LEAP WIRELESS INTERNATIONAL INC, POS AM, 1999-08-10

LEAP WIRELESS INTERNATIONAL INC
POS AM, 1999-08-10
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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 1999

REGISTRATION NO. 333-64459
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

POST-EFFECTIVE AMENDMENT NO. 2 TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

LEAP WIRELESS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 4812 33-0811062
(STATE OR JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>

10307 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
(858) 882-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

HARVEY P. WHITE
CHIEF EXECUTIVE OFFICER
LEAP WIRELESS INTERNATIONAL, INC.
10307 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
(858) 882-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

COPIES TO:
SCOTT N. WOLFE
DAVID A. HAHN
LATHAM & WATKINS
701 B STREET, SUITE 2100
SAN DIEGO, CA 92101-8193
(619) 236-1234

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis under Rule 415 under the Securities Act of 1933,
check the following box: [X]

If this Form is filed to register additional securities for an offering
under Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed under Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed under Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]

If delivery of the prospectus is expected to be made under Rule 434, please
check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.

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<PAGE> 2

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION -- DATED AUGUST 10, 1999

PROSPECTUS

2,271,060 SHARES

LEAP WIRELESS INTERNATIONAL, INC.

COMMON STOCK

Leap Wireless International, Inc., formerly a wholly-owned subsidiary of
QUALCOMM Incorporated, manages, supports, operates and participates in wireless
telecommunications businesses and ventures which utilize code division multiple
access digital transmission technology.

This prospectus relates to the issuance of up to 2,271,060 shares of our
common stock. We will issue these shares upon conversion of the Trust
Convertible Preferred Securities of QUALCOMM Financial Trust I. The registration
of these shares of our common stock does not necessarily mean that all of these
shares will be issued.

Our common stock is listed for trading on the Nasdaq National Market under
the symbol LWIN. On August 9, 1999, the last reported sale price of our common
stock was $17.00.

-------------------------

INVESTING IN SHARES OF OUR COMMON STOCK INVOLVES VARIOUS RISKS. IN
CONSIDERING WHETHER TO CONVERT YOUR TRUST CONVERTIBLE PREFERRED SECURITIES INTO
SHARES OF OUR COMMON STOCK, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED
UNDER "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS.

-------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE ORGANIZATIONS
DETERMINED THAT THIS PROSPECTUS IS ACCURATE AND COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

-------------------------

The date of this prospectus is , 1999
<PAGE> 3

PROSPECTUS SUMMARY

This summary only highlights the more detailed information appearing
elsewhere in this prospectus. This summary is not complete and may not contain
all the information you should consider before investing in our common stock.
You should read this entire prospectus carefully before deciding whether to
convert your securities. The terms "we," "our" "us," and "Leap Wireless" refer
to Leap Wireless International, Inc. and its subsidiaries unless the context
suggests otherwise.

LEAP WIRELESS

Leap Wireless manages, supports, operates and participates in wireless
telecommunications businesses and ventures in the United States, Mexico, Russia
and Chile which utilize code division multiple access (CDMA) digital
transmission technology. These systems are at an early stage of development.
Leap Wireless' operating companies in the United States and Chile began
operations in late 1998. Leap Wireless' operating company in Mexico launched
commercial operations in Tijuana in February 1999. Leap Wireless' joint venture,
Metrosvyaz, launched service in its first system in a Russian market in April
1999. Leap Wireless continues to pursue opportunities involving additional
wireless telecommunications systems in other targeted United States and
international markets offering high growth potential.

Leap Wireless was formed in June 1998 as a subsidiary of QUALCOMM
Incorporated, a provider of CDMA-based digital wireless communications
equipment, technologies and services. On September 23, 1998, QUALCOMM
distributed all of the common stock of Leap Wireless to QUALCOMM's stockholders
as a taxable dividend.

Leap Wireless uses telecommunications systems based on CDMA technology, an
integrated software and hardware system invented by QUALCOMM. CDMA technology
transmits digital telecommunications signals in a wireless network. Leap
Wireless believes that CDMA offers a number of advantages over analog and other
digital technologies, including:

- increased call capacity;

- higher quality voice and data transmission;

- fewer dropped calls;

- enhanced privacy;

- lower power requirements; and

- lower system costs.

Wireless telecommunications companies have developed and are developing
CDMA systems in approximately 36 countries with over 29 million commercial
subscribers worldwide.

Leap Wireless will likely require significant future capital to help meet
the funding requirements of its wireless telecommunications businesses and
ventures and for Leap Wireless' general working capital needs. Leap Wireless
expects to finance its capital needs through early 2000 through borrowing under
its credit agreement with QUALCOMM. Leap Wireless must obtain additional sources
of financing to fund its activities after early 2000. Because of its capital
requirements, Leap Wireless expects to maintain high levels of debt in the near
future.
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The location of Leap Wireless' executive offices is 10307 Pacific Center
Court, San Diego, CA 92121. Its telephone number is (858) 882-6000.

RISK FACTORS

Your ownership of our common stock involves a high degree of investment
risk. You should carefully consider the risk factors discussed in the "Risk
Factors" section of this prospectus in evaluating the ownership of our common
stock.

RELATIONSHIP BETWEEN LEAP WIRELESS AND QUALCOMM

Leap Wireless and QUALCOMM entered into various agreements and
relationships in September 1998 in connection with QUALCOMM's transfer of most
of its interests in wireless telecommunications operating companies to Leap
Wireless. In May 1999, QUALCOMM sold its network infrastructure division to
Telefonaktiebolaget LM Ericsson (pbl), a telecommunications equipment
manufacturer known as Ericsson, and transferred a portion of its rights and
obligations under these agreements to Ericsson. QUALCOMM's and Ericsson's
relationships with Leap Wireless and its operating companies will give QUALCOMM
and Ericsson significant influence over Leap Wireless and may create positions
of conflict with Leap Wireless.

Separation and Distribution Agreement. Immediately prior to QUALCOMM's
distribution of Leap Wireless common stock, Leap Wireless and QUALCOMM entered
into a Separation and Distribution Agreement. The Separation and Distribution
Agreement governed the principal transactions required to effect the separation
of the companies and the distribution of Leap Wireless common stock to
QUALCOMM's stockholders.

To separate the companies, QUALCOMM transferred most of its wireless
telecommunications operating company businesses and ventures to Leap Wireless.
QUALCOMM also contributed to Leap Wireless $10 million in cash and QUALCOMM's
right to receive payment of approximately $113 million of debt. In connection
with these transfers, Leap Wireless issued QUALCOMM a warrant to purchase
5,500,000 shares of Leap Wireless common stock. In March 1999, in exchange for
consideration valued at $5.4 million, QUALCOMM agreed to amend the warrant to
reduce the number of shares which may be purchased upon exercise to 4,500,000.
This warrant is currently exercisable and remains exercisable until September
2008. Leap Wireless also granted options to purchase Leap Wireless common stock
to holders of options to purchase shares of QUALCOMM common stock.

In addition, Leap Wireless assumed some liabilities of QUALCOMM, including
(1) obligations to lend approximately $75 million to Leap Wireless' operating
companies; (2) rights and obligations to participate in the management of Leap
Wireless' operating companies; and (3) liabilities regarding Leap Wireless'
employees in the amount of approximately $2 million.

The Separation and Distribution Agreement originally provided that, until
January 2004, Leap Wireless will deploy only systems based on QUALCOMM's CDMA
technology. Leap Wireless also agreed that, until January 2004, Leap Wireless
will invest only in companies using systems based on this technology. In July
1999, the Federal Communications Commission issued an opinion and order that had
the effect of granting Leap Wireless status as a designated entity qualified to
hold C-Block and F-Block PCS spectrum licenses. To satisfy one of several
conditions to the order, Leap Wireless and QUALCOMM

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<PAGE> 5

amended the Separation and Distribution Agreement to eliminate these CDMA
technology restrictions with respect to Leap Wireless' U.S. operations.

Credit Agreement. Before QUALCOMM's distribution of Leap Wireless common
stock to QUALCOMM's stockholders, Leap Wireless entered into a credit agreement
with QUALCOMM. The credit agreement consists of two sub-facilities. Leap
Wireless may borrow up to $35.2 million under the working capital sub-facility.
Leap Wireless may only use the proceeds from the working capital sub-facility to
meet its normal working capital and operating expenses. Leap Wireless may borrow
up to $229.8 million under the investment capital sub-facility. Leap Wireless
may only use the proceeds from the investment capital sub-facility to make
specified portfolio investments. Leap Wireless must comply with customary
operating covenants under the credit agreement and must maintain a specified
debt to capitalization ratio. In addition, as one of the conditions to the FCC's
recognition of Leap Wireless as a designated entity qualified to hold C-Block
and F-Block licenses of PCS spectrum, Leap Wireless must take steps so that by
January 2001, QUALCOMM holds no more than 50% of Leap Wireless' outstanding debt
obligations.

Master Agreement Regarding Equipment Acquisition. The Master Agreement
Regarding Equipment Acquisition between Leap Wireless and QUALCOMM obligates
Leap Wireless and the companies in which it invests to purchase CDMA
infrastructure and subscriber equipment from QUALCOMM under specific terms and
conditions. In connection with the sale of its network infrastructure division,
QUALCOMM transferred its rights under the Master Agreement Regarding Equipment
Acquisition with respect to infrastructure equipment to Ericsson. Under the
Master Agreement Regarding Equipment Acquisition, Leap Wireless has agreed that
as long as QUALCOMM or Ericsson, as applicable, offers equipment on competitive
terms and conditions, determined under specific bidding criteria and procedures
contained in the agreement, then:

- For five years, Leap Wireless will purchase at least 50% of its
requirements for infrastructure equipment from Ericsson and 50% of its
requirements for subscriber equipment from QUALCOMM.

- For each initial investment made by Leap Wireless before October 2002 in
a U.S. wireless telecommunications entity, Leap Wireless will require
that U.S. entity to enter into an equipment requirements agreement with
QUALCOMM and Ericsson. The equipment requirements agreement will obligate
the U.S. entity to purchase at least 50% of its requirements for
infrastructure equipment from Ericsson and 50% of its requirements for
subscriber equipment from QUALCOMM, in each case for five years.

- For each investment by Leap Wireless in a U.S. operator of wireless
telecommunications made after October 2002, Leap Wireless will attempt to
require the U.S. operator to provide Ericsson and QUALCOMM with an
opportunity to bid on its requirements for infrastructure equipment and
subscriber equipment, respectively.

Until the earlier of (1) October 2002 and (2) the date Leap Wireless
receives a total of $60 million of financing from parties other than QUALCOMM,
Leap Wireless must also cause each unaffiliated, foreign entity in which Leap
Wireless invests to enter into an equipment requirements agreement with QUALCOMM
and Ericsson. These equipment requirements agreements will require the foreign
operators to purchase at least 50% of their requirements for infrastructure
equipment from Ericsson and 50% of their requirements for subscriber equipment
from QUALCOMM, in each case for five years. If Leap Wireless invests in a
foreign operator of wireless telecommunications after October 2002, Leap
Wireless must attempt to cause the foreign operator to provide Ericsson and
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QUALCOMM with an opportunity to bid on the foreign operator's infrastructure
equipment and subscriber equipment, respectively.

The obligations of Leap Wireless and the companies in which it invests
regarding equipment purchases under the Master Agreement Regarding Equipment
Acquisition expire in September 2007.

Conversion Agreement. Under the Conversion Agreement between Leap Wireless
and QUALCOMM, Leap Wireless has agreed to issue up to 2,271,060 shares of Leap
Wireless common stock upon the conversion of the Trust Convertible Preferred
Securities of QUALCOMM Financial Trust I, a wholly-owned statutory business
trust of QUALCOMM. After conversion of the Trust Convertible Preferred
Securities, QUALCOMM will have some of its debt reduced, but Leap Wireless will
receive no additional benefit or other consideration.

THE OFFERING

COMMON STOCK OFFERED BY
LEAP WIRELESS.............. 2,271,060 shares

USE OF PROCEEDS.............. Leap Wireless agreed to issue common stock upon
the conversion of the Trust Convertible
Preferred Securities in consideration for the
transfer of wireless telecommunications
operating company businesses and joint venture
interests from QUALCOMM to Leap Wireless. Leap
Wireless will receive no additional
consideration or forgiveness of debt upon
conversion of the Trust Convertible Preferred
Securities and the issuance of common stock
offered by this prospectus.

NASDAQ NATIONAL MARKET
SYMBOL..................... LWIN
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SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following tables contain summary historical consolidated statement of
operations data and consolidated balance sheet data and corresponding pro forma
data for Leap Wireless, a development stage company. The historical consolidated
financial data for the nine months ended May 31, 1999 and 1998 and fiscal years
ended August 31, 1998, 1997 and 1996 were derived from the unaudited
Consolidated Financial Statements and the audited Consolidated Financial
Statements of Leap Wireless, respectively, as restated, which are included
elsewhere in this prospectus. The historical statements of operations give
effect to the distribution of Leap Wireless common stock as if it had occurred
as of September 1, 1995.

The pro forma financial data are derived from the pro forma statements of
operations that give effect to Leap Wireless' acquisition of the 50% share of
Chilesat Telefonia Personal S.A. that it did not already own on April 19, 1999
and the acquisition of an indirect investment in the Transworld Companies on
August 4, 1998. The pro forma financial data are based upon available
information and assumptions that management believes are reasonable. The pro
forma statements of operations give effect to the acquisition of Chilesat and
the indirect investment in the Transworld Companies as if they had occurred as
of September 1, 1997. The pro forma financial data are provided for illustrative
purposes only and do not purport to represent what Leap Wireless' results of
operations or financial condition actually would have been had the acquisition
of Chilesat or the indirect investment in the Transworld Companies in fact
occurred on such date or to project Leap Wireless' results of operations or
financial condition for any future period or date.

These tables should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the unaudited
Consolidated Financial Statements, the audited Consolidated Financial Statements
and the Pro Forma Financial Statements included elsewhere in this prospectus.

SUMMARY CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED NINE MONTHS PRO FORMA
MAY 31, YEAR ENDED AUGUST 31, ENDED YEAR ENDED
--------------------- --------------------------------- MAY 31, AUGUST 31,
1999 1998(1) 1998(1) 1997(1) 1996 1999 1998
-------- ---------- ---------- ---------- ------- ----------- ----------
(RESTATED) (RESTATED) (RESTATED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(2):
Operating Revenue.......................... $ -- $ -- $ -- $ -- $ -- $ 3,670 $ --
-------- -------- -------- ------- ------- --------- --------
Cost of operating revenues................. -- -- -- -- -- (1,903) --
Selling, general and administrative
expenses................................. (14,357) (5,577) (23,888) (1,361) (396) (24,923) (28,268)
Depreciation and amortization.............. (408) -- -- -- -- (10,431) --
-------- -------- -------- ------- ------- --------- --------
Total operating expenses............... (14,765) (5,577) (23,888) (1,361) (396) (37,257) (28,268)
-------- -------- -------- ------- ------- --------- --------
Net operating loss......................... (14,765) (5,577) (23,888) (1,361) (396) (33,587) (28,268)
Equity in net loss of unconsolidated
wireless operating companies............. (78,917) (11,132) (23,688) (3,793) -- (65,064) (25,666)
Interest income............................ 7,901 -- 843 -- -- 5,227 2,525
Interest expense........................... (4,238) -- -- -- -- (11,732) (5,365)
Foreign currency transaction loss and other
expense.................................. -- -- -- -- -- (4,471) (4,026)
-------- -------- -------- ------- ------- --------- --------
Net loss................................... $(90,019) $(16,709) $(46,733) $(5,154) $ (396) $(109,627) $(60,800)
======== ======== ======== ======= ======= ========= ========
Basic and diluted net loss per common
share(3)................................. $ (5.06) $ (0.95) $ (2.65) $ (0.29) $ (0.02) $ (6.16) $ (3.45)
======== ======== ======== ======= ======= ========= ========
Shares used in computing basic and diluted
net loss per common share(3)............. 17,794 17,648 17,648 17,648 17,648 17,794 17,648
======== ======== ======== ======= ======= ========= ========
BALANCE SHEET DATA(2):
Cash(at end of period)..................... $ 23,527 $ -- $ --
Working capital (deficit).................. (29,105) (14,789) (279)
Total assets............................... 366,104 157,752 42,267
Stockholders' equity....................... 143,937 142,963 41,988
</TABLE>

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(1) These amounts have been restated to adopt the equity method of accounting
retroactively to the initial date of Leap Wireless' investment in Chase
Telecommunications Holdings, Inc.

Leap Wireless' share of net losses under the equity method of accounting
from its initial 50% investment in Chilesat, which was acquired in fiscal
1997. The pro forma statement of operations data for the periods ended May
31, 1999 and August 31, 1998 reflect the 100% consolidation of Chilesat and
Leap Wireless' share of net losses under the equity method of accounting for
the acquisition of an indirect investment in the Transworld Companies as if
the acquisition of the remaining 50% share of Chilesat and the acquisition
of the indirect investment in the Transworld Companies had occurred as of
September 1, 1997.

(3) The basic and diluted net loss per common share for the nine months ended
May 31, 1999 was calculated by dividing the net loss by the weighted average
number of common shares outstanding of 17,794,358. Leap Wireless was a
wholly-owned subsidiary of QUALCOMM prior to September 23, 1998. The basic
and diluted net loss per common share was calculated by dividing the net
loss for the nine months ended May 31, 1998 and the fiscal years ended
August 31, 1998, 1997 and 1996 by the 17,647,685 shares of Leap Wireless
common stock issued in the distribution to QUALCOMM's stockholders on
September 23, 1998.
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RISK FACTORS

LEAP WIRELESS HAS A LIMITED OPERATING HISTORY ON WHICH TO BASE AN EVALUATION OF
ITS BUSINESS AND PROSPECTS

Leap Wireless has a limited operating history. Leap Wireless has only
operated as an independent company since September 1998. Because Leap Wireless
and each of its operating companies are at an early stage of development, Leap
Wireless faces risks generally associated with establishing a new business
enterprise. When considering our prospects, you must also consider the risks,
expenses and difficulties encountered by companies in their early stage of
development. These risks include possible disruptions and inefficiencies
associated with rapid growth and workplace expansion, and the difficulties
associated with raising money to finance new enterprises. You must also consider
the risks we will face as a company in new and rapidly evolving wireless
telecommunications markets experiencing rapid growth.

LEAP WIRELESS MAY FAIL TO ACHIEVE PROFITABILITY

Leap Wireless' ability to generate revenues depends on a number of factors,
including the future operations and profitability of its operating companies.
Leap Wireless' operating companies will probably incur substantial losses for
the foreseeable future. Leap Wireless' businesses operate in a highly
competitive industry. We cannot assure you that any of Leap Wireless' operating
companies will obtain sufficient financing to build-out their wireless systems
as planned or to meet their payment obligations. If these companies fail to
build-out their systems, fail to meet their payment obligations or fail to
become profitable, those failures could negatively affect the value of Leap
Wireless' business and its common stock in the public market. The time required
for Leap Wireless to reach or sustain profitability is highly uncertain.

LEAP WIRELESS MAY FAIL TO RAISE ADDITIONAL CAPITAL NEEDED FOR FUNDING OPERATING
COMPANIES AND FOR GENERAL WORKING CAPITAL NEEDS

Leap Wireless will likely require significant future capital, both to help
meet the funding requirements of its existing operating companies and additional
companies in which it may invest in the future, as well as for general working
capital needs. The size of these capital requirements will depend on a number of
factors, including:

- the specific capital needs of Leap Wireless' operating companies;

- the additional capital needed to acquire or maintain other businesses or
to pursue other telecommunications opportunities;

- competing technological and market developments; and

- changes in existing and future relationships.

The capital markets in the United States and worldwide have recently been
volatile and uncertain. We cannot assure you that these markets will improve or
that Leap Wireless can access these markets or raise additional capital on
favorable terms or at all. If Leap Wireless fails to satisfy these capital
requirements, that failure could have a negative effect on Leap Wireless'
business and the value of the Leap Wireless common stock in the public market.
For example, if Leap Wireless is unable to access the capital markets, Leap
Wireless may have to restrict its activities or sell its interests in one or
more operating companies earlier than planned or at a significant loss.

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Leap Wireless' operating companies also have substantial capital
requirements. These operating companies have business plans which call for
substantial additional financing to build out and operate their planned
networks. Although our operating companies may successfully reduce their capital
requirements by slowing the deployment of new equipment or by decreasing the
scope of their planned networks, these businesses will likely require
substantial new financing in 2000. At this time, however, these companies face
capital markets constraints because of uncertain worldwide economic conditions,
and development stage companies in emerging markets find it difficult to raise
additional capital. As a result, we cannot assure you that our operating
companies will obtain the additional financing they require. Further, if any
operating company fails to gain required new financing, that failure could have
a negative effect on the specific operating company and Leap Wireless.

HIGH LEVELS OF DEBT COULD ADVERSELY AFFECT LEAP WIRELESS' BUSINESS AND FINANCIAL
CONDITION

Leap Wireless expects to obtain much of its required short-term financing
through borrowings under its credit agreement with QUALCOMM. The credit
agreement bears a variable interest rate, exposing Leap Wireless to interest
rate risk. Leap Wireless expects that it will have borrowed substantially all of
the funds available to it under the credit agreement by early 2000. As one of
the conditions to the FCC's recognition of Leap Wireless as a designated entity
qualified to hold C-Block and F-Block licenses of PCS spectrum, however, Leap
Wireless must take steps so that by January 2001, QUALCOMM holds no more than
50% of Leap Wireless' outstanding debt obligations. Leap Wireless cannot assure
you that additional sources of debt financing will be available to Leap Wireless
to finance its operations after the credit agreement has been fully drawn or to
comply with the condition imposed by the FCC regarding Leap Wireless' debt to
QUALCOMM.

The terms of the credit agreement may significantly limit Leap Wireless'
ability to obtain additional debt financing. If Leap Wireless cannot borrow
additional funds for working capital purposes, it may be required to sell
additional stock, sell all or part of its interests in one or more of its
operating companies, or reduce or cease some of its operations. If Leap Wireless
cannot borrow additional funds for investment capital purposes, it may be unable
to make additional investments in its existing operating companies and ventures,
and it may be prevented from investing in new wireless telephone opportunities.
If Leap Wireless raises additional funds through the sale of stock, Leap
Wireless' existing stockholders would experience a reduction in their percentage
ownership interest in Leap Wireless. If Leap Wireless raises additional
financing by selling Leap Wireless' stock in its operating companies, Leap
Wireless will experience a reduction in its percentage ownership in these
operating companies. In addition, if Leap Wireless sells a portion of its stock
in its operating companies, it may give up a substantial portion of its existing
control or influence over these operating companies. If Leap Wireless fails to
obtain adequate additional financing, that failure would have a negative effect
on Leap Wireless' business and financial condition. If Leap Wireless does not
reduce its debt obligations to QUALCOMM to 50% or less of its total debt
obligations by January 2001, Leap Wireless would have failed to fulfill a
condition to the FCC's recognition of Leap Wireless as a designated entity
entitled to hold C-Block and F-Block licenses. Leap Wireless' failure to
maintain its status as a designated entity would likely have a material adverse
effect on Leap Wireless' financial condition and its business prospects in the
United States.

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As a result of its capital requirements Leap Wireless expects to maintain
high levels of debt during fiscal 1999 and beyond. Leap Wireless' high leverage
could have important consequences, including:

- impairing Leap Wireless' ability to obtain additional financing in the
future;

- dedicating a substantial portion of Leap Wireless' future cash flows from
operations to the payment of its debt, thus reducing the funds available
for operations and investments;

- hindering Leap Wireless' ability to adjust rapidly to changing market
conditions;

- leaving Leap Wireless vulnerable in the event of a downturn in general
economic conditions or in its business; or

- reducing the value of stockholders' investment in Leap Wireless, since
holders of Leap Wireless' debt have priority regarding the assets of Leap
Wireless in the event of a liquidation.

We cannot assure you that Leap Wireless will have sufficient future cash
flows to meet Leap Wireless' debt payments or that Leap Wireless will
successfully refinance any of its debt at maturity.

Leap Wireless' operating companies have used various sources of financing.
Although each of them has received funding from the sale of stock, many have or
expect to have high levels of debt. Leap Wireless' operating companies may not
meet their debt covenants, depending on their future performance. Prevailing
economic conditions and financial factors beyond their control may affect the
future performance of Leap Wireless' operating companies. Leap Wireless'
operating companies' level of debt and cash flows may limit their ability to
obtain future financings. In addition, Leap Wireless' operating companies will
receive funds through equipment financing arrangements from vendors. These
equipment financings will depend on meeting planned levels of performance. If
any Leap Wireless operating company fails to meet performance requirements, its
equipment financing may be restricted or cancelled.

LEAP WIRELESS HAS A HISTORY OF LOSSES AND ANTICIPATES FUTURE LOSSES

Leap Wireless experienced net losses of approximately $90 million for the
first nine months of fiscal 1999 and approximately $46.7 million in fiscal 1998,
$5.2 million in fiscal 1997 and $396,000 in fiscal 1996. According to generally
accepted accounting principles, Leap Wireless must recognize a share of its
operating companies' losses. These losses are likely to be significant. Leap
Wireless' operating companies are in the early stages of developing and
deploying their telecommunications systems, which require significant
expenditures. In addition, Leap Wireless' and its operating companies' expected
levels of debt will lead to significant interest expense and principal repayment
obligations. Leap Wireless expects to incur substantial additional losses in the
foreseeable future. We cannot assure you that Leap Wireless or any of its
operating companies will generate profits in the short term or at all. If Leap
Wireless or any of its operating companies fails to achieve profitability, that
failure could have a negative effect on the market value of the Leap Wireless
common stock.

INTERNATIONAL RISKS COULD ADVERSELY AFFECT LEAP WIRELESS' BUSINESS

Leap Wireless faces many risks from its international activities. Leap
Wireless' operating companies largely depend on the economies in which they
operate. These

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economies are in various stages of development or structural reform. Some of
these markets are subject to rapid fluctuations in currency exchange rates,
consumer prices, inflation, employment levels and gross domestic product. Leap
Wireless and its operating companies are subject to currency, economic and
political risks, which could impact their business and financial condition. In
particular, many of the equipment purchase and services agreements of Leap
Wireless' operating companies require payment in U.S. Dollars. In contrast, most
of Leap Wireless' operating companies expected income stream is in the local
currency. If the exchange rate between the U.S. Dollar and the local currency
changes, it could have a negative effect on Leap Wireless and its operating
companies.

In addition, foreign law and courts govern many of the agreements of Leap
Wireless' operating companies. Other parties may breach or may make it difficult
to enforce these agreements. Further, public awareness of the risks associated
with international operations may increase the volatility of the market price of
our common stock. Recent stock market fluctuations attributed to developments in
Russia, Latin America, Asia and other emerging markets evidence this potential
volatility. The risks and volatility associated with Leap Wireless' markets may
negatively impact the ability of Leap Wireless and its operating companies to
raise capital.

Leap Wireless will also face country-specific risks. The country-specific
risks which Leap Wireless faces include:

Risks Associated With Doing Business in Russia

The Russian economy recently has experienced severe volatility in both
financial and currency markets despite the monetary support and financing
provided by the IMF. The Russian government recently devalued the ruble, which
lacks convertibility into other currencies. The Russian government has
experienced extreme political volatility and has defaulted on many of its
obligations. News reports have indicated that a number of Russian banks have
become insolvent. The pace of political reform has slowed and the recent
dismissal of a number of government leaders by the Russian President has
contributed to political instability. This political instability could
exacerbate Russia's existing economic difficulties. Economic and political
instability could have a negative effect on the value of Leap Wireless'
businesses and prospects in Russia. Because the regulatory framework and
authorities in Russia are relatively new, Leap Wireless operating companies face
uncertainty in complying with these regulations. Currently, all of the CDMA
licenses that have been granted in Russia are restricted to fixed wireless
communication. These restrictions are consistent with Leap Wireless' current
strategy in Russia, which is to provide fixed wireless services to homes and
businesses. The Leap Wireless operating companies in Russia cannot offer mobile
wireless service unless their existing CDMA licenses are modified. Leap
Wireless' Russian operating companies face increasing competition from other
telecommunications carriers. We cannot assure you that Leap Wireless' Russian
operating companies will compete successfully.

Risks Associated With Doing Business in Chile

The Leap Wireless operating company in Chile depends largely on the economy
of that country. Fluctuations in the price of natural resources historically
affect the economy of Chile. The economic crisis that began in Asia and spread
to Eastern Europe and Brazil has negatively impacted some commodity prices,
which could negatively impact Leap Wireless' prospects in Chile. Although
Chilean prices and its currency generally have been

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stable, this stability has required continued intervention by the Chilean
government. In addition, although Leap Wireless' Chilean operating company is
the only vendor of CDMA technology in Chile, Leap Wireless' existing competitors
in Chile currently maintain cellular or PCS network systems based on alternative
technology. Also, the Chilean telecommunications market historically has been
very price competitive. The existing competitors in Chile have greater financial
resources and established operations providing them with ample resources to
compete with Leap Wireless on prices. We cannot assure you that Leap Wireless'
Chilean operating company will compete successfully.

Risks Associated With Doing Business in Mexico

Mexico continues to experience a high rate of inflation, and the country's
currency and financial markets continue to experience volatility. The impact on
the Mexican economy of the economic crisis which began in Asia and then spread
to Eastern Europe and Brazil has affected the ability of Mexican companies to
access the capital markets. We cannot assure you that the ability of Mexican
companies to access the capital markets will improve or that it will not
deteriorate further in the future. The economy of Mexico historically also has
close ties to fluctuations in the price of oil and petroleum products.
Fluctuations in the prices of these products and continuing political tensions
in Mexico could negatively impact Leap Wireless' prospects in Mexico.
Additionally, a number of large telecommunications companies, including Bell
Atlantic, AT&T, MCI and SBC, continue to actively engage in developing
telecommunications services in Mexico. Many of these competitors have
substantially greater resources than Leap Wireless. We cannot assure you that
Leap Wireless' Mexican operating company will be able to raise the debt or
equity it needs to continue building its network beyond 1999 or that it will be
able to compete successfully.

LEAP WIRELESS' OPERATING COMPANIES ARE HEAVILY DEPENDENT ON QUALCOMM AND
ERICSSON

QUALCOMM and Leap Wireless' operating companies have entered into
significant infrastructure and subscriber equipment supply agreements. QUALCOMM
agreed to provide substantial vendor financing in connection with the sale of
this equipment. QUALCOMM recently transferred to Ericsson its right to sell
infrastructure equipment to the Leap Wireless operating companies. Leap
Wireless' operating companies ability to construct and operate their wireless
networks and their business systems may depend on the performance of QUALCOMM
and Ericsson under these agreements. Neither Leap Wireless nor any of its
operating companies exercises control over QUALCOMM or Ericsson. We cannot
assure you that QUALCOMM and Ericsson will fulfill their obligations under these
agreements. If QUALCOMM or Ericsson fails to fully perform under these
agreements, that failure could have a negative effect on Leap Wireless and its
operating companies.

Leap Wireless is a party to several agreements with QUALCOMM and Ericsson.
For instance, Leap Wireless will initially be dependent on the credit agreement
with QUALCOMM to meet its needs for capital. In addition, under the terms of the
Master Agreement Regarding Equipment Acquisition, Leap Wireless must purchase
CDMA infrastructure products from Ericsson and CDMA subscriber products from
QUALCOMM. Several of Leap Wireless' operating companies have experienced
reliability problems with respect to their network infrastructure equipment in
their initial year of operation. Leap Wireless and its operating companies are
working with Ericsson to address these problems. If the network infrastructure
equipment that Leap Wireless' operating

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companies have purchased ultimately fails to perform as expected, that failure
could have a material adverse effect on Leap Wireless and its operating
companies.

Leap Wireless' relationships with QUALCOMM and Ericsson may restrict its
ability to invest in other joint ventures. These agreements may also allow
QUALCOMM and Ericsson to exert influence over Leap Wireless. We cannot assure
you that Leap Wireless will not experience disputes or other difficulties with
QUALCOMM or Ericsson regarding their performance under these agreements.

LEAP WIRELESS' FAILURE TO MAINTAIN ITS EXISTING LICENSES AND OBTAIN NEW LICENSES
COULD AFFECT ITS COMPETITIVE POSITION

Leap Wireless' operating companies must maintain their existing
telecommunications licenses to continue offering wireless telecommunications
services. In addition, Leap Wireless' long-term growth prospects may depend upon
obtaining new licenses in the future or otherwise investing and participating in
companies that obtain new licenses. Changes in regulations or an operating
company's failure to comply with the terms of a license could result in a loss
of the license or impede its renewal. For example, an operating company could
fail to construct or operate a wireless network as required by the license. If a
Leap Wireless operating company loses a license, that loss would likely have a
material adverse effect on the operating company and on Leap Wireless. Leap
Wireless believes that intense competition will surround the acquisition of new
telecommunications licenses. If Leap Wireless fails to obtain new licenses, or
cannot otherwise participate in companies that obtain new licenses, Leap
Wireless' ability to expand its operations may be limited.

Leap Wireless' business plan anticipates that it will purchase licenses to
C-Block and F-Block PCS spectrum in the United States. Leap Wireless expects to
use these licenses in connection with its domestic strategy of offering
consumers a wireless service plan that offers them unlimited local calls for a
low, flat monthly rate. Although C-Block and F-Block licenses are generally more
available and are less expensive to obtain than licenses in other spectrum
blocks, licensees are eligible to hold licenses for C-Block and F-Block spectrum
only if they qualify as designated entities under Federal Communications
Commission rules.

In July 1999, the FCC issued an opinion and order that had the effect of
granting Leap Wireless status as a designated entity and that approved Leap
Wireless' applications for the purchase of four F-Block PCS spectrum licenses
and the acquisition of 36 C-Block PCS spectrum licenses, subject to the
fulfillment of certain conditions. The conditions imposed by the FCC include:

(1) amending the Separation and Distribution Agreement with QUALCOMM to
eliminate the provisions that require Leap Wireless' U.S. operations to use only
cdmaOne technology and to refrain from supporting GSM, TDMA or other digital
technologies in competition with cdmaOne (cdmaOne is a wireless
telecommunications standard based on QUALCOMM's CDMA technology);

(2) amending the Separation and Distribution Agreement with QUALCOMM to
eliminate the provisions that require Leap Wireless' U.S. operations to invest
only in companies that use cdmaOne technology;

(3) amending the Master Agreement Regarding Equipment Acquisition to
eliminate QUALCOMM's rights to receive notification of the bids of other
equipment vendors prior

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<PAGE> 15

to submitting its own bid and to reduce its bid to assure it is selected to
supply equipment to Leap Wireless' U.S. operations;

(4) ensuring that, during the designated entity holding period for C-Block
and F-Block PCS spectrum licenses, individuals who are or were previously
officers or directors of QUALCOMM do not comprise a majority of Leap Wireless'
Board of Directors or a majority of its officers;

(5) the consummation of a patent litigation settlement between QUALCOMM and
Ericsson, including Ericsson's acquisition of QUALCOMM's infrastructure
division;

(6) taking steps so that by January 2001, QUALCOMM holds no more than 50%
of Leap Wireless' outstanding debt obligations; and

(7) amending the Agreement Regarding Share Ownership with QUALCOMM to
clarify that QUALCOMM's ownership limitations in that agreement are of the same
duration as those in QUALCOMM's warrant to purchase 4,500,000 shares of Leap
Wireless common stock and the implementation by QUALCOMM of a compliance program
to ensure that it does not exceed its limitations on the ownership of Leap
Wireless stock.

Various parties, including the U.S. Small Business Administration,
previously challenged Leap Wireless recent qualification to hold C-Block and
F-Block PCS licenses, and such parties may appeal the FCC's recent approval of
Leap Wireless' acquisition of C-Block and F-Block licenses. Leap Wireless cannot
assure you that it will prevail in connection with any such appeal or that it
will continue to maintain its status as a designated entity qualified to hold
C-Block or F-Block PCS spectrum licenses.

Leap Wireless and QUALCOMM have signed amendments to the Separation and
Distribution Agreement, the Master Agreement Regarding Equipment Acquisition and
the Agreement Regarding Share Ownership to satisfy several of the conditions
described above. If Leap Wireless fails to meet the remaining conditions imposed
by the FCC or otherwise fails to maintain its qualification to own C-Block and
F-Block licenses, that failure would likely have a material adverse effect on
Leap Wireless' financial condition and business prospects in the United States.

LEAP WIRELESS MAY EXPERIENCE DIFFICULTIES IN CONSTRUCTING AND OPERATING ITS
TELECOMMUNICATION NETWORKS

Leap Wireless and its operating companies will need to construct new
telecommunications networks and expand existing networks. Leap Wireless and its
operating companies may experience cost overruns on construction projects and
delays not within their control or the control of their subcontractors. We
cannot assure you that Leap Wireless and its operating companies can complete
construction projects for the amount budgeted or on a timely basis. If we fail
to satisfactorily complete construction projects, those failures could
jeopardize subscriber contracts, franchises or licenses. These construction
risks could have a negative effect on Leap Wireless and its operating companies.

