##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C. 20549
     FORM 10-Q
     (Mark One)
  þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.For the quarterly period ended
    March 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.For the transition period from
    
    to
    .   Commission File Number 0-29752
   Leap Wireless International,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

33-0811062(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification No.)10307 Pacific Center Court,
    San Diego, CA

92121(Address of principal executive
    offices)

(Zip Code)   (858) 882-6000
 (Registrants telephone
    number, including area code)
  Not applicable
 (Former name, former address and
    former fiscal year, if changed since last reported)
  þ o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
  þ o




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##### 



LEAP
    WIRELESS INTERNATIONAL, INC.
  QUARTERLY REPORT ON
    FORM 10-Q
 For the Quarter Ended March 31, 2006
  TABLE OF CONTENTS
  Page 





 PART I  FINANCIAL
    INFORMATION 





 Item 1.


Financial
    Statements


1 





 Item 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


17 





 Item 3.


Quantitative and
    Qualitative Disclosures About Market Risk


27 





 Item 4.


Controls and
    Procedures


28 





 PART II  OTHER
    INFORMATION 





 Item 1.


Legal
    Proceedings


31 





 Item 1A.


Risk Factors


31 





 Item 2.


Unregistered Sales
    of Equity Securities and Use of Proceeds


43 





 Item 3.


Defaults Upon
    Senior Securities


43 





 Item 4.


Submission of
    Matters to a Vote of Security Holders


43 





 Item 5.


Other
    Information


43 





 Item 6.


Exhibits


44EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




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##### Table of Contents



PART I
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements.  LEAP
    WIRELESS INTERNATIONAL, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In thousands)
  March 31,


December 31,2006


2005(Unaudited)AssetsCash and cash equivalents

$
299,976


$
293,073Short-term investments


65,975



90,981Restricted cash, cash equivalents
    and short-term investments


10,687



13,759Inventories


39,710



37,320Other current assets


35,160



29,237Total current assets


451,508



464,370Property and equipment, net


642,858



621,946Wireless licenses


821,339



821,288Assets held for sale (Note 7)


15,135



15,145Goodwill


431,896



431,896Other intangible assets, net


105,123



113,554Other assets


35,651



38,119Total assets

$
2,503,510


$
2,506,318Liabilities and
    Stockholders EquityAccounts payable and accrued
    liabilities

$
136,460


$
167,770Current maturities of long-term
    debt (Note 4)


6,111



6,111Other current liabilities


53,266



49,627Total current liabilities


195,837



223,508Long-term debt (Note 4)


586,806



588,333Deferred tax liabilities


141,935



141,935Other long-term liabilities


37,920



36,424Total liabilities


962,498



990,200Minority interest


2,463



1,761Commitments and contingencies
    (Notes 4 and 8)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, 61,214,398 and 61,202,806 shares
    issued and outstanding at March 31, 2006 and
    December 31, 2005, respectively


6



6Additional paid-in capital


1,494,974



1,490,638Retained earnings


39,299



21,575Accumulated other comprehensive
    income


4,270



2,138Total stockholders equity


1,538,549



1,514,357Total liabilities and
    stockholders equity

$
2,503,510


$
2,506,318    1




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LEAP
    WIRELESS INTERNATIONAL, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (UNAUDITED)
    (In thousands, except per share data)
  Three Months EndedMarch 31,2006


2005Revenues:Service revenues

$
215,840


$
185,981Equipment revenues


50,848



42,389Total revenues


266,688



228,370Operating expenses:Cost of service (exclusive of
    items shown separately below)


(55,204
)


(50,197
)Cost of equipment


(58,886
)


(49,178
)Selling and marketing


(29,102
)


(22,995
)General and administrative


(49,582
)


(36,035
)Depreciation and amortization


(54,036
)


(48,104
)Total operating expenses


(246,810
)


(206,509
)Operating income


19,878



21,861Minority interest in loss of
    consolidated subsidiary


(75
)


