##### 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
    September 30, 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(State or other jurisdiction ofincorporation or organization)10307 Pacific Center Court, San Diego, CA(Address of principal executive offices)

33-0811062(I.R.S. EmployerIdentification No.)92121(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




---



##### 



LEAP
    WIRELESS INTERNATIONAL, INC.
  QUARTERLY
    REPORT ON
    FORM 10-Q
 For the
    Quarter Ended September 30, 2006
  TABLE OF CONTENTS
  PagePART I 
    FINANCIAL INFORMATIONItem 1.

Financial
    Statements


1Item 2.

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


21Item 3.

Quantitative and
    Qualitative Disclosures About Market Risk


36Item 4.

Controls and
    Procedures


37PART II 
    OTHER INFORMATIONItem 1.

Legal
    Proceedings


40Item 1A.

Risk
    Factors


41Item 2.

Unregistered Sales
    of Equity Securities and Use of Proceeds


56Item 3.

Defaults Upon
    Senior Securities


57Item 4.

Submission of
    Matters to a Vote of Security Holders


57Item 5.

Other
    Information


57Item 6.

Exhibits


57EXHIBIT 10.1EXHIBIT 10.2EXHIBIT 10.3EXHIBIT 10.4.1EXHIBIT 10.5.3EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




---



##### Table of Contents



PART I
    FINANCIAL INFORMATION   Item 1.
    Financial
    Statements.  LEAP
    WIRELESS INTERNATIONAL, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In thousands, except share amounts)
  September 30,


December 31,2006


2005(Unaudited)AssetsCash and cash equivalents

$
233,594


$
293,073Short-term investments


47,096



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


10,009



13,759Inventories


50,937



37,320Other current assets


41,657



29,237Total current assets


383,293



464,370Property and equipment, net


870,779



621,946Wireless licenses


821,338



821,288Assets held for sale (Note 8)


20,354



15,145Goodwill


431,896



431,896Other intangible assets, net


88,260



113,554Deposits for wireless licenses
    (Note 8)


305,000



Other assets


43,631



38,119Total assets

$
2,964,551


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

$
238,369


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


9,000



6,111Other current liabilities


55,782



49,627Total current liabilities


303,151



223,508Long-term debt (Note 4)


888,750



588,333Deferred tax liabilities


138,755



141,935Other long-term liabilities


44,582



36,424Total liabilities


1,375,238



990,200Minority interests


25,099



1,761Commitments and contingencies
    (Notes 4 and 9)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,
    61,298,539 and 61,202,806 shares issued and outstanding at
    September 30, 2006 and December 31, 2005, respectively


6



6Additional paid-in capital


1,505,217



1,490,638Retained earnings


56,788



21,575Accumulated other comprehensive
    income


2,203



2,138Total stockholders equity


1,564,214



1,514,357Total liabilities and
    stockholders equity

$
2,964,551


$
2,506,318    1




---



##### Table of Contents



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


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Revenues:Service revenues

$
249,081


$
193,675


$
695,706


$
569,360Equipment revenues


38,445



36,852



126,361



116,366Total revenues


287,526



230,527



822,067



685,726Operating expenses:Cost of service (exclusive of
    items shown separately below)


(70,722
)


(50,304
)


(186,181
)


(150,109
)Cost of equipment


(68,624
)


(49,576
)


(179,591
)


(141,553
)Selling and marketing


(42,948
)


(25,535
)


(107,992
)


(73,340
)General and administrative


(49,110
)


(41,306
)


(145,268
)


(119,764
)Depreciation and amortization


(56,409
)


(49,076
)


(163,781
)


(144,461
)Impairment of indefinite-lived
    intangible assets


(4,701
)


(689
)


(7,912
)


(12,043
)Total operating expenses


(292,514
)


(216,486
)


(790,725
)


(641,270
)Gains on sales of wireless
    licenses and operating assets (Note 8)


21,990



14,593



21,990



14,593Operating income


17,002



28,634



53,332



59,049Minority interests in income of
    consolidated subsidiaries


(138
)






(347
)


Interest income


5,491



2,991



15,218



6,070Interest expense


(15,753
)


(6,679
)


(31,606
)


(23,368
)Other income (expense), net


272



2,352



(5,112
)


1,027Income before income taxes


6,874



27,298



31,485



42,778Income tax benefit (expense)


3,105



(10,901
)


3,105



(17,762
)Income before cumulative effect of
    change in accounting principle


9,979



16,397



34,590



25,016Cumulative effect of change in
    accounting principle










623



Net income

$
9,979


$
16,397


$
35,213


$
25,016Basic net income per share:Income before cumulative effect of
    change in accounting principle