Even if Leap Wireless and its operating companies complete construction in
a timely and cost effective manner, we will also face challenges in managing and
operating our telecommunication systems. These challenges include managing and
operating the sales, advertising, customer support, billing, and collection
functions of the business. If Leap Wireless or any of its operating companies
fails to successfully implement any of these functions, that failure could
undermine customer satisfaction, increase churn and reduce

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revenues. These factors could have a negative effect on Leap Wireless and its
operating companies.

LEAP WIRELESS' BUSINESS MAY BE ADVERSELY AFFECTED BY ITS PARTICIPATION IN JOINT
VENTURES

Leap Wireless participates in joint venture companies that hold wireless
telephone licenses or interests in companies that hold wireless telephone
licenses. Many of Leap Wireless' partners in these joint venture companies have
little experience in managing wireless telephone operating companies. Leap
Wireless' ability to withdraw funds and to manage these joint ventures may be
dependent on receiving consent from these other participants. Additionally, some
of the partners in these joint ventures have invested relatively small amounts
of their own funds in the joint ventures. Leap Wireless does not control each of
the joint ventures in which it participates. If Leap Wireless and its joint
venture partners disagree regarding the operations of these joint ventures,
those disagreements could have a negative effect on Leap Wireless. Additionally,
if any of Leap Wireless' joint venture partners do not meet their funding or
other obligations, that failure could also negatively affect Leap Wireless. In
that case, Leap Wireless may be forced to make additional investments in these
companies.

A DETERMINATION THAT LEAP WIRELESS IS AN INVESTMENT COMPANY COULD ADVERSELY
AFFECT ITS BUSINESS

Because a large portion of Leap Wireless' assets consist of investments in
entities in which Leap Wireless does not own an interest greater than 50%, Leap
Wireless could be subject to the registration requirements of the Investment
Company Act of 1940. The Investment Company Act of 1940 requires registration of
companies that engage primarily in the business of investing in stock. Because
Leap Wireless' operating companies have business operations and Leap Wireless
intends to actively participate in the management of its operating companies,
Leap Wireless does not believe it is primarily engaged in the business of
investing in stock. Leap Wireless intends to monitor and adjust its interests in
its operating companies to the extent practical to avoid subjecting itself to
the Investment Company Act of 1940. In addition, to clarify Leap Wireless'
status under the Investment Company Act of 1940, in September 1998 Leap Wireless
filed a request for an exemptive order from the SEC declaring Leap Wireless to
be primarily engaged in a business other than investing in stock. The SEC has
not yet ruled on our application. We cannot assure you that the requested
exemptive order will be granted. If we must register as an investment company
under the Investment Company Act of 1940, compliance with these regulations will
negatively impact our business.

LEAP WIRELESS FACES SIGNIFICANT COMPETITION

Participants in the wireless telecommunications industry in the United
States and throughout the world face increasing competition. We cannot assure
you that Leap Wireless or its operating companies will compete successfully. We
cannot assure you that our competitors will not develop new technologies and
products that are more commercially effective than ours. In addition, many of
Leap Wireless' prospective competitors have greater resources than Leap
Wireless.

Although the deployment of advanced telecommunications services is in its
early stages in many developing countries, Leap Wireless believes competition is
increasing as businesses and foreign governments realize the market potential of
telecommunications services. Many of Leap Wireless' operating companies
currently face competition from

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existing wireless telecommunications providers. In addition, a number of large
telecommunications companies are implementing programs to deploy
telecommunications services in both developing and developed countries. In many
cases, Leap Wireless also competes against the landline carriers, including
government-owned telephone companies. In addition, Leap Wireless' operating
companies may face competition with technologies and services introduced in the
future. Although Leap Wireless' operating companies intend to use relatively new
technologies, newer technologies may make our technologies obsolete. Leap
Wireless also expects the price that its operating companies charge for their
products and services in some regions will decline over the next few years as
competition increases in their markets.

The U.S. wireless industry is very competitive. A few of Leap Wireless'
competitors operate wireless telecommunications networks covering most of the
United States. In the United States, Leap Wireless will compete directly with
other wireless providers in each of its markets, many of whom entered the market
before Leap Wireless. Competitors' earlier entry and broader presence in the
U.S. telecommunications market may have a negative effect on our ability to
successfully implement our strategy. Some competitors will likely market other
services, including cable television access, landline telephone service and
Internet access. Also, the available spectrum in an area may be divided into two
or more licenses, each of which cover the same area but has less capacity than
the original license. If the additional licenses are transferred to new entrants
in the service area, competition may increase. Leap Wireless also believes that
the two incumbent cellular providers who operate in each of Leap Wireless'
planned United States markets will be upgrading their networks in the future.
Leap Wireless further expects to compete with other telecommunications
technologies, including paging, enhanced specialized mobile radio and global
satellite networks.

QUALCOMM and Ericsson may choose to pursue new CDMA-based wireless
telecommunications businesses that would also be attractive projects for Leap
Wireless. Although QUALCOMM and Ericsson may refer any of these projects to Leap
Wireless, they have no obligations to do so. It is possible that QUALCOMM and
Ericsson will pursue wireless telecommunications opportunities in the future
that compete directly with Leap Wireless or its operating companies. This type
of competition could result in conflicts of interest between Leap Wireless and
QUALCOMM or Ericsson, negatively affecting the relationships between the
companies.

LEAP WIRELESS MAY FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGY

The telecommunications industry experiences rapid changes in technology
that could lead to new products and services competing with those offered by
Leap Wireless' operating companies. New products and services could lower the
cost of competing products and services to the point where Leap Wireless'
products and services would not be competitive. Leap Wireless cannot predict the
effect of technological changes on its businesses. Also, Leap Wireless'
operating companies could experience technical difficulties in their commercial
deployment. The emergence of a competing technology superior to CDMA systems
could have a negative effect on Leap Wireless' business and financial condition.

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LEAP WIRELESS' FAILURE TO COMPLY WITH GOVERNMENT REGULATION COULD DISRUPT ITS
BUSINESS

Foreign governmental authorities regulate the operation of wireless
telecommunications systems and the use of licenses in the foreign countries in
which Leap Wireless' operating companies operate. In some cases, the regulatory
authorities also operate the competitors of Leap Wireless' operating companies.
Changes in the current regulatory environment of these markets could have a
negative effect on Leap Wireless. In addition, the regulatory frameworks in some
of these countries are relatively new and the interpretation of regulations is
uncertain. This uncertainty may create legal risks for Leap Wireless' operating
companies. Also, changes in the regulatory frameworks may limit the ability to
add subscribers to developing systems. If an operating company fails to comply
with governmental regulations, that failure could result in the loss of
licenses, penalties and fines, which could have a negative effect on Leap
Wireless and its businesses.

State regulatory agencies, the FCC, the United States Congress and the
courts regulate the operation of wireless telecommunications systems and the use
of licenses in the United States. Both Leap Wireless and its U.S. operating
companies must comply with the requirements for conducting wireless operations
in the United States. The Telecommunications Act of 1996 requires the
telecommunications industry to promote competitive development of new service
offerings to expand the availability of telecommunications services. We cannot
assure you that the FCC, Congress, the courts or state agencies having
jurisdiction over Leap Wireless' operating companies will not take actions that
would negatively affect Leap Wireless' business and financial condition. We
cannot assure you that Leap Wireless' U.S. operating companies can maintain
their licenses.

THE LOSS OF KEY PERSONNEL COULD HARM LEAP WIRELESS' BUSINESS

Leap Wireless believes its success depends on the contributions of a number
of its key personnel. Our key personnel include Harvey P. White, Chairman of the
Board and Chief Executive Officer; Susan G. Swenson, President; Thomas J.
Bernard, Vice Chairman and President-International Business Division; and James
E. Hoffmann, Senior Vice President and General Counsel. If we lost the services
of our key personnel, that loss could materially harm Leap Wireless. Leap
Wireless does not maintain "key person" life insurance on any employee.

ISSUANCE OF SHARES RESERVED FOR FUTURE ISSUANCE WILL REDUCE YOUR PERCENTAGE
OWNERSHIP INTEREST IN LEAP WIRELESS

On July 1, 1999, a total of 18,221,595 shares of Leap Wireless common stock
were outstanding. The holders of Leap Wireless' outstanding common stock may
have their percentage ownership interest in Leap Wireless reduced because of the
number of shares of Leap Wireless common stock reserved for issuance in the
future. Altogether, Leap Wireless has reserved for issuance 14,814,485 shares of
Leap Wireless common stock as of July 1, 1999, consisting of the following:

- 4,500,000 shares for issuance upon exercise of the warrant issued to
QUALCOMM;

- 3,259,006 shares for issuance to its employees, officers, directors and
consultants under Leap Wireless equity incentive plans;

- 4,784,906 shares for issuance upon exercise of options to purchase Leap
Wireless common stock granted in connection with the spin-off of Leap
Wireless; and

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<PAGE> 19

- 2,270,573 shares for issuance upon conversion of outstanding Trust
Convertible Preferred Securities.

Although Leap Wireless does not expect to issue all of the reserved shares
described above, the current holders of shares of Leap Wireless' outstanding
common stock would hold 55% of the outstanding common stock upon the issuance of
all of these shares.

THERE HAS BEEN A LIMITED PRIOR MARKET FOR LEAP WIRELESS COMMON STOCK

Leap Wireless common stock began trading on September 23, 1998. We cannot
assure you that an active trading market will be maintained over the long-term.
As a "start-up" company with substantial interests in emerging markets, the
price for shares of Leap Wireless common stock may be highly volatile. The price
of Leap Wireless common stock will depend on a number of factors, including:

- business performance;

- industry dynamics;

- news announcements;

- international factors; and

- changes in general market conditions.

LEAP WIRELESS HAS IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD PREVENT AN
ACQUISITION OF LEAP WIRELESS THAT IS BENEFICIAL TO ITS STOCKHOLDERS

Leap Wireless' charter and bylaws could make it more difficult for a third
party to acquire Leap Wireless, even if doing so would be beneficial to our
stockholders. Leap Wireless' charter and bylaw provisions could diminish the
opportunities for a stockholder to participate in tender offers. The charter and
bylaws may also restrain volatility in the market price of the Leap Wireless
common stock resulting from takeover attempts. In addition, the Board of
Directors may issue preferred stock that could have the effect of delaying or
preventing a change in control of Leap Wireless. The issuance of preferred stock
could also negatively affect the voting power of the holders of Leap Wireless
common stock. The provisions of the charter and bylaws may have the effect of
discouraging or preventing an acquisition of Leap Wireless or a sale of its
businesses.

The preferred stock purchase rights attached to each share of Leap Wireless
common stock could discourage, delay or prevent an acquisition of Leap Wireless
at a premium price. The purpose of the preferred stock purchase rights is to
assure that all of Leap Wireless' stockholders receive fair and equal treatment
in the event of any proposed takeover of Leap Wireless. The preferred stock
purchase rights also guard against a party using abusive tactics to gain control
of Leap Wireless without paying all stockholders a control premium. The
preferred stock purchase rights will cause substantial dilution to a person or
group acquiring 15% or more of Leap Wireless' stock if the acquisition is not
approved by the Board of Directors, although the rights should not interfere
with any merger approved by the Board of Directors.

YEAR 2000 PROBLEMS COULD DISRUPT LEAP WIRELESS' BUSINESS

The Year 2000 issue arises from the fact that most computer software
programs use two digits rather than four to represent a specific year. Any
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculation causing disruptions of

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<PAGE> 20

operations, including a temporary inability to process transactions, send
invoices or engage in normal business activities.

Leap Wireless and its operating companies have recently begun their
respective businesses and have designed and built their wireless telephone
networks and support systems with the Year 2000 issue in mind. The recent
acquisition of network equipment and software does not guarantee, however, that
this equipment and software will be Year 2000 compliant.

Leap Wireless and each of its operating companies are conducting an
inventory to identify systems that may be subject to Year 2000 problems and that
are critical to its business and operations. At the same time, each of the
operating companies has been working with its primary telecommunications systems
vendors to confirm that the vendor's products are Year 2000 ready and, if not,
to agree with such vendor on a remediation and test program to be implemented
prior to the Year 2000.

Although Leap Wireless expects that its operating companies' critical
network infrastructure systems will be Year 2000 compliant, the Leap Wireless
operating companies may experience difficulties with systems maintained by third
parties. For example, other telecommunications systems that interconnect with
the Leap Wireless operating companies' systems (such as landline, long-distance
and power systems) could malfunction and disrupt their ability to provide
wireless service. Leap Wireless' operating companies are not currently aware of
evidence that a failure is likely to occur in their service areas. However, Leap
Wireless and its operating companies continues to evaluate the risk associated
with third party interfaces and Year 2000 issues.

Leap Wireless continues to actively work with its operating companies to
evaluate risk and the development of any required remediation plans. To date,
Leap Wireless has not incurred any material costs in support of the Year 2000
issue. Leap Wireless estimates that it will spend $500,000 or less in fiscal
year 1999 to review and correct any non-compliance as well as to support the
Leap Wireless operating companies and support material third party
relationships. Leap Wireless has not yet developed contingency plans to handle
Year 2000 failures.

We cannot assure you that Leap Wireless and its operating companies will be
able to identify all Year 2000 problems in their systems and third party systems
in advance of the occurrence of those problems. In addition, we may not be able
to remedy any problems that may occur on a timely basis. A material Year 2000
problem could result in an interruption in, or a failure of, some normal
business activities, including the provision of wireless service by the Leap
Wireless operating companies. This type of problem could materially and
adversely affect the business and operations of Leap Wireless and its operating
companies.

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FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We have based these forward-looking statements largely on
our current expectations and projections about future events and financial
trends affecting the financial condition of our business. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions about
Leap Wireless, including, among other things:

- general economic and business conditions, both nationally and in our
international markets;

- our expectations and estimates concerning future financial performance,
financing plans and the impact of competition;

- anticipated trends in our business;

- existing and future regulations affecting our business;

- our acquisition opportunities; and

- other risk factors described in the section entitled "Risk Factors" in
this prospectus.

In addition, we intend that the words "believe," "may," "will," "estimate,"
"continue," "anticipate," "intend," "expect," and similar expressions in this
prospectus, as they relate to Leap Wireless, our business or our management,
identify forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus may not occur and actual results
could differ materially from those anticipated or implied in the forward-looking
statements.

RELATIONSHIP BETWEEN LEAP WIRELESS AND QUALCOMM
AFTER THE DISTRIBUTION

To transfer the business of Leap Wireless from QUALCOMM to Leap Wireless,
QUALCOMM and Leap Wireless entered into various agreements, including a credit
agreement and an agreement requiring Leap Wireless and its operating companies
to purchase network infrastructure equipment and subscriber equipment from
QUALCOMM under specified conditions. In May 1999, QUALCOMM sold its network
infrastructure division to Ericsson. In connection with that sale, QUALCOMM
transferred to Ericsson its rights to sell network infrastructure equipment to
Leap Wireless and its operating companies.

QUALCOMM's and Ericsson's relationships as equipment vendors to Leap
Wireless and its operating companies, and QUALCOMM's relationship as a lender to
Leap Wireless and its operating companies, give QUALCOMM and Ericsson
significant influence over Leap Wireless. These relationships also may create
conflicts of interest with Leap Wireless.

SEPARATION AND DISTRIBUTION AGREEMENT

Immediately before the distribution of Leap Wireless common stock to
QUALCOMM's stockholders, QUALCOMM and Leap Wireless entered into the

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Separation and Distribution Agreement. The Separation and Distribution Agreement
governed the principal transactions required to effect the separation of the
companies and the distribution, and other agreements governing the relationship
between the parties.

To effect the separation of the companies, QUALCOMM transferred some of its
businesses and ventures to Leap Wireless. QUALCOMM also contributed to Leap
Wireless the following:

- $10 million in cash;

- QUALCOMM's right to receive payment of approximately $113 million of debt
from the operating companies;

- QUALCOMM's rights under specific agreements relating to the business and
ventures of Leap Wireless; and

- other assets.

QUALCOMM's performance as an equipment vendor is not a condition to payment
to Leap Wireless under the notes and other debt transferred. Leap Wireless did
not receive any intellectual property in connection with the separation of the
companies, and QUALCOMM retained all rights not expressly transferred regarding
any and all agreements with Leap Wireless' operating companies.

In connection with the transfer of assets and rights by QUALCOMM, Leap
Wireless issued a warrant to QUALCOMM to purchase 5,500,000 shares of Leap
Wireless common stock. In March 1999, in exchange for consideration valued at
$5.4 million, QUALCOMM agreed to amend the warrant to reduce the number of
shares which may be acquired upon exercise of the warrant to 4,500,000. In the
Separation and Distribution Agreement, Leap Wireless also assumed some
liabilities of QUALCOMM, including: (1) funding obligations to Leap Wireless'
operating companies totaling approximately $75 million; (2) QUALCOMM's rights
and obligations to manage Leap Wireless' operating companies; and (3) $2 million
of accrued liabilities regarding Leap Wireless' employees.

The Separation and Distribution Agreement also provides for (1) releases of
claims of each party against the other; (2) the allocation of potential
liabilities; and (3) indemnification rights between the parties.

Leap Wireless agreed in the Separation and Distribution Agreement that,
until January 1, 2004, it will deploy only systems using cdmaOne. CdmaOne is the
original standard for fixed or mobile wireless telecommunications systems based
on or derived from QUALCOMM's CDMA technology and successor standards that
QUALCOMM has adopted. The Telecommunications Industry Association and other
recognized international standards bodies have adopted cdmaOne as an industry
standard. Leap Wireless also agreed that, until January 1, 2004, it would invest
only in companies using cdmaOne systems. In July 1999, the Federal
Communications Commission issued an opinion and order that had the effect of
granting Leap Wireless status as a designated entity qualified to hold C-Block
and F-Block PCS spectrum licenses. To satisfy one of several conditions to the
order, Leap Wireless and QUALCOMM amended the Separation and Distribution
Agreement to eliminate these CDMA technology restrictions with respect to Leap
Wireless' U.S. operations.

Under the Separation and Distribution Agreement, Leap Wireless also granted
QUALCOMM a non-exclusive, royalty-free license to any patent rights developed by
Leap Wireless or its affiliates. In addition, under the Separation and
Distribution Agreement, Leap Wireless granted QUALCOMM a right of first refusal
for a period of three years

21
<PAGE> 23

with respect to proposed transfers by Leap Wireless of its investments and joint
venture interests. Leap Wireless further agreed to take an active role in the
management of companies in which it holds stock or joint venture interests. The
parties also generally agreed that, for a period of three years following the
spin-off of Leap Wireless, neither party would solicit or hire employees of the
other.

Under the Separation and Distribution Agreement, the parties agreed that if
specific events occur by March 2000, QUALCOMM would transfer its ownership
interest in Telesystems of Ukraine to Leap Wireless. As a result of continued
difficulties between QUALCOMM and the other partners in Telesystems of Ukraine,
Leap Wireless believes that it is unlikely that QUALCOMM's interest in
Telesystems of Ukraine will be transferred to Leap Wireless.

CREDIT AGREEMENT

Immediately before the distribution of Leap Wireless common stock to
QUALCOMM's stockholders, Leap Wireless entered into a credit agreement with
QUALCOMM. The credit agreement consists of two sub-facilities. Leap Wireless may
use the working capital sub-facility to borrow up to $35.2 million from
QUALCOMM. Leap Wireless may only use the proceeds from the working capital
sub-facility to meet its normal working capital and operating expenses. These
normal expenses include salaries and overhead, but exclude strategic
investments, substantial acquisitions of capital equipment and the acquisition
of telecommunications licenses. The investment capital sub-facility enables Leap
Wireless to borrow up to $229.8 million from QUALCOMM. Leap Wireless may only
use the proceeds from the investment capital sub-facility to make identified
portfolio investments. In addition, as one of the conditions to the FCC's
recognition of Leap Wireless as a designated entity qualified to hold C-Block
and F-Block licenses of PCS spectrum, Leap Wireless must take steps so that by
January 2001, QUALCOMM holds no more than 50% of Leap Wireless' outstanding debt
obligations.

Amounts borrowed under the credit agreement are due and payable in
September 2006, unless the maturity of the loans is accelerated pursuant to the
provisions of the credit agreement. The credit agreement required a 2%
origination fee. QUALCOMM has a security interest in substantially all of the
assets of Leap Wireless for so long as any amounts are outstanding under the
credit agreement. Amounts borrowed under the credit agreement bear interest at a
variable rate equal to LIBOR plus 5.25% per annum. Interest is payable quarterly
beginning September 30, 2001. Before this time, accrued interest is added to the
principal amount outstanding. If QUALCOMM assigns more than 10% of the total
funding commitments to other lenders, Leap Wireless must pay a commitment fee to
the lenders on unused balances under the credit agreement.

The credit agreement contains operating covenants, including restrictions
on the ability of Leap Wireless to incur debt, merge, consolidate or transfer
substantially all of its assets, create, incur or permit the existence of liens
or pay dividends. Under the credit agreement, Leap Wireless agreed that it will
not permit the quotient obtained by dividing its total debt by total
capitalization to exceed the following level during the indicated period:

<TABLE>
<CAPTION>
PERIOD LEVEL
------ -----
<S> <C>
Through February 23, 2002................................... 70%
After February 23, 2002..................................... 50%
</TABLE>

The terms total debt and total capitalization are each defined in the
credit agreement.

22
<PAGE> 24

Leap Wireless was in compliance with the financial covenant as of May 31,
1999. In addition, the credit agreement limits Leap Wireless' use of borrowed
funds, restricts Leap Wireless' joint venture and stock ownership, and imposes
other restrictions on the operation of Leap Wireless' business. Further, if we
sell some of our assets, we must prepay the credit agreement with a percentage
of the proceeds.

MASTER AGREEMENT REGARDING EQUIPMENT ACQUISITION

The Master Agreement Regarding Equipment Acquisition contains the
obligations of Leap Wireless regarding the purchase and sale of
terrestrial-based cdmaOne infrastructure and subscriber equipment. As a result
of QUALCOMM's sale of its network infrastructure division to Ericsson, Leap
Wireless owes some purchase obligations to Ericsson with respect to network
equipment and to QUALCOMM with respect to subscriber equipment. Under the Master
Agreement Regarding Equipment Acquisition, Leap Wireless agreed that:

- For five years, it will purchase at least 50% of its requirements for
infrastructure equipment from Ericsson and 50% of its requirements for
subscriber equipment from QUALCOMM.

- For each initial investment by Leap Wireless made before October 2002 in
a wireless telecommunication entity operating in the United States, Leap
Wireless will require the U.S. operator to enter into an equipment
requirements agreement with QUALCOMM and Ericsson. The equipment
requirements agreement will require the U.S. operator to purchase at
least 50% of its requirements for infrastructure equipment from Ericsson
and 50% of its requirements for subscriber equipment from QUALCOMM, in
each case for a five year period.

Leap Wireless must comply with these requirements only if Ericsson's bid for the
infrastructure equipment and related services or QUALCOMM's bid for subscriber
equipment is 110% or less than the lowest competing bid that Leap Wireless would
accept. Once Ericsson obtains contracts from Leap Wireless and its domestic
operating companies for infrastructure equipment and related services in an
aggregate amount of $250 million, Leap Wireless and its operating companies must
purchase equipment and services from Ericsson only if its bid for equipment and
services is equal to or less than the lowest competing bid that Leap Wireless or
its operating company would accept. In the same manner, once QUALCOMM has
received contracts from Leap Wireless and its operating companies for at least
$250 million of subscriber equipment, Leap Wireless and its operating companies
must purchase subscriber equipment from QUALCOMM only if its bid is equal to or
less than the lowest competing bid Leap Wireless or its operating company would
accept.

Until the earlier of (1) October 2002 and (2) the date on which Leap
Wireless receives an aggregate of $60 million of financing from parties other
than QUALCOMM, Leap Wireless will require each unaffiliated wireless
telecommunication entity operating outside the United States in which it invests
to enter into an equipment requirements

23
<PAGE> 25

agreement with QUALCOMM and Ericsson. The equipment requirements agreement will
provide that the foreign operator of wireless telecommunications will purchase
at least 50% of its requirements for infrastructure equipment from Ericsson and
50% of its requirements for subscriber equipment from QUALCOMM, in each case for
a five year period. If Leap Wireless makes this type of investment after the
date described above, Leap Wireless will seek to provide QUALCOMM and Ericsson
with an opportunity to bid on the foreign operator's infrastructure and
subscriber equipment. Leap Wireless will also encourage the foreign operator to
acquire its equipment from QUALCOMM and Ericsson. The obligations of all the
foreign operators will depend on QUALCOMM and Ericsson providing competitive
prices.

All the obligations of Leap Wireless and its operating companies regarding
equipment purchases under the Master Agreement Regarding Equipment Acquisition
will expire in September 2007.

Ericsson's right to supply infrastructure equipment and QUALCOMM's right to
supply subscriber equipment is a right of first refusal of Ericsson and
QUALCOMM, respectively. However, the FCC conditioned its July 1999 recognition
of Leap Wireless as a designated entity qualified to hold C-Block and F-Block
PCS spectrum licenses on several matters, including Leap Wireless and QUALCOMM
amending the Master Agreement Regarding Equipment Acquisition to eliminate
QUALCOMM's rights to receive notification of bids submitted by other equipment
vendors prior to submitting its own bid and to reduce its bid to assure it is
selected to supply equipment to Leap Wireless' U.S. operations. Leap Wireless
and QUALCOMM have signed an amendment to the Master Agreement Regarding
Equipment Acquisition to satisfy this condition. If Leap Wireless or one of its
operating companies attempts to acquire equipment on a "bundled" basis, then
Ericsson and QUALCOMM are entitled, in some cases, to respond separately to each
portion of the proposed bundled acquisition. If Leap Wireless does not attempt
to acquire the equipment on a competitive basis from multiple vendors, but
instead decides to negotiate exclusively with Ericsson or QUALCOMM, then
Ericsson or QUALCOMM, as applicable, will offer and sell the equipment to Leap
Wireless on a "most favored pricing" basis.

INTERIM SERVICES AGREEMENT

Leap Wireless and QUALCOMM entered into the Interim Services Agreement
immediately before the distribution of Leap Wireless common stock. The Interim
Services Agreement governs the temporary provision by QUALCOMM to Leap Wireless
of data processing, telecommunications and other services. Leap Wireless has
agreed to pay QUALCOMM the hourly rate of the QUALCOMM employees providing these
services, plus associated overhead and expenses. Leap Wireless does not expect
these interim services to extend beyond September 1999.

EMPLOYEE BENEFITS AGREEMENT

The Employee Benefits Agreement between QUALCOMM and Leap Wireless governs
the employee benefit obligations of Leap Wireless for employees assigned to Leap
Wireless. Under the Employee Benefits Agreement, Leap Wireless assumed and
agreed to pay all liabilities relating to former employees of QUALCOMM employed
by Leap Wireless. The Employee Benefits Agreement also required Leap Wireless to
adopt a 401(k) plan similar to QUALCOMM's plan. In addition, Leap Wireless
granted options

24
<PAGE> 26

to purchase shares of Leap Wireless common stock to holders of options to
purchase shares of QUALCOMM common stock.

TAX AGREEMENT

The Tax Agreement between QUALCOMM and Leap Wireless generally requires
QUALCOMM to pay all federal, state, local and foreign taxes relating to the
businesses conducted by QUALCOMM or its subsidiaries for any taxable period,
excluding: (1) taxes relating to Leap Wireless and its U.S. subsidiaries after
the distribution of Leap Wireless; (2) taxes relating to Leap Wireless' non-U.S.
subsidiaries or any predecessor or successor for all periods before and after
the distribution of Leap Wireless (other than regarding restructuring
transactions incident to the distribution of Leap Wireless common stock); and
(3) taxes arising out of actions taken by, or in respect of, Leap Wireless or
any of its subsidiaries that cause negative tax consequences to QUALCOMM, Leap
Wireless or their respective subsidiaries regarding the distribution of Leap
Wireless common stock or the related transactions.

The Tax Agreement further provides for cooperation regarding tax matters,
the exchange of information and retention of records that may affect the tax
liability of either party.

CONVERSION AGREEMENT

Under the Conversion Agreement, Leap Wireless agreed to issue the Leap
Wireless common stock offered by this prospectus to holders of the Trust
Convertible Preferred Securities upon the conversion of their securities. Leap
Wireless also agreed to reserve and keep available Leap Wireless common stock
for issuance and delivery upon that conversion. Leap Wireless must also file and
keep effective this registration statement covering the shares of Leap Wireless
common stock issuable upon conversion of the Trust Convertible Preferred
Securities. Upon conversion of the Trust Convertible Preferred Securities,
QUALCOMM will receive benefit in the form of forgiveness of debt, but Leap
Wireless will receive no additional benefit or other consideration.

QUALCOMM TRUST CONVERTIBLE PREFERRED SECURITIES

In February 1997, QUALCOMM Financial Trust I completed a private placement
of $660 million of Trust Convertible Preferred Securities. The sole assets of
QUALCOMM Financial Trust I are QUALCOMM 5 3/4% Convertible Subordinated
Debentures due February 24, 2012. The holders of Trust Convertible Preferred
Securities receive required periodic payments from QUALCOMM Financial Trust I.
The payments by QUALCOMM to QUALCOMM Financial Trust I under the payment terms
of the Convertible Subordinated Debentures permit QUALCOMM Financial Trust I to
fulfill its payment obligations regarding the Trust Convertible Preferred
Securities. The terms of a guaranty may obligate QUALCOMM to make payments to
the holders of the Trust Convertible Preferred Securities if QUALCOMM Financial
Trust I fails to make them. Distributions on the Trust Convertible Preferred
Securities are payable until their mandatory redemption on February 24, 2012, at
a redemption price of $50 per preferred security.

Before the distribution of Leap Wireless' common stock to QUALCOMM's
stockholders, the Trust Convertible Preferred Securities were convertible only
into QUALCOMM common stock, at the rate of 1.3764 shares of QUALCOMM common

25
<PAGE> 27

stock for each Trust Convertible Preferred Security (equivalent to a conversion
price of $36.3266 per share of common stock). As a result of and after the
distribution of Leap Wireless common stock, each Trust Convertible Preferred
Security is convertible into both QUALCOMM common stock at the rate of 1.3764
shares and Leap Wireless common stock at the rate of 0.17205 shares, for each
Trust Convertible Preferred Security. Leap Wireless agreed to issue common stock
upon the future conversion of the Trust Convertible Preferred Securities in
consideration for the contribution to Leap Wireless of its operating companies,
joint venture interests and other assets.

The conversion rates and conversion prices of QUALCOMM shares provided in
this section of the prospectus have been adjusted to give effect to QUALCOMM's
two-for-one stock split of its common stock in April 1999.

USE OF PROCEEDS

The shares of Leap Wireless common stock offered by this prospectus will be
issued to holders of Trust Convertible Preferred Securities upon the future
conversion of the Trust Convertible Preferred Securities. Leap Wireless will
receive no additional consideration or forgiveness of debt upon conversion of
the Trust Convertible Preferred Securities and the issuance of common stock.
Upon the conversion of the Trust Convertible Preferred Securities, QUALCOMM will
receive benefit in the form of forgiveness of debt. See also "Relationship
Between Leap Wireless and QUALCOMM After the Distribution -- Conversion
Agreement."

PLAN OF DISTRIBUTION

The shares of Leap Wireless common stock offered by this prospectus will be
issued from time to time by Leap Wireless to holders of Trust Convertible
Preferred Securities upon exercise of the holders' conversion rights. Under the
Conversion Agreement, QUALCOMM agreed to pay all expenses of Leap Wireless,
including professional fees, incurred in connection with the registration of
common stock offered by this prospectus and the additional expenses that will be
incurred from time to time to maintain the registration statement. Leap Wireless
also expects to incur administrative expenses in connection with the issuance of
common stock upon the conversion of the Trust Convertible Preferred Securities.

PRICE RANGE OF COMMON STOCK

The Leap Wireless common stock is listed for trading on the Nasdaq National
Market System under the symbol LWIN. Since September 24, 1998, our common stock
has been quoted on the Nasdaq National Market. The following table provides the
high and low sales price for our common stock during the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1999
1st Quarter ended November 30, 1998 (from September 24,
1998).................................................. $ 9 $ 2 11/16
2nd Quarter ended February 28, 1999....................... 7 7/8 4 3/4
3rd Quarter ended May 31, 1999............................ 25 1/2 5 7/8
4th Quarter ended August 31, 1999 (through August 9,
1999).................................................. 21 3/4 16
</TABLE>

26
<PAGE> 28

The number of stockholders of record as of July 1, 1999 was approximately
2,030. On August 9, 1999, the last reported sale price of our common stock as
reported by the Nasdaq National Market System was $17.00 per share.

DIVIDEND POLICY

As of the date of this prospectus, Leap Wireless has never declared or paid
any cash dividends on shares of its common stock. The terms of the credit
agreement prohibit Leap Wireless from declaring or paying cash dividends. For a
more detailed discussion see "Relationship Between Leap Wireless and QUALCOMM
After the Distribution -- Credit Agreement." Leap Wireless currently intends to
retain its earnings for future growth and does not anticipate paying any cash
dividends in the foreseeable future.

CAPITALIZATION

The following table sets forth, as of May 31, 1999, the capitalization of
Leap Wireless:

<TABLE>
<CAPTION>
AS OF
MAY 31, 1999
--------------
(IN THOUSANDS)
<S> <C>
Long-term debt(1)........................................... $ 152,306
---------
Stockholders' equity:
Common stock(2)........................................... 2
Additional paid-in capital(3)............................. 288,953
Deficit accumulated during the development stage.......... (142,302)
Cumulative translation adjustment......................... (2,716)
---------
Total stockholders' equity............................. 143,937
---------
Total capitalization................................... $ 296,243
=========
</TABLE>

- -------------------------
(1) QUALCOMM provided Leap Wireless with a credit agreement providing $35.2
million for working capital and $229.8 million for investment capital
purposes. The facility generally bears interest at a variable rate equal to
LIBOR plus 5.25% per annum. Interest will be payable quarterly beginning
September 30, 2001 and, prior to that time, accrued interest is added to the
principal amount outstanding.

(2) In connection with the distribution of Leap Wireless common stock to
QUALCOMM's stockholders, one share of Leap Wireless' common stock was issued
for every four shares of QUALCOMM common stock outstanding on the record
date for the distribution, September 11, 1998. See Note 1 of the audited
Consolidated Financial Statements.

(3) Includes the contribution of net assets by QUALCOMM to Leap Wireless on
September 23, 1998.

DILUTION

As of May 31, 1999, the net tangible book value of Leap Wireless' common
stock was $77.3 million or $4.27 per share of common stock. Net tangible book
value per share represents Leap Wireless' total tangible assets less total
liabilities, divided by 18,098,984, which is the number of shares of common
stock outstanding as of May 31, 1999. Dilution

27
<PAGE> 29

per share represents the difference between the net tangible book value per
share before the issuance of our common stock upon the conversion of the Trust
Convertible Preferred Securities and the net tangible book value per share after
the issuance of our common stock upon the conversion of the Trust Convertible
Preferred Securities. Upon conversion of the Trust Convertible Preferred
Securities, QUALCOMM will receive benefit in the form of forgiveness of debt,
but Leap Wireless will receive no benefit or additional consideration. As a
result, after giving effect to the issuance by Leap Wireless of 2,271,060 shares
offered by this prospectus, Leap Wireless' net tangible book value as of May 31,
1999, would have remained at $77.3 million in the aggregate but would have
decreased to $3.80 per share of common stock. This represents an immediate
decrease in such net tangible book value of $0.47 per share to existing
stockholders. Holders of Trust Convertible Preferred Securities will receive
0.17205 shares of Leap Wireless' common stock per preferred security upon
conversion, the value of which will depend upon the market price of Leap
Wireless' common stock on the date of conversion. On August 9, 1999, the closing
price of the Leap Wireless common stock was $17.00 per share.

SUBSTANTIAL FUTURE DILUTION FROM LEAP WIRELESS SHARE RESERVES

The computations in the previous paragraph assume no exercise of Leap
Wireless stock options or warrants outstanding. The holders of Leap Wireless
common stock will be subject to potential substantial dilution due to the
significant number of shares of common stock of Leap Wireless currently reserved
for issuance. As of July 1, 1999, in addition to the 2,270,573 shares of common
stock reserved for issuance upon the conversion of outstanding Trust Convertible
Preferred Securities, there were 12,543,912 shares of common stock of Leap
Wireless reserved for issuance consisting of the following:

- 4,500,000 shares reserved for issuance upon exercise of the warrant
issued to QUALCOMM.