Interest income


4,194



1,903Interest expense


(7,431
)


(9,123
)Other income (expense), net


535



(1,286
)Income before income taxes and
    cumulative effect of change in accounting principle


17,101



13,355Income taxes






(5,839
)Income before cumulative effect of
    change in accounting principle


17,101



7,516Cumulative effect of change in
    accounting principle (Note 2)


623



Net income

$
17,724


$
7,516Basic net income per share:Income before cumulative effect of
    change in accounting principle

$
0.28


$
0.13Cumulative effect of change in
    accounting principle


0.01



Basic net income per share

$
0.29


$
0.13Diluted net income per share:Income before cumulative effect of
    change in accounting principle

$
0.28


$
0.12Cumulative effect of change in
    accounting principle


0.01



Diluted net income per share

$
0.29


$
0.12Shares used in per share
    calculations:Basic


61,203



60,000Diluted


61,961



60,236    2




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LEAP
    WIRELESS INTERNATIONAL, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (UNAUDITED)
    (In thousands)
  Three Months EndedMarch 31,2006


2005Operating activities:Net cash provided by operating
    activities

$
38,290


$
23,462Investing activities:Purchases of property and equipment


(60,894
)


(22,720
)Change in prepayments for
    purchases of property and equipment


4,573



(1,767
)Purchases of and deposits for
    wireless licenses


(91
)


(212,095
)Purchases of investments


(46,865
)


(69,025
)Sales and maturities of investments


72,657



83,568Restricted cash, cash equivalents
    and short-term investments, net


(50
)


407Net cash used in investing
    activities


(30,670
)


(221,632
)Financing activities:Proceeds from long-term debt






500,000Repayments of long-term debt


(1,527
)


(413,979
)Minority interest


668



Issuance of stock


233



Payment of debt issuance costs


(91
)


(6,781
)Net cash provided by (used in)
    financing activities


(717
)


79,240Net increase (decrease) in cash
    and cash equivalents


6,903



(118,930
)Cash and cash equivalents at
    beginning of period


293,073



141,141Cash and cash equivalents at end
    of period

$
299,976


$
22,211Supplementary disclosure of cash
    flow information:Cash paid for interest

$
11,098


$
27,142Cash paid for income taxes

$
168


$
52    3




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LEAP
    WIRELESS INTERNATIONAL, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)
  Note 1.
    The
    Company and Nature of Business  ® tm
    Note 2.
    Basis of
    Presentation and Significant Accounting Policies  Basis
    of Presentation
  Form 10-Q Form 10-K
  No. 46-R,
  Revenues
    and Cost of Revenues
  month-to-month
 4




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and/or
    Costs
    and Expenses
    Cost of Service.
  Cost of Equipment. lower-of- cost-or-market
  Selling and Marketing.
  General and Administrative Expenses.
  Property
    and Equipment
   5




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DepreciableLifeNetwork equipment:Switches


10Switch power equipment


15Cell site equipment, and site
    acquisitions and improvements


7Towers


15Antennae


3Computer hardware and software


3-5Furniture, fixtures, retail and
    office equipment


3-7   construction-in-progress construction-in-progress, No. FAS 13-1, construction-in-progress.
    Impairment
    of Long-Lived Assets
    Wireless
    Licenses
    Goodwill
    and Other Intangible Assets
   6




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Impairment
    of Indefinite-Lived Intangible Assets
    Basic
    and Diluted Net Income Per Share
      Three Months EndedMarch 31,2006


2005Weighted average shares
    outstanding  basic net income per share


61,203



60,000Effect of dilutive securities:Non-qualified stock options


31



9Restricted stock awards


381



Warrants


346



227Adjusted weighted average shares
    outstanding  diluted net income per share


61,961



60,236     Comprehensive
    Income
    Three Months Ended
    March 31,2006


2005Net income

$
17,724


$
7,516Other comprehensive income:Net unrealized holding losses on
    investments, net of tax


(17
)