$
0.17


$
0.27


$
0.57


$
0.42Cumulative effect of change in
    accounting principle










0.01



Basic net income per share

$
0.17


$
0.27


$
0.58


$
0.42Diluted net income per share:Income before cumulative effect of
    change in accounting principle

$
0.16


$
0.27


$
0.56


$
0.41Cumulative effect of change in
    accounting principle










0.01



Diluted net income per share

$
0.16


$
0.27


$
0.57


$
0.41Shares used in per share
    calculations:Basic


60,295



60,246



60,286



60,093Diluted


62,290



61,395



61,866



60,727    2




---



##### Table of Contents



LEAP
    WIRELESS INTERNATIONAL, INC.
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (UNAUDITED)
    (In thousands)
  Nine Months EndedSeptember 30,2006


2005Operating activities:Net cash provided by operating
    activities

$
223,007


$
191,191Investing activities:Cash purchases of property and
    equipment


(348,911
)


(82,259
)Change in prepayments for
    purchases of property and equipment


2,770



(1,137
)Purchases of and deposits for
    wireless licenses


(307,128
)


(243,987
)Proceeds from sales of wireless
    licenses and operating assets


27,968



99,050Purchases of investments


(120,398
)


(270,587
)Sales and maturities of investments


165,982



158,501Change in restricted cash, cash
    equivalents and short-term investments, net


(3,443
)


83Net cash used in investing
    activities


(583,160
)


(340,336
)Financing activities:Proceeds from long-term debt


900,000



600,000Repayment of long-term debt


(596,694
)


(416,757
)Debt issuance costs


(8,058
)


(6,951
)Minority interest contributions


5,767



Proceeds from issuance of common
    stock, net


725



Costs related to forward equity
    sale


(1,066
)


Net cash provided by financing
    activities


300,674



176,292Net increase (decrease) in cash
    and cash equivalents


(59,479
)


27,147Cash and cash equivalents at
    beginning of period


293,073



141,141Cash and cash equivalents at end
    of period

$
233,594


$
168,288Supplementary disclosure of cash
    flow information:Cash paid for interest

$
41,942


$
44,951Cash paid for income taxes

$
327


$
280    3




---



##### Table of Contents



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
    Revenues
  month-to-month
 4




---



##### Table of Contents



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




---



##### Table of Contents



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.
    Wireless
    Licenses
    Goodwill
    and Other Intangible Assets
    Impairment
    of Long-Lived Assets
   6




---



##### Table of Contents



Impairment
    of Indefinite-Lived Intangible Assets
      Basic
    and Diluted Earnings Per Share
      Three Months


Nine MonthsEnded September 30,


Ended September 30,2006


2005


2006


2005Weighted-average shares
    outstanding  basic net income per share


60,295



60,246



60,286



60,093Effect of dilutive securities:Non-qualified stock options


247







147



62Restricted stock awards


974



861



933



327Warrants


379



288



367



245Common shares issuable upon
    physical settlement of forward sale agreements


395







133



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


62,290



61,395



61,866



60,727    7




---



##### Table of Contents



Comprehensive
    Income
    Three Months


Nine MonthsEnded September 30,


Ended September 30,2006


2005


2006


2005Net income

$
9,979


$
16,397


$
35,213


$
25,016Other comprehensive income:Net unrealized holding gains
    (losses) on investments, net of tax


(128
)


120



(170
)


82Unrealized gains (losses) on
    interest rate swaps, net of tax


(3,033
)


2,007



235



1,213Comprehensive income

$
6,818


$
18,524


$
35,278


$
26,311     September 30,


December 31,2006


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

$
(178
)

$
(8
)Unrealized gains on interest rate
    swaps, net of tax


2,381



2,146Accumulated other comprehensive
    income

$
2,203


$
2,138   Share-Based
    Payments
        8




---



##### Table of Contents



Share-Based
    Compensation Information under SFAS 123R
      Three Months


Nine MonthsEnded


EndedSeptember 30, 2006


September 30, 2006Expected volatility


47
%


47
%Expected term (in years)


6.5



6.5Risk-free interest rate


4.87
%


4.80
%Expected dividend yield






      9




---



##### Table of Contents



Three Months


Nine MonthsEnded


EndedSeptember 30, 2006


September 30, 2006Cost of service

$
311


$
830Selling and marketing expenses


637



1,437General and administrative expenses


4,115



12,210Share-based compensation expense
    before tax


5,063



14,477Related income tax benefit






Share-based compensation expense,
    net of tax

$
5,063


$
14,477Net share-based compensation
    expense per share:Basic

$
0.08


$
0.24Diluted

$
0.08


$
0.23       Three Months


Nine MonthsEnded


EndedSeptember 30, 2005


September 30, 2005Cost of service

$
217


$
1,014Selling and marketing expenses


203



896General and administrative expenses


2,301



7,941Share-based compensation expense

$
2,721


$
9,851  10




---



##### Table of Contents



Pro Forma
    Information under SFAS 123 for Periods Prior to Fiscal
    2006
    Three Months