- 3,259,006 shares reserved for issuance to Leap Wireless' employees,
officers, directors and consultants under Leap Wireless' equity incentive
plans.

- 4,784,906 shares reserved for issuance upon exercise of options to
purchase Leap Wireless common stock granted in connection with the
spin-off of Leap Wireless (including options issued to Leap Wireless
employees who were former employees of QUALCOMM and held options for
QUALCOMM common stock on the date of the spin-off).

To the extent we issue shares upon exercise of options, warrants or rights
that are presently outstanding or granted in the future, or reserved for future
issuance under our stock plans, there will be further dilution to new investors.

28
<PAGE> 30

SELECTED CONSOLIDATED HISTORICAL
AND UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected historical consolidated statements of operations
data and consolidated balance sheet data and corresponding pro forma data of
Leap Wireless should be read in conjunction with the historical consolidated
financial statements and notes thereto included elsewhere in this prospectus.
The historical consolidated financial data for the nine months ended May 31,
1999 and 1998 and fiscal years ended August 31, 1998, 1997 and 1996 were derived
from the unaudited Consolidated Financial Statements and the audited
Consolidated Financial Statements of Leap Wireless, respectively, as restated,
which are included elsewhere in this prospectus. The historical statements of
operations give effect to the distribution of Leap Wireless common stock as if
it had occurred as of September 1, 1995.

The pro forma financial data are derived from the pro forma statements of
operations that give effect to Leap Wireless' acquisition of the 50% share of
Chilesat that it did not already own on April 19, 1999 and the acquisition of an
indirect investment in the Transworld Companies on August 4, 1998. The pro forma
financial data are based upon available information and assumptions that
management believes are reasonable. The pro forma statements of operations give
effect to the acquisition of Chilesat and the indirect investment in the
Transworld Companies as if they had occurred as of September 1, 1997. The pro
forma financial data are provided for illustrative purposes only and do not
purport to represent what Leap Wireless' results of operations or financial
condition actually would have been had the acquisition of Chilesat or the
indirect investment in the Transworld Companies in fact occurred on such date or
to project Leap Wireless' results of operations or financial condition for any
future period or date.

29
<PAGE> 31

SELECTED CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED YEAR ENDED NINE MONTHS PRO FORMA
MAY 31, AUGUST 31, ENDED YEAR ENDED
--------------------- -------------------------------- MAY 31, AUGUST 31,
1999 1998(1) 1998(1) 1997(1) 1996 1999 1998
-------- ---------- ---------- ---------- ------ ----------- ----------
(RESTATED) (RESTATED) (RESTATED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(2):
Operating Revenue..................... $ -- $ -- $ -- $ -- $ -- $ 3,670 $ --
-------- -------- -------- ------- ------ --------- --------
Cost of operating revenues............ -- -- -- -- -- (1,903) --
Selling, general and administrative
expenses............................ (14,357) (5,577) (23,888) (1,361) (396) (24,923) (28,268)
Depreciation and amortization......... (408) -- -- -- -- (10,431) --
-------- -------- -------- ------- ------ --------- --------
Total operating expenses.......... (14,765) (5,577) (23,888) (1,361) (396) (37,257) (28,268)
-------- -------- -------- ------- ------ --------- --------
Net operating loss.................... (14,765) (5,577) (23,888) (1,361) (396) (33,587) (28,268)
Equity in net loss of unconsolidated
wireless operating companies........ (78,917) (11,132) (23,688) (3,793) -- (65,064) (25,666)
Interest income....................... 7,901 -- 843 -- -- 5,227 2,525
Interest expense...................... (4,238) -- -- -- -- (11,732) (5,367)
Foreign currency transaction loss and
other expense....................... -- -- -- -- -- (4,471) (4,026)
-------- -------- -------- ------- ------ --------- --------
Net loss.............................. $(90,019) $(16,709) $(46,733) $(5,154) $ (396) $(109,627) $(60,800)
======== ======== ======== ======= ====== ========= ========
Basic and diluted net loss per common
share(3)............................ $ (5.06) $ (0.95) $ (2.65) $ (0.29) $(0.02) $ (6.16) $ (3.45)
======== ======== ======== ======= ====== ========= ========
Shares used in computing basic and
diluted net loss per common
share(3)............................ 17,794 17,648 17,648 17,648 17,648 17,794 17,648
======== ======== ======== ======= ====== ========= ========
BALANCE SHEET DATA(2):
Cash (at end of period)............... $ 23,527 $ -- $ --
Working capital (deficit)............. (29,105) (14,789) (279)
Total assets.......................... 366,104 157,752 42,267
Stockholders' equity.................. 143,937 142,963 41,988
</TABLE>

(2) As of May 31, 1999, Leap Wireless' consolidated historical financial data
reflects the consolidation of Chilesat. For the nine months ended May 31,
1999 and 1998, and the fiscal years ended August 31, 1998 and 1997, Leap
Wireless' consolidated historical financial data reflect Leap Wireless'
share of net losses under the equity method of accounting from its initial
50% investment in Chilesat, which was acquired in fiscal 1997. The pro forma
statement of operations data for the periods ended May 31, 1999 and August
31, 1998 reflect the 100% consolidation of Chilesat and Leap Wireless' share
of net losses under the equity method of accounting for the acquisition of
an indirect investment in the Transworld Companies as if the acquisition of
the remaining 50% share of Chilesat and the acquisition of an indirect
investment in the Transworld Companies had occurred as of September 1, 1997.

(3) The basic and diluted net loss per common share for the nine months ended
May 31, 1999 was calculated by dividing the net loss by the weighted average
number of common shares outstanding of 17,794,358. Leap Wireless had no
shares of common stock outstanding prior to September 23, 1998. The basic
and diluted net loss per common share was calculated by dividing the net
loss for the nine months ended May 31, 1998 and the fiscal years ended
August 31, 1998, 1997 and 1996 by the 17,647,685 shares of Leap Wireless
common stock issued in the distribution to QUALCOMM's stockholders on
September 23, 1998.

30
<PAGE> 32

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements that involve
risks and uncertainties. For a discussion of these risks and uncertainties, see
"Risk Factors" and "Forward-Looking Statements."

PRESENTATION

Management's Discussion and Analysis of Financial Condition and Results of
Operations reviews the financial position, results of operations, cash flows and
changes in stockholders' equity of the business that was transferred to Leap
Wireless on September 23, 1998, as if Leap Wireless were a separate entity for
all periods discussed. In the second quarter of fiscal 1999, to accommodate the
different fiscal periods of Leap Wireless and its foreign operating companies,
Leap Wireless extended the lag for recognition of its share of net earnings or
losses of its foreign operating companies from one month to two months. The
effect of this change on previously reported amounts was not significant.

In March 1999, Leap Wireless' concept for a flat-rate local area service
targeted at the mass consumer market was launched under an agreement that
requires the management of a subsidiary of Chase Telecommunications Holdings,
Inc. to control the business until Leap Wireless' proposed acquisition of
substantially all of the assets of Chase Telecommunications Holdings receives
all necessary governmental approvals and is completed. As a result of this
launch and the satisfaction of specific contingencies to the parties'
obligations under the asset purchase agreement between Leap Wireless and Chase
Telecommunications Holdings, Leap Wireless adopted the equity method of
accounting for its investment in Chase Telecommunications Holdings in the third
quarter of fiscal 1999. Accordingly, all prior periods presented in these
financial statements have been adjusted retroactively in accordance with
generally accepted accounting principles to give effect to the equity method of
accounting for Chase Telecommunications Holdings. Leap Wireless recorded equity
losses from this investment of $16.9 million and $3.7 million during the nine
months ended May 31, 1999 and 1998, respectively. Equity losses from this
investment totaled $33 million during the period from September 1, 1995
(inception) to May 31, 1999.

OVERVIEW AND SIGNIFICANT DEVELOPMENTS

Leap Wireless is a wireless communications carrier that owns, operates and
participates in CDMA telecommunications networks in domestic and international
markets with strong growth potential. Through its operating companies, Leap
Wireless has launched all digital wireless networks in Chile, Mexico, Russia and
the United States. A Leap Wireless subsidiary also owns wireless
telecommunications licenses in Australia. In August 1999, Leap Wireless agreed
to sell this subsidiary for approximately $16.3 million. Leap Wireless expects
to complete the sale in the near future. Upon completion of Leap Wireless'
pending U.S. asset acquisitions and the sale of its Australian subsidiary, Leap
Wireless will have interests in existing and planned telecommunications systems
covering 170 million potential customers, of which its equity share will be
approximately 66 million potential customers. Leap Wireless also was the high
bidder for 36 C-Block licenses in mid-sized markets covering an aggregate of
11.2 million additional potential customers in the federal government's recently
completed re-auction of broadband PCS spectrum. To complete its pending U.S.
asset acquisitions and its acquisition of the licenses for which it

31
<PAGE> 33

was high bidder in the recent spectrum re-auction, Leap Wireless must qualify as
a designated entity entitled to hold C-Block and F-Block licenses under FCC
rules and the FCC must approve the transfer of the applicable spectrum licenses.
In July 1999, the FCC issued an opinion and order that had the effect of
granting Leap Wireless status as a designated entity and that approved Leap
Wireless' acquisition of F-Block spectrum licenses from AirGate Wireless, L.L.C.
and C-Block licenses in connection with the government's recent spectrum
re-auction. The approval is subject to several specified conditions and is also
subject to appeal. For a description of these conditions and a possible appeal,
see "Risk Factors -- Leap Wireless' Failure to Maintain its Existing Licenses
and Obtain New Licenses Could Affect its Competitive Position." Leap Wireless
has not yet filed an application with the FCC for the acquisition of Chase
Telecommunications' C-Block licenses.

Domestic and international telecommunications markets are expanding rapidly
as countries seek to increase their number of telephone lines as a percentage of
their population, known as teledensity, and to increase competition among
carriers. Increased demand, decreased government regulation, and new spectrum
auctions have created opportunities for new providers to capture market share.
Leap Wireless believes that wireless is the cheapest and fastest way to increase
teledensity in regions not yet connected by copper telephone lines, and that it
possesses the expertise to oversee and manage the entry of new wireless
operating companies into these competitive markets.

Leap Wireless' domestic strategy is to offer consumers a wireless service
plan that provides them with unlimited local calls for a low, flat monthly rate.
Aimed at the mass consumer market, the service is marketed under the name
"Cricket"(SM) and is identified as "the around town phone"(SM) and "comfortable
wireless."(SM) Leap Wireless' international strategy includes identifying and
investing in growth markets with local partners who provide familiarity with the
market and an ability to facilitate deployment. For each of its ventures in
which it holds a significant position, Leap Wireless is actively involved in the
management of the networks, combining its expertise in international markets
with its wireless technical expertise in CDMA. Leap Wireless is committed to
bringing the benefits of reliable, cost-effective and high-quality voice and
data services to its operating companies' customers.

Leap Wireless and its operating companies are in the early stages of
development and face risks inherent in establishing a new business enterprise.
Leap Wireless' results of operations must be considered in light of the risks,
expenses and difficulties encountered by companies at this stage of development,
particularly companies involved in new and rapidly evolving international
markets and companies experiencing rapid growth.

Start-up wireless telecommunications companies typically require
substantial capital expenditures for the construction of their networks, license
fees and license acquisition costs. These costs are generally capitalized. In
addition, these companies typically incur significant marketing and other
expenses as they begin commercial operations. Accordingly, as Leap Wireless'
operating companies continue to build-out their networks, expand their
operations, and amortize their capitalized costs, their net operating losses and
Leap Wireless' proportionate share of the losses will grow.

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RESULTS OF OPERATIONS

NINE MONTHS ENDED MAY 31, 1999 COMPARED TO NINE MONTHS ENDED MAY 31, 1998

Leap Wireless' consolidated net loss during the nine month period ended May
31, 1999 was $90.0 million compared to a net loss of $16.7 million in the
corresponding period of the prior fiscal year. The increase was primarily the
result of substantial start-up costs associated with Leap Wireless' foreign
operating companies and a $16.9 million impairment loss recorded by Orrengrove
Investments Limited as described below.

Equity in net loss of unconsolidated wireless operating companies during
the nine month period ended May 31, 1999 was $78.9 million compared to $11.1
million in the corresponding period of the prior fiscal year. The significant
increase in Leap Wireless' share in the net loss of its unconsolidated wireless
operating companies relates primarily to increased network development by these
companies and the significant expenditures they made in preparing to launch
their network services. The impairment loss recorded by Orrengrove in the third
quarter of fiscal 1999 also increased Leap Wireless' share in the net loss of
its unconsolidated wireless operating companies by $16.9 million.

In April 1999, the Transworld Companies, partially owned subsidiaries of
Orrengrove, learned that third party satellite equipment they used to provide
commercial long distance service in the Russian Federation had failed. Leap
Wireless does not expect that this satellite equipment can be repaired. The
Transworld Companies have begun using fiber lines to provide long distance
service as a short-term alternative to the satellite transmission option they
previously used. The Transworld Companies are exploring long-term alternative
transmission sources for their long distance services. As a result of these
events, Orrengrove and its subsidiaries wrote-off their satellite related assets
and reduced to fair value their license to carry long-distance traffic in
Russia. The value of the license was impaired because of the loss of the
satellite facilities and because of the current financial conditions in Russia.

General and administrative expenses were $14.8 million for the nine month
period ended May 31, 1999 compared to $5.6 million in the corresponding period
of the prior fiscal year. The increase resulted primarily from increased
staffing and business development activity related to Leap Wireless' creation of
a wireless operating business in the United States. Leap Wireless expects that
general and administrative expenses will continue to increase and that the
amounts presented are not representative of general and administrative expenses
it will incur in future periods due to the expected consolidation of Chilesat
Telefonia Personal in the fourth quarter of fiscal 1999 and the pending
acquisition and consolidation of Chase Telecommunications, Inc. Leap Wireless
also expects that it will continue to add managerial personnel as it expands its
involvement in wireless projects in the United States and various other parts of
the world.

Interest income for the nine month period ended May 31, 1999 was $7.9
million, primarily from Leap Wireless' loans to its operating companies.
Interest expense was $4.2 million for the nine month period ended May 31, 1999
due to borrowings from banks and under Leap Wireless' credit agreement with
QUALCOMM. There was no interest income or expense during the corresponding
period of the prior fiscal year.

In the second quarter of fiscal 1999, Leap Wireless' operating company in
Mexico, Pegaso, launched commercial operations in Tijuana, the first of four
cities in which it expects to begin offering wireless service in 1999. In
addition, Pegaso and Sprint PCS signed a roaming agreement during the second
quarter of fiscal 1999 that will enable Pegaso's customers to use Sprint PCS's
nationwide wireless network in the United States.

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Under the agreement, Sprint PCS customers will also be able to roam on Pegaso's
network in Mexico.

In March 1999, Leap Wireless' concept of providing flat-rate local area
service targeted at the mass consumer market was launched in Chattanooga,
Tennessee. The service, marketed under the name "Cricket"(SM) and identified as
the "around town phone"(SM) and "comfortable wireless,"(SM) was introduced using
Chase Telecommunications' existing infrastructure. Cricket(SM) provides
customers with a simple and affordable wireless communication option by allowing
them to make unlimited local calls for a flat rate. The expansion of Cricket(SM)
service to Nashville, Tennessee is currently underway. The service was launched
under an agreement that requires the management of Chase Telecommunications to
control the business until Leap Wireless' proposed acquisition of Chase
Telecommunications receives all necessary governmental approvals and is
completed.

On February 1, 1999, Chase Telecommunications had approximately 4,900
subscribers who were offered the option of converting to the Cricket(SM)
service. Approximately one-half chose to convert. Approximately 8,700
subscribers used the Cricket(SM) service provided by Chase Telecommunications as
of May 31, 1999.

Metrosvyaz Ltd., a Leap Wireless operating company, develops joint ventures
with local Russian telecommunications operators for the formation, development,
financing and operation of wireless telephone services in the Russian
Federation. Petrosvyaz, a Metrosvyaz joint venture, launched commercial service
in St. Petersburg in April 1999. Metrosvyaz expects to launch commercial
operations in several additional Russian cities through additional joint
ventures in the following months.

As of May 31, 1999, Chilesat had approximately 30,600 subscribers, Chase
Telecommunications had approximately 8,700 subscribers, Pegaso had approximately
2,800 subscribers and Metrosvyaz had approximately 270 subscribers.

In May 1999, QUALCOMM sold its CDMA wireless infrastructure division to
Telefonaktiebolaget LM Ericsson (pbl), also known as Ericsson. As a result,
Ericsson and its subsidiaries are likely to become primary suppliers of network
infrastructure equipment to Leap Wireless and its operating companies. In
connection with the sale, Ericsson assumed most of QUALCOMM's obligations to
Leap Wireless and its operating companies under existing infrastructure supply
agreements.

Several of Leap Wireless operating companies have experienced reliability
problems with respect to their network infrastructure equipment in their initial
year of operation. Leap Wireless and its operating companies are working with
Ericsson to address these problems.

FISCAL YEAR ENDED AUGUST 31, 1998 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1997

Equity in net losses of Leap Wireless' operating companies for fiscal 1998
was $23.7 million, which represents Leap Wireless' share of the net losses of
the operating companies in which it holds an ownership interest accounted for
under the equity method of accounting. These losses consisted of costs incurred
before service launch during the network build-out and testing phases, such as
salary and related benefits, overhead expenses, professional and consulting
fees, and interest on long-term debt. Through August 31, 1998, there was no
depreciation of network equipment and no amortization of licenses as service had
not been launched commercially. For fiscal 1997, equity in net losses of Leap
Wireless' operating companies amounted to $3.8 million, primarily reflecting

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interest on the financing of wireless telecommunications licenses and initial
working capital and the fact that Leap Wireless' operating companies in which
Leap Wireless invested had only recently begun network planning and build-out
activities. The increase in equity in net losses of Leap Wireless' operating
companies from fiscal 1997 to 1998 reflected greater network planning and build
out activities in the latter period.

General and administrative expenses were $23.9 million for fiscal 1998,
compared to $1.4 million for fiscal 1997. The increase was due principally to
increases in business development activities relating to projects to create Leap
Wireless' operating companies in Mexico and Russia and a $1.7 million provision
for bad debts against a receivable from a potential business acquisition,
described in greater detail below. These development activities resulted in
significantly higher professional and consulting expenses and an increase in
QUALCOMM corporate overhead allocated to Leap Wireless. Leap Wireless expects
that general and administrative expenses will continue to increase as a result
of on-going development efforts on current and new projects. Also, general and
administrative expenses will likely continue to increase from the hiring of
personnel as a result of Leap Wireless becoming a stand-alone entity.

During November 1997, QUALCOMMTel Isle of Man entered into a letter of
intent to purchase a controlling interest in a Russian telephone company for
approximately $10 million, subject to adjustment and pending due diligence
procedures. In connection with the potential acquisition, during November and
December of 1997 QUALCOMMTel Isle of Man provided $1.7 million in
interest-bearing loans under an exclusivity clause to meet the interim working
capital needs of the potential acquiree. After negotiations failed to result in
an acquisition agreement and, due to substantial doubt on the ability of the
potential acquiree to repay these loans, Leap Wireless provided a $1.7 million
bad debt allowance against the receivable.

No provision for income taxes was recognized for fiscal 1998 and 1997, as a
result of the net losses incurred.

FISCAL YEAR ENDED AUGUST 31, 1997 COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1996

Equity in net losses of Leap Wireless' operating companies for fiscal 1997
was $3.8 million, which represents Leap Wireless' share of the net losses of its
operating companies in which it holds an ownership interest accounted for under
the equity method of accounting. The net losses represent interest expense, net
of the entities' financing of license acquisitions and initial working capital,
in additional to costs incurred before service launch during the network
build-out and testing phases. These costs included salary and related benefits,
overhead expenses and professional and consulting fees. Through August 31, 1997,
there was no depreciation of network equipment and no amortization of licenses
as service had not been launched commercially. Through August 31, 1996, Leap
Wireless did not have any operating company interests, and, accordingly, there
was no equity in earnings of investees during the year then ended.

General and administrative expenses were $1.4 million for fiscal 1997,
compared to $0.4 million for fiscal 1996. This increase was due principally to
increases in business development activity relating to projects to create a
wireless operating company in Chile. The development activity resulted in higher
professional and consulting fees. Additionally, Leap Wireless incurred higher
incremental labor and travel expenses to develop its operating companies.

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No provision for income taxes was recognized for the years ended August 31,
1997 and 1996, as a result of the net losses incurred.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

Leap Wireless expects to have significant future capital requirements over
the next several years in relation to corporate operations and the financing of
current development projects and additional new projects. Leap Wireless' sources
of liquidity are $23.5 million of cash and cash equivalents, as of May 31, 1999,
and a $265 million credit agreement with QUALCOMM which contains a $35.2 million
sub-facility to fund working capital and operating expenses of Leap Wireless and
a $229.8 million sub-facility to fund specified portfolio investments by Leap
Wireless. As of May 31, 1999, Leap Wireless had $174.5 million available to it
under this credit agreement, with $26.7 million of this amount available under
the working capital sub-facility and $147.8 million available under the
investment sub-facility. Leap Wireless expects to meet its cash requirements for
existing operations and for further investments in its development projects
through early 2000 from available cash balances and borrowings under its credit
agreement. As a condition to the FCC's recognition of Leap Wireless as a
designated entity qualified to hold C-Block and F-Block licenses of PCS
spectrum, however, Leap Wireless must take steps so that by January 2001,
QUALCOMM holds no more than 50% of Leap Wireless' outstanding debt obligations.

Leap Wireless is seeking additional debt or equity to fund its activities
in the year 2000 and beyond. Leap Wireless cannot assure you that additional
financing will be available or, if available, that it will be offered to Leap
Wireless on acceptable terms. In addition, Leap Wireless cannot assure you that
it will be able to reduce its debt to QUALCOMM to 50% or less of its outstanding
debt obligations by January 2001. If Leap Wireless does not obtain additional
working capital or financing by early 2000, management plans to reduce future
capital needs by reducing or discontinuing the funding of uncommitted
investments. In addition, to the extent necessary, management will consider
other strategic modifications to its operational plans, including reducing
corporate activities and possibly selling all or portions of its interests in
one or more of Leap Wireless' operating companies.

OPERATING ACTIVITIES

In the first nine months of fiscal 1999, Leap Wireless used $23.8 million
in cash for operating activities, compared to $2.7 million for the corresponding
period of the prior fiscal year.

Leap Wireless expects that cash used in operating activities will increase
further as Leap Wireless continues to expand its project development efforts on
existing and new project opportunities. In addition, Leap Wireless expects that
cash used in operating activities will increase substantially in the future as a
result of Leap Wireless' acquisition and consolidation of Chilesat, its pending
acquisition of Chase Telecommunications and other Leap Wireless activities
related to its domestic strategy of providing a flat rate wireless local area
telephone service.

INVESTING ACTIVITIES

Cash used in investing activities was $138.3 million in the first nine
months of fiscal 1999, compared to $26.9 million in the same period of fiscal
1998. Significant investments

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in the first nine months of fiscal 1999 consisted of a $60.7 million capital
contribution to Pegaso which was made before Leap Wireless began to operate as
an independent company, loans and advances of $46.9 million to Leap Wireless'
operating companies and $28 million for Leap Wireless' acquisition of the
remaining 50% of the shares of Chilesat. Leap Wireless and its wholly-owned
subsidiaries expect to continue making significant investments and loans to the
Leap Wireless operating companies and to continue investing in capital assets,
including wireless telecommunications licenses and network equipment. Investment
activity in the corresponding period in fiscal 1998 consisted of loans and
start-up expenses advanced to Leap Wireless' operating companies, primarily in
Mexico and Chile.

Cash used in investing activities was $140.7 million for fiscal 1998
compared to $46.0 million for fiscal 1997. The 1998 activity results primarily
from $133.9 million of investments and loans to Leap Wireless' business
ventures, and the purchase of additional spectrum in Australia. Investment
activity in the corresponding period for fiscal 1997 represented Leap Wireless'
$42 million investment in preferred stock of Chilesat and the $4.0 million
purchase of Series B Common Stock in Chase Telecommunications.

In March 1999, Leap Wireless submitted a $20 million deposit for bidding in
the federal government re-auction of C, D, E and F-Block broadband PCS spectrum.
Leap Wireless was the winning bidder for 36 licenses of C-Block spectrum with an
aggregate bid of $18.7 million, or $1.66 per potential customer, referred to as
a POP. The licenses cover 36 mid-sized markets with an aggregate of 11.2 million
potential customers. In July 1999, the FCC approved Leap Wireless' purchase of
these licenses subject to specified conditions. For a description of these
conditions, see "Risk Factors -- Leap Wireless' Failure to Maintain its Existing
Licenses and Obtain New Licenses Could Affect its Competitive Position." Upon
completion of the bidding in May 1999, the FCC returned $16.3 million of the
deposit to Leap Wireless. The $3.7 million retained by the FCC represents a 20%
deposit on the $18.7 million winning bid price.

In April 1999, Leap Wireless announced that it had increased its ownership
interest in Chilesat Telefonia Personal from 50% to 100%. Leap Wireless' Chilean
subsidiary purchased the remaining 50% of Chilesat from Telex-Chile, a Chilean
telecommunications company, and an affiliate of Telex-Chile, for $28 million and
a $22 million interest-free note payable in three years. Leap Wireless is
currently working to re-energize Chilesat by strengthening its management team
and resuming consumer acquisition and marketing efforts that were temporarily
suspended during the acquisition.

Leap Wireless's pending acquisition of F-Block spectrum licenses in North
and South Carolina from AirGate Wireless, L.L.C., its pending acquisition of
Chase Telecommunications and the C-Block licenses under which Chase
Telecommunications operates, and its pending purchase of the 36 C-Block licenses
it won in the federal government's recent spectrum re-auction all require Leap
Wireless to qualify as a designated entity under FCC rules and are subject to
Federal Communications Commission approval. In July 1999, the FCC issued an
opinion and order that had the effect of granting Leap Wireless status as a
designated entity qualified to hold C-Block and F-Block PCS spectrum licenses
and that approved Leap Wireless' acquisition of F-Block spectrum licenses from
AirGate Wireless, L.L.C. and C-Block licenses in connection with the
government's recent spectrum re-auction. The approval is subject to several
specified conditions and is also subject to appeal. For a description of these
conditions and a possible appeal, see "Risk Factors -- Leap Wireless' Failure to
Maintain its Existing Licenses and Obtain New Licenses Could

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Affect its Competitive Position." Leap Wireless has not yet filed an application
with the FCC for the acquisition of Chase Telecommunications' C-Block licenses.

In August 1999, Leap Wireless agreed to sell all of the shares of its
wholly-owned subsidiary, OzPhone Pty Limited, for approximately $16.3 million.
Leap Wireless expects to complete the sale in the near future.

FINANCING ACTIVITIES

Cash provided by financing activities during the first nine months of
fiscal 1999 was $185.6 million, representing $95.3 million of funding from
QUALCOMM for Leap Wireless operations and investing activities prior to the
distribution of Leap Wireless common stock to QUALCOMM's stockholders and $88.9
million of net borrowings. Cash provided by financing activities during the
first nine months of fiscal 1998 was $29.6 million, representing QUALCOMM's
funding of Leap Wireless operations and investing activities in this period.

Cash provided by financing activities during fiscal 1998 and 1997 amounted
to $159.1 million and $47.2 million, respectively, consisting of QUALCOMM's
funding of the operating and investing cash used by Leap Wireless and a short
term bank loan in fiscal 1998 to a consolidated subsidiary in connection with
the Chilean venture.

In the first quarter of fiscal 1999, Leap Wireless loaned $17.5 million to
Pegaso Comunicaciones y Servicios, S.A. de C.V., a Mexican company 96%-owned by
Mr. Alejandro Burillo Azcarraga, a member of Leap Wireless' Board of Directors.
The purpose of the loan was to facilitate investment by Pegaso Comunicaciones y
Servicios, S.A. de C.V. in Pegaso, the joint venture in which Leap Wireless has
an interest, and to ensure that the investors in Pegaso made all capital
contributions to Pegaso that were required for the acquisition of Mexican
telecommunications licenses in September 1998. The loan accrued interest at a
rate of 13% per annum, was guaranteed by Mr. Burillo, and was secured by a
pledge of all of the shares of Pegaso Comunicaciones y Servicios, S.A. de C.V.
and Mr. Burillo's interest in an unrelated joint venture with QUALCOMM. As
scheduled, the first principal installment of $7.5 million, plus accrued
interest, was repaid in the first quarter of fiscal 1999, and the second and
final principal installment of $10 million, plus accrued interest, was repaid in
the second quarter of fiscal 1999.

In March 1999, QUALCOMM agreed to reduce the number of shares exercisable
under its warrant for Leap Wireless common stock from 5,500,000 to 4,500,000
shares. Leap Wireless valued the buy-back of the warrant shares at $5.4 million,
which included $3.0 million in cash and $2.4 million related to a handset
purchase commitment. Leap Wireless borrowed $3.0 million under its credit
agreement to satisfy the cash obligation.

QUALCOMM CREDIT AGREEMENT

Before the distribution of Leap Wireless common stock by QUALCOMM, Leap
Wireless entered into the credit agreement with QUALCOMM. The credit agreement
consists of two sub-facilities. The working capital sub-facility enables Leap
Wireless to borrow up to $35.2 million. Leap Wireless may only use the proceeds
from the working capital sub-facility to meet normal working capital and
operating expenses. The investment capital sub-facility enables Leap Wireless to
borrow up to $229.8 million. Leap Wireless may only use the proceeds from the
investment capital sub-facility to make identified portfolio investments. In
addition, as one of the conditions to the FCC's recognition of Leap Wireless as
a designated entity qualified to hold C-Block and F-Block licenses of

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PCS spectrum, Leap Wireless must take steps so that by January 2001, QUALCOMM
holds no more than 50% of Leap Wireless' outstanding debt obligations.

The credit agreement requires Leap Wireless to comply with customary
operating covenants, including a total debt to total capitalization ratio. Leap
Wireless was in compliance with the financial covenant as of May 31, 1999.

In addition, the credit agreement permits uses of funds only for specified
purposes consistent with approved business plans, restricts the nature and
breadth of Leap Wireless' investments and imposes other restrictions peculiar to
Leap Wireless' business. The restrictions imposed by QUALCOMM related to the
credit agreement could have a significant negative effect on Leap Wireless.

Leap Wireless expects to have significant long-term future capital
requirements beyond fiscal 1999 relating (1) to funding commitments to its
operating companies and other operating companies in which Leap Wireless may
acquire joint venture or equity interests and (2) to general working capital
needs and other cash requirements. The magnitude of these long-term capital
requirements will depend on a number of factors, including the specific capital
needs of Leap Wireless' operating companies, additional capital needed to
acquire or maintain other joint venture or equity interests or to pursue other
telecommunications opportunities, competing technological and market
developments and changes in existing and future relationships. Leap Wireless
intends to address its long-term liquidity needs through access to private or
public equity or high yield debt markets. However, we cannot assure you that
Leap Wireless will be successful in its efforts to raise the capital required to
fund operations on a long-term basis. Failure to satisfy these capital
requirements would have a significant negative effect on Leap Wireless'
business, results of operations, liquidity and financial position.

LIQUIDITY AND SUBSTANTIAL LEVERAGE OF LEAP WIRELESS' OPERATING COMPANIES

Leap Wireless generally expects that its operating companies will be
financed initially with equity contributions and loans from Leap Wireless and
its partners. Leap Wireless also expects that its operating companies will seek
stand-alone third party financing after their initial stages of development. In
some cases, Leap Wireless and its partners may provide additional equity or
loans to operating companies after their initial contributions.

Although each of Leap Wireless' operating companies has obtained
substantial equity contributions, they generally are or may become highly
leveraged, which is typical for start-up wireless telecommunications companies.
The ability of these companies to obtain future financings and to meet debt
covenants in connection with the financings will be dependent upon their future
performance, including the generation of revenue and cash flow, and upon
prevailing economic conditions which are beyond their control. In addition, Leap
Wireless expects that some of its operating companies will be substantially
funded through equipment financing arrangements from vendors. These equipment
financings will be dependent upon meeting planned levels of performance. If the
operating companies fail to meet these performance requirements, the related
equipment financings could be materially restricted or terminated.

Leap Wireless' credit agreement provides it with sufficient liquidity to
contribute the approximately $45.9 million of financing it is contractually
bound to provide to its operating companies as of May 31, 1999. The companies
have business plans, however, which call for substantial additional financing to
build-out and operate their planned networks. These operating companies are
generally seeking new equity and debt from

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existing investors, equipment vendors and third parties, and Leap Wireless has
been assisting them in their efforts. At this time, however, capital markets
have been constrained because of uncertain worldwide economic conditions, and
development stage companies in emerging markets find it difficult to raise
additional capital. As a result, Leap Wireless cannot assure you that its
operating companies will be able to obtain the required additional financing.
Further, if an operating company fails to gain required new financing, that
failure could have a material adverse effect on that company and, as a result, a
material adverse effect on Leap Wireless.

In March 1999, Leap Wireless entered into a substitute loan agreement to
provide $72.5 million of working capital to Metrosvyaz. As previously
contemplated, the amount available to Metrosvyaz under its credit agreement with
QUALCOMM was simultaneously reduced by $72.5 million to $102.5 million, making a
combined total of $175 million available to Metrosvyaz from QUALCOMM and Leap
Wireless. Leap Wireless intends to fund its loan to Metrosvyaz, which is
subordinated to QUALCOMM's loan to Metrosvyaz, through borrowings under Leap
Wireless' $265 million credit agreement with QUALCOMM. Metrosvyaz owed Leap
Wireless $27.4 million under the substitute loan agreement as of May 31, 1999.

In response to restricted capital markets and economic difficulties in
Russia, Metrosvyaz reduced the capacity of the networks it planned to construct
or procure in 1999. Petrosvyaz, a Metrosvyaz joint venture, launched commercial
service in St. Petersburg in April 1999. Metrosvyaz expects to launch commercial
operations in several additional Russian cities through additional joint
ventures in 1999. Leap Wireless expects that the $175 million available to
Metrosvyaz under its current QUALCOMM credit facility and Leap Wireless credit
facility will provide Metrosvyaz with sufficient liquidity to fund its
deployment and operations through the end of 1999.

In May 1999, Pegaso entered into a $100 million loan agreement. Leap
Wireless has agreed to pay 33% of Pegaso's obligations under this agreement in
the event of Pegaso's default. Leap Wireless expects that the $100 million
facility and approximately $50 million of equity which is committed to be
contributed to Pegaso within the next several months will be sufficient to
finance Pegaso's capital and operating requirements through the end of 1999.

During the third quarter of fiscal 1999, Leap Wireless loaned Chilesat $7.0
million. At May 31, 1999, working capital loans to Chilesat totaled
approximately $23 million. Leap Wireless estimates that, as of May 31, 1999,
Chilesat needed approximately $109 million of additional working capital,
infrastructure and handset financing to fund its activities and to expand its
networks and businesses as currently contemplated through the end of 1999. As of
May 31, 1999, Leap Wireless had approximately $23 million available to loan to
Chilesat under its credit agreement with QUALCOMM, and Chilesat had
approximately $8 million of additional handset funding committed from QUALCOMM.
In addition, Leap Wireless is currently in late stage discussions to obtain
additional vendor financing for Chilesat, and Chilesat will seek additional
equity and debt financing to satisfy the balance of its desired financing
through 1999. If Chilesat does not obtain all of the funds it requires to
operate and expand as currently anticipated through the end of 1999, Chilesat
will restrict or postpone its expansion until additional funds are available.
The preceding estimates of Chilesat's financing needs assume that Chilesat will
not be required to make debt repayments to QUALCOMM throughout the remainder of
1999. Chilesat is currently in discussions with QUALCOMM to restructure the
terms of a deferred payment agreement with QUALCOMM and is currently delinquent
in payments of $10.9 million.

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Leap Wireless and Chase Telecommunications are among the parties to a
credit agreement under which Leap Wireless has agreed to provide, at its
discretion, working capital to Chase Telecommunications. The parties have agreed
in principle to increase the maximum principal amount that may be drawn under
the facility to $45 million. At May 31, 1999, principal borrowings under the
working capital facility totaled approximately $26.8 million.

CURRENCY FLUCTUATION RISKS

Leap Wireless reports its financial statements in U.S. Dollars. Leap
Wireless' principal operating companies function in different currency
jurisdictions and all report in local currencies. Consequently, fluctuations in
currency exchange rates between the U.S. Dollar and the applicable local
currency will affect Leap Wireless' results of operations as well as the value
of its ownership interests in its operating companies or start-up projects.