(46
)Unrealized gains on derivative
    instruments, net of tax


2,149



Comprehensive income

$
19,856


$
7,470  7




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##### Table of Contents



March 31,


December 31,2006


2005(Unaudited)Net unrealized holding losses on
    investments, net of tax

$
(25
)

$
(8
)Unrealized gains on derivative
    instruments, net of tax


4,295



2,146Accumulated other comprehensive
    income

$
4,270


$
2,138   Share-Based
    Payments
            Share-Based
    Compensation Information under SFAS 123R
   8




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Three Months EndedMarch 31, 2006Expected volatility


48
%Expected term (in years)


6.5Risk-free interest rate


4.53
%Expected dividend yield


         Three Months EndedMarch 31, 2006Cost of service

$
258Selling and marketing expenses


327General and administrative expenses


4,141Share-based compensation expense
    before tax


4,726Related income tax benefit


Share-based compensation expense,
    net of tax

$
4,726Net share-based compensation
    expense per share:Basic

$
0.08Diluted

$
0.08  9




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Three Months EndedMarch 31, 2006Share-based compensation expense
    before tax

$
2,446Related income tax benefit


Share-based compensation expense,
    net of tax

$
2,446Share-based compensation expense
    per share:Basic

$
0.04Diluted

$
0.04   Pro Forma
    Information under SFAS 123 for Periods Prior to Fiscal
    2006
    Three Months EndedMarch 31, 2005As reported net income

$
7,516Less pro forma compensation
    expense, net of tax


(1,526
)Pro forma net income

$
5,990Basic net income per share:As reported

$
0.13Pro forma

$
0.10Diluted net income per share:As reported

$
0.12Pro forma

$
0.10       Three Months EndedMarch 31, 2005Expected volatility


87
%Expected term (in years)


5.4Risk-free interest rate


3.48
%Expected dividend yield


  10




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##### Table of Contents



Note 3.
    Supplementary
    Balance Sheet Information (in thousands):  March 31,


December 31,2006


2005(Unaudited)Property and equipment, net:Network equipment

$
707,974


$
654,993Computer equipment and other


47,989



38,778Construction-in-progress


139,186



134,929895,149



828,700Accumulated depreciation


(252,291
)


(206,754
)$
642,858


$
621,946Accounts payable and accrued
    liabilities:Trade accounts payable

$
73,675


$
117,140Accrued payroll and related
    benefits


18,225



13,185Other accrued liabilities


44,560



37,445$
136,460


$
167,770Other current liabilities:Accrued property taxes

$
6,634


$
6,536Accrued sales, telecommunications
    and other taxes payable


12,379



15,745Deferred revenue


28,585



21,391Other


5,668



5,955$
53,266


$
49,627   Note 4.
    Long-Term
    Debt       11




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Note 5.
    Income
    Taxes         12




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Note 6.
    Employee
    Stock Benefit Plans  Stock
    Option Plan
      WeightedWeighted


Average


AggregateNumber of


Average


Remaining


IntrinsicShares


Exercise


Contractual


Value(in thousands)


Price


Term (years)


(in thousands)Outstanding at December 31,
    2005


1,892


$
28.94Options granted


237



40.50Options forfeited


(48
)


31.58Options exercised






Outstanding at March 31, 2006


2,081


$
30.20



9.21


$
27,491Exercisable at March 31, 2006


76


$
26.50



8.95


$
1,291     WeightedNumber of


AverageShares


Grant Date(in thousands)


Fair ValueNonvested at December 31, 2005


895


$
28.56Shares granted


35



40.53Shares forfeited


(23
)


28.75Shares vested






Nonvested at March 31, 2006


907


$
29.03      13




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Exercisable


TotalWeighted





WeightedAverage





AverageNumber of


Exercise


Number of


ExerciseExercise Prices

Shares


Price


Shares


PriceLess than $35.00


76


$
26.50



1,827


$
28.79Above $35.00










254



40.33Total outstanding


76


$
26.50



2,081


$
30.20   Employee
    Stock Purchase Plan
    Note 7.
    Significant
    Acquisitions and Dispositions    debtor-in-possession
    Note 8.
    Commitments
    and Contingencies   14