Nine MonthsEnded


EndedSeptember 30, 2005


September 30, 2005As reported net income

$
16,397


$
25,016Add back share-based compensation
    expense included in net income


2,721



9,851Less pro forma compensation
    expense, net of tax


(4,962
)


(15,002
)Pro forma net income

$
14,156


$
19,865Basic net income per share:As reported

$
0.27


$
0.42Pro forma

$
0.24


$
0.33Diluted net income per share:As reported

$
0.27


$
0.41Pro forma

$
0.23


$
0.33       Three Months


Nine MonthsEnded


EndedSeptember 30, 2005


September 30, 2005Expected volatility


87
%


87
%Expected term (in years)


6.5



5.7Risk-free interest rate


3.93
%


3.61
%Expected dividend yield






   Recent
    Accounting Pronouncements
     11




---



##### Table of Contents



Note 3.  Supplementary
    Balance Sheet Information (in thousands):
  September 30,


December 31,2006


2005(Unaudited)Other current assets:Accounts receivable, net

$
23,208


$
17,397Prepaid expenses


15,495



9,884Other


2,954



1,956$
41,657


$
29,237Property and equipment, net:Network equipment

$
908,559


$
654,993Computer equipment and other


63,593



38,778Construction-in-progress


239,785



134,9291,211,937



828,700Accumulated depreciation


(341,158
)


(206,754
)$
870,779


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

$
164,772


$
117,140Accrued payroll and related
    benefits


25,263



13,185Other accrued liabilities


48,334



37,445$
238,369


$
167,770Other current liabilities:Deferred revenues

$
24,167


$
21,391Accrued property taxes


9,796



6,536Sales, telecommunications and
    other tax liabilities


9,552



15,745Other


12,267



5,955$
55,782


$
49,627   Note 4.
    Long-Term Debt
  Senior
    Secured Credit Facility
   12




---



##### Table of Contents



Bridge
    Loan Facility
   13




---



##### Table of Contents



Note 5.
    Income
    Taxes      Position 90-7,
  Note 6.
    Employee
    Stock Benefit Plans  Stock
    Option Plan
   14




---



##### Table of Contents



Weighted-


Weighted-Average


AverageExercise


RemainingNumber of


Price Per


Contractual


AggregateShares


Share


Term


Intrinsic Value(In thousands)





(In years)


(In thousands)Outstanding at December 31,
    2005


1,892


$
28.94Options granted


745



44.08Options forfeited


(85
)


31.01Options exercised






Outstanding at September 30,
    2006


2,552


$
33.30



8.91


$
37,939Exercisable at September 30,
    2006


76


$
26.50



8.44


$
1,654     Weighted-AverageGrant DateNumber of


Fair ValueShares


Per Share(In thousands)Unvested at December 31, 2005


895


$
28.56Shares granted


139



44.26Shares forfeited


(33
)


28.85Shares vested






Unvested at September 30, 2006


1,001


$
30.74         Exercisable


TotalWeighted-





Weighted-Average





AverageExercise





ExerciseNumber of


Price Per


Number of


Price PerExercise Prices

Shares


Share


Shares


Share(In thousands)





(In thousands)Less than $35.00


76


$
26.50



1,789


$
28.76Above $35.00










763



43.94Total outstanding


76


$
26.50



2,552


$
33.30   Employee
    Stock Purchase Plan
   15




---



##### Table of Contents



Note 7.
    Stockholders
    Equity  Forward
    Sale Agreements
    Note 8.
    Significant
    Acquisitions and Dispositions        debtor-in-possession
 16




---



##### Table of Contents



Note 9.
    Commitments
    and Contingencies  Outstanding
    Bankruptcy Claims
    Patent
    Litigation
  Method for
    Providing Wireless Communication Services and Network and System
    for Delivering Same,
  Operations Method
    for Providing Wireless Communication Services and Network and
    System for Delivering Same
   17




---



##### Table of Contents



Tortious
    Interference and Unfair Competition Litigation
  T-Mobile (T-Mobile) T-Mobile T-Mobile T-Mobiles T-Mobile
  Other
  and/or
  and/or
   18