Leap Wireless' operating companies face certain risks from fluctuations in
foreign currency and interest rates, which could impact each company's
respective results of operations and financial condition. Because many of the
operating companies' contracts with equipment suppliers are denominated in U.S.
Dollars, a significant change in the value of the U.S. Dollar against the
national currency of any operating company could result in the increase of the
relative cost of the contracts. Such a change also could restrict an operating
company from fulfilling its contractual obligations. As a result, any
devaluation in the local currency relative to the currencies in which these
liabilities are payable could have a significant negative effect on Leap
Wireless. In some developing countries, including Mexico and Russia, significant
devaluations relative to the U.S. Dollar have occurred and may occur again in
the future. In these circumstances, Leap Wireless may experience economic loss
regarding its ownership interests and fluctuations in its results of operations
solely as a result of exchange rate fluctuations.

Leap Wireless seeks to reduce its foreign exchange exposure arising from
transactions by matching, where possible, assets and liabilities. We cannot
assure you that Leap Wireless will successfully match its assets and liabilities
or otherwise reduce its foreign exchange exposure. In some cases, the operating
companies may borrow in U.S. Dollars rather than in local currencies because the
U.S. Dollar borrowings are the only funding source available to them at the
time. In these circumstances, Leap Wireless has decided, in conjunction with its
partners, to accept the inherent currency risk principally because of the
relatively high cost of buying or the inability to buy forward cover in
currencies of the countries in which the operating companies conduct business.

HEDGING ACTIVITIES

Leap Wireless does not have a policy to systematically hedge against
foreign currency exchange rate and interest rate risks. From time to time,
however, Leap Wireless may enter into such a hedging arrangement to the extent
deemed beneficial. In March 1999, Leap Wireless entered into an interest rate
cap agreement which effectively caps a portion of Leap Wireless' variable rate
interest obligations at a fixed rate.

INFLATION

Inflation has had and may continue to have negative effects on the
economies and securities markets of emerging market countries and could have
negative effects on the operating companies and start-up projects in those
countries, including their ability to obtain financing. Russia, Chile and
Mexico, for example, have periodically experienced

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relatively high rates of inflation. The operating companies, where permitted,
and subject to competitive pressures, intend to increase their tariffs to
account for the effects of inflation. However, in those jurisdictions where
tariff rates are regulated or specified in the license, the operating companies
may not successfully mitigate the impact of inflation on their operations.

While system equipment costs may increase over time as a result of
inflation, Leap Wireless expects that the cost of subscriber equipment will
decrease over time, although there can be no assurance that this will be the
case. General operating expenses such as salaries, employee benefits and lease
costs are, however, subject to normal inflationary or deflationary pressures.

YEAR 2000 ISSUE

The Year 2000 issue arises from the fact that most computer software
programs have been written using two digits rather than four to represent a
specific year. Any computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculation causing disruptions of
operations including a temporary inability to process transactions, send
invoices or engage in similar normal business activities.

Leap Wireless and its operating companies have recently begun their
respective businesses and have designed and built their wireless telephone
networks and support systems with the Year 2000 issue in mind. The recent
acquisition of network equipment and software does not guarantee, however, that
such equipment and software will be Year 2000 compliant.

Leap Wireless and each of its operating companies are conducting an
inventory to identify its systems that may be subject to Year 2000 problems and
that are critical to its business and operations. At the same time, each of Leap
Wireless' operating companies has been working with its primary
telecommunications systems vendors to confirm that the vendor's products are
Year 2000 ready and, if not, to agree with such vendor on a remediation and test
program to be implemented prior to the Year 2000.

Although Leap Wireless expects that its operating companies' critical
network infrastructure systems will be Year 2000 compliant, Leap Wireless'
operating companies may experience difficulties with systems maintained by third
parties. For example, other telecommunications systems that interconnect with
the operating companies' systems (such as landline, long-distance and power
systems) could malfunction and disrupt their ability to provide wireless
service. Leap Wireless' operating companies are not currently aware of evidence
that a failure is likely to occur in their service areas. However, Leap
Wireless' operating companies continue to evaluate the risk associated with
third party interfaces and Year 2000 issues.

We cannot assure you that Leap Wireless and its operating companies will be
able to identify all Year 2000 problems in their systems and third party systems
in advance of the

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occurrence of those problems. In addition, we may not be able to remedy any
problems that may occur on a timely basis. A material Year 2000 problem could
result in an interruption in, or a failure of, certain normal business
activities, including the provision of wireless service by the Leap Wireless
operating companies. Such a problem could materially and adversely affect the
business and operations of Leap Wireless and its operating companies.

FUTURE ACCOUNTING REQUIREMENTS

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 ("FAS 131"), "Disclosures about Segments of an Enterprise and Related
Information," which Leap Wireless must adopt for fiscal year-end 1999. This
statement establishes standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Under FAS 131, operating segments are to
be determined consistent with the way that management organizes and evaluates
financial information internally for making operating decisions and assessing
performance. Leap Wireless has not determined the impact of the adoption of this
new accounting standard on its financial statement disclosures.

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging
Activities," which Leap Wireless must adopt for fiscal year 2001. This statement
establishes a new model for accounting for derivatives and hedging activities.
Under FAS 133, all derivatives must be recognized as assets and liabilities and
measured at fair value. Leap Wireless has not determined the impact of the
adoption of this new accounting standard on its consolidated financial position
or results of operations.

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BUSINESS

INTRODUCTION

Leap Wireless manages, supports, operates and participates in CDMA-based
wireless telecommunications businesses and ventures in the United States,
Mexico, Russia and Chile. In addition, Leap Wireless is pursuing opportunities
to construct, manage, support, operate and participate in additional wireless
telecommunications systems in other targeted United States and international
markets offering high growth potential.

Leap Wireless was formed in June 1998 as a subsidiary of QUALCOMM, a
provider of CDMA-based digital wireless communications equipment, technologies
and services. On September 23, 1998, QUALCOMM distributed all of the outstanding
shares of Leap Wireless common stock to QUALCOMM's stockholders as a taxable
dividend. In May 1999, QUALCOMM sold substantially all of the assets of its CDMA
infrastructure division to Ericsson.

QUALCOMM and Ericsson are major suppliers of CDMA subscriber and
infrastructure equipment, respectively, for Leap Wireless' wireless
telecommunications businesses. Leap Wireless expects that QUALCOMM and Ericsson
will continue to be major suppliers for future wireless telecommunications
businesses in which Leap Wireless participates.

Leap Wireless owns joint venture interests or stock in the following
telecommunication companies: Pegaso Telecomunicaciones S.A. de C.V. (Mexico),
Metrosvyaz Limited (Russia), Orrengrove Investments Limited (Russia), Chilesat
Telefonia Personal, S.A. (Chile), Chase Telecommunications, Inc. (U.S.) and
OzPhone Pty. Ltd. (Australia). QUALCOMM transferred its interests in these
companies to Leap Wireless. In addition, Leap Wireless has secured and is
pursuing additional telecommunications opportunities in domestic and
international markets. In April 1999, Leap Wireless purchased the 50% interest
in Chilesat that it did not already own. Subject to FCC approval, Leap Wireless
also agreed to acquire four F-Block PCS licenses in North and South Carolina and
100% of the stock of Chase Telecommunications and related C-Block licenses
covering virtually all of Tennessee. In addition, Leap Wireless was the high
bidder, also subject to FCC approval, for 36 C-Block PCS licenses covering
approximately 11.2 million potential customers in mid-sized markets throughout
the U.S. in the recent government reauction of PCS spectrum. In July 1999, the
FCC issued an opinion and order that had the effect of granting Leap Wireless
status as a designated entity qualified to hold C-Block and F-Block PCS spectrum
licenses and that approved Leap Wireless' acquisition of F-Block spectrum
licenses from AirGate Wireless, L.L.C. and C-Block licenses in connection with
the government's recent spectrum re-auction. The approval is subject to several
specified conditions and is also subject to appeal. For a description of these
conditions and a possible appeal, see "Risk Factors -- Leap Wireless' Failure to
Maintain its Existing Licenses and Obtain New Licenses Could Affect its
Competitive Position." Leap Wireless has not yet filed an application with the
FCC for the acquisition of Chase Telecommunications' C-Block licenses. Various
parties, including the U.S. Small Business Administration, previously challenged
Leap Wireless' qualification to hold C-Block and F-Block PCS licenses, and such
parties may appeal the FCC's opinion and order approving the transfer of several
C-Block and F-Block PCS spectrum licenses to Leap Wireless. Leap Wireless cannot
assure you that its pending acquisitions will be consummated.

CDMA forms the technological basis for Leap Wireless' wireless
telecommunications systems. CDMA is an integrated software and hardware system
invented by

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<PAGE> 46

QUALCOMM which digitally transmits telecommunications signals in a wireless
network. Wireless telecommunication companies have deployed CDMA systems in
approximately 36 countries with over 29 million commercial subscribers
worldwide. Leap Wireless believes that CDMA offers a number of advantages over
analog and other digital technologies. These advantages include:

- increased call capacity;

- higher quality voice and data transmission;

- fewer dropped calls;

- enhanced privacy;

- lower power requirements; and

- lower system costs.

Leap Wireless' senior management has many years of experience in the
wireless telecommunications industry. A number of Leap Wireless' senior
management members were previously members of QUALCOMM's senior management and
joined Leap Wireless from QUALCOMM in connection with the formation of Leap
Wireless. Leap Wireless senior management includes (1) Harvey P. White, a
co-founder of QUALCOMM and formerly President and later Vice Chairman of the
Board of QUALCOMM, who is Leap Wireless' Chief Executive Officer and Chairman of
the Board; (2) Susan G. Swenson, formerly President and Chief Executive Offer of
Cellular One, a joint venture between AirTouch and AT&T Wireless, who is Leap
Wireless' President; (3) Thomas J. Bernard, formerly Senior Vice President of
QUALCOMM, who is Leap Wireless' Vice Chairman and President -- International
Business Division; and (4) James E. Hoffmann, formerly Vice President, Legal
Counsel of QUALCOMM, who is Leap Wireless' Senior Vice President and General
Counsel.

Leap Wireless participates in its wireless telecommunications businesses
primarily through joint ventures and strategic alliances with other parties.
Leap Wireless provides the business in which it participates with:

- substantial management and operational support;

- assistance in selecting contractors and negotiating contracts;

- support in designing and developing marketing plans, distribution
systems, billing systems and customer support plans; and

- system launch and roll-out planning.

Leap Wireless provides these services using its own employees as well as
through consultants with substantial experience in the telecommunications
industry. Leap Wireless intends to continue to focus on providing this
management and operational support in its future wireless telecommunications
business opportunities.

Leap Wireless has only operated as an independent company since September
1998 and it, and each of its wireless telecommunications businesses and
ventures, are at an early stage of development. Leap Wireless expects to incur
substantial losses for the foreseeable future. Leap Wireless has generated net
losses since inception, and must recognize a share of the losses of its
operating companies as a result of Leap Wireless' ownership interests in these
businesses and ventures. Leap Wireless' ability to generate revenues will depend
on a number of factors, including the future operations and profitability of
Leap Wireless' wireless telecommunications businesses and ventures.

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<PAGE> 47

Leap Wireless will require significant capital in the future to help meet
the funding requirements of its existing wireless telecommunications businesses
and ventures and any additional companies in which it invests, as well as for
general working capital needs. Leap Wireless expects to obtain much of its
required near-term financing through borrowings under its credit agreement with
QUALCOMM. As one of the conditions to the FCC's recognition of Leap Wireless as
a designated entity qualified to hold C-Block and F-Block licenses of PCS
spectrum, however, Leap Wireless must take steps so that by January 2001,
QUALCOMM holds no more than 50% of Leap Wireless' outstanding debt obligations.
Leap Wireless cannot assure you that additional sources of debt financing will
be available to Leap Wireless to finance its operations after the credit
agreement has been fully drawn or to comply with the condition imposed by the
FCC regarding Leap Wireless' debt to QUALCOMM. As a result of its capital
requirements, including borrowings under the credit agreement, Leap Wireless
expects to maintain high levels of debt.

Leap Wireless believes that recent changes in the telecommunications
industry have resulted in a growing opportunity to manage, operate and invest in
wireless systems around the world. While older wireless systems had spurred the
growth of cellular networks, the invention of terrestrial wireless CDMA not only
improved cellular systems but also effectively supported fixed wireless with
growth in capacity, improvements in voice quality, and lower equipment and
maintenance costs. While wireless telecommunications has historically been
viewed primarily as a second phone for the affluent, Leap Wireless believes it
will increasingly become the logical and preferred system for use as a first
phone.

As new carriers and spectrum opportunities arose for the deployment of CDMA
systems, wireless operators and others approached QUALCOMM to join new carriers
in operating joint ventures in the United States and abroad. QUALCOMM agreed to
participate in several of these business opportunities. Prior to QUALCOMM's
distribution of Leap Wireless' common stock, QUALCOMM transferred its interests
in the Leap Wireless operating companies to Leap Wireless. Leap Wireless
believes that it has an advantage in being already established in the business
of managing, supporting and investing in CDMA wireless networks that are being
built out or are in the planning stages of build out. Leap Wireless anticipates
that there will be additional opportunities where new licensees or licensees
seeking to expand their business will seek help from Leap Wireless for
operational support, management and capital.

Leap Wireless intends to continue its strategy of entering into joint
ventures to access new markets and opportunities. Leap Wireless expects that it
will selectively focus on a limited number of high-growth opportunities, taking
into account its management and capital resources. Leap Wireless plans to focus
its operations on areas where the potential to provide value added services, and
thereby launch successful wireless ventures, is higher. Leap Wireless will
strive to expand its expertise through the experience gained on its current and
future ventures to become a sought after and more valuable participant in future
joint ventures.

Leap Wireless believes that it will not hold a majority ownership in many
of the joint ventures in which it elects to participate due to a variety of
reasons, ranging from foreign governmental policies to Leap Wireless' investment
limitations and the desire to bring many parties with diverse experiences into a
joint venture. Generally, Leap Wireless plans to have a significant initial
ownership and to be active in the management of all the systems in which it has
an equity interest. Over time, however, Leap Wireless expects that its
percentage ownership interests will face reduction as part of the dilution that
will occur

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as the operating companies raise additional capital to expand or build-out the
systems. From time to time, Leap Wireless may also sell ownership interests as
part of a strategy of returning value to its stockholders from the increase in
value of the systems in which it participates. These sales will likely provide
funds for future participation in new projects thereby providing for growth in
Leap Wireless.

Leap Wireless and its operating companies hold licenses to provide wireless
telecommunications services to an aggregate of approximately 170 million
potential subscribers as of May 31, 1999, assuming completion of Leap Wireless'
pending acquisition of licenses in North and South Carolina and its pending sale
of its Australian subsidiary. Leap Wireless was also the high bidder for 36
C-Block spectrum licenses in mid-sized markets covering approximately 11 million
potential customers in the federal government's recent re-auction of broadband
PCS spectrum.

Leap Wireless' operating company in Mexico, Pegaso, holds licenses to
provide nationwide services throughout Mexico and began providing wireless
telecommunications services in Tijuana in February 1999. Chase
Telecommunications, a corporation that Leap Wireless agreed to acquire subject
to FCC approval, began offering wireless service in Chattanooga, Tennessee in
September 1998. Leap Wireless' domestic wireless concept, "Cricket,"(SM) was
launched using Chase Telecommunications' existing infrastructure in March 1999.
In Russia, Leap Wireless' subsidiary QUALCOMM Telecommunications Ltd. and an
affiliate of Itar Tass, the official news agency of the Russian Federation, have
formed a joint venture in which they hold equal shares. The joint venture,
Metrosvyaz Ltd., is in the process of entering into other joint ventures with
local telecommunications operators to finance, build and operate wireless
systems in Russia. One of these joint ventures began offering service in St.
Petersburg in April 1999. A separate Leap Wireless subsidiary, also named
QUALCOMM Telecommunications Limited, is a joint venture participant in
Orrengrove Investments Limited, which is seeking to build a long distance
network in Russia through its subsidiaries. These subsidiaries began to offer
limited long distance service between Moscow and Perm in December 1998. Leap
Wireless participates in the Chilean telecommunications market through its 100%
investment in Chilesat Telefonia Personal, which holds a nationwide Chilean PCS
license. Chilesat began operations in September 1998. In Australia, a
wholly-owned subsidiary of Leap Wireless owns a license to operate wireless
telecommunications in 13 regions covering approximately 6.4 million potential
customers, known as POPs. In August 1999, Leap Wireless agreed to sell all of
the shares of this subsidiary, OzPhone Pty Limited, for approximately $16.3
million. Leap Wireless expects to complete the sale in the near future. In
addition, QUALCOMM and Leap Wireless have agreed that QUALCOMM will transfer its
49% ownership interest in Telesystems of Ukraine to Leap Wireless if specific
events occur before April 2000. As a result of continued difficulties between
QUALCOMM and Telesystems of Ukraine, we do not believe that these conditions
will be satisfied by April 2000 or that the transfer will occur.

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The following table summarizes Leap Wireless' current joint ventures and
other interests and provides certain information relating thereto:

<TABLE>
<CAPTION>
ACTUAL/
EQUITY LICENSED EQUITY TOTAL EQUITY EXPECTED
INVESTMENT LOCATION INTEREST POPS POPS SUBSCRIBERS SUBSCRIBERS LAUNCH
---------- ---------- -------- -------- ------ ----------- ----------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Pegaso Telecomunicaciones,
S.A. de C.V.(1)........... Mexico 33%(2) 99.0 32.7(2) 2,800 924 Feb 99
Chase Telecommunications Tennessee,
Holdings Inc.(3).......... U.S.A. 7.2% 6.3 6.3(4) 8,700 8,700(4) Sep 98
Chilesat Telefonia Personal,
S.A.(5)................... Chile 100% 14.9 14.9 30,600 30,600 Sep 98
QUALCOMMTel/Metrosvyaz...... Russia --(6) 46.5(7) --(7) 270(8) 47(8) Apr 99
QUALCOMMTel/Orrengrove (Long
distance venture)......... Russia --(9) --(9) --(9) N/A N/A Dec 98
OzPhone..................... Australia 100%(10) 6.4 6.4(10) N/A N/A --
</TABLE>

- -------------------------
(1) Leap Wireless' holdings are through a wholly-owned subsidiary, Leap PCS
Mexico, Inc., which in turn owns 33% of Pegaso Telecomunicaciones, S.A. de
C.V. Pegaso Telecomunicaciones, S.A. de C.V. owns three companies, one of
which owns the licenses, one of which owns the operating assets and
operates the business, and one of which employs the operating personnel.

(2) Leap Wireless' interest in Pegaso Telecomunicaciones, S.A. de C.V. is
expected to be diluted to approximately 25% through new capital that other
investors have committed to contribute, and this will reduce the Equity
POPs to 24.8 million.

(3) Leap Wireless has entered into an agreement to purchase substantially all
of the assets of Chase Telecommunications Holdings, Inc., including all of
the outstanding equity of Chase Telecommunications, Inc.

(4) Assumes Leap Wireless completes its pending acquisition of Chase
Telecommunications, Inc.

(5) Leap Wireless' holdings are through a wholly-owned subsidiary, Inversiones
Leap Wireless Chile S.A., which in turn owns 100% of Chilesat.

(6) Leap Wireless' holdings in Russia are through two distinct subsidiaries.
Leap Wireless holds a 70% owned subsidiary, QUALCOMM Telecommunications
Ltd., a Cayman Islands company, which in turn owns 50% of Metrosvyaz
Limited, which plans to own 50% of several operating joint ventures in
Russia. See Note 9 below regarding the second subsidiary.

(7) Licensed POPs (licenses covering a number of potential customers) and
Equity POPs (licensed POPs multiplied by equity percentage ownership) are
based on the 20 regions that Metrosvyaz currently expects to serve through
joint ventures, based upon executed joint venture agreements and letters of
intent regarding the formation of joint ventures.

(8) Total Subscribers and Equity Subscribers are based on subscribers of
Petrosvyaz, a Metrosvyaz joint venture that launched service in St.
Petersburg in April 1999.

(9) In addition to the subsidiary discussed in Note 6, Leap Wireless holds a
70% interest in QUALCOMM Telecommunications Ltd., an Isle of Man company,
which in turn owns a 50% interest in Orrengrove Investments Limited, which
in turn owns a 60% interest in three related companies referred to as the
Transworld Companies. Orrengrove is seeking to build a long distance
network in Russia through its subsidiaries. Because Orrengrove's
subsidiaries intend to provide long distance services to operators and not
wireless communications services to subscribers, no figures are listed for
Licensed POPs and Equity POPs.

(10) Leap Wireless has agreed to sell all of the shares of OzPhone.

INDUSTRY BACKGROUND

Telecommunications markets are expanding rapidly as countries seek to
increase teledensity and competition among carriers. Often the fastest, most
economical and easiest way to meet these demands is through the implementation
and operation of wireless systems. The number of wireless licenses and the
amount of spectrum allocated to wireless networks are growing rapidly. Awards of
multiple licenses for fixed and mobile wireless telecommunications operations to
multiple carriers to spur the growth of teledensity and

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competition are occurring in many markets. Historically, many countries had just
one government-owned or government-supported wireless carrier, but many of these
nations now have multiple national or regional carriers. These changes have
created a need for capital to build out these new (largely wireless) systems and
expertise to oversee and manage the entry of these new systems into their
competitive markets.

Significant demand for high-quality wireless telecommunications systems
also exists in more developed international markets. Local governments in many
of these countries regulate the telecommunications systems, and licenses to
provide services have been largely unavailable. Decreased government regulation,
and active solicitation of new and better services through auctions of licenses,
create opportunities for local and foreign providers to capture market share.
These opportunities have been recognized in many countries, including those
where Leap Wireless has operations.

Wireless telecommunications service is currently available using either
analog or digital technology. Although analog technology is more widely deployed
than digital technology, its use is growing more slowly and analog technology
has significant limitations. Digital wireless telecommunications systems
overcome the capacity constraints of analog systems by converting voice or data
signals into a stream of digits that is compressed before transmission, enabling
a single radio channel to carry multiple simultaneous signal transmissions. This
increased capacity, along with enhancements in digital protocols, allow
digitally based systems to offer new and advanced services including greater
call privacy, fraud protection, higher voice quality, single number service,
integrated voice and paging, and enhanced wireless data transmission services
such as e-mail, facsimile and wireless connections to computer networks.

The primary digital technologies available for wireless fixed and mobile
applications are CDMA and Time Division Multiple Access, known as TDMA. TDMA has
been deployed in three predominant variations: (1) Global System for Mobile
Communications, known as GSM, a system standardized in Europe and widely
exported and deployed throughout the world, including a variant used for PCS in
the United States; (2) U.S. TDMA, a standard for cellular and PCS in the U.S.
which has had limited success outside the Americas; and (3) PDC, a Japanese
standard.

From an economic standpoint, CDMA technology provides cost savings in
initial capital investment and over the life of the network because of its
capacity and coverage advantages. CDMA networks cost less to design and engineer
than other types of wireless systems, making them easier to reconfigure and
expand. CDMA currently provides more than 10 times the capacity of analog
wireless technologies in large scale systems, and more than three to five times
the capacity of other digital technologies, enabling service providers to
support more subscribers and greater volumes of wireless traffic within a given
amount of radio frequency spectrum. CDMA networks also require fewer cell sites
than other wireless technologies to cover a given area, which can reduce initial
capital expenditures as well as ongoing operational and maintenance costs. In
addition, CDMA is the only wireless technology that effectively supports both
fixed and mobile services from the same platform, supporting two sources of
revenue and providing a rapid, cost-effective means to respond to dynamic market
requirements. From a performance standpoint, consumers benefit from improved
voice and call quality, longer phone battery life, better coverage and fewer
dropped calls, and the security afforded by digital coding techniques.

CDMA is an open standard with over 50 manufacturers who are licensed to
produce CDMA network equipment, subscriber handsets, and test equipment,
providing a wide choice in suppliers, competitive equipment pricing and
continued product developments.

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CORPORATE STRATEGY

Leap Wireless' strategy is to provide management and project expertise to,
and selectively invest in and manage, joint ventures and other collaborative
efforts to provide cdmaOne wireless telecommunications services in markets with
significant growth potential. Leap Wireless believes its experience, technical
and commercial expertise, and access to equipment and technology will benefit
Leap Wireless and the entities in which it invests. Elements of Leap Wireless'
strategy include:

Focus on National/International Growth Markets. Leap Wireless expects to
continue to invest in entities that serve or intend to serve markets in which
Leap Wireless' contributions could result in added value and contribute to an
enterprise that captures significant market share. The launch of "Cricket"(SM)
service in Tennessee is an example of its strategy of providing unlimited local
calls to the mass consumer market for a low, flat-rate. Leap Wireless' equity
interests in Chile and its joint venture interest in Mexico reflect Leap
Wireless' strategy of obtaining licenses in markets where these licenses were
previously unavailable or more limited in number and scope. Leap Wireless'
equity interests in Russia are examples of Leap Wireless' plan to invest in
developing countries and provide wireless service to markets without significant
wireline penetration.

Actively Participate in Operating Companies' Management. Leap Wireless
exercises (to varying degrees) significant management influence and oversight
over the businesses in which it invests. Leap Wireless believes its experience,
business relationships and other factors enable it to add value to its joint
ventures and equity interests and increase its operating companies' performance
and likelihood of success. Leap Wireless has the right to appoint or nominate
management personnel for, and has representation on the Boards of Directors of,
the operating companies in which it holds significant equity positions.
Moreover, Leap Wireless has entered into contractual arrangements with its
operating companies to provide financing and services. Leap Wireless has played
a significant role in the development of its operating companies' business plans
and objectives.

Leverage Strategic Alliances. In securing investment partners, Leap
Wireless seeks entities that can provide familiarity with local markets, an
ability to facilitate development in a particular market, or other necessary
features of a successful network-building enterprise. Leap Wireless intends to
cultivate its existing relationships with its co-investors in various markets in
order that each investor can contribute to the success of a particular operating
company. Leap Wireless also intends to continue to search for strategic partners
with whom it can invest in new enterprises supported by a wide range of
expertise and available resources. Leap Wireless seeks to ensure that its
strategic alliances enable it to better prepare and equip its operating
companies for successful development.

Build Industry-Leading Networks. The wireless networks of Leap Wireless are
designed to utilize cdmaOne technology. Leap Wireless intends that its operating
companies will build high-quality, industry-leading networks that provide
state-of-the-art services and sophistication. Leap Wireless believes cdmaOne
technology will allow its operating companies to offer cost-effective, high
quality telecommunications services, integrate advanced feature functionality,
and provide advanced services that make their offerings attractive to end-users.
Leap Wireless believes its use of CDMA technology will give it an advantage over
competitors utilizing competing technologies in terms of the costs to deploy and
operate networks, spectral efficiencies, improved service offerings to
customers, enhanced voice quality, privacy and fraud protection and fewer
dropped calls.

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OPERATING COMPANIES OF LEAP WIRELESS

Leap Wireless' operating companies consist of joint ventures and other
entities around the world, each of which is described below.

PEGASO TELECOMUNICACIONES, S.A. DE C.V. AND PEGASO COMUNICACIONES Y SISTEMAS,
S.A. DE C.V., MEXICO

General. Leap Wireless holds an interest in Pegaso Telecomunicaciones, S.A.
de C.V., a joint venture formed to construct and operate a wireless
telecommunications network in Mexico. In October of 1998, Pegaso Comunicaciones
y Sistemas, S.A. de C.V., a wholly-owned subsidiary of Pegaso
Telecomunicaciones, acquired nationwide PCS licenses in the 1.9GHz frequency
bands in Mexico for approximately US $221 million (based on exchange rates in
effect on the dates the license payments were made -- averaging 9.86 Mexican
pesos per U.S. dollar). Pegaso launched operations in Tijuana in February 1999
and expects to begin commercial service in Mexico City, Monterrey and
Guadalajara later in 1999. Pegaso hopes to eventually construct and operate
wireless telecommunications systems in up to 63 additional cities. In bidding
for its licenses, Pegaso Telecomunicaciones agreed to provide coverage by
October 2001 to municipalities containing at least 20% of the total population
of most of the licensed regions and to provide service to at least 50% of the
total population of most of the licensed regions by October 2003. We cannot
assure you that Pegaso Telecomunicaciones can complete these construction
projects for the amount budgeted or on a timely basis.

Pegaso Telecomunicaciones and Sprint PCS have signed a roaming agreement
that will enable Pegaso customers to use Sprint PCS's nationwide wireless
network in the U.S., and will allow Sprint PCS customers to roam on Pegaso's
network in Mexico.

The opportunity to assist in the license acquisition, financing, design,
construction and operation of a new wireless cdmaOne system in an area
previously underserved makes Leap Wireless' Mexico operation a blueprint for
future Leap Wireless joint venture opportunities.

Market Opportunity. In early 1998, the Mexican government auctioned four
additional licenses in each region of Mexico to allow additional competition in
the mobile wireless market. Pegaso Telecomunicaciones acquired nationwide PCS
licenses in these auctions. Mexico's population of approximately 99 million
people is approximately 70% urban with approximately 50% living in Mexico City,
Monterrey and Guadalajara, the country's three largest cities. In 1998, Mexico's
teledensity was approximately 10.4% and its cellular penetration was
approximately 3.5%.

Strategic Partners. In addition to Leap Wireless, Pegaso Comunicaciones y
Servicios, S.A. de C.V. and Corporativo del Valle de Mexico, S.A. de C.V., an
affiliate of Grupo Televisa, have interests in Pegaso Telecomunicaciones. Grupo
Televisa is the largest media company in the Spanish-speaking world and is a
major participant in the international entertainment business. Pegaso
Comunicaciones y Servicios, S.A. de C.V., a Mexican company 96%-owned by
Alejandro Burillo Azcarraga, a member of the Leap Wireless board of directors,
is affiliated with Grupo Pegaso, a private investment group with investments in
various industries including cable television, communications, retail
electronics, real estate, sports and entertainment. Leap Wireless management
believes that Pegaso Comunicaciones y Servicios' and Corporativo del Valle de
Mexico's strong financing resources, as well as their political access in
Mexico, provide Pegaso

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Telecomunicaciones critical skills and relationships for assisting the network
build-out and in marketing and distributing Pegaso Telecomunicaciones' wireless
services.

Leap Wireless Rights and Interests. Leap Wireless, through a wholly-owned
subsidiary, currently owns a 33% interest in Pegaso Telecomunicaciones and has
invested $100 million of the $300 million of capital that has been contributed
by the members of the joint venture. Once all $400 million of capital committed
to the venture by the members has been contributed, Leap Wireless, Pegaso
Comunicaciones y Servicios and Grupo Televisa will hold approximately 25%, 29%
and 15% of the voting shares, respectively, with several other investors holding
the balance of the shares. Under the joint venture agreement with Pegaso
Telecomunicaciones, Leap Wireless has a contractual right to elect two of nine
directors for so long as Leap Wireless owns 15% or more of the equity. Leap
Wireless has agreed to provide operator services to Pegaso Telecomunicaciones
and in turn has generally subcontracted those services to a subsidiary of GTE.
GTE is one of the world's largest publicly traded international
telecommunications operators, with investments and operations in the United
States and many other parts of the world.

Capital Requirements and Projected Investments. Leap Wireless expects that
Pegaso will be required to raise approximately $1.6 billion to build-out, launch
and operate its planned network. To date, the members of the joint venture have
contributed $300 million of equity, and members other than Leap Wireless have
committed an additional $100 million of equity contributions. In addition,
QUALCOMM and another equipment vendor have agreed to provide approximately $580
million of secured equipment financing to the venture. In May 1999, Pegaso
Telecomunicaciones entered into a $100 million working capital facility. Leap
Wireless expects that the facility and the $50 million of capital that is
committed to be contributed this year will finance Pegaso Telecomunicaciones'
capital and operating requirements through the end of 1999.

Regulatory Environment. After the passage of the Ley Federal de
Telecomunicaciones (Federal Telecom Law), which came into effect on June 8,
1995, Mexican PCS/ WLL auctions started on November 17, 1997. The Comision
Federal de Telecomunicaciones offered four licenses in the 1.9GHz band (PCS) and
four licenses in the 3.4GHz band (WLL). Pegaso Telecomunicaciones successfully
purchased nationwide PCS licenses in the auctions, each with a term of 20 years.
The Secretaria de Comunicaciones y Transportes, known as the SCT, is the
government ministry responsible for regulating the telecommunications sector and
licensing new competitors, while the Comision Federal de Telecomunicaciones is
the independent authority specifically charged with promoting and supervising
the deregulation of Mexico's telecom sector. Modeled after the U.S. Federal
Communications Commission, the Comision Federal de Telecomunicaciones was
created by the Federal Telecom Law. The Federal Telecom Law provides the
underlying basis for telecommunications competition in Mexico. The Federal
Telecom Law is designed to provide a pro-competitive regulatory environment in
the Mexican wireless services market. It is also intended to outlaw cross
subsidization of concessionary and competitive services and provides that
concession and permit holders for public wireless service may not receive
subsidies or preferential treatment from other telecommunications concessions.

Telmex, the government telecommunications operator, is required by Mexico's
Federal Telecom Law to interconnect competing cellular operators to the landline
public switch telephone network. Interconnect agreements are supervised and
approved by the SCT. While cellular tariffs are no longer regulated by the SCT,
rates must still be registered with the SCT. Mexico currently restricts foreign
voting ownership of telecommunications networks and services to 49%.

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Competition. Mexico's current cellular market is divided into nine regions
which operated with a regulated duopoly in each region prior to the recent
auction of additional wireless licenses. Prior to the auction, seven operators
provided cellular telephone service to one or more regions in Mexico: Telcel
(which is a subsidiary of Telmex and which held the only nationwide license
prior to the recent auctions), Iusacell, Norcel, Portatel, Baja Cellular
Mexican, Movitel and Cedetel. As a result of the auction, Pegaso
Telecomunicaciones and the following wireless operators won the right to
purchase licenses to operate in the Mexican PCS market: Unefon, Midicell, Grupo
Hermes, Dipsa (a subsidiary of Telmex), and Iusacell. Furthermore, the local
access market has been liberalized and new providers of local service are in the
process of being licensed.

Currently, Telcel, the largest cellular operator, is the Band A national
cellular operator and covers all nine regions with a subscriber base of
approximately 1.1 million subscribers. In the auctions, Telmex, through its
subsidiary Dipsa, acquired an additional nationwide 10MHz PCS license. Iusacell
is the second largest cellular operator in Mexico, covering four regions,
including Mexico City and Guadalajara. However, even after acquiring two 10MHz
PCS licenses at the auctions, Iusacell does not have licenses in all regions and
thus does not have nationwide coverage. The license purchased by Grupo Hermes
covers only 1 of the 9 regions in Mexico. Unefon and Midicell did not pay the
80% balance of their license payments due on September 30, 1998. The Mexican
regulatory authorities granted these delinquent bidders six additional months to
make final payment, plus interest, with the restriction that they could not
launch service until six months after payment. At the end of March, the Mexican
Regulatory Authorities granted Unefon and Midicell an additional payment
extension to June 15, 1999 provided that they made an interim interest payment.
Unefon made the required payment; Midicell failed to make the interim interest
payment and forfeited its right to the licenses it acquired in the auctions.
Axtel (formerly named Telenor), a company developing licenses for wireless local
loop telephone service in Mexico, has filed suit against the Mexican government
challenging its right to provide additional time to Unefon and Midicell to make
license payments. The other existing cellular operators, primarily those
bordering the U.S., are run by operators significantly owned by Motorola.

In summary, in the Mexican cellular and PCS bands there is one existing
nationwide operator, Telemex, which operates through its subsidiaries Telcel and
Dipsa; one carrier, Iusacell, with a large mixed band footprint (four 800 MHz
licenses and two 1900 MHz licenses); and Pegaso Telecomunicaciones, which holds
a nationwide PCS license. In addition, Unefon has been granted nationwide
licenses, but cannot launch service until December 1999. As noted above, the
award of licenses to Unefon is being challenged in court. Other competitors hold
regional licenses.

QUALCOMM TELECOMMUNICATIONS LTD., RUSSIA

Leap Wireless holds a 70% interest in two companies which both have the
name QUALCOMM Telecommunications Ltd. The first of these companies, which is
organized under the laws of Cayman Islands, is referred to as QUALCOMMTel
Cayman, and is a joint venture partner in Metrosvyaz Limited. Metrosvyaz
develops joint ventures with local Russian telecommunications operators for the
formation, development, financing and operation of wireless telephone services
in the Russian Federation. Many local operators are currently licensed to
operate wireless systems in Russia. Partnerships are being used to facilitate
the implementation of these operations. As of May 1999, Metrosvyaz was in
various stages of negotiations with 25 local partners to offer the regional
telephone companies and other licensed telecommunications operators a local
solution, including

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financing, for the delivery of wireless telecommunications systems in their
regions. Fourteen Russian joint ventures have been formed as of June 1999.
Metrosvyaz's goal is to obtain approximately 10 million new wireless local loop
lines through the Metrosvyaz Russian joint ventures over the next 10 years. We
cannot assure you that Metrosvyaz will successfully obtain these wireless local
loop lines. Metrosvyaz expects to own 50% of each joint venture in which it
participates. Three of QUALCOMM's original customers who are in the process of
implementing CDMA wireless local loop services with equipment provided by
QUALCOMM have agreed to transfer their current operations, including their
telecommunications licenses, to a joint venture with Metrosvyaz. Long distance
and international traffic will likely be carried by Tass Loutch Telecom, a
company organized under the laws of the Russian Federation and the holder of
licenses for international and long distance telephone services in Russia. Tass
Telecom, a 50% owner of Tass Loutch Telecom, agreed to represent Metrosvyaz as
its agent in connection with establishing the Russian joint ventures and is
being paid a commission based upon subscriber lines sold to the joint venture.