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and/or
  and/or
       15




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Year Ended
    December 31:Remainder of 2006

$
39,2392007


42,3002008


40,1192009


38,2482010


37,299Thereafter


169,362Total

$
366,567  16




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Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  As used in this report, the terms we,
    our, ours, and us refer to
    Leap Wireless International, Inc., a Delaware corporation, and
    its subsidiaries, unless the context suggests otherwise.
    Leap refers to Leap Wireless International, Inc.,
    and Cricket refers to Cricket Communications, Inc.
    Unless otherwise specified, information relating to population
    and potential customers, or POPs, is based on 2006 population
    estimates provided by Claritas Inc.
  Form 10-K
    
    our ability to attract and retain customers in an extremely
    competitive marketplace;
    changes in economic conditions that could adversely affect the
    market for wireless services;
    the impact of competitors initiatives;
    our ability to successfully implement product offerings and
    execute market expansion plans;
    our ability to comply with the covenants in our senior secured
    credit facilities;
    our ability to attract, motivate and retain an experienced
    workforce;
    failure of our network systems to perform according to
    expectations; and
    other factors detailed in
    Part II  Item 1A. Risk
    Factors below.    Overview
  Our Business. ® tm
 17




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tm
    
    In 2005 we acquired four wireless licenses in the FCCs
    Auction #58 covering 11.3 million POPs and ANB 1
    License acquired nine licenses covering 10.2 million POPs.
    In August 2005 we launched service in our newly acquired Fresno,
    California market to form a cluster with our existing Modesto
    and Visalia, California markets, which doubled our Central
    Valley network footprint to 2.4 million POPs.
    In November 2005 we entered into a series of agreements with CSM
    Wireless, LLC and the controlling members of WLPCS Management,
    LLC to obtain a 73.3% non-controlling equity interest in LCW
    Wireless, LLC, or LCW Wireless, which currently holds a license
    for the Portland, Oregon market. We have agreed to contribute
    our existing Eugene and Salem, Oregon markets to LCW Wireless to
    create a new Oregon market cluster covering 3.2 million
    POPs. Completion of this transaction is subject to customary
    closing conditions, including third party consents.
    In March 2006 a wholly owned subsidiary of Cricket, Cricket
    Licensee (Reauction), Inc., entered into an agreement with a
    debtor-in-possession
    for the purchase of 13 wireless licenses in North Carolina and
    South Carolina for an aggregate purchase price of
    $31.8 million. Completion of this transaction is subject to
    customary closing conditions, including FCC approval and the
    receipt of an FCC order agreeing to extend certain build-out
    requirements with respect to certain of the licenses.      Form 10-K
 18




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Results
    of Operations
  Financial
    Performance
    Three Months EndedMarch 31,2006


2005Revenues:Service revenues

$
215,840


$
185,981Equipment revenues


50,848



42,389Total revenues


266,688



228,370Operating expenses:Cost of service (exclusive of
    items shown separately below)


(55,204
)


(50,197
)Cost of equipment


(58,886
)


(49,178
)Selling and marketing


(29,102
)


(22,995
)General and administrative


(49,582
)


(36,035
)Depreciation and amortization


(54,036
)


(48,104
)Total operating expenses


(246,810
)


(206,509
)Operating income


19,878



21,861Minority interest in loss of
    consolidated subsidiary


(75
)


Interest income


4,194



1,903Interest expense


(7,431
)


(9,123
)Other income (expense), net


535



(1,286
)Income before income taxes and
    cumulative effect of change in accounting principle


17,101



13,355Income taxes






(5,839
)Income before cumulative effect of
    change in accounting principle


17,101



7,516Cumulative effect of change in
    accounting principle


623



Net income

$
17,724


$
7,516   Three
    Months Ended March 31, 2006 Compared to Three Months Ended
    March 31, 2005
       19