---



##### Table of Contents



Commitments
    Year Ended December 31:Remainder of 2006

$
20,4612007


77,6082008


75,5702009


74,2572010


73,940Thereafter


389,472Total

$
711,308   Note 10.
    Subsequent
    Events  Senior
    Notes
     19




---



##### Table of Contents



LCW
    Operations Senior Secured Credit Agreement
   20




---



##### Table of Contents



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 wholly owned 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;
    failure of the FCC to approve the transfers to our wholly owned
    subsidiary, Cricket Licensee (Reauction), Inc., or to Denali
    Spectrum License, LLC of the wireless licenses for which they
    were named winning bidders in Auction #66;
    our ability to attract, motivate and retain an experienced
    workforce;
    our ability to comply with the covenants in our senior secured
    credit agreement, indenture and any future credit agreement,
    indenture or similar instrument;
    failure of our network or information technology systems to
    perform according to expectations; and
    other factors detailed in Part II 
    Item 1A. Risk Factors below.    Overview
  Our Business. ® tm
 21




---



##### Table of Contents



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. 22




---



##### Table of Contents




    In March 2006, we 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 the receipt of certain
    FCC approvals and orders which have already been issued but
    which have not yet become final.
    In July 2006, we acquired a 72% non-controlling membership
    interest in LCW Wireless, which held a license for the Portland,
    Oregon market and to which we contributed, among other things,
    our existing Eugene and Salem, Oregon markets to create a new
    Oregon cluster of licenses covering 3.2 million POPs.
    In August 2006, we exchanged our wireless license in Grand
    Rapids, Michigan for a wireless license in Rochester, New York
    to form a new market cluster with our existing Buffalo and
    Syracuse markets in upstate New York. These three licenses cover
    3.1 million POPs.
    In September 2006, our wholly owned subsidiary was the winning
    bidder for 99 wireless licenses covering 121.2 million POPs
    (adjusted to eliminate duplication among certain overlapping
    licenses won by it in Auction #66), and Denali License was
    the winning bidder for one wireless license covering
    59.3 million POPs (which includes markets covering
    5.7 million POPs which overlap with certain licenses won by
    our wholly owned subsidiary in Auction #66). The post
    Auction grants of these licenses remain subject to FCC approval,
    and we cannot assure you that the FCC will award these licenses
    to us or Denali License. The use of any licenses that we or
    Denali License acquire in Auction #66 may be affected by
    the requirements to clear the spectrum of existing
    U.S. government and other private sector wireless
    operations, some of which are permitted to continue for several
    years.
    We, ANB 1 License and LCW Operations have launched 12
    markets in 2006, and we currently expect to launch two
    additional markets by the end of 2006.       23




---



##### Table of Contents



Results
    of Operations
  Operating
    Items
    Three Months Ended September 30,% of 2006





% of 2005


Change fromService





Service


Prior Year2006


Revenues


2005


Revenues


Dollars


PercentRevenues:Service revenues

$
249,081






$
193,675






$
55,406



28.6
%Equipment revenues


38,445







36,852







1,593



4.3
%Total revenues


287,526







230,527







56,999



24.7
%Operating expenses:Cost of service (exclusive of
    items shown separately below)


70,722



28.4
%


50,304



26.0
%


20,418



40.6
%Cost of equipment


68,624



27.6
%


49,576



25.6
%


19,048



38.4
%Selling and marketing


42,948



17.2
%


25,535



13.2
%


17,413



68.2
%General and administrative


49,110



19.7
%


41,306



21.3
%


7,804



18.9
%Depreciation and amortization


56,409



22.6
%


49,076



25.3
%


7,333



14.9
%Impairment of indefinite-lived
    intangible assets


4,701



1.9
%


689



0.4
%


4,012



582.3
%Total operating expenses


292,514



117.4
%


216,486



111.8
%


76,028



35.1
%Gain on sale of wireless licenses
    and operating assets


21,990



8.8
%


14,593



7.5
%


7,397



50.7
%Operating income

$
17,002



6.8
%

$
28,634



14.8
%

$
(11,632
)


(40.6
)%   24




---



##### Table of Contents



Nine Months Ended September 30,% of 2006





% of 2005


Change fromService





Service


Prior Year2006


Revenues


2005


Revenues


Dollars


PercentRevenues:Service revenues

$
695,706






$
569,360






$
126,346



22.2
%Equipment revenues


126,361







116,366







9,995



8.6
%Total revenues


822,067







685,726







136,341



19.9
%Operating expenses:Cost of service (exclusive of
    items shown separately below)


186,181



26.8
%


150,109



26.4
%


36,072



24.0
%Cost of equipment


179,591



25.8
%


141,553



24.9
%


38,038



26.9
%Selling and marketing


107,992



15.5
%


73,340



12.9
%


34,652



47.2
%General and administrative


145,268



20.9
%


119,764



21.0
%


25,504



21.3
%Depreciation and amortization


163,781



23.5
%


144,461



25.4
%


19,320



13.4
%Impairment of indefinite-lived
    intangible assets


7,912



1.1
%


12,043



2.1
%


(4,131
)