In April 1999, a joint venture formed by Metrosvyaz launched its first
wireless local loop telephone service in St. Petersburg.

In addition, Leap Wireless holds an interest in QUALCOMM Telecommunications
Ltd., an Isle of Man company, known as QUALCOMMTEL Isle of Man, which in turn
owns a 50% interest in Orrengrove Investments Limited. Orrengrove currently
holds a 60% interest in three related companies, known as the Transworld
Companies, one of which is the 50% owner of Tass Loutch Telecom. One of the
Transworld Companies, through a subsidiary, intends to implement a long distance
network in Russia and launched initial long distance service between Moscow and
Perm in December 1998. The long distance network has been designed to work in
conjunction with satellite and terrestrial services being provided by another
Transworld Company to Tass Loutch Telecom. This network is intended to be used
by Tass Loutch Telecom to offer long distance and international telephone
services in Russia to local operators.

In April 1999, the Transworld Companies learned that third party satellite
equipment they used to provide commercial long distance service had experienced
thermal-related damage. Leap Wireless does not expect that this satellite
equipment can be repaired. The Transworld Companies have begun using fiber lines
to provide long distance service as a short-term alternative to the satellite
transmission option they previously used. The Transworld Companies are exploring
long-term alternative transmission sources for their long distance services.

Leap Wireless contemplates that the Transworld Companies and the Russian
joint ventures may enter into cooperative arrangements in the future, under
which Tass Loutch Telecom will carry long distance and international traffic
generated by the joint venture's wireless operations.

Market Opportunity. Leap Wireless believes that the Russian Federation
market represents a significant CDMA service market opportunity. Russia
currently has a population of approximately 149 million people with a
teledensity of only 19%. Recently, the Russian telecommunications authorities
announced that they intend to add 30 million additional subscriber lines of
fixed service over the next 10-year period. To that end, more than 50 CDMA
licenses have been granted to existing Russian PTT's and some private carriers.
Russia's current population is approximately 73% urban. The cellular penetration
was only 0.5% at the end of 1998 with very little wireless local loop service.

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Strategic Partners. The 50% of Metrosvyaz and the 50% of Orrengrove not
owned by the respective QUALCOMMTel organizations are owned by Teletal Limited,
a holding company affiliated with Itar Tass, the official news agency of the
Russian Federation. The 30% of each of the QUALCOMMTel entities not owned by
Leap Wireless are held by Tiller International Ltd., a private investment
company with telecommunications interests in Russia and significant contacts
with Russian telecommunications regulators and regional operators.

Leap Wireless Rights and Interests. Leap Wireless holds a 70% interest in
each of the QUALCOMMTEL entities. QUALCOMMTel Cayman owns a 50% interest in
Metrosvyaz, organized in 1997, a joint venture with Teletal Limited. Leap
Wireless holds a 70% interest in QUALCOMMTel Isle of Man, which in turn owns a
50% interest in Orrengrove. Orrengrove was organized in 1998 and also is a joint
venture with Teletal Limited. In each of Metrosvyaz and Orrengrove, the
applicable QUALCOMMTel entity has a right to elect four of nine directors, with
Teletal Limited also having a right to elect four directors. The ninth director
is jointly elected by the respective QUALCOMMTel entity and Teletal Limited.
Each of the QUALCOMMTel entities agreed to elect a representative of Tiller as
one of the directors. Leap Wireless has a right to elect four of seven directors
of each of the QUALCOMMTel entities and Tiller has the right to elect the
remaining three directors.

Leap Wireless intends to play a significant role in the operation of
Metrosvyaz as the implementation and rollout of the joint venture companies are
initiated. Leap Wireless intends to provide oversight and direct support for the
services in areas including marketing, distribution, customer care, billing and
service initiation. The expertise of Leap Wireless' management will be applied
(through Metrosvyaz) to assist the joint venture operators in managing
successful system launches. Leap Wireless also intends to play a significant
role in the implementation and rollout of the operations of the Transworld
Companies, including construction, marketing, distribution, customer care,
billing and service implementation.

Capital Requirements and Project Investments. QUALCOMM has committed to
provide $102.5 million of equipment financing to Metrosvyaz and Leap Wireless
has committed to provide $72.5 million in working capital to Metrosvyaz. Leap
Wireless intends to fund its loan to Metrosvyaz, which is subordinated to
QUALCOMM's loan to Metrosvyaz, through borrowings under its credit agreement
with QUALCOMM. Leap Wireless expects that the $175 million available to
Metrovyaz under these two facilities will provide Metrosvyaz with sufficient
liquidity to fund its deployment and operations through the end of 1999. The
operating plans of Metrosvyaz are to raise another $325 million over the next
two years to build out portions of the joint ventures it has under
consideration. Metrosvyaz expects to require approximately $4 billion of capital
over a 10-year period in order to provide the 10 million lines targeted by
Metrosvyaz's management.

Leap Wireless has invested $51.8 million in Orrengrove in the form of a
promissory note. Orrengrove, in turn, invested this amount in the Transworld
Companies. At May 31, 1999, the Transworld Companies retained approximately $30
million of this amount for

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further development of their businesses. As a result of the third party
satellite failure discussed above, the Transworld Companies are reevaluating
their business plans for the Russian long distance market. Further development
of their business will require substantial additional financing.

We cannot assure you that required financing for either Metrosvyaz or the
Transworld Companies will be obtained.

Regulatory Environment. The Russian Ministry of Communications is
responsible for regulation and oversight of the telecommunications sector.
Improving and maintaining the installed infrastructure are principal objectives
of the Ministry of Communications in Russia. Deregulation and privatization of
the telecommunications industry is occurring throughout the country. One
company, Svyazinvest, a partially state-owned company with foreign investors,
controls the majority of the voting interest in Russia's 89 regional PTT's. The
CDMA licenses that have been granted in Russia are restricted to fixed wireless
communication. These restrictions are consistent with Leap Wireless' current
strategy in Russia, which is to provide fixed wireless services to homes and
businesses.

Competition. Most of the targeted operators with whom Metrosvyaz expects to
enter into joint venture agreements are established, government-owned,
telecommunications companies in the various regions of Russia. The competition
with the joint venture in most of the regions is primarily with wireline
services operated by the local partner of the joint venture. In some larger
cities, however, including Moscow and St. Petersburg, there is meaningful
competition from private cellular operators. In the long distance area, the
principal competition is from Rostelecom, the established long distance and
international carrier in Russia.

CHILESAT TELEFONIA PERSONAL, S.A., CHILE

General. Chilesat Telefonia Personal, S.A. is a wireless telecommunications
provider in which Leap Wireless holds a 100% interest. In 1997, Chilesat
acquired a nationwide license to offer PCS services in Chile. Chilesat has
deployed a nationwide cdmaOne system provided and financed by QUALCOMM. The
system began operation in September 1998 and had approximately 30,600
subscribers in late May 1999. In April 1999, Leap Wireless increased its
ownership of Chilesat from 50% to 100%; Leap Wireless' Chilean subsidiary
purchased 50% of Chilesat from Telex-Chile, a Chilean telecommunications
company, and an affiliate of Telex-Chile, for $28 million and a $22 million
interest-free note payable in three years.

Market Opportunity. Chile is considered by many to be a technology leader
in Latin America. It has a stable economy and a regulatory environment that is
friendly to foreign investors. Chile has a population of approximately 15
million people. In excess of 70% of the population is concentrated in the center
of the country in the Santiago and Valparaiso regions. Current teledensity is
approximately 21.1%. Current wireless penetration in Chile is approximately
6.5%.

Capital Requirements and Projected Investments. During the third quarter of
fiscal 1999, Leap Wireless loaned Chilesat $7.0 million. At May 31, 1999,
working capital loans to Chilesat totaled approximately $23 million. Leap
Wireless estimates that, as of May 31, 1999, Chilesat needed approximately $109
million of additional working capital, infrastructure and handset financing to
fund its activities and to expand its networks and businesses as currently
contemplated through the end of 1999. As of May 31, 1999, Leap Wireless had
approximately $23 million available to loan to Chilesat under its credit
agreement with

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QUALCOMM, and Chilesat had approximately $8 million of additional handset
funding committed from QUALCOMM. In addition, Leap Wireless is currently in late
stage discussions to obtain additional vendor financing for Chilesat, and
Chilesat will seek additional equity and debt financing to satisfy the balance
of its desired financing through 1999. If Chilesat does not obtain all of the
funds it requires to operate and expand as currently anticipated through the end
of 1999, Chilesat will restrict or postpone its expansion until additional funds
are available. The preceding estimates of Chilesat's financing needs assume that
Chilesat will not be required to make debt repayments to QUALCOMM throughout the
remainder of 1999. Chilesat is currently in discussions with QUALCOMM to
restructure the terms of a deferred payment agreement with QUALCOMM and is
currently delinquent in payments of $10.9 million.

Regulatory Environment. The Subsecretaria Telecomunicaciones regulates the
basic telecommunications network in Chile. In April 1997, Subsecretaria
Telecomunicaciones awarded three licenses for PCS (1900MHz) mobile operations in
Chile -- one to Chilesat and two to affiliates of Entel Cellular. In addition,
three major cellular operators, including Entel Cellular, were previously
licensed by the government and are operating in Chile. The regulatory
environment in Chile is considered to be stable, reliable and neutral to foreign
investment. Leap Wireless believes that the regulatory environment will not
present obstacles to an effective marketing plan, pricing or operations in
Chile. Licenses and interconnections have been received and are in place.

Competition. In addition to Chilesat, there are three major operators of
wireless services in Chile, each of which effectively provides nationwide
service. CTC/Startel operates a nationwide cellular system. Bell South operates
in central Chile, but has acquired the cellular license for the regions outside
of Santiago from Entel Cellular. Bell South has an existing roaming agreement
with Entel Cellular that will allow it to effectively provide nationwide
coverage while it builds out its own nationwide network. In addition to these
cellular services, Entel launched a commercial PCS service using GSM technology
in March 1998 and currently has approximately 210 base stations deployed
throughout Chile. A second PCS license, also controlled by Entel, has not been
built out or put into operation.

CHASE TELECOMMUNICATIONS, UNITED STATES

General. Chase Telecommunications, Inc., a Delaware corporation, was the
winning bidder for 11 wideband PCS C-Block licenses in the FCC's 1996 C-Block
spectrum auction. Chase Telecommunications now holds 15MHz of spectrum covering
approximately 6.3 million POPs in a region which includes approximately 98% of
Tennessee. Major markets include Nashville, Memphis, Knoxville and Chattanooga.
Leap Wireless currently owns 7.2% of Chase Telecommunications Holdings, Inc.,
the parent of Chase Telecommunications. In December 1998, Leap Wireless agreed
to purchase substantially all the assets of Chase Telecommunications Holdings,
including all of the stock of Chase Telecommunications. Because the acquisition
involves the transfer of telecommunications licenses, it is subject to approval
by the FCC.

Chase Telecommunications began offering wireless service in Chattanooga in
October 1998. On February 1, 1999, in anticipation of the launch of Cricket(SM),
Chase Telecommunications ceased selling conventional wireless service to new
subscribers. Chase Telecommunications had approximately 4,900 subscribers at
that time. In March 1999, Leap Wireless' concept of providing flat-rate local
area service targeted at the mass consumer market was launched in Chattanooga,
Tennessee. The service, advertised as the

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"around town phone"(SM) and "comfortable wireless"(SM), and marketed under the
name "Cricket"(SM), was introduced using Chase Telecommunications' existing
infrastructure. Cricket(SM) provides customers with a simple and affordable
wireless communication option by allowing them to make unlimited local calls for
a flat rate. The service was launched under an agreement that requires the
management of Chase Telecommunications to control the business until Leap
Wireless' proposed acquisition of Chase Telecommunications receives all
necessary governmental approvals and is completed. Leap Wireless and Chase
Telecommunications also entered into a trademark license agreement relating to
the use of the name "Cricket"(SM).

Chase Telecommunications has begun efforts to expand the Cricket(SM)
service to other markets in Tennessee.

Market Opportunity. Chase Telecommunications' Nashville, Memphis, Knoxville
and Chattanooga markets account for approximately 4.6 million of Chase
Telecommunications' approximately 6.3 million POPs. The state of Tennessee is
situated in the heart of the growing Southeast with a diverse economic base
including manufacturing, services, retail and wholesale trade, transportation,
finance and agriculture. Tennessee has experienced strong population and
economic growth over the period from 1991 to 1996. In addition, Tennessee's
median household income grew at the second highest rate in the United States
between 1992 and 1994 and at 129% of the national average from 1991 to 1996.
Tennessee continues to attract people and businesses due to its low state excise
and franchise taxes and lack of both personal income tax on earned income and
property tax. Tennessee's job growth was 125% of the U.S. average from 1991 to
1996 and continues to present strong growth for small and mid-sized business.

Strategic Partners. Chase Telecommunications was founded by Tony Chase,
formerly the chairman and CEO of Faith Broadcasting Corporation which operates
radio communications licenses in several major markets in Texas. Leap Wireless
expects to continue to maintain and benefit from its relationship with Mr. Chase
after the licenses are transferred.

Leap Wireless Rights and Interests. Leap Wireless does not have a right to
representation on the board of Chase Telecommunications Holdings or the board of
Chase Telecommunications, although it participates in the management and
operation of Chase Telecommunications under the terms of the management
agreement described above. If the FCC does not approve the transfer of the Chase
Telecommunications license, Leap Wireless has the right to continue in its role
as manager until December 2005.

Capital Requirement and Project Investments. Chase Telecommunications'
business plan for building-out and launching in the four largest cities in
Tennessee requires it to raise approximately $250 million. Leap Wireless and
Chase Telecommunications are among the parties to a credit facility under which
Leap Wireless has agreed, at its discretion, to provide working capital to Chase
Telecommunications. The parties have agreed in principle to increase the maximum
principal amount that may be drawn under the facility to $45 million. Borrowings
under the facility bear interest at prime plus 4.5%. The borrowings are
collateralized by substantially all of the assets of Chase Telecommunications,
and are subordinated in right of payment to amounts Chase Telecommunications
owes to QUALCOMM under an equipment financing agreement. At May 31, 1999,
borrowings under the working capital facility totaled $26.8 million, plus
approximately $2.2 million of accrued interest. Chase Telecommunications is
seeking an equipment vendor for further build-out of its system and expects to
obtain substantial additional financing from the vendor that is eventually
selected.

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Regulatory Environment. In order to maintain its PCS licenses, Chase
Telecommunications is required to comply with numerous FCC requirements. To
close its pending acquisition of Chase Telecommunications, Leap Wireless must
qualify as a designated entity. If the FCC recognizes Leap Wireless as a
designated entity, Leap Wireless would be entitled to benefit from the favorable
government financing extended to Chase Telecommunications with respect to its
purchase of the licenses.

Competition. Chase Telecommunications faces and expects to face competition
in its markets from current and potential market entrants including, among
others, Sprint Spectrum, Power Telecom, AT&T, Bell South and Alltel. Leap
Wireless believes that these competitors currently are or will soon begin
operating networks in the territories served or to be served by Chase
Telecommunications. Additionally, FCC rules allow licensees to partition or
disaggregate their spectrum. If other licensees create partitioned or
disaggregated licenses, this could increase the number of competitors and the
types of competition in Chase Telecommunications' markets.

UNITED STATES WIRELESS OPPORTUNITIES

General. Leap Wireless' domestic strategy is to offer consumers a wireless
service plan that provides them with unlimited local calls for a low, flat
monthly fee. Aimed at the mass consumer market, the service is marketed under
the name "Cricket"(SM) and is identified as the "around town phone"(SM) and
"comfortable wireless."(SM) This strategy is different from the existing model
used by most current wireless operators in the United States. Leap Wireless
believes this approach may also be appropriate in selected foreign markets.

As described above, Leap Wireless' "Cricket"(SM) concept was launched in
Chattanooga, Tennessee in March 1999 using existing infrastructure of Chase
Telecommunications. Leap Wireless has agreed to acquire Chase Telecommunications
and its wireless licenses which cover 98% of Tennessee. The completion of the
transaction, however, is subject to the FCC's approval of the transfer of the
Chase Telecommunications' licenses to Leap Wireless.

Leap Wireless has also agreed to acquire spectrum in North and South
Carolina from AirGate Wireless, L.L.C. and Leap Wireless was the winning bidder
for 36 licenses of C-Block spectrum in the federal government's recent
re-auction of broadband PCS spectrum. In July 1999, the FCC issued an opinion
and order that had the effect of granting Leap Wireless status as a designated
entity qualified to hold C-Block and F-Block PCS spectrum licenses and that
approved Leap Wireless' acquisition of F-Block spectrum licenses from AirGate
Wireless, L.L.C. and C-Block licenses in connection with the government's recent
spectrum re-auction. The approval is subject to several specified conditions and
is also subject to appeal. For a description of these conditions and a possible
appeal, see "Risk Factors -- Leap Wireless' Failure to Maintain its Existing
Licenses and Obtain New Licenses Could Affect its Competitive Position." Leap
Wireless has not yet filed an application with the FCC for the acquisition of
Chase Telecommunications' C-Block licenses.

Leap Wireless is also considering the purchase of additional spectrum in
the United States.

If Leap Wireless is not able to directly or indirectly acquire spectrum
licenses, it may enter into reseller agreements with PCS operators for minutes
of use, with Leap Wireless making equity investments in the operators in
accordance with applicable law.

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Market Opportunity. Wireless telephony penetration is currently
approximately 26% of the potential U.S. market. A market convergence is
beginning to occur between the development of wireless and wireline services as
wireless costs rapidly drop below traditional wireline costs for comparable
services. This has resulted in the introduction of new wireless services that
have penetrated new markets. In the U.S. market, incumbent wireline operators
are preparing to offer long distance services to their customers, while at the
same time the traditional long distance carriers are trying to effect entry into
the local loop arena. Wireless carriers have made efforts to offer more
competitively priced services, but have focused on high mobility customers that
generate higher revenues.

Without the economies of scale that volume affords, current wireless
marketing models suffer with the loss of any portion of the traditional business
market segment. Wireless companies operating on these models are likely to
continue to compete for the same customer base and for increasingly diminishing
economic returns. In contrast, Leap Wireless' intended strategy is to provide a
high-quality, low cost, flat fee service offering unlimited local calls targeted
at the mass consumer market.

Strategic Partners. Leap Wireless expects to implement its United States
wireless opportunities through a strategic consortium of companies and
investors.

Capital Requirements and Projected Investments. Leap Wireless estimates
that it will require approximately $250 million of financing to build-out and
launch wireless telecommunications networks in the first 10 markets in which it
deploys Cricket(SM) service (other than markets in Tennessee). Leap Wireless has
approximately $81 million available to it under the QUALCOMM credit agreement
for development of Cricket(SM) networks in the United States. A portion of this
amount has already been spent as a bid deposit in the federal government's
reauction of broadband PCS spectrum licenses and for continued development of
the Cricket(SM) model. Leap Wireless expects to obtain a majority of the
remaining financing that is required to develop these 10 markets through
equipment vendor financing, and to satisfy the remaining requirements through
additional debt or equity financing. Leap Wireless' actual financing needs for
the development of Cricket(SM) networks will vary depending on the number of
these networks that are developed and the speed at which these networks are
constructed and launched.

Regulatory Environment. In this effort, Leap Wireless operates in the
complex United States FCC regulatory scheme. Leap Wireless must maintain
compliance with all of the requirements for conducting wireless operations in
the United States and, if it enters into the reseller agreements, all of the
requirements applicable to reseller agreements with United States operators,
including the requirements applicable to designated entities to the extent the
relevant wireless spectrum is in the C-Block or F-Block. PCS license grants are
for a 10 year period, at the end of which the licensee must apply for renewal.
Licensees face the possibility of revocation by the FCC at any time for cause,
including failure to comply with the terms of the licenses or failure to qualify
for the licenses, malfeasance or other misconduct. Construction regulations and
moratoria are in effect in some markets which can create risks and costs
associated with the construction of a network. The licensing, construction,
operation, sale and interconnection agreements of wireless telecommunications
systems face regulation to varying degrees by the FCC and state regulatory
agencies. This regulation is continually evolving and there are a number of
issues on which regulation has been or in the future may be suggested. The
Telecommunications Act of 1996 mandates significant changes in existing
regulations of the telecommunications industry to promote competitive
development of new service

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offerings, to expand the availability of telecommunications services and to
streamline the regulation of the industry.

Competition. The U.S. wireless industry is characterized by intense
competition between PCS, cellular and other wireless service providers. We
cannot assure you that Leap Wireless will compete successfully or that new
technologies and products that are more commercially effective than Leap
Wireless' technologies and products will not be developed. In addition, most of
Leap Wireless' prospective competitors have substantially greater financial,
technical, marketing, sales and distribution resources than those of Leap
Wireless. Some competitors will likely market and bundle other services, such as
cable television access, long distance, landline telephone service and Internet
access with their wireless telecommunications service offerings. Leap Wireless
plans to enter into agreements with others that will allow it to offer some or
all of these services, but it has not yet entered into any of these agreements
and it cannot provide assurances that it will enter into any of these
agreements. A limited number of Leap Wireless' prospective competitors are
operating, or planning to operate, through joint ventures and affiliation
arrangements, wireless telecommunications networks that cover most of the United
States.

Leap Wireless' planned service would compete with some or all of the
services offered by (1) the historic landline operators and other local exchange
carriers, (2) PCS carriers, and (3) cellular carriers. Landline and local
exchange carrier operators have established market positions which put Leap
Wireless at a significant market disadvantage. Other PCS providers in the U.S.
include major competitors such as PrimeCo, Sprint and AT&T, all of which have
large coverage systems and entered the PCS market earlier than Leap Wireless. We
cannot assure you that the time-to-market advantage will not have a material
adverse effect on Leap Wireless' ability to successfully implement its strategy
in the United States. Furthermore, PCS licensees may also divide their licenses
in a service area into two or more licenses, each of which covers the same area
but have less capacity than the original license. After receiving approval from
the FCC, the original licensee may transfer one or more of the new licenses to
new entrants in the service area, thus increasing competition. Leap Wireless
also believes that the two incumbent cellular providers who operate in each of
Leap Wireless' planned United States markets, all of whom have infrastructure in
place, a customer base and a brand name, and have been operational for five to
10 years or more, will continue to upgrade their networks. Leap Wireless further
expects to compete with other telecommunications technologies such as paging,
enhanced specialized mobile radio and global satellite networks.

OZPHONE PTY. LTD., AUSTRALIA

Leap Wireless holds a 100% equity interest in OzPhone Pty. Ltd., an
Australian corporation formed to participate in Australia's personal
communication services auctions. OzPhone has been awarded 10 800MHz licenses
covering approximately 6.4 million POPs to provide digital mobile and wireless
local loop services in major metropolitan and rural areas throughout Australia.
The licenses cover the Tasmania, Perth and the Brisbane/ Cairns regions as well
as some remote regions.

In August 1999, Leap Wireless agreed to sell all of the shares of OzPhone
for approximately $16.3 million. Leap Wireless expects to complete the sale in
the near future.

GOVERNMENT REGULATION

The construction, operation, sale and interconnection arrangements of
wireless telecommunications systems and the grant, maintenance and renewal of
applicable licenses

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<PAGE> 63

in each of the countries outside the United States in which Leap Wireless has
operations are regulated by governmental authorities in each country. In some
cases, the regulatory authorities also operate or control the operations of the
competitors of the operating companies. Changes in the current regulatory
environment of these markets or future judicial intervention, or regulations
affecting the pricing of the operating companies' services, could have a
material adverse effect on Leap Wireless. In addition, the regulatory framework
and authorities in the countries where Leap Wireless operates are relatively
recent and, therefore, the enforcement and interpretation of regulations, the
assessment of compliance, and the degree of flexibility of regulatory
authorities are uncertain. Further, changes in the regulatory framework may
limit the ability to add subscribers to developing systems. An operating
company's failure to comply with applicable governmental regulations or
operating requirements could result in the loss of licenses, penalties and fines
or otherwise could have a material adverse effect on Leap Wireless. For a more
detailed description of the regulatory environment in the United States and each
of the other countries in which Leap Wireless operates, see the "Regulatory
Environment" discussion for each of Leap Wireless' operating companies under
"Business -- Operating Companies of Leap Wireless."

The construction, operation, sale and interconnection arrangements of
wireless telecommunications systems and the grant, maintenance and renewal of
applicable licenses in the United States are regulated to varying degrees by
state regulatory agencies, the FCC, the United States Congress and the courts.
Leap Wireless' operating companies doing business in the United States, and Leap
Wireless, must maintain compliance with all of the requirements for conducting
wireless operations in the United States and the requirements for entering into
reseller agreements with United States operators. This regulation is continually
evolving and there are a number of issues on which regulation has been or in the
future may be suggested. The Telecommunications Act of 1996 mandates significant
changes in existing regulations of the telecommunications industry to promote
competitive development of new service offerings to expand the availability of
telecommunications services and to streamline the regulation of the industry. We
cannot assure you that the FCC, Congress, the courts or state agencies having
jurisdiction over the business of any of Leap Wireless' United States operating
companies will not adopt or change regulations or take other actions that would
adversely affect Leap Wireless' financial condition or results of operations.
Many of the FCC's rules relating to the businesses of Leap Wireless' United
States operating companies have not been tested by the courts and are subject to
being changed by Congressional action. In addition, FCC licenses are subject to
renewal and revocation. We cannot assure you that the licenses of Leap Wireless'
United States operating companies will be renewed or not be revoked.

EMPLOYEES

On July 1, 1999, Leap Wireless had approximately 70 full time employees,
including temporary employees but excluding employees of Leap Wireless'
operating companies. It also had several consultants under contract to work on
specific projects.

FACILITIES

Leap Wireless has leased approximately 50,000 square feet of office space
in San Diego, California, U.S.A.

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LEGAL PROCEEDINGS

Neither Leap Wireless nor any of its operating companies is a party to any
litigation that Leap Wireless believes would, individually or in the aggregate,
have a significant negative effect on Leap Wireless and its operating companies,
taken as a whole, and Leap Wireless is not aware that any such litigation is
threatened.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning the directors and
executive officers of Leap Wireless:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Harvey P. White.......... 65 Chairman, Chief Executive Officer and Director
Thomas J. Bernard........ 67 Vice Chairman, President-International Business
Division and Director
James E. Hoffmann........ 49 Senior Vice President, General Counsel and Secretary
Daniel O. Pegg........... 53 Senior Vice President, Public Affairs
Leonard C. Stephens...... 42 Senior Vice President, Human Resources
Susan G. Swenson......... 51 President and Director
Thomas D. Willardson..... 48 Senior Vice President, Finance and Treasurer
Alejandro Burillo 47 Director
Azcarraga..............
Robert C. Dynes.......... 56 Director
Scott B. Jarvis.......... 38 Director
John J. Moores........... 55 Director
Michael B. Targoff....... 55 Director
Jeffrey P. Williams...... 48 Director
</TABLE>

Additional information concerning the directors and executive officers is
set forth below:

Harvey P. White has served as Chairman of the Board, Chief Executive
Officer, and a Director of Leap Wireless since its formation in June 1998. He is
one of the founders of QUALCOMM, and served as Vice Chairman of the Board of
QUALCOMM from June 1998 to September 1998. From May 1992 until June 1998 he
served as President of QUALCOMM and from February 1994 to August 1995 as Chief
Operating Officer of QUALCOMM. Prior to May 1992, he was Executive Vice
President and Chief Operating Officer, and was also a Director of QUALCOMM since
it began operations in July 1985 until he resigned in September 1998 when Leap
Wireless became an independent, publicly-traded company. From March 1978 to June
1985, Mr. White was an officer of LINKABIT (M/A-COM LINKABIT after August 1980),
where he was successively Chief Financial Officer, Vice President, Senior Vice
President and Executive Vice President. Mr. White became Chief Operating Officer
of LINKABIT in July 1979 and a Director of LINKABIT in December 1979. Mr. White
is currently a director of Solana Technology Development Corp, a privately held
multimedia technology start-up company, and Applied Micro Circuits Corporation,
a supplier of high-bandwidth silicon connectivity. He holds a B.A. degree in
Economics from Marshall University.

Thomas J. Bernard has served as a Director of Leap Wireless since its
formation in June 1998. He is also the Vice Chairman and President-International
Business Division. From June 1998 to July 1999, he served as Executive Vice
President of Leap Wireless. Prior to joining Leap Wireless, Mr. Bernard served
as a Senior Vice President of QUALCOMM from April 1996 through June 1998. From
April 1996 until June 1998, he was also General Manager of the Infrastructure
Products Division of QUALCOMM. He had retired in April 1994, but returned to
QUALCOMM in August 1995 as Executive Consultant and became Senior Vice
President, Marketing, in December 1995. Mr. Bernard first joined QUALCOMM in
September 1986. He served as Vice President and General

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<PAGE> 66

Manager for the OmniTRACS division and in September 1992 was promoted to Senior
Vice President. From March 1982 to September 1986, Mr. Bernard held various
positions at M/A-COM LINKABIT. Prior to joining QUALCOMM in September 1986, Mr.
Bernard was Executive Vice President and General Manager, M/A-COM
Telecommunications Division, Western Operations. Mr. Bernard served on the Board
of Directors of Sigma Circuits, Inc., a circuit board manufacturing company,
from April 1995 to July 1998.

James E. Hoffmann has served as Senior Vice President, General Counsel and
Secretary of Leap Wireless since its formation in June 1998. Prior to joining
Leap Wireless, he served as Vice President, Legal Counsel of QUALCOMM from June
1998 to September 1998. From February 1995 until June 1998, he served as Vice
President of QUALCOMM and Division Counsel for the Infrastructure Products
Division, having joined QUALCOMM as Senior Legal Counsel in June 1993. Prior to
joining QUALCOMM, Mr. Hoffmann was a partner in the law firm of Gray, Cary, Ames
& Frye, where he practiced transactional corporate law. He holds a B.S. degree
from the United States Naval Academy, an M.B.A. degree from Golden Gate
University and a J.D. degree from University of California, Hastings College of
the Law.

Daniel O. Pegg, Leap Wireless' Senior Vice President, Public Affairs,
served as Senior Vice President, Public Affairs of QUALCOMM from March 1997 to
September 1998. Prior to joining QUALCOMM, Mr. Pegg was President and Chief
Executive Officer of the San Diego Economic Development Corporation for 14
years. Mr. Pegg served on the Board of Directors of Gensia Pharmaceuticals from
1986 to 1996. Mr. Pegg holds a B.A. degree from California State University at
Los Angeles.

Leonard C. Stephens, Leap Wireless' Senior Vice President, Human Resources,
served as Vice President, Human Resources Operations for QUALCOMM from December
1995 to September 1998. Prior to joining QUALCOMM, Mr. Stephens was employed by
Pfizer Inc., where he served in a number of human resources positions over a 14
year career. He holds a B.A. degree in Political Science from Howard University.

Susan G. Swenson joined Leap Wireless as President and as a Director in
July 1999. From March 1994 until July 1999, she served as President and Chief
Executive Officer of Cellular One, a joint venture between Air Touch and AT&T
Wireless that provided wireless telecommunications services to regions covering
approximately 10 million potential subscribers. From 1979 to 1994, Ms. Swenson
held various operating positions with Pacific Telesis Group, including Vice
President and General Manager of Pacific Bell's San Francisco Bay Area operating
unit for one year and President and Chief Operating Officer of PacTel Cellular
for two and one-half years. Ms. Swenson also serves as a director of Wells Fargo
& Company, General Magic, Inc., and Working Assets Funding Service. Ms. Swenson
holds a B.A. degree from San Diego State University.

Thomas D. Willardson joined QUALCOMM in July 1998 to serve as Senior Vice
President, Finance and Treasurer of Leap Wireless. From July 1995 to July 1998,
Mr. Willardson was Vice President and Associate Managing Director of Bechtel
Enterprises, Inc., a wholly-owned investment and development subsidiary of
Bechtel Group, Inc. From January 1986 to July 1995, Mr. Willardson served as a
principal at The Fremont Group, an investment company. Mr. Willardson was
re-elected in June 1998 to serve as a Director of Cost Plus, Inc. where he has
served as a Director since March 1991. He holds an M.B.A. degree from the
University of Southern California and a B.S. degree in Finance from Brigham
Young University.

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<PAGE> 67

Alejandro Burillo Azcarraga has served as a Director of Leap Wireless since
September 1998. He has more than 30 years experience working for, and holds 14%
of the controlling interest in, Grupo Televisa. Mr. Burillo presently serves as
Vice-Chairman of the Board of Directors and President of International Affairs
of Grupo Televisa, positions to which he was appointed in 1997. Previously and
since 1991, Mr. Burillo served as Vice-Chairman of the Board and Chief Operating
Officer of Grupo Televisa. Mr. Burillo also holds a controlling interest in
Grupo Pegaso, a private investment group with interests in various industries
including cable television, communications, retail electronics, real estate,
sports and entertainment. Mr. Burillo also serves as a Board Member of Grupo
Desc, an NYSE-listed company and one of Mexico's main industrial groups.

Robert C. Dynes was elected as a Director of Leap Wireless in July 1999. He
has served as the Chancellor of the University of California, San Diego since
1996 and as a Professor of Physics at UCSD since 1991. He was Senior Vice
Chancellor -- Academic Affairs from 1995 to 1996. Prior to 1991, Chancellor
Dynes held numerous research science positions at AT&T Bell Laboratories. He
holds a B.Sc. in Mathematics and Physics from the University of Western Ontario
and a M.Sc. and Ph.D. in Physics from McMaster University in Hamilton, Ontario.
Chancellor Dynes is a member of the National Academy of Sciences and a Fellow of
the American Academy of Arts and Sciences, the Canadian Institute of Advanced
Research and the American Physical Society. He serves on numerous scientific and
educational boards and committees.

Scot B. Jarvis is a cofounder and managing member of Cedar Grove Partners,
LLC, a privately owned company formed to make investments in telecommunications
ventures. From 1994 to 1996, Mr. Jarvis was a Vice President of Operations for
Eagle River, Inc., a telecommunications investment company owned by Craig O.
McCaw. While at Eagle River, Mr. Jarvis was the cofounder and acting President
of Nextlink Communications, Inc., now a publicly traded competitive local
exchange company (CLEC) controlled by Mr. McCaw. Mr. Jarvis was also responsible
for certain operations and sat on the board of NEXTEL Communications, a
nationwide provider of specialized mobile radio service. From 1985 to 1994, Mr.
Jarvis held a number of executive positions at McCaw Cellular Communications
which was sold to AT&T in August 1994. His responsibilities included
Acquisitions and Development, International Development, and he operated two
separate Cellular One Districts in California from 1990 to 1993. Including Leap
Wireless and Nextlink, Mr. Jarvis serves on the Board of Directors of PulsePoint
Communications, Inc., Metawave Communications Corp., and XYPoint Corporation.

John J. Moores was elected as a Director of Leap Wireless in June 1999.
Since December 1994, Mr. Moores has served as owner and Chairman of the Board of
the San Diego Padres Baseball Club, L.P., and since September 1991 as Chairman
of the Board of JMI Services, Inc., a private investment company. In 1980, Mr.
Moores founded BMC Software, Inc. and served as its President and Chief
Executive Officer from 1980 to 1986 and as Chairman of its Board of Directors
from 1980 to 1992. Mr. Moore also serves as a director of Bindview Development
Corporation, NEON Systems, Inc., and Peregrine Systems, Inc. and several
privately-held corporations. Mr. Moores holds a B.S. in Economics and a J.D.
from the University of Houston.

Michael B. Targoff has served as a Director of Leap Wireless since
September 1998. He is founder and CEO of Michael B. Targoff and Co., a company
that seeks controlling investments in telecommunications and related industry
companies. From its formation in January 1996 through January 1998, Mr. Targoff
was President and Chief Operating Officer of Loral Space & Communications
Limited. Prior to that, Mr. Targoff was Senior

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<PAGE> 68

Vice President of Loral Corporation. From 1991, Mr. Targoff was a Director and a
principal Loral executive responsible for Loral's satellite manufacturing joint
venture with Alcatel, Aerospatiale, Alenia and Daimler Benz Aerospace. Mr.
Targoff was also the President and is a Director of Globalstar
Telecommunications Limited, the company that is the public owner of Globalstar,
Loral's global mobile satellite system. Mr. Targoff is also a Director of
Foremost Corporation of America. Prior to joining Loral Corporation in 1981, Mr.
Targoff was a Partner in the New York law firm of Willkie Farr and Gallagher.
Mr. Targoff attended Brown University where he received a B.A. degree in 1966.
From Columbia University School of Law, he earned a J.D. degree in 1969 and was
a Hamilton Fisk Scholar and Editor of the Columbia Journal of Law and Social
Problems.