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20




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Performance
    Measures
  Regulation S-K
     21




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Three Months EndedMarch 31,2006


2005ARPU

$
41.87


$
39.03CPGA

$
130


$
128CCU

$
19.57


$
18.94Churn


3.3
%


3.3
%   Reconciliation
    of Non-GAAP Financial Measures
  Regulation S-K
 22




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##### Table of Contents



Three Months EndedMarch 31,2006


2005Selling and marketing expense

$
29,102


$
22,995Less stock-based compensation
    expense included in selling and marketing expense


(327
)


Plus cost of equipment


58,886



49,178Less equipment revenue


(50,848
)


(42,389
)Less net loss on equipment
    transactions unrelated to initial customer acquisition


(521
)


(4,012
)Total costs used in the
    calculation of CPGA

$
36,292


$
25,772Gross customer additions


278,370



201,467CPGA

$
130


$
128     Three Months EndedMarch 31,2006


2005Cost of service

$
55,204


$
50,197Plus general and administrative
    expense


49,582



36,035Less stock-based compensation
    expense included in cost of service and general and
    administrative expense


(4,399
)


Plus net loss on equipment
    transactions unrelated to initial customer acquisition


521



4,012Total costs used in the
    calculation of CCU

$
100,908


$
90,244Weighted-average number of
    customers


1,718,349



1,588,372CCU

$
19.57


$
18.94   Liquidity
    and Capital Resources
  Overview
   23




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and/or
  and/or and/or
     24




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Cash
    Flows
  pay-in-kind
    pay-in-kind
  Secured
    Credit Facility
       25




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##### Table of Contents



Capital
    Expenditures and Other Asset Acquisitions and
    Dispositions
  2006
    Capital Expenditures
    Auction #58
    Properties and Build-Out
  Form 10-K
  Significant
    Acquisitions and Dispositions
   26




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##### Table of Contents



Form 10-K
  debtor-in-possession
    Off-Balance
    Sheet Arrangements
    Our
    Plans for Auction #66
  and/or
    and/or
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk.  Interest Rate Risk:
 27




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Hedging Policy:
  Item 4.
    Controls
    and Procedures.  (a) Evaluation
    of Disclosure Controls and Procedures
    Rule 13a-15(b), Form 10-Q, Rule 13a-15(e)
  Form 10-Q Form 10-Q
    Insufficient Staffing in the Accounting, Financial Reporting
    and Tax Functions.
 28




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##### Table of Contents




    The Company hired a new vice president, chief accounting officer
    in May 2005. This individual is a certified public accountant
    with over 19 years of experience as an accounting
    professional, including over 14 years of public accounting
    experience with Pricewaterhouse Coopers, LLP. He possesses a
    strong background in technical accounting and the application of
    generally accepted accounting principles.
    The Company has hired a number of key accounting personnel since
    February 2005 that are appropriately qualified and experienced
    to identify and apply technical accounting literature, including
    several new directors and managers.  Form 10-Q,
    Errors in the Accounting for Income Taxes.
    
    The Company has initiated a search for a qualified full-time tax
    department leader and continues to make this a priority. The
    Company has been actively recruiting for this position for
    several months, but has experienced difficulty in finding
    qualified applicants. Nevertheless, the Company is striving to
    fill the position as soon as possible.
    As part of its 2005 annual income tax provision, the Company
    improved its internal control over income tax accounting to
    establish detailed procedures for the preparation and review of
    the income tax provision, including review by the Companys
    chief accounting officer.
    The Company used experienced qualified consultants to assist
    management in interpreting and applying income tax accounting
    literature and preparing the Companys income tax provision
    for the quarter ended March 31, 2006 and the year ended
    December 31, 2005, and will continue to use such
    consultants in the future to obtain access to as much income tax
    accounting expertise as it needs. The Company recognizes,
    however, that a full-time tax department leader with appropriate
    tax accounting expertise is important for the Company to
    maintain effective internal controls on an ongoing basis. 29