(34.3
)%Total operating expenses


790,725



113.7
%


641,270



112.6
%


149,155



23.3
%Gain on sale of wireless licenses
    and operating assets


21,990



3.2
%


14,593



2.6
%


7,397



50.7
%Operating income

$
53,332



7.7
%

$
59,049



10.4
%

$
(5,717
)


(9.7
)%     Change2006


2005


Amount


PercentFor the Three Months Ended
    September 30:Gross customer additions


405,178



233,699



171,479



73.4
%Net customer additions


161,688



23,298



138,390



594.0
%Weighted average number of
    customers


1,870,204



1,605,222



264,982



16.5
%As of
    September 30:Total customers


1,967,369



1,622,526



344,843



21.3
%   Change2006


2005


Amount


PercentFor the Nine Months Ended
    September 30:Gross customer additions


936,581



626,454



310,127



49.5
%Net customer additions


329,780



71,609



258,171



360.5
%Weighted average number of
    customers


1,792,928



1,601,706



191,222



11.9
%   Three
    and Nine Months Ended September 30, 2006 Compared to Three
    and Nine Months Ended 
    September 30, 2005
       25




---



##### Table of Contents



26




---



##### Table of Contents



Non-Operating
    Items
    Three Months Ended September 30,2006


2005


ChangeInterest income

$
5,491


$
2,991


$
2,500Interest expense


(15,753
)


(6,679
)


(9,074
)Minority interests in income of
    consolidated subsidiaries


(138
)






(138
)Other income (expense), net


272



2,352



(2,080
)Income tax benefit (expense)


3,105



(10,901
)


14,006   Nine Months Ended September 30,2006


2005


ChangeInterest income

$
15,218


$
6,070


$
9,148Interest expense


(31,606
)


(23,368
)


(8,238
)Minority interests in income of
    consolidated subsidiaries


(347
)






(347
)Other income (expense), net


(5,112
)


1,027



(6,139
)Income tax benefit (expense)


3,105



(17,762
)


20,867   Three
    and Nine Months Ended September 30, 2006 Compared to Three
    and Nine Months Ended September 30, 2005
     27




---



##### Table of Contents



year-to-date
     28




---



##### Table of Contents



Performance
    Measures
  Regulation S-K
       29




---



##### Table of Contents



Three MonthsEnded September 30,2006


2005ARPU

$
44.39


$
40.22CPGA

$
176


$
142CCU

$
20.74


$
19.52Churn


4.3
%


4.4
%   Reconciliation
    of Non-GAAP Financial Measures
  Regulation S-K
    Three Months EndedSeptember 30,2006


2005Selling and marketing expense

$
42,948


$
25,535Less share-based compensation
    expense included in selling and marketing expense


(637
)


(203
)Plus cost of equipment


68,624



49,576Less equipment revenue


(38,445
)


(36,852
)Less net loss on equipment
    transactions unrelated to initial customer acquisition


(983
)


(4,917
)Total costs used in the
    calculation of CPGA

$
71,507


$
33,139Gross customer additions


405,178



233,699CPGA

$
176


$
142  30




---



##### Table of Contents



Three Months EndedSeptember 30,2006


2005Cost of service

$
70,722


$
50,304Plus general and administrative
    expense


49,110



41,306Less share-based compensation
    expense included in cost of service and general and
    administrative expense


(4,426
)


(2,518
)Plus net loss on equipment
    transactions unrelated to initial customer acquisition


983



4,917Total costs used in the
    calculation of CCU

$
116,389


$
94,009Weighted-average number of
    customers


1,870,204



1,605,222CCU

$
20.74


$
19.52   Liquidity
    and Capital Resources
  Overview
      
    In June 2006, we replaced our previous $710 million senior
    secured credit facility with a new amended and restated senior
    secured credit facility consisting of a $900 million term
    loan and a $200 million revolving credit facility. The
    replacement term loan generated proceeds of approximately
    $307 million, after repayment of the principal balances of
    the old term loans and prior to the payment of fees and
    expenses. See  Senior Secured Credit
    Facilities below.
    In July 2006, we and Denali License paid to the FCC
    $255 million and $50 million, respectively, as bidding
    deposits for Auction #66.    
    In October 2006, we physically settled 6,440,000 shares of
    Leap common stock pursuant to our forward sale agreements and
    received aggregate cash proceeds of $260 million (before
    expenses) from such physical settlements. See
     Forward Sale Agreements below.
    In October 2006, we borrowed $570 million under our
    $850 million unsecured bridge loan facility to finance a
    portion of the remaining amounts owed by us and Denali License
    to the FCC for Auction #66 licenses.
    In October 2006, we and Denali License paid to the FCC
    $455.2 million and $224.1 million, respectively, in
    satisfaction of the remaining amounts owed by us and Denali
    License to the FCC for Auction #66 licenses.
    In October 2006, we issued $750 million of
    9.375% senior notes due 2014, and we used a portion of the
    approximately $739 million of cash proceeds (after
    commission and before expenses) from the sale to repay our
    outstanding obligations, including accrued interest, under our
    bridge loan facility. Upon repayment of our outstanding
    indebtedness, the bridge loan facility was terminated. See
     Senior Notes below. 31