Jeffrey P. Williams has served as a Director of Leap Wireless since
September 1998. He has been a Managing Partner at Greenhill & Co., LLC, an
investment banking firm, since 1998. From September 1996 to January 1998, Mr.
Williams was Executive Vice President, Strategic Development and Global Markets
for McGraw-Hill Companies, and from 1984 through 1996 he was an investment
banker with Morgan Stanley and Company in their Telecommunications and Media
Group. Mr. Williams has a Bachelor of Architecture from the University of
Cincinnati and an M.B.A. degree with distinction from Harvard University
Graduate School of Business Administration.

CLASSIFIED BOARD OF DIRECTORS

Leap Wireless' Charter provides for a classified Board of Directors
consisting of three classes as nearly equal in number as possible with the
directors in each class serving staggered three-year terms. The terms of the
Class I, Class II and Class III directors will expire in 2002, 2000 and 2001,
respectively. Messrs. Moores and Targoff and Ms. Swenson are Class I directors,
Messrs. Bernard, Burillo and Dynes are Class II directors, and Messrs. Jarvis,
White and Williams are Class III directors. At each annual meeting of the
stockholders of Leap Wireless, the successors to the class of directors whose
term expires will be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following their election. For a
more detailed discussion see "Description of Leap Wireless Capital Stock."

COMMITTEES OF THE BOARD OF DIRECTORS

For the two months that Leap Wireless was in existence during the 1998
fiscal year, Leap Wireless' Board of Directors acted solely through written
consents. In September 1998, the Board of Directors of Leap Wireless established
standing Audit and Compensation Committees.

The Audit Committee will, among other things, recommend independent
certified public accountants; review the scope of the audit examination,
including fees and staffing; review the independence of the auditors; review and
approve non-audit services provided by the auditors; review findings and
recommendations of auditors and management's response; review the internal audit
and control function; and review compliance with Leap Wireless' ethical business
practices policy. The members of the Audit Committee are Messrs. Targoff and
Williams.

The Compensation Committee will review management compensation programs,
approve compensation changes for senior executive officers, review compensation
changes for senior management, and administer management stock plans. The
members of the Compensation Committee are Messrs. Burillo and Targoff.

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COMPENSATION OF DIRECTORS

Directors of Leap Wireless do not receive any compensation for their
services as director except that each non-employee director receives an option
to purchase 20,000 shares of Leap Wireless common stock when he or she first
serves as a non-employee director and an option to purchase 10,000 additional
shares of Leap Wireless common stock at the time of each subsequent annual
meeting that occurs while he or she continues to serve as a non-employee
director.

The exercise price for each option is the fair market value of Leap
Wireless' common stock on the date the option is granted. Each option becomes
exercisable over five years according to the following schedule: as long as the
optionee continues to serve as a non-employee director, employee or consultant
to Leap Wireless, 20% of the shares subject to the option first become
exercisable on each of the first five anniversaries of the date of grant. Each
option has a term of 10 years, except that the options terminate 30 days after
the optionee ceases to be a non-employee director, employee or consultant to
Leap Wireless. Special exercise and termination rules apply if the optionee's
relationship with Leap Wireless is terminated as a result of retirement at age
70 after at least nine years of service on the Board, permanent and total
disability, or death.

Leap Wireless also reimburses directors for their travel expenses incurred
in connection with attendance at Board and Board committee meetings.

COMPENSATION OF EXECUTIVE OFFICERS

Leap Wireless first hired employees on September 23, 1998. Prior to that
date, all of Leap Wireless' executive officers were employees of QUALCOMM. As a
result, the information provided in the following tables reflects compensation
earned by Leap Wireless' Chief Executive Officer and the four other most highly
compensated executive officers of Leap Wireless for services they rendered to
QUALCOMM as QUALCOMM employees during QUALCOMM's last three fiscal years.

The services rendered by these individuals to QUALCOMM were, in some
instances, in capacities not equivalent to the positions they currently hold
with Leap Wireless. Therefore, these tables do not necessarily reflect the
compensation that will be paid to the executive officers of Leap Wireless.

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<PAGE> 70

SUMMARY COMPENSATION TABLE
(COMPENSATION PAID BY QUALCOMM)

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------------------------- LONG-TERM
OTHER COMPENSATION
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(2) OPTIONS SATION(4)
--------------------------- ---- -------- -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Harvey P. White.......................... 1998 $477,853 $320,000 $ 0 75,000 $108,902
Chairman of the Board and 1997 $395,713 $250,000 $ 0 0 $ 37,011
Chief Executive Officer 1996 $354,963 $100,000 $ 0 85,000 $ 34,437
Thomas J. Bernard........................ 1998 $287,509 $120,000 $ 0 0 $ 34,545
Vice Chairman,
President -- International 1997 $245,142 $ 65,000 $ 0 0 $ 6,086
Business Division and Director 1996 $186,976 $ 40,000 $ 0 60,000 $ 0
James E. Hoffmann........................ 1998 $178,930 $ 60,000 $ 0 4,000 $ 13,899
Senior Vice President, 1997 $149,283 $ 50,000 $ 0 3,000 $ 10,048
General Counsel and Secretary 1996 $131,646 $ 20,000 $ 0 4,000 $ 9,418
Leonard C. Stephens...................... 1998 $176,930 $ 55,000 $104,947 6,000 $ 2,258
Senior Vice President, 1997 $146,828 $ 45,000 $ 42,268 3,000 $ 1,816
Human Resources 1996 $112,711 $ 25,000 $ 43,644 15,000 $ 0
Daniel O. Pegg........................... 1998 $209,868 $ 68,000 $ 0 0 $ 41,475
Senior Vice President, 1997 $111,174(3) $ 55,000 $ 0 50,000 $ 3,463
Public Affairs 1996 $ 0 $ 0 $ 0 0 $ 0
</TABLE>

- -------------------------
(1) As permitted by rules established by the SEC, no amounts are shown regarding
"perquisites" where such amounts do not exceed the lesser of either $50,000
or 10% of the total of annual salary and bonus.

(2) In December 1995, Leonard C. Stephens joined QUALCOMM as Vice President of
Human Resources. QUALCOMM made payments related to his relocation as shown
above and in its 1998 fiscal year reimbursed Mr. Stephens in the amount of
$50,705 for income taxes arising from the relocation payment.

(3) Mr. Pegg joined QUALCOMM in March 1997. If he had been employed by QUALCOMM
during the entire 1997 fiscal year at the same annual base salary rate, his
salary for fiscal 1997 would have been $212,000.

(4) Includes QUALCOMM matching 401(k) contributions, executive benefits
payments, executive retirement stock matching and financial planning
services as follows:

<TABLE>
<CAPTION>
QUALCOMM
MATCHING EXECUTIVE EXECUTIVE FINANCIAL TOTAL
401(K) BENEFITS RETIREMENT PLANNING OTHER
NAME YEAR CONTRIBUTIONS PAYMENTS CONTRIBUTIONS(1) SERVICES COMPENSATION
---- ---- ------------- ---------- ---------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Harvey P. White.............. 1998 $ 2,313 $2,520 $48,919 $38,070 $108,902(2)
1997 $ 2,145 $2,520 $32,346 $ 0 $ 37,011
1996 $ 2,191 $2,520 $29,726 $ 0 $ 34,437
Thomas J. Bernard............ 1998 $ 2,659 $4,270 $26,532 $ 1,084 $ 34,545
1997 $ 1,816 $4,270 $ 0 $ 0 $ 6,086
1996 $ 0 $ 0 $ 0 $ 0 $ 0
James E. Hoffmann............ 1998 $ 2,659 $ 0 $ 8,916 $ 2,324 $ 13,899
1997 $ 2,145 $ 0 $ 7,903 $ 0 $ 10,048
1996 $ 2,191 $ 0 $ 7,227 $ 0 $ 9,418
Leonard C. Stephens.......... 1998 $ 2,258 $ 0 $ 0 $ 0 $ 2,258
1997 $ 1,816 $ 0 $ 0 $ 0 $ 1,816
1996 $ 0 $ 0 $ 0 $ 0 $ 0
Daniel O. Pegg............... 1998 $14,048 $4,475 $ 9,174 $14,048 $ 41,745
1997 $ 0 $ 0 $ 3,463 $ 0 $ 3,463
1996 $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>

- -------------------------
(1) QUALCOMM has a voluntary retirement plan that allows eligible executives to
defer up to 100% of their income on a pre-tax basis. The participants
receive 50% company stock match on a maximum deferral of 15% of income
payable only upon eligible retirement. Participants become fully vested in
the stock benefit at age 65, with partial vesting beginning after the
participant reaches the age of 61 and has at least three years of employment
with QUALCOMM, or has participated in the plan for more than 10 years. The
employee contributions and the stock benefit are unsecured and subject to
the general creditors of QUALCOMM. At September 28, 1998, 2,167 shares were
vested on behalf of Harvey P. White and 536 shares were vested on behalf of
Thomas J. Bernard.

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<PAGE> 71

(2) Also includes $17,080, the dollar value of the benefit or premiums paid for
a split-dollar life insurance policy (unrelated to term life insurance
coverage) reflecting the present value of the economic benefit of the
premiums paid by QUALCOMM during its fiscal year 1998.

Effective September 23, 1998, Leap Wireless assumed QUALCOMM's obligation
to pay premiums under an existing split dollar life insurance policy for the
benefit of Harvey P. White and his wife. The initial annual premiums are
approximately $600,000, and the policy's death benefit is initially $9,800,000.
Upon the death of the second to die of Mr. White and his wife, Leap Wireless
will receive out of the policy's proceeds a full reimbursement of any premiums
paid under the policy. The value of the premium paid by QUALCOMM in its fiscal
1998 is reflected in the Summary Compensation Table above.

The following table shows the specified information with respect to options
to purchase QUALCOMM common stock granted to Leap Wireless' officers named in
the Summary Compensation Table above during QUALCOMM's fiscal 1998:

QUALCOMM OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF TOTAL AT ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO OPTION TERM(2)
GRANTED EMPLOYEES IN EXERCISE EXPIRATION -----------------------------
NAME (#)(1) FISCAL YEAR PRICE DATE 5% 10%
---- ---------- ------------ -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James E. Hoffmann............. 4,000 0.07% $64.18 12/04/07 $ 161,393.93 $ 408,971.71
Leonard C. Stephens........... 6,000 0.10% $64.18 12/04/07 $ 242,090.90 $ 613,457.57
Harvey P. White............... 75,000 1.23% $62.35 11/13/07 $2,939,850.37 $7,449,571.43
</TABLE>

- -------------------------
(1) These QUALCOMM options become exercisable according to the following
schedule: 20% first become exercisable on each of the first, second, third,
fourth and fifth anniversaries of the date of grant.

(2) Calculated on the assumption that the market value of the underlying
QUALCOMM common stock increases at the stated values, compounded annually.
Options granted under QUALCOMM's Option Plan generally have a maximum term
of 10 years. The total appreciation of the options over their 10 year terms
at 5% and 10% is 63% and 159%, respectively.

QUALCOMM AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT FY-END
SHARES VALUE OPTIONS AT FY-END(#) ($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harvey P. White....... 6,000 $132,540 202,000 162,000 $3,950,860 $1,154,850
Thomas J. Bernard..... 0 $ 0 18,000 42,000 $ 136,500 $ 374,700
James E. Hoffmann..... 0 $ 0 19,400 12,600 $ 509,560 $ 141,310
Daniel O. Pegg........ 0 $ 0 10,000 40,000 $ 0 $ 0
Leonard C. Stephens... 0 $ 0 3,600 20,400 $ 45,276 $ 181,104
</TABLE>

- -------------------------
(1) Represents the closing price per share of the underlying shares on the last
day of the fiscal year less the option exercise price multiplied by the
number of shares. The closing price per share was $51.00 on the last trading
day of the fiscal year as reported on the Nasdaq National Market.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The businesses to be conducted by Leap Wireless have in the past engaged in
transactions with QUALCOMM and its businesses. QUALCOMM has a significant
relationship with Leap Wireless as a result of the agreements entered into by
QUALCOMM and Leap Wireless in connection with the distribution of Leap Wireless
common stock in September 1998, and due to QUALCOMM's warrant to purchase
4,500,000 shares of Leap Wireless. QUALCOMM's relationships as equipment vendor
to Leap Wireless and its operating companies and as lender under the credit
facility will give QUALCOMM significant influence over Leap Wireless and may
create conflicts of interest with Leap Wireless. In addition, QUALCOMM is not
restricted from competing with Leap Wireless or its operating companies or
pursuing directly wireless telecommunications businesses or interests which
would also be attractive to Leap Wireless. For a more detailed discussion see
"Risk Factors -- Leap Wireless' Operating Companies are Heavily Dependent on
QUALCOMM and Ericsson" and "Relationship Between Leap Wireless and QUALCOMM
After the Distribution."

In late September 1998, Leap Wireless provided a $17.5 million loan to
Pegaso Comunicaciones y Servicios, a Mexican company 96%-owned by Alejandro
Burillo Azcarraga, a member of Leap Wireless' Board of Directors. The Pegaso
Comunicaciones y Servicios loan bore interest at the rate of 13% per annum and
was repayable in installments of $7.5 million on or before October 31, 1998 and
$10 million on or before December 31, 1998. The purpose of the Pegaso
Comunicaciones y Servicios loan was to facilitate investment by Pegaso
Comunicaciones y Servicios in Pegaso Telecomunicaciones, the joint venture in
which Leap Wireless has an interest, and to ensure that all capital
contributions required for the acquisition of the Mexican licenses on September
30, 1998 were made by the respective investors. The Pegaso Comunicaciones y
Servicios loan was guaranteed by Mr. Burillo and was secured by a pledge of all
of the shares of Pegaso Comunicaciones y Servicios and Mr. Burillo's interest in
an unrelated joint venture with QUALCOMM to operate a satellite tracking,
management and two-way communications systems for the trucking industry in
Mexico. As scheduled, the first principal installment of $7.5 million, plus
accrued interest, was repaid in the first quarter of fiscal 1999, and the second
and final installment of $10 million, plus accrued interest, was repaid in the
second quarter of fiscal 1999.

Prior to the spin-off of Leap Wireless, Scot Jarvis and Jeffrey Williams
worked with QUALCOMM to develop the "Cricket"(SM) unlimited local calling
strategy that Leap Wireless has adopted and refined for use in domestic wireless
markets. In June 1999, Cricket Communications, Inc., a wholly-owned subsidiary
of Leap Wireless that is expected to implement the Cricket strategy, granted
Messrs. Jarvis and Williams options for 795,000 shares and 410,000 shares,
respectively, of Cricket Communications, Inc. common stock, exercisable at $1.00
per share. Messrs. Jarvis and Williams have exercised these options in full. As
a result, they own approximately 1.6% and 0.8%, respectively, of the outstanding
common stock of Cricket Communications, Inc.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth the beneficial ownership of Leap Wireless
common stock as of July 1, 1999, by (1) all those known by Leap Wireless to be
beneficial owners of more than 5% of its common stock; (2) each director of Leap
Wireless; (3) each executive officer named in the Summary Compensation Table;
and (4) all directors and officers of Leap Wireless as a group.

<TABLE>
<CAPTION>
LEAP WIRELESS
SHARES PROJECTED
TO BE
BENEFICIALLY OWNED(1)
-----------------------
NUMBER OF PERCENT OF
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS SHARES(2) TOTAL
--------------------------------------- --------- ----------
<S> <C> <C>
QUALCOMM Incorporated(3)................................. 4,500,000 19.8%
Harvey P. White(4)(5)(6)................................. 458,040 2.5%
Thomas J. Bernard(5)(6)(7)............................... 18,721 *
James E. Hoffmann(5)(6).................................. 15,619 *
Daniel O. Pegg(5)(6)(8).................................. 10,610 *
Leonard C. Stephens(6)................................... 4,165 *
Susan G. Swenson......................................... 0 *
Thomas D. Willardson..................................... 0 *
Alejandro Burillo Azcarraga.............................. 0 *
Robert C. Dynes.......................................... 0 *
Scot B. Jarvis(9)........................................ 700 *
John J. Moores........................................... 0 *
Michael B. Targoff....................................... 0 *
Jeffrey P. Williams...................................... 0 *
All Officers and Directors as a group (13 persons)....... 507,855 2.7%
</TABLE>

- -------------------------
* Less than one percent.

(1) This table is based upon information supplied by officers, directors and
principal stockholders of QUALCOMM and Schedules 13D and 13G filed with the
SEC. Unless otherwise indicated in the footnotes to this table and subject
to marital property laws where applicable, each of the stockholders named in
this table has sole voting and investment power regarding the shares
indicated as beneficially owned and has a business address care of Leap
Wireless International, Inc., 10307 Pacific Center Court, San Diego,
California 92121. Applicable percentages are based on 18,221,595 shares of
Leap Wireless common stock outstanding on July 1, 1999, adjusted as required
by rules promulgated by the SEC.

(2) In addition to shares held in the individual's sole name, this column
includes shares held by the spouse and other members of the named person's
immediate household who share that household with the named person, and
shares held in family trusts.

(3) Consists entirely of a warrant to purchase shares of Leap Wireless common
stock, fully exercisable immediately, which expires 10 years following the
distribution of Leap Wireless. QUALCOMM Incorporated's business address is
6455 Lusk Blvd., San Diego, California 92121.

(4) Includes 2,500 shares held in a foundation of which Mr. White disclaims
beneficial ownership. Also, includes 50,500 shares held in trust for Mr.
White's grandchildren, 358,343 shares held in family trusts, 7,500 held in a
Family Limited Partnership,

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<PAGE> 74

250 shares held in a charitable remainder trust, and 27,947 shares held in
trusts for the benefit of other relatives.

(5) Includes shares issuable upon exercise of options exercisable within 60 days
of July 1, 1999 as follows: Mr. Bernard, 5,458 shares (including 3,950
shares subject to options held by Mr. Bernard's wife); Mr. Hoffmann, 5,650
shares; Mr. Pegg, 5,000 shares; and Mr. White, 11,000 shares.

(6) Does not include shares issuable upon exercise of QUALCOMM stock options.
The officers hold options to purchase shares of QUALCOMM exercisable within
60 days following July 1, 1999 in the following amounts: Mr. Bernard, 13,600
shares (including 1,600 shares subject to options held by Mr. Bernard's
wife); and Mr. White, 492,000 shares.

(7) Includes 60 shares held by Mr. Bernard's spouse.

(8) Includes 5,000 shares held in a family trust, 25 shares held in a custodial
account for the benefit of Mr. Pegg, 500 shares held in a custodial account
for the benefit of Mr. Pegg's spouse and 25 shares held by Mr. Pegg's minor
son.

(9) Includes 150 shares held in by Mr. Jarvis for the account of his children
and 50 shares held in a custodial retirement account.

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<PAGE> 75

DESCRIPTION OF LEAP WIRELESS CAPITAL STOCK

Under the charter, the total number of shares of all classes of stock that
Leap Wireless has authority to issue is 85,000,000, consisting of 10,000,000
shares of preferred stock and 75,000,000 shares of common stock.

COMMON STOCK

As of July 1, 1999, Leap Wireless had 18,221,595 shares of common stock
outstanding. The holders of Leap Wireless common stock are entitled to one vote
for each share on all matters voted on by stockholders. The holders of our
shares of common stock possess all voting power, except as otherwise required by
law or provided in any resolution adopted by the Board of Directors of Leap
Wireless regarding any series of preferred stock. Subject to any preferential or
other rights of any outstanding series of Leap Wireless preferred stock that may
be designated by the Board of Directors of Leap Wireless, the holders of Leap
Wireless common stock will be entitled to such dividends as may be declared from
time to time by the Board of Directors of Leap Wireless from available funds and
upon liquidation will be entitled to receive pro rata all assets of Leap
Wireless available for distribution to the holders. For a more detailed
discussion see "Dividend Policy."

PREFERRED STOCK

The Board of Directors of Leap Wireless is authorized to issue shares of
preferred stock, in one or more series, and to determine, regarding any series,
the terms and rights of the series, including the following: (1) the designation
of the series; (2) the rate and time of, and conditions and preferences
regarding, dividends, and whether the dividends are cumulative; (3) the voting
rights, if any, of shares of the series; (4) the price, timing and conditions
regarding the redemption of shares of the series and whether a sinking fund
should be established for the series; (5) the rights and preferences of shares
of the series in the event of voluntary or involuntary dissolution, liquidation
or winding up of the affairs of Leap Wireless; and (6) the right, if any, to
convert or exchange shares of the series into or for stock or securities of any
other series or class.

Leap Wireless believes that the availability of the preferred stock will
provide Leap Wireless with increased flexibility in structuring possible future
financings and acquisitions, and in meeting other corporate needs which might
arise. Having authorized shares available for issuance will allow Leap Wireless
to issue shares of preferred stock without the expense and delay of a special
stockholders' meeting. The authorized shares of preferred stock, as well as
shares of Leap Wireless common stock, will be available for issuance without
further action by Leap Wireless' stockholders, unless action is required by
applicable law or the rules of any stock exchange on which Leap Wireless'
securities may be listed or unless Leap Wireless is restricted by the preferred
stock.

On September 9, 1998, the Board of Directors adopted a Rights Plan. For a
more detailed discussion see "Description of Rights Agreement." In connection
with the Rights Plan, the Board of Directors of Leap Wireless declared a
dividend of one preferred stock purchase right for each outstanding share of
common stock of Leap Wireless. Each preferred stock purchase right will entitle
the registered holder after the preferred stock purchase rights become
exercisable and until September 10, 2008 (or the earlier redemption, exchange or
termination of the preferred stock purchase rights), to purchase from Leap
Wireless one one-thousandth (1/1000) of a share of Series A Preferred Stock,
par value $.0001 per share, at a price of $90.00 per one one-thousandth
(1/1000) of a share of

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<PAGE> 76

Series A Preferred Stock, subject to anti-dilution adjustments. Each share of
Series A Preferred Stock purchasable upon exercise of the preferred stock
purchase rights will be entitled, when, as and if declared, to a minimum
preferential quarterly dividend payment of $10.00 per share but will be entitled
to an aggregate dividend of 1,000 times the dividend, if any, declared per share
of common stock. In the event of liquidation, dissolution or winding up of Leap
Wireless, the holders of the Series A Preferred Stock will be entitled to a
preferential liquidation payment of $1,000 per share plus any accrued but unpaid
dividends but will be entitled to an aggregate payment of 1,000 times the
payment made per share of common stock. Each share of Series A Preferred Stock
will have 1,000 votes and will vote together with the shares of common stock.
Finally, in the event of any merger, consolidation or other transaction in which
outstanding shares of Leap Wireless common stock are exchanged, each share of
Series A Preferred Stock will be entitled to receive 1,000 times the amount
received per share of common stock. Shares of Series A Preferred Stock will not
be redeemable. Leap Wireless has reserved for issuance 75,000 shares of Series A
Preferred Stock issuable upon exercise of the preferred stock purchase rights.

WARRANTS

In connection with the distribution of Leap Wireless, Leap Wireless issued
a warrant to purchase 5,500,000 shares of Leap Wireless common stock to QUALCOMM
at an exercise price of approximately $6.11 per share. In March 1999, in
exchange for consideration valued at $5.4 million, QUALCOMM agreed to amend the
warrant to reduce the number of shares which may be acquired upon exercise to
4,500,000. The warrant is exercisable during the 10 years following the spin-off
of Leap Wireless. Upon exercise in full of this warrant, QUALCOMM would hold
approximately 14% of the outstanding Leap Wireless common stock, assuming
exercise of all outstanding options and convertible securities.

LEAP WIRELESS COMMON STOCK RESERVED FOR ISSUANCE

Future sales of substantial amounts of Leap Wireless common stock in the
public market could adversely affect the trading price of the Leap Wireless
common stock. As of July 1, 1999, Leap Wireless had 18,221,595 shares of common
stock outstanding, the large majority of which were freely tradable without
restriction or further registration under the Securities Act. Also, as of July
1, 1999, in addition to the 2,270,573 shares of common stock reserved for
issuance upon conversion of outstanding Trust Convertible Preferred Securities,
12,543,912 shares of common stock were reserved for issuance as follows:
4,500,000 shares reserved for issuance upon exercise of a warrant held by
QUALCOMM; 3,259,006 shares reserved for issuance to employees, officers,
directors and consultants under Leap Wireless equity incentive plans; and
4,784,906 reserved for issuance upon exercise of options granted in connection
with the spin-off of Leap Wireless to holders of options for QUALCOMM common
stock (including Leap Wireless employees who were former employees of QUALCOMM).

RECENT SALES OF UNREGISTERED SECURITIES

In June 1998, Leap Wireless sold 1,000 shares of common stock to QUALCOMM
for $.10 in a transaction exempt from the registration requirements of the
Securities Act of 1933 under Section 4(2). In connection with the distribution
of Leap Wireless, each outstanding share of Leap Wireless common stock was
converted and split into the number of shares of Leap Wireless common stock
necessary to provide QUALCOMM with all

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<PAGE> 77

shares to be transferred in the distribution of Leap Wireless. In connection
with the distribution of Leap Wireless, Leap Wireless also issued a warrant to
purchase 5,500,000, shares of common stock to QUALCOMM in a transaction exempt
from the registration requirements of the Securities Act of 1933 under Section
4(2). The warrant was subsequently amended to reduce the number of shares which
may be acquired upon exercise of the warrant to 4,500,000.

NO PREEMPTIVE RIGHTS

No holder of any stock of Leap Wireless of any class authorized at the date
of distribution of Leap Wireless will then have any preemptive right to
subscribe to any securities of Leap Wireless of any kind or class.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Leap Wireless common stock is
Harris Trust Company of California.

DELAWARE LAW AND CHARTER PROVISIONS

Leap Wireless must comply with the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, the statute
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, owns (or within three
years prior, did own) 15% or more of the corporation's voting stock.

Leap Wireless' charter also requires that any required or permitted action
by stockholders of Leap Wireless must be effected at a duly called annual or
special meeting of stockholders and may not be effected by any consent in
writing. In addition, special meetings of stockholders of Leap Wireless may be
called only by a majority of the authorized number of directors, the Chairman of
the Board or the President of Leap Wireless. The charter also provides for a
classified Board of Directors consisting of three classes of directors. In
addition, the charter provides that the authorized number of directors may be
changed only by resolution of the Board of Directors. Leap Wireless' bylaws
require advance notice by a stockholder of a proposal or director nomination
which such stockholder desires to present at the annual meeting of stockholders.
Leap Wireless' charter and bylaws also require that the holders of at least
66 2/3% of the voting stock of Leap Wireless must approve any amendment to
either the charter or bylaws affecting certain provisions. These provisions may
have the effect of deterring hostile takeovers or delaying changes in control or
management of Leap Wireless.

DESCRIPTION OF RIGHTS AGREEMENT

On September 9, 1998, the Board of Directors of Leap Wireless adopted a
Rights Plan. The following description of the Rights Plan is intended as a
summary only and is qualified in its entirety by reference to the Rights
Agreement dated as of September 14, 1998 between Leap Wireless and Harris Trust
Company of California, a form of which is

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filed as an exhibit to Leap Wireless' registration statement on Form S-1, of
which this prospectus is a part.

In connection with the Rights Plan, the Board of Directors of Leap Wireless
declared a dividend of one preferred share purchase right for each outstanding
share of our common stock outstanding at the close of business on September 11,
1998. Each preferred stock purchase right will entitle the registered holder
after the preferred stock purchase rights become exercisable and until September
10, 2008 (or the earlier redemption, exchange or termination of the preferred
stock purchase rights), to purchase from Leap Wireless one one-thousandth
(1/1000) of a share of Series A Preferred Stock, par value $.0001 per share, at
a price of $90.00 per one one-thousandth (1/1000) of a share of Series A
Preferred Stock, subject to anti-dilution adjustments. Until the earlier to
occur of (1) 10 days following a public announcement that a person or group of
affiliated or associated persons (other than an Existing Holder (as defined
below)) has acquired, or obtained the right to acquire, beneficial ownership of
15% or more of the outstanding Leap Wireless common stock (an "Acquiring
Person") or (2) 10 business days (or a later date as may be determined by action
of the Board of Directors before such time as any person or group of affiliated
persons becomes an Acquiring Person) following the commencement or announcement
of an intention to make a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or group of 15% or
more of our outstanding common stock (the earlier of (1) and (2) being called
the "preferred stock purchase rights distribution date"), the preferred stock
purchase rights will be evidenced, regarding any of the common stock
certificates outstanding as of the record date, by the common stock certificate.
"Existing Holder" means QUALCOMM, together with its affiliates and associates
(but excluding individual officers, directors and employees of QUALCOMM) unless
and until the Existing Holder has acquired beneficial ownership of one or more
additional shares of common stock. The preferred stock purchase rights will be
transferred with and only with our common stock until the preferred stock
purchase rights distribution date or earlier redemption or expiration of the
preferred stock purchase rights. As soon as practicable following the preferred
stock purchase rights distribution date, separate certificates evidencing the
preferred stock purchase rights will be mailed to holders of record of our
outstanding common stock as of the close of business on the preferred stock
purchase rights distribution date and such separate certificates of preferred
stock purchase rights alone will evidence the preferred stock purchase rights.
The preferred stock purchase rights will at no time have any voting rights.

Each share of Series A Preferred Stock purchasable upon exercise of the
preferred stock purchase rights will be entitled, when, as and if declared, to a
minimum preferential quarterly dividend payment of $10.00 per share but will be
entitled to an aggregate dividend of 1,000 times the dividend, if any, declared
per share of common stock. In the event of liquidation, dissolution or winding
up of Leap Wireless, the holders of the Series A Preferred Stock will be
entitled to a preferential liquidation payment of $1,000 per share plus any
accrued but unpaid dividends but will be entitled to an aggregate payment of
1,000 times the payment made per share of common stock. Each share of Series A
Preferred Stock will have 1,000 votes and will vote together with the shares of
common stock. Finally, in the event of any merger, consolidation or other
transaction in which outstanding shares of Leap Wireless common stock are
exchanged, each share of Series A Preferred Stock will be entitled to receive
1,000 times the amount received per share of common stock. Shares of Series A
Preferred Stock will not be redeemable. These preferred stock purchase rights
are protected by customary anti-dilution provisions. Because of the nature of
the Series A Preferred Stock's dividend, liquidation and voting

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rights, the value of one one-thousandth of a share of Series A Preferred Stock
purchasable upon exercise of each preferred stock purchase right should
approximate the value of one share of common stock.

If a person or group becomes an Acquiring Person or if Leap Wireless were
the surviving corporation in a merger with an Acquiring Person or any affiliate
or associate of an and the outstanding shares of Leap Wireless common stock were
not changed or exchanged, each holder of a preferred stock purchase right, other
than preferred stock purchase rights that are or were acquired or beneficially
owned by the Acquiring Person (which preferred stock purchase rights will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of common stock having a market value of two times the
then current purchase price of one preferred stock purchase right. If, after a
person or group has become an Acquiring Person, Leap Wireless were acquired in a
merger or other business combination transaction or more than 50% of its assets
or earning power were sold, proper provision will be made so that each holder of
a preferred stock purchase right will thereafter have the right to receive, upon
the exercise at the then current purchase price of the preferred stock purchase
right, that number of shares of common stock of the acquiring company which at
the time of such transaction would have a market value of two times the then
current purchase price of one preferred stock purchase right.

At any time after a person or group becomes an Acquiring Person and before
the earlier of one of the events described in the last sentence in the previous
paragraph or the acquisition by the Acquiring Person of 50% or more of the then
outstanding shares of Leap Wireless common stock, the Board of Directors may
cause Leap Wireless to exchange the preferred stock purchase rights (other than
preferred stock purchase rights owned by an Acquiring Person which have become
void), in whole or in part, for shares of common stock at an exchange rate equal
to that number of shares of common stock having an aggregate value equal to the
difference between the value of the shares of common stock issuable upon
exercise of a preferred stock purchase right and the purchase price therefor
(with such values being based on the current per share market price, as
determined under the Rights Agreement) per preferred stock purchase right
(subject to adjustment).

The preferred stock purchase rights may be redeemed in whole, but not in
part, at a price of $.01 per preferred stock purchase right by the Board of
Directors at any time before the time that an Acquiring Person the entity or
group. The redemption of the preferred stock purchase rights may be made
effective at this time, on the basis and with the conditions as the Board of
Directors in its sole discretion may establish. Immediately upon any redemption
of the preferred stock purchase rights, the right to exercise the preferred
stock purchase rights will terminate and the only right of the holders of
preferred stock purchase rights will be to receive the redemption price of a
preferred stock purchase right.

The preferred stock purchase rights will expire on September 10, 2008
(unless earlier redeemed, exchanged or cancelled). Harris Trust Company of
California is the Rights Agent.

The purchase price payable, and the number of one one-thousandths of a
share of Series A Preferred Stock or other securities or property issuable, upon
exercise of the preferred stock purchase rights are subject to adjustment from
time to time to prevent dilution (1) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Series A Preferred Stock,
(2) upon the grant to holders of the Series A Preferred Stock of rights or
warrants to subscribe for or purchase shares of

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Series A Preferred Stock or convertible securities at less than the current
market price of the Series A Preferred Stock or (3) upon the distribution to
holders of the Series A Preferred Stock of evidences of debt, cash, securities
or assets (excluding regular periodic cash dividends at a rate not in excess of
125% of the rate of the last regular periodic cash dividend paid or, in case
regular periodic cash dividends have not been paid, at a rate not in excess of
50% of the average net income per share of Leap Wireless for the four quarters
ended immediately before the payment of such dividend, or dividends payable in
shares of Series A Preferred Stock (which dividends will be subject to the
adjustment described in clause (1) above)) or of subscription rights or warrants
(other than those referred to above).

Until a preferred stock purchase right is exercised, the holder will have
no rights as a stockholder of Leap Wireless beyond those as an existing
stockholder, including, without limitation, the right to vote or to receive
dividends.

Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of Leap Wireless for so long as the preferred stock purchase rights
are then redeemable, and after the preferred stock purchase rights are no longer
redeemable, Leap Wireless may amend or supplement the Rights Agreement in any
manner that does not negatively affect the interests of the holder of the
preferred stock purchase rights.

One preferred stock purchase right was distributed to stockholders of Leap
Wireless for each share of Leap Wireless common stock owned of record by them on
September 11, 1998. As long as the preferred stock purchase rights are attached
to the shares of common stock, Leap Wireless will issue one preferred stock
purchase right with each new share of common stock (including, without
limitation, the shares of Leap Wireless common stock that will be distributed in
the distribution of Leap Wireless) so that all shares will have attached
preferred stock purchase rights. Leap Wireless agrees that, from and after the
preferred stock purchase rights distribution date, Leap Wireless will reserve
75,000 shares of Series A Preferred Stock initially for issuance upon exercise
of the preferred stock purchase rights.

The preferred stock purchase rights may have some anti-takeover affects.
The rights are designed to assure that all of Leap Wireless' stockholders
receive fair and equal treatment in the event of any proposed takeover of Leap
Wireless and to guard against partial tender offers, open market accumulations
and other abusive tactics to gain control of Leap Wireless without paying all
stockholders a control premium. The preferred stock purchase rights will cause
substantial dilution to a person or group (other than an Existing Holder) that
acquires 15% or more of Leap Wireless' stock on terms not approved by Leap
Wireless' Board of Directors. The preferred stock purchase rights should not
interfere with any merger or other business combination approved by the Board of
Directors at any time before the first date that a person or group has become an
Acquiring Person.

LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Officers and directors of Leap Wireless are covered by the provisions of
the DGCL, the charter, the bylaws, individual indemnification agreements with
Leap Wireless and insurance policies which serve to limit, and, in some
instances, to indemnify them against, liabilities which they may incur in such
capacities. None of such provisions would have retroactive effect for periods
before the distribution of Leap Wireless, and Leap Wireless is not aware of any
claim or proceeding in the last three years, or any threatened claim,

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which would have been or would be covered by these provisions. These various
provisions are described below.

Elimination of Liability in Certain Circumstances. In June 1986, Delaware
enacted legislation which authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. This duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all significant information
reasonably available to them. Absent the limitations now authorized by such
legislation, directors are accountable to corporations and their stockholders
for monetary damages for conduct constituting negligence or gross negligence in
the exercise of their duty of care. Although the statute does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The charter limits the
liability of directors to Leap Wireless or its stockholders (in their capacity
as directors but not in their capacity as officers) to the fullest extent
permitted by such legislation. Specifically, the directors of Leap Wireless will
not be personally liable for monetary damages for breach of a director's
fiduciary duty as director, except for liability: (1) for any breach of the
director's duty of loyalty to Leap Wireless or its stockholders; (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) for unlawful payments of dividends or unlawful share
repurchases or redemptions as provided in Section 174 of the DGCL; or (4) for
any transaction from which the director derived an improper personal benefit.