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
    As a result of the remediation initiatives described above, the
    Company identified certain of the errors that gave rise to the
    restatements of the consolidated financial statements for
    deferred income taxes.    (b) Changes
    in Internal Control over Financial Reporting
   30




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PART II
 OTHER INFORMATION
  Item 1.
    Legal
    Proceedings.  Form 10-K
      Item 1A.
    Risk
    Factors.  Risks
    Related to Our Business and Industry
  We Have
    Experienced Net Losses, and We May Not Be Profitable in the
    Future.
    We May
    Not Be Successful in Increasing Our Customer Base Which Would
    Negatively Affect Our Business Plans and Financial
    Outlook.
  quarter-by-quarter
  If We
    Experience High Rates of Customer Turnover, Our Ability to
    Become Profitable Will Decrease.
   31




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We Have
    Made Significant Investment, and Will Continue to Invest, in
    Joint Ventures, including ANB 1 and LCW Wireless, That We
    Do Not Control.
      We Face
    Increasing Competition Which Could Have a Material Adverse
    Effect on Demand for the Cricket Service.
  and/or
   32




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We Have
    Identified Material Weaknesses in Our Internal Control Over
    Financial Reporting, and Our Business and Stock Price May Be
    Adversely Affected If We Do Not Remediate All of These Material
    Weaknesses, or If We Have Other Material Weaknesses in Our
    Internal Control Over Financial Reporting.
      Our
    Internal Control Over Financial Reporting Was Not Effective as
    of December 31, 2005, and Our Business May Be Adversely
    Affected if We Are Not Able to Implement Effective Control Over
    Financial Reporting.
  Form 10-K
 33




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Our
    Primary Business Strategy May Not Succeed in the Long
    Term.
    We Expect
    to Incur Substantial Costs in Connection with the Build-Out of
    Our New Markets, and any Delays or Cost Increases in the
    Build-Out of Our New Markets Could Adversely Affect Our
    Business.
    If We Are
    Unable to Manage Our Planned Growth, Our Operations Could Be
    Adversely Impacted.
    Our
    Indebtedness Could Adversely Affect Our Financial
    Health.
   34




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
    make it more difficult for us to satisfy our debt obligations;
    increase our vulnerability to general adverse economic and
    industry conditions;
    impair our ability to obtain additional financing in the future
    for working capital needs, capital expenditures, building out
    our network, acquisitions and general corporate purposes;
    require us to dedicate a substantial portion of our cash flows
    from operations to the payment of principal and interest on our
    indebtedness, thereby reducing the availability of our cash
    flows to fund working capital needs, capital expenditures,
    acquisitions and other general corporate purposes;
    limit our flexibility in planning for, or reacting to, changes
    in our business and the industry in which we operate;
    place us at a disadvantage compared to our competitors that have
    less indebtedness; and
    expose us to higher interest expense in the event of increases
    in interest rates because our indebtedness under our secured
    credit facility bears interest at a variable rate. For a
    description of our secured credit facility, see
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Liquidity
    and Capital Resources  Secured Credit
    Facility.  Despite
    Current Indebtedness Levels, We May Incur Substantially More
    Indebtedness. This Could Further Increase the Risks Associated
    with Our Leverage.
    and/or and/or
     35




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To
    Service Our Indebtedness and Fund Our Working Capital and
    Capital Expenditures, We Will Require a Significant Amount of
    Cash. Our Ability to Generate Cash Depends on Many Factors
    Beyond Our Control.
    Covenants
    in Our Secured Credit Agreement and Other Credit Agreements or
    Indentures that we may Enter Into in the Future May Limit Our
    Ability to Operate Our Business.
    Form 10-K Form 10-Q Form 10-K
  Rises in
    Interest Rates Could Adversely Affect our Financial
    Condition.
    The
    Wireless Industry is Experiencing Rapid Technological Change,
    and We May Lose Customers if We Fail to Keep Up with These
    Changes.
   36