---



##### Table of Contents



Cash
    Flows
        Senior
    Secured Credit Facilities
       32




---



##### Table of Contents



Forward
    Sale Agreements
   33




---



##### Table of Contents



Senior
    Notes
          Capital
    Expenditures and Other Asset Acquisitions and
    Dispositions
  Capital
    Expenditures
     34




---



##### Table of Contents



Auction #58
    Properties and Build-Outs
    Auction #66
    Properties and Build-Outs
    Arrangements
    with Denali
     35




---



##### Table of Contents



Other
    Acquisitions and Dispositions
        debtor-in-possession
  Off-Balance
    Sheet Arrangements
    Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk.  Interest Rate Risk.
  Hedging Policy.
 36




---



##### Table of Contents



Item 4.
    Controls
    and Procedures.  (a)
    Evaluation
    of Disclosure Controls and Procedures    Rule 13a-15(b), Form 10-Q, Rule 13a-15(e)
      Insufficient Staffing in the Accounting, Financial Reporting
    and Tax Functions.
  
    The Company hired a new executive vice president, chief
    financial officer in August 2006. This individual has over
    20 years of experience as a financial executive, including
    over seven years as a chief financial officer of public
    companies.
    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 PricewaterhouseCoopers, LLP. He possesses a
    strong background in technical accounting and the application of
    generally accepted accounting principles in complex or
    non-routine transactions.
    The Company hired a new assistant controller in October 2006.
    This individual is a certified public accountant with over
    15 years of experience as an accounting executive with a
    large public company. She also possesses a strong background in
    technical accounting and the application of generally accepted
    accounting principles in complex or non-routine transactions. 37




---



##### Table of Contents




    In June 2006, the Company hired a new director of tax to lead
    its tax function. This individual is a certified public
    accountant with over 19 years of experience as a tax
    professional, including over nine years with the tax practices
    of large public accounting firms. He possesses a strong
    background in interpreting and applying income tax accounting
    literature and preparing income tax provisions for public
    companies.
    The Company has hired a number of other 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.
    The Company has used experienced qualified consultants to assist
    management in addressing the application of generally accepted
    accounting principles in complex or non-routine transactions for
    the quarters ended September 30, 2006, June 30, 2006
    and March 31, 2006 and the year ended December 31,
    2005, and will continue to use such consultants in the future,
    as needed, to supplement its existing staff.  Form 10-Q Form 10-K
    Errors in the Accounting for Income Taxes.
    
    In June 2006, the Company hired a new director of tax to lead
    its tax function. This individual is a certified public
    accountant with over 19 years of experience as a tax
    professional, including over nine years with the tax practices
    of large public accounting firms. He possesses a strong
    background in interpreting and applying income tax accounting
    literature and preparing income tax provisions for public
    companies.
    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 quarters ended September 30, 2006, June 30,
    2006 and March 31, 2006 and the year ended
    December 31, 2005, and may continue to use such consultants
    in the future to obtain access to as much income tax accounting
    expertise as it needs. 38




---



##### Table of Contents



(b)
    Changes
    in Internal Control over Financial Reporting   39




---



##### Table of Contents



PART II
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings.  Form 10-K
  Outstanding
    Bankruptcy Claims
  No. 06-CCV-1282.
  Patent
    Litigation
  No. 2-06H-CV-00240-TJW, Method for Providing Wireless Communication Services
    and Network and System for Delivering Same, No. 8:06-CV-01754-T-23TBM, Method for
    Providing Wireless Communication Services and Network and System
    for Delivering Same
  No. 3-06CV1399-D,
 40