Indemnification and Insurance. As a Delaware corporation, Leap Wireless has
the power, under specified circumstances generally requiring the director or
officer to act in good faith and in a manner he reasonably believes to be in or
not opposed to Leap Wireless' best interests, to indemnify its directors and
officers in connection with actions, suits or proceedings brought against them
by a third party or in the name of Leap Wireless, by reason of the fact that
they were or are such directors or officers, against expenses, judgments, fines
and amounts paid in settlement in connection with any such action, suit or
proceeding. The bylaws generally provide for mandatory indemnification of Leap
Wireless' directors and officers to the full extent provided by Delaware
corporate law. In addition, Leap Wireless intends to enter into indemnification
agreements with its directors and officers which generally provide for mandatory
indemnification under circumstances for which indemnification would otherwise be
discretionary under Delaware law.

Leap Wireless intends to purchase and maintain insurance on behalf of any
person who is or was a director or officer of Leap Wireless, or is or was a
director or officer of Leap Wireless serving at the request of Leap Wireless as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not Leap Wireless would have the
power or obligation to indemnify him against such liability under the provisions
of the bylaws.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of common stock in the public market
could negatively affect market prices prevailing from time to time. As of July
1, 1999, Leap Wireless had outstanding 18,221,595 shares of common stock,
substantially all of which are freely tradeable without further registration
under the Securities Act of 1933. In addition,

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approximately 14,814,485 shares of common stock were reserved for issuance in
connection with currently outstanding warrants, options and convertible
securities. For a more detailed discussion see "Description of Leap Wireless
Capital Stock."

EXPERTS

The consolidated financial statements as of August 31, 1998 and 1997 and
for each of the three years in the period ended August 31, 1998 and for the
period from September 1, 1995 (inception) to August 31, 1998 of Leap Wireless
International, Inc., as restated, and the consolidated financial statements as
of December 31, 1998 and for the period from July 28, 1998 (inception) to
December 31, 1998 of Orrengrove Investments Ltd. included in this registration
statement have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

The financial statements as of December 31, 1998 and 1997 and for the year
ended December 31, 1998, for the period from March 3, 1997 (inception) to
December 31, 1997 and for the period from March 3, 1997 (inception) to December
31, 1998 of Chilesat Telefonia Personal S.A. included in this registration
statement have been so included in reliance on the report of Price Waterhouse,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

The financial statements as of December 31, 1998 and for the period from
June 24, 1998 (date of incorporation) to December 31, 1998 of Pegaso
Telecomunicaiones, S.A. de C.V. included in this registration statement have
been so included in reliance on the report of PricewaterhouseCoopers,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

LEGAL MATTERS

Certain legal matters regarding the issuance of the Leap Wireless common
stock have been passed upon for Leap Wireless by Latham & Watkins, San Diego,
California.

WHERE TO FIND ADDITIONAL INFORMATION

Leap Wireless files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy materials Leap
Wireless has filed with the SEC at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of its public reference room. Leap
Wireless' SEC filings also are available to the public on the SEC's Internet
site at http://www.sec.gov. In addition, you may obtain a copy of Leap Wireless'
SEC filings at no cost by writing or telephoning Leap Wireless' General Counsel
at:

Leap Wireless International, Inc.
10307 Pacific Center Court
San Diego, CA 92121
(858) 882-6000

Leap Wireless has filed with the SEC a "shelf" registration statement on
Form S-1 under the Securities Act of 1933, relating to the securities that may
be offered by this prospectus. This prospectus is a part of that registration
statement, but does not contain all

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<PAGE> 83

of the information in the registration statement. For more detail concerning
Leap Wireless and any securities offered by this prospectus, you may examine the
registration statement and the exhibits filed with it at the locations listed in
the first paragraph under this heading.

You should only rely on the information provided or incorporated by
reference in this prospectus or in the applicable supplement to this prospectus.
Readers should not assume that the information in this prospectus and the
applicable supplement is accurate as of any date other than the date on the
front cover of the document.

Leap Wireless intends to furnish to its stockholders annual reports
containing consolidated financial statements prepared in accordance with
generally accepted accounting principles and audited by an independent public
accounting firm accompanied by an opinion expressed by the independent public
accounting firm.

82
<PAGE> 84

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LEAP WIRELESS INTERNATIONAL, INC. (A DEVELOPMENT STAGE
COMPANY)
Pro Forma Financial Statements.............................. F-3
Unaudited Pro Forma Statement of Operations for the nine
months ended May 31, 1999.............................. F-4
Unaudited Pro Forma Statement of Operations for year ended
August 31, 1998........................................ F-5
Notes to the Pro Forma Financial Statements (unaudited)... F-6

LEAP WIRELESS INTERNATIONAL, INC. (A DEVELOPMENT STAGE
COMPANY)
Consolidated Financial Statements:
Consolidated Balance Sheets at May 31, 1999 (unaudited),
and August 31, 1998 (restated)......................... F-9
Consolidated Statements of Operations and Comprehensive
Loss (unaudited) for the nine months ended May 31, 1999
and 1998 (restated), and for the period September 1,
1995 (inception) to May 31, 1999 (restated)............ F-10
Consolidated Statements of Cash Flows (unaudited) for the
nine months ended May 31, 1999 and 1998 (restated), and
for the period September 1, 1995 (inception) to May 31,
1999 (restated)........................................ F-11
Consolidated Statement of Stockholders' Equity (unaudited)
for the period September 1, 1995 (inception) to May 31,
1999................................................... F-12
Notes to Consolidated Financial Statements (unaudited).... F-13

LEAP WIRELESS INTERNATIONAL, INC. (A DEVELOPMENT STAGE
COMPANY)
Consolidated Financial Statements:
Report of Independent Accountants......................... F-27
Consolidated Balance Sheets at August 31, 1998 (restated)
and 1997 (restated).................................... F-28
Consolidated Statements of Operations and Comprehensive
Loss for the fiscal years ended August 31, 1998
(restated), 1997 (restated) and 1996 and for the period
from September 1, 1995 (inception) to August 31, 1998
(restated)............................................. F-29
Consolidated Statements of Cash Flows for the fiscal years
ended August 31, 1998 (restated), 1997 (restated) and
1996 and for the period from September 1, 1995
(inception) to August 31, 1998 (restated).............. F-30
Consolidated Statements of Stockholders' Equity for each
of the fiscal years in the Period from September 1,
1995 (inception) to August 31, 1998.................... F-31
Notes to Consolidated Financial Statements................ F-32

CHILESAT TELEFONIA PERSONAL S.A. (COMPANY IN THE DEVELOPMENT
STAGE)
Financial Statements:
Report of Independent Accountants......................... F-52
Balance Sheet at March 31, 1999 (unaudited), December 31,
1998 and 1997.......................................... F-53
Statement of Income and Comprehensive Income for the three
months ended March 31, 1999 (unaudited) and March 31,
1998 (unaudited), for the year ended December 31, 1998
and for the periods from inception (March 3, 1997) to
December 31, 1997, to March 31, 1999 (unaudited) and to
December 31, 1998...................................... F-54
</TABLE>

F-1
<PAGE> 85

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Statement of Cash Flows for the three months ended March
31, 1999 (unaudited) and March 31, 1998 (unaudited),
for the year ended December 31, 1998 and for the
periods from inception (March 3, 1997) to December 31,
1997, to March 31, 1999 (unaudited) and to December 31,
1998................................................... F-55
Statement of Shareholders' Equity for the period from
inception (March 3, 1997) to December 31, 1998 and for
the period from January 1, 1999 to March 31, 1999
(unaudited)............................................ F-57
Notes to the Financial Statements......................... F-58

ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES (A DEVELOPMENT
STAGE COMPANY)
Consolidated Financial Statements:
Report of Independent Accountants......................... F-75
Consolidated Balance Sheet at December 31, 1998........... F-76
Consolidated Statement of Operations for the period from
July 27, 1998 (inception) to December 31, 1998......... F-77
Consolidated Statement of Cash Flows for the period from
July 27, 1998 (inception) to December 31, 1998......... F-78
Consolidated Statement of Stockholders' Deficit for the
period from July 27, 1998
(inception) to December 31, 1998....................... F-79
Notes to the Financial Statements......................... F-80

PEGASO TELECOMUNICACIONES, S.A. DE C.V. (DEVELOPMENT STAGE
ENTERPRISE)
Consolidated Financial Statements:
Report of Independent Accountants......................... F-89
Consolidated Balance Sheet at December 31, 1998........... F-90
Consolidated Statement of Income for the period from June
24, 1998 (date of incorporation) to December 31,
1998................................................... F-91
Consolidated Statement of Cash Flows for the period from
June 24, 1998 (date of incorporation) to December 31,
1998................................................... F-92
Statement of Stockholders' Equity for the period from June
24, 1998 (date of incorporation) to December 31,
1998................................................... F-93
Notes to the Consolidated Financial Statements............ F-94
</TABLE>

F-2
<PAGE> 86

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

PRO FORMA FINANCIAL STATEMENTS

The Pro Forma Financial Statements are based on the historical consolidated
financial statements of Leap Wireless International, Inc. and its subsidiaries
("Leap Wireless" or the "Company"), as restated, for the nine months ended May
31, 1999 and for the year ended August 31, 1998, adjusted to give effect to the
Company's acquisition of 50% of the shares of Chilesat Telefonia Personal S.A.
("Chilesat") on April 19, 1999 and the acquisition of an indirect investment in
the Transworld Companies on August 4, 1998. As a result of the acquisition of
the 50% of the shares of Chilesat on April 19, 1999, the Company now owns 100%
of the outstanding shares of Chilesat.

The Unaudited Pro Forma Statements of Operations for the nine months ended
May 31, 1999 and the year ended August 31, 1998 give effect to the acquisition
of the remaining 50% interest in Chilesat and the acquisition of the indirect
investment in the Transworld Companies as if they had occurred as of September
1, 1997. The Pro Forma Financial Statements include the historical results of
operations of Chilesat and the Company's share of equity losses of the
Transworld Companies for the nine months ended March 31, 1999 and for the year
ended June 30, 1998, a two-month lag from Leap Wireless. The acquisition and
related adjustments are described in the accompanying notes.

The Pro Forma Financial Statements are based upon available information and
certain assumptions that management believes are reasonable. The Pro Forma
Financial Statements are provided for illustrative purposes only and do not
purport to represent what the Company's results of operations would actually
have been had the acquisition of 50% of the shares of Chilesat and the
acquisition of the indirect investment in the Transworld Companies in fact
occurred on such date or to project the Company's results of operations for any
future period or date. The Pro Forma Financial Statements and accompanying notes
should be read in conjunction with the historical financial statements of the
Company and Chilesat.

F-3
<PAGE> 87

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31, 1999
----------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS PRO FORMA LEAP
LEAP RELATED TO ADJUSTMENTS WIRELESS
WIRELESS TRANSWORLD CHILESAT RELATED TO CONSOLIDATED
HISTORICAL COMPANIES HISTORICAL CHILESAT PRO FORMA
---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues........... $ -- $ -- $ 3,670 $ -- $ 3,670
-------- ----- -------- ------- ---------
Operating expenses:
Cost of operating revenues... -- -- (2,843) 940(2) (1,903)
Selling, general &
administrative expenses.... (14,357) -- (10,566) -- (24,923)
Depreciation and
amortization............... (408) -- (7,895) (2,128)(2) (10,431)
-------- ----- -------- ------- ---------
Total operating
expenses.............. (14,765) -- (21,304) (1,188) (37,257)
-------- ----- -------- ------- ---------
Net operating loss......... (14,765) -- (17,634) (1,188) (33,587)
Equity in net loss of
unconsolidated wireless
operating companies........ (78,917) (626)(1) -- 14,479(3) (65,064)
Interest income.............. 7,901 -- 383 (3,057)(4) 5,227
Interest expense............. (4,238) -- (5,997) (1,497)(4) (11,732)
Foreign currency transaction
losses..................... -- -- (4,199) -- (4,199)
Other income
(expense) -- net........... -- -- (272) -- (272)
-------- ----- -------- ------- ---------
Net loss................... $(90,019) $(626) $(27,719) $ 8,737 $(109,627)
======== ===== ======== ======= =========
Pro forma basic and diluted
net loss per common
share...................... $ (5.06) $ (6.16)
======== =========
Shares used to calculate pro
forma basic and diluted net
loss per common share...... 17,794 17,794
======== =========
</TABLE>

See Notes to the Pro Forma Financial Statements.

F-4
<PAGE> 88

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1998
------------------------------------------------------------------
PRO FORMA
LEAP ADJUSTMENTS PRO FORMA LEAP
WIRELESS RELATED TO ADJUSTMENTS WIRELESS
HISTORICAL TRANSWORLD CHILESAT RELATED TO CONSOLIDATED
(RESTATED) COMPANIES HISTORICAL CHILESAT PRO FORMA
---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues................. $ -- $ -- $ -- $ -- $ --
-------- ------- ------- ------- --------
Operating expenses:
Cost of operating revenues......... -- -- -- -- --
Selling, general & administrative
expenses......................... (23,888) -- (4,380) -- (28,268)
Depreciation and amortization...... -- -- -- -- --
-------- ------- ------- ------- --------
Total operating expenses...... (23,888) -- (4,380) -- (28,268)
-------- ------- ------- ------- --------
Net operating loss............... (23,888) -- (4,380) -- (28,268)
Equity in net loss of
unconsolidated wireless operating
companies........................ (23,688) (5,126)(1) -- 3,148(3) (25,666)
Interest income.................... 843 -- 2,110 (428)(4) 2,525
Interest expense................... -- -- (239) (5,126)(4) (5,365)
Foreign currency transaction
losses........................... -- -- (3,970) -- (3,970)
Other income (expense) -- net...... -- -- (56) -- (56)
-------- ------- ------- ------- --------
Net loss......................... $(46,733) $(5,126) $(6,535) $(2,406) $(60,800)
======== ======= ======= ======= ========
Pro forma basic and diluted net
loss per common share............ $ (2.65) $ (3.45)
======== ========
Shares used to calculate pro forma
basic and diluted net loss per
common share..................... 17,648 17,648
======== ========
</TABLE>

See Notes to the Pro Forma Financial Statements.

F-5
<PAGE> 89

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

On September 23, 1998, QUALCOMM Incorporated ("QUALCOMM") distributed all
of the outstanding Common Stock of the Company to QUALCOMM's stockholders (the
"Distribution"). The historical consolidated financial statements of the
Company, which have been used to prepare the Pro Forma Financial Statements,
reflect periods during which the Company did not operate as a separate,
independent company, and certain assumptions have been made in preparing such
statements. Therefore, such Pro Forma Financial Statements may not reflect the
results of operations that would have been achieved had the Company been a
separate, independent company for all periods presented.

On August 4, 1998, prior to the Distribution, the Company became a 70%
common owner in a start-up joint venture, QUALCOMM Telecommunications Ltd.
("QUALCOMMTel Isle of Man"), an Isle of Man corporation. QUALCOMMTel Isle of Man
holds a 50% investment in Orrengrove Investments Limited ("Orrengrove"). On
August 4, 1998, Orrengrove purchased 60% of the common stock of Transworld
Communications, Inc., Transworld Communications Services, Inc. and Transworld
Communications (Bermuda), Ltd. (the "Transworld Companies") for an aggregate
purchase price of $51.8 million. As a result of QUALCOMMTel Isle of Man's 50%
interest in Orrengrove, the Company has a 21% indirect interest in the
Transworld Companies and accounts for the investment under the equity method of
accounting.

The Pro Forma Financial Statements give effect to the acquisition of the
shares of the Transworld Companies by Orrengrove as if the acquisition had
occurred on September 1, 1997.

On April 19, 1999, a wholly owned subsidiary of Leap Wireless acquired all
of the shares of Chilesat that it did not already own from Telex-Chile S.A. and
its operating affiliate, Chilesat S.A. (collectively "Telex-Chile"). Chilesat, a
Chilean corporation that holds a license to offer wireless telephone services,
has deployed and is operating a nationwide wireless telephone system in Chile.
Prior to the acquisition, the Company's wholly owned subsidiary, Inversiones
Leap Wireless Chile S.A. ("Inversiones"), owned 50% of the shares of Chilesat.
The Company has previously accounted for its initial 50% interest in Chilesat
under the equity method.

Inversiones acquired the remaining 50% of the shares of Chilesat from
Telex-Chile for $28 million in cash and a $22 million, non-interest bearing note
payable to Telex-Chile due on May 11, 2002. The present value of the $22 million
non-interest bearing note payable to Telex-Chile is approximately $15.7 million.
Therefore, the total estimated fair value of the acquisition was $43.7 million,
of which approximately $41 million has been allocated under the purchase method
of accounting to intangible assets, primarily telecommunications licenses and
rights to telecommunications network systems. The Company obtained $28 million
for the cash payment to Telex-Chile through additional borrowings under its
credit agreement with QUALCOMM.

F-6
<PAGE> 90
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

The Pro Forma Financial Statements give effect to the acquisition of the
remaining 50% interest in Chilesat as if it had occurred on September 1, 1997.

To accommodate the different fiscal periods of the Company and its
operating companies, including the Transworld Companies and Chilesat, the
Company has adopted a two-month lag for the recognition of the Company's share
of net earnings or losses of such investments.

The historical financial statements of Chilesat have been converted to U.S.
dollars using the period end exchange rate for the assets and liabilities,
historical exchange rates for stockholders' equity and the average exchange rate
for the statements of operations for the respective periods. In addition,
certain reclassifications have been made to the historical consolidated
financial statements of Leap Wireless, as restated, to conform to the pro-forma
financial statement presentation.

NOTE 2. RESTATEMENT

In the third quarter of fiscal 1999, the Company adopted the equity method
of accounting for its existing investment in a United States telecommunications
operator. Under generally accepted accounting principles, a change from the cost
method to the equity method of accounting requires retroactive adjustment to all
prior period financial statements. Accordingly, the Leap Wireless August 31,
1998 historical financial statements presented in these Pro Forma Financial
Statements have been restated to give effect to this accounting change.

NOTE 3. PRO FORMA ADJUSTMENTS RELATED TO THE TRANSWORLD COMPANIES

(1) To record the Company's share of net losses of the Transworld Companies
under the equity method of accounting.

NOTE 4. PRO FORMA ADJUSTMENTS RELATED TO CHILESAT

(2) (a) Additional amortization of $1.2 million for the Chilesat
telecommunications licenses (amortized on a straight-line basis over a
28.7 year remaining expected useful life) resulting from the purchase
price allocation and (b) reclassification of amortization of the rights
to telecommunications network systems of $0.9 million (amortized on a
straight-line basis over a 11.5 year expected useful life) from cost of
operating revenues to depreciation and amortization. Consistent with
the application of generally accepted accounting principles applied to
the historical financial statements of Chilesat, amortization of the
telecommunications licenses and rights to telecommunications network
systems began in September 1998 when telephone traffic commenced.

(3) Elimination of the Company's share of the net loss of Chilesat for the
relevant period previously recognized under the equity method of
accounting.

F-7
<PAGE> 91
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

(4) (a) Elimination of interest income recorded by Leap Wireless on
inter-company loans advanced to Chilesat, (b) elimination of interest
expense recorded by Chilesat on inter-company loans advanced by Leap
Wireless to Chilesat, (c) additional interest expense for the periods
reflecting $28.0 million of borrowings by the Company under its credit
agreement with QUALCOMM to fund the cash portion of the purchase price
and (d) recognition as interest expense the present value discount on
the $22 million, non-interest bearing three-year note payable to
Telex-Chile, calculated using an imputed interest rate of 11.73%
commencing September 1, 1997.

F-8
<PAGE> 92

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MAY 31, 1999 AUGUST 31, 1998
------------ ---------------
(UNAUDITED) (RESTATED)
<S> <C> <C>
ASSETS
Cash and cash equivalents......................... $ 23,527 $ --
Accounts receivable -- net........................ 1,523 --
Inventories....................................... 1,421 --
Recoverable taxes................................. 3,308 --
Other current assets.............................. 1,770 --
--------- --------
Total current assets....................... 31,549 --
--------- --------
Property, plant and equipment -- net.............. 125,761 --
Investments in unconsolidated wireless operating
companies....................................... 123,254 97,719
Loans receivable from unconsolidated wireless
operating company............................... -- 27,968
Other loans receivable............................ 7,768 25,227
Intangible assets................................. 66,621 6,838
Deposits and other assets......................... 11,151 --
--------- --------
Total assets............................... $ 366,104 $157,752
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities.......... $ 10,270 $ 5,789
Loans payable to banks............................ 16,657 9,000
Current portion of long-term debt................. 33,727 --
--------- --------
Total current liabilities.................. 60,654 14,789
--------- --------
Long-term debt.................................... 152,306 --
Other liabilities................................. 9,207 --
--------- --------
Total liabilities.......................... 222,167 14,789
--------- --------
Commitments (Note 8)
Stockholders' equity:
Preferred stock -- authorized 10,000,000 shares
$.0001 par value, no shares issued and
outstanding.................................. -- --
Common stock -- authorized 75,000,000 shares;
$.0001 par value, 18,098,984 shares issued
and outstanding.............................. 2 --
Additional paid-in capital...................... 288,953 --
Former parent company's investment.............. -- 197,598
Deficit accumulated during the development
stage........................................ (142,302) (52,283)
Accumulated other comprehensive loss............ (2,716) (2,352)
--------- --------
Total stockholders' equity................. 143,937 142,963
--------- --------
Total liabilities and stockholders'
equity.................................. $ 366,104 $157,752
========= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-9
<PAGE> 93

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED FOR THE PERIOD
MAY 31, SEPTEMBER 1, 1995
---------------------- (INCEPTION) TO
1999 1998 MAY 31, 1999
-------- ---------- -----------------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Equity in net loss of unconsolidated
wireless operating companies............ $(78,917) $(11,132) $(106,398)
General and administrative expenses....... (14,765) (5,577) (40,410)
Interest income........................... 7,901 -- 8,744
Interest expense.......................... (4,238) -- (4,238)
-------- -------- ---------
Net loss................................ (90,019) (16,709) (142,302)
Other comprehensive loss:
Cumulative translation adjustment....... (364) (1,858) (2,716)
-------- -------- ---------
Comprehensive loss........................ $(90,383) $(18,567) $(145,018)
======== ======== =========
Basic and diluted net loss per common
share (Note 2).......................... $ (5.06) $ (0.95) $ (8.05)
======== ======== =========
Shares used to calculate basic and diluted
net loss per common share (Note 2)...... 17,794 17,648 17,677
======== ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-10
<PAGE> 94

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31, SEPTEMBER 1, 1995
---------------------- (INCEPTION) TO
1999 1998 MAY 31, 1999
--------- ---------- -----------------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Operating activities:
Net loss.................................................. $ (90,019) $(16,709) $(142,302)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 408 -- 408
Equity in net loss of unconsolidated wireless
operating companies.................................. 78,917 11,132 106,398
Interest accrued to loans receivable and
payable -- net....................................... (3,083) -- (3,926)
Changes in assets and liabilities, net of effects
from acquisition:
Deposits and other assets.......................... (9,452) -- (9,452)
Accounts payable and accrued liabilities........... 1,151 -- 6,940
Other liabilities.................................. (1,712) 2,897 (1,712)
--------- -------- ---------
Net cash used in operating activities....................... (23,790) (2,680) (43,646)
--------- -------- ---------
Investing activities:
Purchase of property, plant and equipment................. (3,060) -- (3,060)
Investments in unconsolidated wireless operating
companies............................................... (78,984) (14,703) (194,428)
Loans to unconsolidated wireless operating companies...... (28,625) (11,633) (93,085)
Loan receivable to related party.......................... (17,500) -- (17,500)
Repayment of loan receivable from related party........... 17,500 -- 17,500
Acquisitions, net of cash acquired........................ (26,942) (564) (27,506)
Purchase of wireless telecommunications licenses.......... (689) -- (6,963)
--------- -------- ---------
Net cash used in investing activities....................... (138,300) (26,900) (325,042)
--------- -------- ---------
Financing activities:
Proceeds from loans payable to banks...................... 6,720 -- 15,720
Borrowings under credit agreement......................... 99,721 -- 99,721
Repayment of borrowings under credit agreement............ (17,500) -- (17,500)
Issuance of common stock.................................. 1,408 -- 1,408
Former parent company's investment........................ 95,268 29,580 292,866
--------- -------- ---------
Net cash provided by financing activities................... 185,617 29,580 392,215
--------- -------- ---------
Net increase in cash and cash equivalents................... 23,527 -- 23,527
Cash and cash equivalents at beginning of period............ -- -- --
--------- -------- ---------
Cash and cash equivalents at end of period.................. $ 23,527 $ -- $ 23,527
========= ======== =========
Supplemental disclosure of non-cash investing and financing
activities:
Loans to unconsolidated wireless operating companies
converted to equity investment.......................... $ 50,196 $ -- $ 50,196
Deferred charge for credit agreement fee due on long-term
debt.................................................... $ 5,300 $ -- $ 5,300
Repurchase of stock purchase warrant...................... $ 5,355 $ -- $ 5,355
Supplemental disclosure of cash used for acquisitions:
Total purchase value...................................... $ 43,699 $ 564 $ 44,263
Note payable issued at present value...................... (15,699) -- (15,699)
Cash acquired............................................. (1,058) -- (1,058)
--------- -------- ---------
Cash used for acquisitions................................ $ 26,942 $ 564 $ 27,506
========= ======== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-11
<PAGE> 95

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON FORMER DEFICIT OTHER
STOCK ADDITIONAL PARENT ACCUMULATED DURING COMPREHENSIVE
------------------- PAID-IN COMPANY'S THE DEVELOPMENT INCOME
SHARES AMOUNT CAPITAL INVESTMENT STAGE (LOSS) TOTALS
---------- ------ ---------- ---------- ------------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 1, 1995
(inception)................ -- $ -- $ -- $ -- $ -- $ -- $ --
Transfers from former
parent................... -- -- -- 285 -- -- 285
Net loss................... -- -- -- -- (396) -- (396)
---------- ---- -------- --------- --------- ------- --------
Balance at August 31, 1996... -- -- -- 285 (396) -- (111)
Transfer from former
parent................... -- -- -- 47,193 -- -- 47,193
Net loss (restated)........ -- -- -- -- (5,154) -- (5,154)
Foreign currency
translation adjustment... -- -- -- -- -- 60 60
---------- ---- -------- --------- --------- ------- --------
Balance at August 31, 1997... -- -- -- 47,478 (5,550) 60 41,988
Transfers from former
parent................... -- -- -- 150,120 -- -- 150,120
Net loss (restated)........ -- -- -- -- (46,733) -- (46,733)
Foreign currency
translation adjustment... -- -- -- -- -- (2,412) (2,412)
---------- ---- -------- --------- --------- ------- --------
Balance at August 31, 1998... -- -- -- 197,598 (52,283) (2,352) 142,963
September 1, 1998 to May 31,
1999 (Unaudited):.......... --
Transfers from former
parent................... -- -- -- 95,268 -- -- 95,268
Distribution by former
parent................... 17,647,685 2 292,864 (292,866) -- -- --
Repurchase of warrant...... -- -- (5,355) -- -- -- (5,355)
Issuance of common stock... 451,299 -- 1,444 -- -- -- 1,444
Net loss................... -- -- -- -- (90,019) -- (90,019)
Foreign currency
translation adjustment... -- -- -- -- -- (364) (364)
---------- ---- -------- --------- --------- ------- --------
Balance at May 31, 1999
(Unaudited):............... 18,098,984 $ 2 $288,953 $ -- $(142,302) $(2,716) $143,937
========== ==== ======== ========= ========= ======= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-12
<PAGE> 96

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. THE COMPANY

The Company

Leap Wireless International, Inc. (the "Company" or "Leap Wireless"), a
Delaware corporation, was incorporated on June 24, 1998 as a wholly owned
subsidiary of QUALCOMM Incorporated ("QUALCOMM"). On September 23, 1998 (the
"Distribution Date"), QUALCOMM distributed all of the outstanding shares of
common stock of the Company to QUALCOMM's stockholders as a taxable dividend
(the "Distribution"). In connection with the Distribution, one share of the
Company's common stock was issued for every four shares of QUALCOMM common stock
outstanding on September 11, 1998. Following the Distribution, the Company and
QUALCOMM operate as independent companies.

The Company's business strategy is to manage, support, operate and
otherwise participate in Code Division Multiple Access ("CDMA") based wireless
telecommunications businesses and ventures in emerging international markets and
in the United States.

The Distribution

In connection with the Distribution, QUALCOMM transferred to the Company
its equity interests in the following domestic and international emerging
wireless telecommunications operating companies: Pegaso Telecomunicaciones, S.A.
de C.V. (Mexico), Metrosvyaz Limited (Russia), Orrengrove Investments Limited
(Russia), Chilesat Telefonia Personal, S.A. (Chile), Chase Telecommunications
Holdings, Inc. (United States), OzPhone Pty. Ltd. (Australia), and certain other
development stage businesses (collectively, the "Leap Wireless Operating
Companies"). The Company and QUALCOMM also agreed that, if certain events occur
within 18 months after the Distribution, QUALCOMM will transfer to the Company
its equity interests and working capital loan related to Telesystems of Ukraine
("TOU"), a wireless telecommunications company in Ukraine. To date, these
conditions have not been satisfied. In connection with the Distribution,
QUALCOMM also transferred to the Company cash and certain indebtedness of the
Leap Wireless Operating Companies owed to QUALCOMM, as well as certain
miscellaneous assets and liabilities. The aggregate net tangible book value of
the assets transferred by QUALCOMM to the Company in connection with the
Distribution was approximately $236 million.

In May 1999, QUALCOMM sold its CDMA wireless infrastructure division to
Telefonaktiebolaget LM Ericsson (pbl) ("Ericsson"). As a result, Ericsson and
its subsidiaries will become primary suppliers of network infrastructure
equipment to Leap Wireless and its operating companies. In connection with the
sale, Ericsson assumed most of QUALCOMM's obligations to Leap Wireless and its
operating companies under existing infrastructure supply agreements.

F-13
<PAGE> 97
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Basis of Presentation

The financial statements have been prepared using the historical basis in
the assets and liabilities and historical results of operations related to the
Company's business, as restated. Certain prior period amounts have been
reclassified to conform to the current period presentation. In the second
quarter of fiscal 1999, to accommodate the different fiscal periods of the
Company and its foreign operating companies, the Company extended the lag for
recognition of its share of net earnings or losses of such foreign companies
from one month to two months. The effect of this change on previously reported
amounts was not significant.

Restatement

The Company adopted the equity method of accounting for its investment in
Chase Telecommunications Holdings, Inc., a development stage company, in the
third quarter of fiscal 1999. Accordingly, all prior periods presented in these
financial statements have been adjusted retroactively in accordance with
generally accepted accounting principles to give effect to the equity method of
accounting. See Note 4.

Interim Financial Statements

The interim consolidated financial statements have been prepared by Leap
Wireless without audit, in accordance with the instructions under Rule 10-1 of
Regulation S-X and, therefore, do not include all information and footnotes
necessary for a fair presentation of its financial position, results of
operations, cash flows and stockholders' equity in accordance with generally
accepted accounting principles. In the opinion of management, the unaudited
financial information for the interim periods presented reflects all adjustments
(which include only normal, recurring adjustments) necessary for a fair
presentation. These interim consolidated financial statements and notes thereto
should be read in conjunction with the consolidated financial statements and
notes thereto included elsewhere in this Registration Statement for the fiscal
year ended August 31, 1998, as restated. Operating results for interim periods
are not necessarily indicative of operating results for an entire fiscal year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

The interim financial data as of May 31, 1999, and for the nine months
ended May 31, 1999 and 1998, and for the period September 1, 1995 (inception) to
May 31, 1999 is unaudited; however, in the opinion of the Company, the interim
data includes all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of the results for the interim period.

F-14
<PAGE> 98
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash equivalents

The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The cost of these
investments approximates fair value.

Accounts Receivable

The Company records an allowance for uncollectable accounts receivable with
respect to those amounts estimated not to be recoverable.

Inventories

Inventories are comprised of handsets and accessories not yet placed into
service which are stated at the lower of historical cost, determined under a
first-in, first-out unit flow assumption, or market.

Recoverable Taxes

Recoverable taxes relate to value added taxes (VAT) incurred on the supply
of goods and services which are eventually borne by the final consumer. VAT
payments made by the Company on the buildout of its wireless telecommunications
networks are recovered in cash from customers as service is provided.

Property, plant and equipment

Property, plant and equipment are recorded at acquisition cost. Constructed
assets are recorded at cost plus capitalized interest and direct costs incurred
during the construction phase. Depreciation is applied using the straight-line
method over the estimated useful lives of the assets once the assets are placed
in service, ranging from two to ten years. Leasehold improvements are amortized
over the shorter of their estimated useful lives or the remaining term of the
related lease. Repairs and maintenance costs are expensed as incurred.

Intangible Assets

Intangible assets, primarily telecommunications licenses and rights to
telecommunications network systems, are recorded at cost and amortized over
their estimated useful lives upon commencement of commercial service, which
currently range from ten to twenty-eight years.

Basic and Diluted Net Loss Per Common Share

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("FAS 128"), "Earnings per Share",
which the

F-15
<PAGE> 99
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Company has adopted to compute the basic and diluted net loss per common share
amount for the three and nine months ended May 31, 1999 and 1998, respectively.

The basic and diluted net loss per common share for the nine months ended
May 31, 1999 was calculated by dividing the net loss by the weighted average
number of common shares outstanding of 17,794,358. The weighted average number
of common shares outstanding assumes that the 17,647,685 shares issued at
Distribution were outstanding for the periods prior to Distribution. Stock
options for 5,926,945 common shares, the conversion of QUALCOMM's Trust
Convertible Preferred Securities which are convertible into 2,271,060 shares of
the Company's Common Stock, and the exercise of a warrant issued to QUALCOMM for
4,500,000 shares of the Company's Common Stock have not been considered in
calculating basic and diluted net loss per common share because their effect
would be anti-dilutive. As a result, the Company's basic and diluted net loss
per common share are the same.

Reporting Comprehensive Income (Loss)

Effective September 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 ("FAS 130"), "Reporting Comprehensive Income". This
statement requires the Company to report in the financial statements, in
addition to net income (loss), comprehensive income (loss) and its components.
Prior period financial statements have been adjusted to conform to the
requirements of FAS 130.

NOTE 3. ACQUISITION OF CHILESAT TELEFONIA PERSONAL, S.A.

On April 19, 1999, a wholly owned subsidiary of Leap Wireless acquired all
of the shares of Chilesat Telefonia Personal, S.A. ("Chilesat") that it did not
already own from Telex-Chile S.A. and its operating affiliate, Chilesat S.A.
(collectively "Telex-Chile"). Chilesat, a Chilean corporation that holds a
license to offer wireless telephone services, has deployed and is operating a
nationwide wireless telephone system in Chile. Prior to the acquisition, the
Company's wholly owned subsidiary, Inversiones Leap Wireless Chile S.A.
("Inversiones"), owned 50% of the shares of Chilesat.

Inversiones acquired the remaining 50% of the shares of Chilesat from
Telex-Chile for $28 million in cash and a $22 million, non-interest bearing note
payable to Telex-Chile due on May 11, 2002. The present value of the $22 million
non-interest bearing note payable to Telex-Chile is approximately $15.7 million.
Therefore, the total estimated fair value of the acquisition was $43.7 million,
of which approximately $41 million has been allocated to intangible assets,
primarily telecommunications licenses and rights to telecommunications network
systems. The Company obtained $28 million for the cash payment to Telex-Chile
through additional borrowings under its credit agreement with QUALCOMM.

The Company consolidated the balance sheet of Chilesat as of May 31, 1999
due to its acquisition of the remaining 50% of the shares of Chilesat in April
1999. The Company has adopted a two-month lag for the recognition of the
Company's share of net earnings

F-16
<PAGE> 100
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

and losses of Chilesat. As such, the Company will fully consolidate Chilesat's
results of operations commencing July 1, 1999.

The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had taken place on September 1,
1997 (in thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED
MAY 31,
---------------------
1999 1998
--------- --------
<S> <C> <C>
Revenues................................................ $ 3,670 $ --
========= ========
Net loss................................................ $(109,001) $(22,229)
========= ========
Pro forma basic and diluted net loss per common share... $ (6.13) $ (1.26)
========= ========
</TABLE>

These unaudited pro forma results of operations have been prepared for
comparative purposes only and do not purport to be indicative of the results of
operations which actually would have resulted had the acquisition occurred on
the date indicated, or which may result in the future.