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##### Table of Contents



The Loss
    of Key Personnel and Difficulty Attracting and Retaining
    Qualified Personnel Could Harm Our Business.
      Risks
    Associated with Wireless Handsets Could Pose Product Liability,
    Health and Safety Risks That Could Adversely Affect Our
    Business.
         37




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We Rely
    Heavily on Third Parties to Provide Specialized Services; a
    Failure by Such Parties to Provide the Agreed Services Could
    Materially Adversely Affect Our Business, Results of Operations
    and Financial Condition.
    System
    Failures Could Result in Higher Churn, Reduced Revenue and
    Increased Costs, and Could Harm Our Reputation.
    We May
    Not be Successful in Protecting and Enforcing Our Intellectual
    Property Rights.
      We May Be
    Subject to Claims of Infringement Regarding Telecommunications
    Technologies That Are Protected by Patents and Other
    Intellectual Property Rights.
   38




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Regulation
    by Government Agencies May Increase Our Costs of Providing
    Service or Require Us to Change Our Services.
        If Call
    Volume under Our Cricket Flat Price Plans Exceeds Our
    Expectations, Our Costs of Providing Service Could Increase,
    Which Could Have a Material Adverse Effect on Our Competitive
    Position.
   39




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We May Be
    Unable to Acquire Additional Spectrum in the Future at a
    Reasonable Cost or on a Timely Basis.
    Our
    Wireless Licenses are Subject to Renewal and Potential
    Revocation in the Event that We Violate Applicable
    Laws.
  10-year
  Future
    Declines in the Fair Value of Our Wireless Licenses Could Result
    in Future Impairment Charges.
  Position 90-7, SOP 90-7,
    
    consolidation in the wireless industry allows or requires
    carriers to sell significant portions of their wireless spectrum
    holdings;
    a sudden large sale of spectrum by one or more wireless
    providers occurs; or
    market prices decline as a result of the sales prices in
    upcoming FCC auctions, including Auction #66.   40




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Declines
    in Our Operating Performance Could Ultimately Result in an
    Impairment of Our Indefinite-Lived Assets, Including Goodwill,
    or Our Long-Lived Assets, Including Property and
    Equipment.
  and/or and/or
  We May
    Incur Higher Than Anticipated Intercarrier Compensation
    Costs.
      Because
    Our Consolidated Financial Statements Reflect Fresh-Start
    Reporting Adjustments Made upon Our Emergence from Bankruptcy,
    Financial Information in Our Current and Future Financial
    Statements Will Not Be Comparable to Our Financial Information
    for Periods Prior to Our Emergence from Bankruptcy.
    If We
    Experience High Rates of Credit Card Subscription or Dealer
    Fraud, Our Ability to Become Profitable Will Decrease.
   41




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Risks
    Related to Ownership of Our Common Stock
  Our Stock
    Price May Be Volatile, and You May Lose All or Some of Your
    Investment.
    
    variations in our operating results;
    announcements of technological innovations, new services or
    service enhancements, strategic alliances or significant
    agreements by us or by our competitors;
    recruitment or departure of key personnel;
    changes in the estimates of our operating results or changes in
    recommendations by any securities analysts that elect to follow
    Leap common stock; and
    market conditions in our industry and the economy as a whole.  The
    16,860,077 Shares of Leap Common Stock Registered for
    Resale By Our Shelf Registration Statement on
    Form S-1 May
    Adversely Affect The Market Price of Leaps Common
    Stock.
  Form S-1,
  Your
    Ownership Interest in Leap Will Be Diluted Upon Issuance of
    Shares We Have Reserved for Future Issuances, and Future
    Issuances or Sales of Such Shares May Adversely Affect The
    Market Price of Leaps Common Stock.
    pro rata
   42




