusted OIBDA to operating income (loss), which we consider to be the most directly comparable GAAP financial measure to adjusted OIBDA (unaudited; in thousands):

Three Months Ended

June 30,

Six Months Ended

June 30,

2012

2011

2012

2011

Operating income

 (loss)

$

31,589

$

12,337

$

15,786

$

(5,773)

Plus

depreciation and

amortization

154,483

136,137

301,026

262,811

OIBDA

$

186,072

$

148,474

$

316,812

$

257,038

Plus loss on

sale or disposal

of assets, net

333

4,646

801

4,995

Plus

impairments

and other

charges

—

631

—

631

Plus share-

based

compensation

expense

4,429

6,946

3,735

10,525

Adjusted OIBDA

$

190,834

$

160,697

$

321,348

$

273,189