Leap Wireless Restates Its Financials

Leap Wireless International, a pay-as-you-go wireless operator, reported that it has revised more than three years of its financial results.

According to filings at the Securities and Exchange Commission, Leap cut operating income by $22.5 million and service revenue by $7.5 million between 2004 and 2007. During the period, Leap had reported an operating profit of $102.2 million and $3.09 billion in service revenue.

The restatements, reported to the SEC this week, weren't unexpected and were suggested in the wake of an internal review of Leap's financials. The company has said the restatements were not attributable to any misconduct on the part of its employees and explained that billing problems were the main cause for the restatement.

A review of Leap's financials came last fall in the midst of an offer by another pay-as-you-go mobile phone service provider -- MetroPCS -- which sought to acquire Leap for $5.2 billion. Leap declined the MetroPCS offer at the time, and there was no indication Leap's planned restatement of its financials had any bearing on the proposed acquisition.

There had been intense interest in a combination of the two companies, because they have somewhat complementary approaches to generally different markets, with Leap focusing on rural customers and MetroPCS on urban customers. A merged company would have created a new nationwide network capable of competing with established nationwide mobile phone service providers.

Standard & Poor's Ratings Services removed Leap from its credit watch negative list after the restatement, Thomson Financial reported. "Although our immediate liquidity concerns have been partially mitigated, we have determined that the reinstatement of a positive outlook will hinge on the company's ability to limit further accounting issues, which would require a minimum of two quarters of timely and accurate financial reporting," S&P said.