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##### Table of Contents



Form 10-K
  Our
    Directors and Affiliated Entities Have Substantial Influence
    over Our Affairs.
    Provisions
    in Our Amended and Restated Certificate of Incorporation and
    Bylaws or Delaware Law Might Discourage, Delay or Prevent a
    Change in Control of Our Company or Changes in Our Management
    and, Therefore, Depress The Trading Price of Our Common
    Stock.
    
    require super-majority voting to amend some provisions in our
    amended and restated certificate of incorporation and bylaws;
    authorize the issuance of blank check preferred
    stock that our board of directors could issue to increase the
    number of outstanding shares to discourage a takeover attempt;
    prohibit stockholder action by written consent, and require that
    all stockholder actions be taken at a meeting of our
    stockholders;
    provide that the board of directors is expressly authorized to
    make, alter or repeal our bylaws; and
    establish advance notice requirements for nominations for
    elections to our board or for proposing matters that can be
    acted upon by stockholders at stockholder meetings.    Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds.    Item 3.
    Defaults
    Upon Senior Securities.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.    Item 5.
    Other
    Information.   43




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##### Table of Contents



Item 6.
    Exhibits.  Index to
    Exhibits:
  ExhibitNumber

Description of
    Exhibit10.3.9(1)+

Amendment No. 9 to Amended
    and Restated System Equipment Purchase Agreement, effective as
    of January 11, 2006, between Cricket Communications, Inc.
    and Lucent Technologies, Inc.10.8.4(1)

Amendment No. 4 dated
    January 9, 2006, to the Credit Agreement, dated as of
    December 22, 2004, among Cricket Communications, Inc.,
    Alaska Native Broadband 1 License LLC, and Alaska Native
    Broadband 1, LLC.10.8.5(2)

Amendment No. 5, dated
    April 24, 2006, to the Credit Agreement, dated as of
    December 22, 2004, among Cricket Communications, Inc.,
    Alaska Native Broadband 1 License, LLC, and Alaska Native
    Broadband 1, LLC.10.10.2(1)#

Second Amendment to Amended and
    Restated Executive Employment Agreement among Leap Wireless
    International, Inc., Cricket Communications, Inc. and S. Douglas
    Hutcheson, effective as of February 17, 2006.10.11.7(1)

Letter Waiver, dated as of
    March 6, 2006, among Leap Wireless International, Inc.,
    Cricket Communications, Inc., Bank of America, N.A., and a
    syndicate of lenders.31.1*

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.31.2*

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.32***

Certifications of Chief Executive
    Officer and Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith.***
    
    These certifications are being furnished solely to accompany
    this quarterly report pursuant to 18 U.S.C.
    § 1350, and are not being filed for purposes of
    Section 18 of the Securities Exchange Act of 1934, as
    amended, and are not to be incorporated by reference into any
    filing of Leap Wireless International, Inc., whether made before
    or after the date hereof, regardless of any general
    incorporation language in such filing.+
    
    Portions of this exhibit (indicated by asterisk) have been
    omitted pursuant to a request for confidential treatment
    pursuant to
    Rule 24b-2
    under the Securities Exchange Act of 1934.#
    
    Management contract or compensatory plan or arrangement in which
    one or more executive officers or directors participate.(1)
    
    Filed as an exhibit to Leaps Annual Report on
    Form 10-K,
    for the year ended 2005, filed with the SEC on March 27,
    2006, and incorporated herein by reference.(2)
    
    Filed as an exhibit to Leaps Current Report on
    Form 8-K,
    dated April 24, 2006, as filed with the SEC on
    April 27, 2006, and incorporated herein by reference. 44




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SIGNATURES
  Form 10-Q
  LEAP WIRELESS INTERNATIONAL, INC.Date: May 10, 2006

By:

/s/  S.
    Douglas
    HutchesonS.
    Douglas Hutcheson
    Chief Executive Officer and President
    (Principal Executive Officer)Date: May 10, 2006

By:

/s/  Dean
    M.
    LuvisaDean
    M. Luvisa
    Vice President, Finance and
    Acting Chief Financial Officer
    (Principal Financial Officer)  45