---



##### Table of Contents



Operations Method
    for Providing Wireless Communication Services and Network and
    System for Delivering Same
    Tortious
    Interference and Unfair Competition Litigation
  T-Mobile T-Mobile, No. 2006-42215, T-Mobile T-Mobile T-Mobiles T-Mobile
   Item 1A.  Risk
    Factors.  Form 10-Q
  
    the Risk Factor below entitled 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, which
    has been updated to reflect risks associated with the
    manufacture and supply of network equipment and handsets for AWS
    spectrum;
    the Risk Factor below entitled If We Are Unable to Manage
    Our Planned Growth, Our Operations Could Be Adversely
    Impacted, which has been updated to reflect additional
    risks associated with continued growth;
    the Risk Factors below entitled Our Indebtedness Could
    Adversely Affect Our Financial Health, Despite
    Current Indebtedness Levels, We May Incur Substantially More
    Indebtedness. This Could Further Increase the Risks Associated
    with Our Leverage and Covenants in Our Indenture and
    Credit Agreement and Other Credit Agreements or Indentures That
    We May Enter Into in the Future May Limit Our Ability to Operate
    Our Business, and the addition of a new Risk Factor below
    entitled We May Be Unable to Refinance Our 41




---



##### Table of Contents



Indebtedness, which have been updated or added to reflect
    our borrowings under and repayment of our bridge loan facility,
    and the issuance by Cricket in October 2006 of $750 million
    of unsecured senior notes due in 2014 (see Item 2.
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations  Liquidity and Capital
    Resources  Senior Notes in Part I above);
    and  
    the Risk Factors below entitled 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, and
    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, which have been
    updated to reflect developments.  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
    Remain Profitable Will Decrease.
    We Have
    Made Significant Investment, and Will Continue to Invest, in
    Joint Ventures That We Do Not Control.
   42




---



##### Table of Contents



We Face
    Increasing Competition Which Could Have a Material Adverse
    Effect on Demand for the Cricket Service.
  and/or
   43




---



##### Table of Contents



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
 44




---



##### Table of Contents



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.
    and/or
   45




---



##### Table of Contents



If We Are
    Unable to Manage Our Planned Growth, Our Operations Could Be
    Adversely Impacted.
    Our
    Indebtedness Could Adversely Affect Our Financial
    Health.
    
    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 indebtedness under our senior secured
    credit facility bears interest at a variable rate. For a
    description of our senior secured credit facility, see
    Item 2. Managements Discussion and Analysis of
    Financial Condition and Results of Operations 
    Liquidity and Capital Resources  Senior Secured
    Credit Facilities in Part I of this report. 46




---



##### Table of Contents



Despite
    Current Indebtedness Levels, We May Incur Substantially More
    Indebtedness. This Could Further Increase the Risks Associated
    with Our Leverage.
        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.
    We May Be
    Unable to Refinance Our Indebtedness.
   47




---



##### Table of Contents



Covenants
    in Our Indenture and Credit Agreement and Other Credit
    Agreements or Indentures That We May Enter Into in the Future
    May Limit Our Ability to Operate Our Business.
    
    incur additional indebtedness;
    create liens or other encumbrances;
    place limitations on distributions from restricted subsidiaries;
    pay dividends, make investments, prepay subordinated
    indebtedness or make other restricted payments;
    issue or sell capital stock of restricted subsidiaries;
    issue guarantees;
    sell or otherwise dispose of all or substantially all of our
    assets;
    enter into transactions with affiliates; and
    make acquisitions or merge or consolidate with another entity.    Form 10-K Form 10-Q Form 10-K
    Rises in
    Interest Rates Could Adversely Affect our Financial
    Condition.
   48




---



##### Table of Contents



The
    Wireless Industry is Experiencing Rapid Technological Change,
    and We May Lose Customers if We Fail to Keep Up with These
    Changes.
      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.
       49




---



##### Table of Contents



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.
   50




---



##### Table of Contents



No. 2-06-CV-00240-TJW, Method for Providing Wireless Communication Services
    and Network and System for Delivering Same, No. 8:06-CV-01754-T-23TBM, Method for
    Providing Wireless Communication Services and Network and System
    for Delivering Same
  No. 3-06CV1399-D, Operations Method for Providing
    Wireless Communication Services and Network and System for
    Delivering Same
    We May Be
    Subject to Claims of Infringement Regarding Telecommunications
    Technologies That Are Protected by Patents and Other
    Intellectual Property Rights.
   51




---



##### Table of Contents



Regulation
    by Government Agencies May Increase Our Costs of Providing
    Service or Require Us to Change Our Services.
        If Call
    Volume under Our Cricket and Jump Mobile Services Exceeds Our
    Expectations, Our Costs of Providing Service Could Increase,
    Which Could Have a Material Adverse Effect on Our Competitive
    Position.
   52




---



##### Table of Contents



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 recent
    and upcoming FCC auctions, including Auction #66.   53




---



##### Table of Contents



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.
   54




---



##### Table of Contents



If We
    Experience High Rates of Credit Card, Subscription or Dealer
    Fraud, Our Ability to Become Profitable Will Decrease.
    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
    16,460,077 Shares of Leap Common Stock Registered for
    Resale By Our Shelf Registration Statement May Adversely Affect
    The Market Price of Leaps Common Stock.
    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.
     55




---



##### 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.   56




---



##### Table of Contents



Item 3.
    Defaults
    Upon Senior Securities.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.    Item 5.
    Other
    Information.    Item 6.
    Exhibits.  Index to Exhibits:
  ExhibitNumber

Description of Exhibit4.1(1)

Confirmation of Forward Sale
    Transaction, dated August 15, 2006, by and between Leap
    Wireless International, Inc. and Goldman Sachs Financial
    Markets, L.P.4.2(1)

Confirmation of Forward Sale
    Transaction, dated August 15, 2006, by and between Leap
    Wireless International, Inc. and Citibank, N.A.4.3(2)

Indenture, dated as of
    October 23, 2006, by and among Cricket Communications,
    Inc., the Initial Guarantors (as defined therein) and Wells
    Fargo Bank, N.A., as trustee.4.4(2)

Registration Rights Agreement,
    dated as of October 23, 2006, by and among Cricket
    Communications, Inc., the Guarantors (as defined therein),
    Citigroup Global Markets Inc. and Goldman, Sachs & Co.,
    as representatives of the Initial Purchasers named therein.10.1*

Amendment No. 6 to Amended
    and Restated System Equipment Purchase Agreement, effective as
    of August 31, 2006, by and between Cricket Communications,
    Inc. and Nortel Networks Inc.10.2*

Amendment No. 7 to Amended
    and Restated System Equipment Purchase Agreement, effective as
    of October 18, 2006, by and between Cricket Communications,
    Inc. and Nortel Networks Inc.10.3*

Letter Amendment to the Amended
    and Restated Security Agreement dated as of June 16, 2006
    by and among Cricket Communications, Inc., Leap Wireless
    International, Inc. and Bank of America, N.A., as administrative
    agent, dated October 16, 200610.4(3)

Credit Agreement, dated as of
    July 13, 2006, by and among Cricket Communications, Inc.,
    Denali Spectrum License, LLC and Denali Spectrum, LLC.10.4.1*

Amendment No. 1 to Credit
    Agreement by and among Cricket Communications, Inc., Denali
    Spectrum License, LLC and Denali Spectrum, LLC, dated as of
    September 28, 2006, between Cricket Communications, Inc.,
    Denali Spectrum License, LLC and Denali Spectrum, LLC.10.5(4)

Bridge Credit Agreement, dated
    August 8, 2006, by and among Cricket Communications, Inc.,
    Leap Wireless International, Inc., the lenders party thereto and
    Citicorp North America, Inc., as administrative agent.10.5.1(4)

Parent Guaranty, dated
    August 8, 2006, made by Leap Wireless International, Inc.
    in favor of the lenders under the Bridge Credit Agreement.10.5.2(4)

Subsidiary Guaranty, dated
    August 8, 2006, made by the Subsidiary Guarantors in favor
    of the lenders under the Bridge Credit Agreement.10.5.3*

Letter Amendment to the Bridge
    Credit Agreement dated as of August 8, 2006 by and among
    Cricket Communications, Inc., Leap Wireless International, Inc.,
    Citicorp North America, Inc., as administrative agent, and the
    lenders party thereto, dated October 12, 2006.31.1*

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. 57




---



##### Table of Contents



***
    
    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 asterisks) have been
    omitted pursuant to a request for confidential treatment
    pursuant to
    Rule 24b-2
    under the Securities Exchange Act of 1934.(1)
    
    Filed as an exhibit to Leaps Current Report on
    Form 8-K,
    dated August 15, 2006, filed with the SEC on
    October 30, 2006, and incorporated herein by reference.(2)
    
    Filed as an exhibit to Leaps Current Report on
    Form 8-K,
    dated October 23, 2006, filed with the SEC on
    October 24, 2006, and incorporated herein by reference.(3)
    
    Filed as an exhibit to Leaps Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended June 30, 2006, as filed with
    the SEC on August 8, 2006, and incorporated herein by
    reference.(4)
    
    Filed as an exhibit to Leaps Current Report on
    Form 8-K,
    dated August 8, 2006, filed with the SEC on August 10,
    2006, and incorporated herein by reference. 58




---



##### Table of Contents



SIGNATURES
      Date: November 8, 2006

By: /s/  S. Douglas HutchesonS. Douglas HutchesonChief Executive Officer and President(Principal Executive Officer)Date: November 8, 2006

By: /s/  Amin
    I. KhalifaAMIN
    I. KHALIFA
    Executive Vice President and
    Chief Financial Officer
    (Principal Financial Officer)  59