NOTE 4. INVESTMENTS AND LOANS TO LEAP WIRELESS OPERATING COMPANIES

The Company and its consolidated subsidiaries have equity interests in
companies that directly or indirectly hold wireless telephone licenses. Its
participation in each company differs and, except for Chilesat, the Company does
not have majority interests in such companies. The Company's ability to withdraw
funds, including dividends, from its participation in such investments is
dependent in many cases on receiving the consent of lenders and the other
participants, over which the Company has no control. The Company and its
consolidated subsidiaries have investments in the Leap Wireless Operating
Companies consisting of the following:

<TABLE>
<CAPTION>
PERCENTAGE OF
OWNERSHIP
---------------------
MAY 31, AUGUST 31,
1999 1998
------- ----------
<S> <C> <C>
EQUITY INVESTEE
Chase Telecommunications Holdings, Inc. (U.S.).......... 7.2% 7.2%
Chilesat Telefonia Personal, S.A. (Chile)............... 100% 50%
Pegaso Telecomunicaciones, S.A. de C.V. (Mexico)........ 33% 49%
Metrosvyaz Limited (Russia)............................. 50% 50%
Orrengrove Investments Limited (Russia)................. 50% 50%
</TABLE>

F-17
<PAGE> 101
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Condensed financial information for the unconsolidated Leap Wireless
Operating Companies accounted for under the equity method is summarized as
follows (in thousands):

<TABLE>
<CAPTION>
MAY 31, 1999
-------------------------------------------
U.S. MEXICO RUSSIA TOTAL
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Current assets........................ $ 6,020 $ 26,526 $ 39,857 $ 72,403
Non-current assets.................... 79,770 387,379 33,077 500,226
Current liabilities................... (6,630) (67,448) (8,601) (82,679)
Non-current liabilities............... (135,583) (96,752) (23,512) (255,847)
--------- -------- -------- ---------
Total stockholders'
capital.................. (56,423) 249,705 40,821 234,103
Other stockholders' share of
capital............................. (56,423) 167,222 50 110,849
--------- -------- -------- ---------
Company's share of capital............ -- 82,483 40,771 123,254
Excess cost of investment............. -- -- -- --
--------- -------- -------- ---------
Equity investments in unconsolidated
wireless operating companies..... $ -- $ 82,483 $ 40,771 $ 123,254
========= ======== ======== =========
</TABLE>

<TABLE>
<CAPTION>
AUGUST 31, 1998
------------------------------------------------------
U.S. MEXICO CHILE RUSSIA TOTAL
--------- -------- -------- ------- ----------
(RESTATED)
<S> <C> <C> <C> <C> <C>
Current assets............... $ 7,776 $ 9,783 $ 24,140 $40,876 $ 82,575
Non-current assets........... 81,215 63,526 100,474 18,328 263,543
Current liabilities.......... (6,070) (57,142) (30,180) (5,742) (99,134)
Non-current liabilities...... (117,436) -- (61,055) -- (178,491)
--------- -------- -------- ------- ---------
Total stockholders'
capital......... (34,515) 16,167 33,379 53,462 68,493
Other stockholders' share of
capital.................... (34,515) 7,455 16,690 1,162 (9,208)
--------- -------- -------- ------- ---------
Company's share of capital... -- 8,712 16,689 52,300 77,701
Excess cost of investment.... -- -- 20,018 -- 20,018
--------- -------- -------- ------- ---------
Equity investments in
unconsolidated wireless
operating companies..... $ -- $ 8,712 $ 36,707 $52,300 $ 97,719
========= ======== ======== ======= =========
</TABLE>

F-18
<PAGE> 102
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31, 1999
-----------------------------------------------------
U.S. MEXICO CHILE RUSSIA TOTAL
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues...................... $ 1,917 $ 514 $ 3,670 $ 22 $ 6,123
======== ======== ======== ======== =========
Operating expenses............ (12,686) (45,331) (21,304) (33,095) (112,416)
Other income (expense), net... (6,518) 545 (5,864) 706 (11,131)
Foreign currency transaction
loss........................ -- (1,231) (4,199) -- (5,430)
-------- -------- -------- -------- ---------
Net loss.................... (17,287) (45,503) (27,697) (32,367) (122,854)
Other stockholders' share of
net loss.................... (374) (30,345) (13,848) -- (44,567)
-------- -------- -------- -------- ---------
Company's share of net loss... (16,913) (15,158) (13,849) (32,367) (78,287)
Amortization of excess cost of
investment.................. -- -- (630) -- (630)
-------- -------- -------- -------- ---------
Equity in net loss of
unconsolidated wireless
operating companies...... $(16,913) $(15,158) $(14,479) $(32,367) $ (78,917)
======== ======== ======== ======== =========
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31, 1998
-------------------------------------------------
U.S. MEXICO CHILE RUSSIA TOTAL
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues...................... $ -- $ -- $ -- $ -- $ --
======== ======= ======= ======= ========
Operating expenses............ (3,865) (4,700) (2,724) (3,632) (14,921)
Other income (expense), net... (18,869) -- 1,991 -- (16,878)
Foreign currency transaction
loss........................ -- -- (2,337) -- (2,337)
-------- ------- ------- ------- --------
Net loss.................... (22,734) (4,700) (3,070) (3,632) (34,136)
Other stockholders' share of
net loss.................... (19,072) (2,397) (1,535) -- (23,004)
-------- ------- ------- ------- --------
Company's share of net loss... (3,662) (2,303) (1,535) (3,632) (11,132)
Amortization of excess cost of
investment.................. -- -- -- -- --
-------- ------- ------- ------- --------
Equity in net loss of
unconsolidated wireless
operating companies...... $ (3,662) $(2,303) $(1,535) $(3,632) $(11,132)
======== ======= ======= ======= ========
</TABLE>

As of May 31, 1999, the Leap Wireless Operating Companies had not commenced
significant commercial revenue generating operations

F-19
<PAGE> 103
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Chase Telecommunications Holdings, Inc.

In December 1996, the Company purchased $4 million of Class B Common Stock
of Chase Telecommunications Holdings, Inc., a development stage company
("Chase"), representing 7.2% of the outstanding capital stock of Chase. In June
1998, the Company agreed to provide a $25 million working capital facility to
Chase. Borrowings under the facility are subject to interest at an annual rate
of prime plus 4.5%. Semi-annual principal payments are to be made ratably over a
six year period commencing June 2000, with accrued interest payable on maturity.
Borrowings are collateralized by substantially all of the assets of Chase and
are subordinated to Chase's equipment vendor loans from QUALCOMM. The Company
and Chase have agreed in principle to increase the maximum principal amount that
may be drawn under the working capital facility to $45 million. At May 31, 1999,
borrowings under the facility totaled $29.0 million, including $2.2 million of
accrued interest. However, because the working capital facility is the only
source of working capital for Chase, the carrying value of the loans under the
facility have been reduced to zero as Leap Wireless has recognized 100% of the
net losses of Chase to the extent of its investment and loans.

In December 1998, the Company agreed to purchase substantially all the
assets of Chase for $6.3 million; a warrant to purchase 1% of the common stock
in a wholly-owned subsidiary of the Company exercisable at $1.0 million; the
Company's existing stock ownership and warrants to purchase stock in Chase; and
certain contingent earn-outs. This acquisition involves the transfer of wireless
telecommunication licenses, which is subject to approval by the Federal
Communications Commission ("FCC"). The acquisition will not occur unless the FCC
approves the transfer of the licenses.

In March 1999, Leap Wireless' concept for a flat-rate local area service
targeted at the mass consumer market was launched under an agreement that
requires the management of a subsidiary of Chase to control the business until
Leap Wireless' proposed acquisition of substantially all of the assets of Chase
receives all necessary governmental approvals and is complete. As a result of
this launch and the satisfaction of certain contingencies to the parties'
obligation under the purchase agreement, the Company adopted the equity method
of accounting for its investment in Chase in the third quarter of fiscal 1999.
Accordingly, all prior periods presented in these financial statements have been
adjusted retroactively in accordance with generally accepted accounting
principles to give effect to the equity method of accounting. The Company
recorded equity losses from this investment of $16.9 million and $3.7 million
during the nine months ended May 31, 1999 and 1998, respectively. Equity losses
from this investment totaled $33 million during the period from September 1,
1995 (inception) to May 31, 1999.

Chilesat Telefonia Personal, S.A.

On April 19, 1999, a wholly-owned subsidiary of the Company acquired all of
the shares of Chilesat that it did not already own from Telex-Chile. See Note 3.
The Company consolidated the balance sheet of Chilesat on May 31, 1999. The
Company has adopted a two-month lag for the recognition of the Company's share
of net earnings and

F-20
<PAGE> 104
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

losses of Chilesat. Accordingly, the Company will begin fully consolidating
Chilesat's results of operations commencing July 1, 1999.

The Company recorded equity losses resulting from this investment of $14.5
million and $1.5 million during the nine months ended May 31, 1999 and 1998,
respectively.

Pegaso Telecomunicaciones, S.A. de C.V.

The Company, through a wholly-owned subsidiary, Leap PCS Mexico, Inc.,
formerly named QUALCOMM PCS Mexico, Inc., had a 49% ownership interest in a
development stage company, Pegaso Telecomunicaciones, S.A. de C.V. ("Pegaso"), a
Mexican corporation. During fiscal 1998, the Company advanced a portion of
Pegaso's working capital requirements and provided a loan of $27.4 million to
Pegaso. The purpose of the loan was to fund a portion of Pegaso's first PCS
license payment. Interest on the loan accrued at a rate of 10% and was added to
the principal amount of the loan outstanding. In September 1998, the Company
provided $60.7 million of funding and converted its advances and loan, with
accrued interest, into common stock of Pegaso. The Company's total investment in
Pegaso after these transactions was $100 million. On the same date, other
investors also subscribed for and purchased common stock of Pegaso such that,
after these transactions, the total par value of the common equity of Pegaso was
$300 million. As a result, the Company's ownership interest in Pegaso was
diluted from 49% to 33%. As a result of start-up expenses incurred by Pegaso,
the Company recorded equity losses of $15.2 million and $2.3 million during the
nine months ended May 31, 1999 and 1998, respectively. See Note 8.

Metrosvyaz Limited

The Company has a 70% interest in QUALCOMM Telecommunications Ltd.
("QUALCOMMTel Cayman"), a Cayman Islands corporation, and QUALCOMMTel Cayman has
a 50% interest in Metrosvyaz Limited ("Metrosvyaz"). The Company has agreed to
provide a $72.5 million loan facility to Metrosvyaz to support its business plan
and working capital needs. Metrosvyaz also has a $102.5 million equipment loan
facility from QUALCOMM. The Company has pledged its equity interest in
Metrosvyaz as collateral for amounts owed under QUALCOMM's loan facility to
Metrosvyaz, and has subordinated its $72.5 million loan facility to QUALCOMM's
$102.5 loan facility. Borrowings under the $72.5 million facility are subject to
interest at 13% and are due in August 2007. Interest will be payable
semi-annually beginning August 2000 and, prior to such time, added to the
principal amount outstanding. At May 31, 1999, borrowings under the Company's
loan facility to Metrosvyaz totaled $27.4 million, including $0.8 million of
accrued interest, with a remaining loan commitment of $45.9 million. As a result
of start-up expenses incurred by Metrosvyaz, the Company recorded equity losses
of $11.5 million and $3.6 million during the nine months ended May 31, 1999 and
1998, respectively.

F-21
<PAGE> 105
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Orrengrove Investments Limited

The Company has a 70% interest in QUALCOMM Telecommunications Ltd.
("QUALCOMMTel Isle of Man"), an Isle of Man corporation, and QUALCOMMTel Isle of
Man holds a 50% investment in Orrengrove Investments Limited ("Orrengrove"). In
August 1998, Orrengrove acquired a 60% interest in Transworld
Telecommunications, Inc., Transworld Communications Services, Inc., and
Transworld Communications (Bermuda), Ltd. (collectively the "Transworld
Companies").

The Transworld Companies obtained, through a number of agreements, the
rights to utilize the capacity on certain Russian satellites in order to provide
commercial long-distance voice, video and data services to the Russian
Federation. In April 1999, the Transworld Companies were notified by Mercury
Telesat ("Mercury"), provider of the satellite signal transmission capacity,
that the satellite equipment used to provide their long distance service had
failed. Mercury's prognosis indicates that the satellite's operational status
will not be restored. The Transworld Companies have already identified and put
into operation a short-term terrestrial transmission solution by leasing fiber
capacity and are exploring long-term alternatives to the lost satellite
transmission capacity. As a result of these events, Orrengrove and the
Transworld Companies have recognized an impairment loss of approximately $16.9
million in the third quarter ending May 31, 1999 to write-off certain satellite
related assets and to write-down to fair value its license to carry long-
distance traffic. The value of the license was determined to have been impaired
in part due to the current financial conditions in Russia.

As a result of start-up expenses incurred by the Transworld Companies,
write-off of the satellite related assets and impairment of the license, the
Company recorded equity losses of $20.9 million during the nine months ended May
31, 1999.

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is summarized as follows (in thousands):

<TABLE>
<CAPTION>
MAY 31,
1999
--------
<S> <C>
Land........................................................ $ 332
Buildings and infrastructure................................ 113,849
Machinery and equipment..................................... 13,033
Other....................................................... 6,734
--------
133,948
Accumulated depreciation and amortization................... (8,187)
--------
$125,761
========
</TABLE>

NOTE 6. LOANS PAYABLE TO BANKS

Between July and November 1998, Inversiones borrowed $15.7 million under
notes payable to banks in Chile. In February 1999, Inversiones was granted a
one-year extension

F-22
<PAGE> 106
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

for the payment of the loans. The renewed loans of $9.0 million and $6.7
million, along with capitalized interest and fees, bear interest at rates of
8.1% and 8.5% per annum, respectively, and are due to be repaid in February
2000.

NOTE 7. LONG-TERM DEBT

Long-term debt is summarized as follows (in thousands):

<TABLE>
<CAPTION>
MAY 31,
1999
--------
<S> <C>
QUALCOMM Credit Agreement................................... $ 93,281
QUALCOMM Deferred Payment Agreement......................... 77,053
Note payable to Telex-Chile at present value................ 15,699
--------
186,033
Less current portion........................................ (33,727)
--------
$152,306
========
</TABLE>

QUALCOMM Credit Agreement

The Company entered into a secured credit facility with QUALCOMM (the
"Credit Agreement") on September 23, 1998. The Credit Agreement consists of two
sub-facilities. The first sub-facility enables the Company to borrow up to $35.2
million from QUALCOMM. The proceeds from this sub-facility may be used by the
Company solely to meet the normal working capital and operating expenses of the
Company, including salaries and overhead, but excluding, among other things,
strategic capital investments in wireless operators, substantial acquisitions of
capital equipment, and/or the acquisition of telecommunications licenses. The
other sub-facility enables the Company to borrow up to $229.8 million from
QUALCOMM. The proceeds from this second sub-facility may be used by the Company
solely to make certain identified investments.

Amounts borrowed under the Credit Agreement are due September 23, 2006.
QUALCOMM has a security interest in substantially all of the assets of the
Company as long as any amounts are outstanding under the Credit Agreement. The
Credit Agreement requires the Company to meet certain financial and operating
covenants. Amounts borrowed under the Credit Agreement bear interest at either a
prime or LIBOR rate, plus an applicable margin. At May 31, 1999, the rate of
interest was generally 10.25%. Interest will be payable quarterly beginning
September 30, 2001 and, prior to such time, accrued interest shall be added to
the principal amount outstanding. At May 31, 1999, $2.8 million of capitalized
and accrued interest had been added to the Credit Agreement.

F-23
<PAGE> 107
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

QUALCOMM Deferred Payment Agreement

Chilesat and QUALCOMM are parties to a Deferred Payment Agreement related
to Chilesat's purchase of equipment, software and services from QUALCOMM. The
assets of Chilesat collateralize its obligations under the Deferred Payment
Agreement. The Company has also pledged its shares in Chilesat as guaranty for
Chilesat's obligation to QUALCOMM.

Under the terms of the agreement, QUALCOMM has agreed to defer collection
of amounts up to a maximum of $84.5 million. The deferred payments bear interest
at either a prime or LIBOR rate, plus an applicable margin. At May 31, 1999, the
rate of interest was generally 9.75%. Accrued interest is added monthly to the
outstanding principal amount of the applicable borrowing until its first due
date, at which time interest is payable with principal. Chilesat is currently in
discussions with QUALCOMM to restructure the terms of the agreement and is
currently delinquent on payments of $10.9 million.

NOTE 8. COMMITMENTS

The Company has made commitments to invest additional working capital into
certain of the Leap Wireless Operating Companies. As of May 31, 1999, these
commitments totaled approximately $45.9 million. The Company expects to fund its
commitments with borrowings under the Credit Agreement.

In May 1999, Pegaso entered into a $100 million loan agreement. The Company
has agreed to pay 33% of Pegaso's obligations under this loan agreement in the
event of Pegaso's default.

In April 1999, the Company was the successful bidder at $18.7 million on 36
wireless telecommunications licenses in the U.S. government's re-auction of PCS
spectrum, paying a deposit of $3.7 million on these licenses. The purchase of
the licenses is subject to approval of the FCC. See Note 10.

In October 1998, the Company agreed to purchase four telecommunications
licenses from AirGate Wireless, L.L.C. for $19.5 million, paying an escrow
deposit of $0.6 million. The purchase is subject to the approval of the FCC. See
Note 10.

NOTE 9. STOCKHOLDERS' EQUITY

Stockholder Rights Plan

F-24
<PAGE> 108
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Junior Participating Preferred Stock, $0.0001 par value per share, at a purchase
price of $90 (subject to adjustment). The Rights are exercisable only if a
person or group (an "Acquiring Person"), other than QUALCOMM with respect to its
exercise of the warrant granted to it in connection with the Distribution,
acquires beneficial ownership of 15% or more of the Company's outstanding shares
of Common Stock. Upon exercise, holders other than an Acquiring Person, will
have the right (subject to termination) to receive the Company's Common Stock or
other securities having a market value (as defined) equal to twice the purchase
price of the Right. The Rights, which expire on September 10, 2008, are
redeemable in whole, but not in part, at the Company's option at any time for a
price of $0.01 per Right.

In conjunction with the distribution of the Rights, the Company's Board of
Directors designated 75,000 shares of Preferred Stock as Series A Junior
Participating Preferred Stock and reserved such shares for issuance upon
exercise of the Rights. At May 31, 1999, no shares of Preferred Stock were
outstanding.

Stock Purchase Warrant

In connection with the Distribution, the Company issued to QUALCOMM a
warrant to purchase 5,500,000 shares of the Company's Common Stock. In March
1999, QUALCOMM agreed to reduce the number of shares to 4,500,000 for
consideration of $3.0 million in cash. The Company also recorded $2.4 million
related to a handset purchase commitment. The Company borrowed $3.0 million
under the Credit Agreement to satisfy the cash obligation. This warrant is
currently exercisable and remains exercisable until September 2008.

NOTE 10. SUBSEQUENT EVENTS

Adoption of Cricket Communications Stock Option Plan

In June 1999, the Company's wholly-owned subsidiary, Cricket
Communications, Inc. ("Cricket Communications") adopted the Cricket
Communications 1999 Stock Option Plan ("the Cricket Plan") that allows the
Cricket Communications Board of Directors to grant options to selected
employees, directors and consultants to purchase shares of Cricket
Communication's common stock. The Cricket Plan provides for the grant of both
incentive and non-qualified stock options. Incentive stock options are
exercisable at a price not less than 100% of the fair market value of the common
stock on the date of grant. Non-qualified stock options are exercisable at a
price not less than 85% of the fair market value of the common stock on the date
of grant. Generally, options vest over a five year period and are exercisable
for up to ten years from the grant date.

Purchase of Wireless Telecommunications Licenses

F-25
<PAGE> 109
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

the Company's purchase of 36 wireless telecommunications licenses in the U.S.
government's re-auction of PCS spectrum. The approval was subject to several
conditions, including the Company taking steps so that by January 2001, QUALCOMM
holds no more than 50% of Leap Wireless' outstanding debt obligations.

Sale of OzPhone Pty Limited

In August 1999, the Company agreed to sell all of the shares of its
wholly-owned subsidiary, OzPhone Pty Limited, for approximately $16.3 million.

F-26
<PAGE> 110

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF LEAP WIRELESS INTERNATIONAL, INC.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of
stockholder's equity present fairly, in all material respects, the financial
position of Leap Wireless International, Inc. (a development stage company) at
August 31, 1998 and 1997, and the results of its operations and its cash flows
for the fiscal years ended August 31, 1998, 1997 and 1996 and for the period
from September 1, 1995 (inception) through August 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 2 to the consolidated financial statements, the
Company adopted the equity method of accounting for its investment in Chase
Telecommunications Holdings, Inc. during the three months ended May 31, 1999.
The accompanying financial statements have been restated to reflect the adoption
of the equity method retroactive to the initial date of the Company's investment
in Chase Telecommunications Holdings, Inc.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
November 19, 1998, except for Note 2 which is as of July 15, 1999

F-27
<PAGE> 111

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
AUGUST 31,
------------------------
1998 1997
---------- ----------
(RESTATED) (RESTATED)
<S> <C> <C>
ASSETS
Current assets.......................................... $ -- $ --
Investments in unconsolidated wireless operating
companies............................................. 97,719 42,267
Loans receivable from unconsolidated wireless operating
companies............................................. 53,195 --
Other assets............................................ 6,838 --
-------- -------
Total assets....................................... $157,752 $42,267
======== =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities................ $ 5,789 $ 279
Loan payable to bank.................................... 9,000 --
-------- -------
Total liabilities.................................. 14,789 279
-------- -------
Commitments (Note 8)
Stockholder's equity:
Former parent company's investment.................... 197,598 47,478
Deficit accumulated during the development stage...... (52,283) (5,550)
Accumulated other comprehensive income (loss)......... (2,352) 60
-------- -------
Total stockholder's equity......................... 142,963 41,988
-------- -------
Total liabilities and stockholder's equity......... $157,752 $42,267
======== =======
</TABLE>

See accompanying notes.

F-28
<PAGE> 112

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED FOR THE PERIOD
AUGUST 31, FROM SEPTEMBER 1, 1995
---------------------------------- (INCEPTION) TO
1998 1997 1996 AUGUST 31, 1998
---------- ---------- ------ ----------------------
(RESTATED) (RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Equity in net loss of
unconsolidated wireless
operating companies.... $(23,688) $(3,793) $ -- $(27,481)
General and
administrative
expenses............... (23,888) (1,361) (396) (25,645)
Interest income.......... 843 -- -- 843
-------- ------- ------ --------
Net loss............ $(46,733) $(5,154) $ (396) $(52,283)
Other comprehensive
income (loss):
Cumulative transaction
adjustment.......... (2,412) 60 -- (2,352)
-------- ------- ------ --------
Comprehensive
loss.............. $(49,145) $(5,094) $ (396) $(54,635)
======== ======= ====== ========
Basic and diluted net
loss per common share
(Note 1)............... $ (2.65) $ (0.29) $(0.02) $ (3.10)
======== ======= ====== ========
Shares used to calculate
pro forma basic and
diluted net loss per
common share (Note
1)..................... 17,648 17,648 17,648 17,648
======== ======= ====== ========
</TABLE>

See accompanying notes.

F-29
<PAGE> 113

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE PERIOD
YEARS ENDED FROM
AUGUST 31, SEPTEMBER 1, 1995
------------------------------- (INCEPTION) TO
1998 1997 1996 AUGUST 31, 1998
---------- ---------- ----- -----------------
(RESTATED) (RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
Operating activities:
Net loss......................... $ (46,733) $ (5,154) $(396) $ (52,283)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Equity in net loss of
unconsolidated wireless
operating companies......... 23,688 3,793 -- 27,481
Interest accrued to loans
receivable.................. (843) -- -- (843)
Change in accounts payable and
accrued liabilities......... 5,510 168 111 5,789
--------- -------- ----- ---------
Net cash used in operating
activities....................... (18,378) (1,193) (285) (19,856)
--------- -------- ----- ---------
Investing activities:
Investments in unconsolidated
wireless operating
companies..................... (69,444) (46,000) -- (115,444)
Loans to unconsolidated wireless
operating companies........... (64,460) -- -- (64,460)
Acquisition of consolidated
wireless operating company.... (564) -- -- (564)
Purchase of wireless
communication Licenses........ (6,274) -- -- (6,274)
--------- -------- ----- ---------
Net cash used in investing
activities....................... (140,742) (46,000) -- (186,742)
--------- -------- ----- ---------
Financing activities:
Proceeds from bank loan.......... 9,000 -- -- 9,000
Former parent company's
investment.................... 150,120 47,193 285 197,598
--------- -------- ----- ---------
Net cash provided by financing
activities....................... 159,120 47,193 285 206,598
--------- -------- ----- ---------
Net change in cash and cash
equivalents...................... -- -- -- --
Cash and cash equivalents at
beginning of period.............. -- -- -- --
--------- -------- ----- ---------
Cash and cash equivalents at end of
period........................... $ -- $ -- $ -- $ --
========= ======== ===== =========
</TABLE>

See accompanying notes.

F-30
<PAGE> 114

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
FORMER DEFICIT ACCUMULATED
PARENT ACCUMULATED OTHER
COMPANY'S DURING THE COMPREHENSIVE
INVESTMENT DEVELOPMENT STAGE INCOME (LOSS) TOTAL
---------- ----------------- ------------- --------
<S> <C> <C> <C> <C>
Balance at September 1, 1995
(inception)................. $ -- $ -- $ -- $ --
Transfers from former
parent................... 285 -- -- 285
Net loss.................... -- (396) -- (396)
-------- -------- ------- --------
Balance at August 31, 1996.... 285 (396) -- (111)
Transfers from former
parent................... 47,193 -- -- 47,193
Net loss (restated)......... -- (5,154) -- (5,154)
Cumulative translation
adjustment............... -- -- 60 60
-------- -------- ------- --------
Balance at August 31, 1997.... 47,478 (5,550) 60 41,988
Transfers from former
parent................... 150,120 -- -- 150,120
Net loss (restated)......... -- (46,733) -- (46,733)
Cumulative translation
adjustment............... -- -- (2,412) (2,412)
-------- -------- ------- --------
Balance at August 31, 1998.... $197,598 $(52,283) $(2,352) $142,963
======== ======== ======= ========
</TABLE>

See accompanying notes.

F-31
<PAGE> 115

LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

The Company

Leap Wireless International, Inc. (the "Company" or "Leap Wireless"), a
Delaware corporation, was incorporated on June 24, 1998 as a wholly owned
subsidiary of QUALCOMM Incorporated ("QUALCOMM"). On September 23, 1998 (the
"Distribution Date"), QUALCOMM distributed all of the outstanding shares of
common stock of the Company to QUALCOMM's stockholder as a taxable dividend (the
"Distribution"). In connection with the Distribution, one share of the Company's
common stock was issued to every four shares of QUALCOMM common stock
outstanding on September 11, 1998. Following the Distribution, QUALCOMM and the
Company operate as independent companies.

The Distribution

In connection with the Distribution, QUALCOMM transferred to the Company
its joint venture and equity interests in the following domestic and
international emerging terrestrial based wireless telecommunications operating
companies: Pegaso Telecomunicaciones, S.A. de C.V. (Mexico), Metrosvyaz Limited
(Russia), Orrengrove Investments Limited (Russia), Chilesat Telefonia Personal,
S.A. (Chile), Chase Telecommunications, Inc. (United States), OzPhone Pty. Ltd.
(Australia), and certain other development stage businesses (the "Leap Wireless
Operating Companies"). QUALCOMM and the Company also agreed that, if certain
events occur within 18 months after the Distribution, QUALCOMM will transfer to
the Company its equity interests and working capital loan related to Telesystems
of Ukraine ("TOU"), a wireless telecommunications company in Ukraine. In
connection with the Distribution, QUALCOMM also transferred to the Company cash
and certain indebtedness of the Leap Wireless Operating Companies owed to
QUALCOMM, as well as certain miscellaneous assets. The aggregate net tangible
book value of the assets transferred by QUALCOMM to the Company in connection
with the Distribution was approximately $236 million.

The Company has agreed to assume certain of QUALCOMM's obligations to
manage operations of and finance costs relating to ongoing build-outs of the
wireless telecommunications systems being deployed by the Leap Wireless
Operating Companies, including approximately $75 million of funding obligations
to such operating companies, as well as certain miscellaneous liabilities.
QUALCOMM will continue to be a supplier of CDMA equipment and is expected to
provide significant vendor financing to the Company's wireless
telecommunications businesses and ventures.

The Company entered into a secured credit agreement with QUALCOMM (the
"Credit Agreement"). The Credit Agreement consists of two sub-facilities. The
first sub-facility enables the Company to borrow up to $35.2 million from
QUALCOMM. The

F-32
<PAGE> 116
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

proceeds from this sub-facility may be used by the Company solely to meet the
normal working capital and operating expenses of the Company, including salaries
and overhead, but excluding, among other things, strategic capital investments
in wireless operators, substantial acquisitions of capital equipment, and/or the
acquisition of telecommunications licenses. The other sub-facility enables the
Company to borrow up to $229.8 million from QUALCOMM. The proceeds from this
second sub-facility may be used by the Company solely to make certain identified
investments.

Amounts borrowed under the Credit Agreement will be due and payable
approximately eight years following the Distribution Date. QUALCOMM has a first
priority security interest in, subject to some exceptions, substantially all of
the assets of the Company for so long as any amounts are outstanding under the
Credit Agreement. Amounts borrowed under the Credit Agreement will bear interest
at a variable rate equal to LIBOR plus 5.25% per annum. Interest will be payable
quarterly beginning September 30, 2001 and, prior to such time, accrued interest
shall be added to the principal amount outstanding.

Basis of Presentation

The consolidated financial statements reflect the financial position,
results of operations, cash flows and changes in stockholder's equity of the
business that was transferred to the Company from QUALCOMM as if: (i) the
Company were a separate entity for all periods presented, and (ii) the
historical investments in the Leap Operating Wireless Operating Companies as of
August 31, 1998 and significant agreements entered into with such companies
prior to the Distribution were owned or entered into by the Company. However,
for the periods covered by the financial statements, such investments were
directly or indirectly legally owned by QUALCOMM. All significant intercompany
transactions and balances have been eliminated. Additionally, the results of the
Company's unconsolidated Leap Wireless Operating Companies have been included as
of and for the twelve months ended July 31, a one month lag. The financial
statements have been presented as if the Company were a development stage
company with an inception date of September 1, 1995. The financial statements
have been prepared using the historical basis in the assets and liabilities and
historical results of operations related to the Company's business. The
businesses attributed to the Company did not engage in any significant activity
prior to fiscal 1996 and, as of August 31, 1998, neither the Company nor the
businesses in which it was deemed to own an equity investment had generated any
revenues from their planned principal operations. The Company had no cash
balances as of August 31, 1998 and 1997 as no specific cash accounts had been
designated by QUALCOMM for the Company. When Company liabilities were paid or
investments made, it is assumed that the cash used by the Company was funded by
a stockholder cash contribution. Changes in stockholder's equity represent
QUALCOMM's contribution after giving effect to the net operating cash used by
the Company and amounts necessary to finance the acquisition of ownership
interests in the Leap Wireless Operating Companies.

The Company had no employees nor were any QUALCOMM employees wholly
dedicated to its business during the fiscal periods presented. QUALCOMM
departmental

F-33
<PAGE> 117
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

labor and other direct costs have been allocated to the Company based on
estimates of incremental efforts expended and incremental costs incurred related
to the Company's business. General corporate overhead related to QUALCOMM's
corporate headquarters and common support divisions have been allocated to the
Company generally based on the proportion of the Company's costs and expenses to
QUALCOMM's costs and expenses.

Management believes these allocations reasonably approximate costs incurred
by QUALCOMM on behalf of the Company's operations. However, the costs as
allocated to the Company are not necessarily indicative of the costs that would
have been incurred if the Company had performed these functions as a stand-alone
entity. Following the Distribution, the Company hired its own staff to perform
necessary functions using its own resources or purchased resources and is
responsible for the costs and expenses associated with the management of a
public corporation.

The financial information included herein may not necessarily reflect the
financial position, results of operations, cash flows and changes in
stockholder's equity of the Company in the future or what they would have been
had it been a separate, stand-alone entity during the periods presented.

Developmental Stage Activities and Additional Capital Needs

The Company has only operated as an independent public company since the
Distribution and is at an early stage of development. As such, the Company is
subject to the risks inherent in the establishment of a new business enterprise
and its prospects must be considered in light of the risks, expenses and
difficulties encountered by companies in their early stage of development,
particularly companies in new and rapidly evolving markets and companies
experiencing rapid growth. To date, the Company has generated no revenue from
its ownership interests in or management roles with the Leap Wireless Operating
Companies. The Company's ability to generate revenues will be dependent on a
number of factors, including the future operations and profitability of its
operating companies. The Leap Wireless Operating Companies are expected to incur
substantial losses for the foreseeable future and are subject to substantial
risks. The Company will be required to recognize a share of these companies'
start-up operating losses as a result of the Company's ownership interests in
these companies. The industry in which the operating companies operate is highly
competitive and is subject to a number of significant project, market,
political, credit and exchange risks, among others. The Company may be required
to provide substantial funding to these entities to finance completion of their
wireless operating systems. The build-out of the operating companies' wireless
systems may take a number of years to complete. There can be no assurance that
any of the existing operating companies or any other companies in which the
Company may acquire a joint venture or equity interest will be able to obtain
sufficient financing to build-out their systems, meet their payment obligations
to the Company or others, including the Federal Communications Commission
("FCC") and other regulatory agencies, or become profitable. The failure of
these companies to build-out their systems, meet their payment obligations or
become profitable would adversely affect the value of the Company's assets and
its future profitability. The time required for the Company to reach or sustain

F-34
<PAGE> 118
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

profitability is highly uncertain, and there can be no assurance that the
Company will be able to achieve or maintain profitability. Moreover, if
profitability is achieved, the level of such profitability cannot be predicted
and may vary significantly from quarter to quarter.

The Company expects to have significant future capital requirements
relating to funding of the Leap Wireless Operating Companies and other operating
companies in which the Company may acquire joint venture or equity interests and
to general working capital needs and other cash requirements. The magnitude of
these capital requirements will depend on a number of factors, including the
specific capital needs of the Leap Wireless Operating Companies, additional
capital needed to acquire or maintain other joint venture or equity interests,
competing technological and market developments and changes in existing and
future relationships.

The Company expects to obtain much of its required near term financing
through borrowings under the Credit Agreement. The Company expects, however,
that it will reach its borrowing limit under both sub-facilities of the Credit
Agreement on or about the end of fiscal 1999. The Company had no other
agreements for working capital or financing. In addition, the Company is subject
to restrictive covenants and other obligations under the Credit Agreement. There
can be no assurance that the Company will have continued access to borrowings
under the Credit Agreement when required.

There can be no assurance that the Company will be able to obtain
additional required financing on favorable terms or at all. The terms of the
Credit Agreement include security interests in favor of QUALCOMM and other
restrictive covenants, and may significantly limit or prevent the Company from
obtaining additional debt financing. If additional funds are raised through
equity financings, dilution to the Company's existing stockholders would result.
To the extent that such additional financing is raised by the sale or other
transfer of any of the Company's equity interests in the Leap Wireless Operating
Companies, the Company will be diluted or relinquish ownership of such
interests. As fiscal 1999 progresses if management comes to believe that it will
be unable to obtain working capital or financing in addition to the Credit
Agreement, management expects to reduce the Company's capital requirements by
slowly or discontinuing the funding of uncommitted investments. In addition, to
the extent necessary, management will consider other strategic modifications to
its operational plans, including reducing corporate activities and possibly
selling portions of its interests in one or more of the Leap Wireless Operating
Companies. The failure to obtain adequate additional financing may have a
material adverse effect on the Company's business, results of operations,
liquidity and financial position.

As a result of its capital requirements, including expected borrowings
under the Credit Agreement, the Company expects that it will be highly
leveraged. The degree to which the Company is leveraged could have important
consequences, including: (i) the Company's ability to obtain additional
financing in the future may be impaired; (ii) a substantial portion of the
Company's future cash flows from operations may be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
for operations; (iii) the Company may be hindered in its ability to adjust
rapidly to changing market conditions; and (iv) the Company's substantial degree
of leverage may

F-35
<PAGE> 119
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

make it more vulnerable in the event of a downturn in general economic
conditions or in its business. There can be no assurance that the Company's
future cash flows will be sufficient to meet the Company's debt service
requirements or that the Company will be able to refinance any of its
indebtedness at maturity.

The Company experienced net losses for the years ended August 31, 1998,
1997 and 1996 of $46.7 million, $5.2 million and $396,000, respectively.
Following the Distribution, the Company is responsible for the additional costs
associated with being an independent public company, including costs related to
corporate governance, listed and registered securities and investor relations
issues. Further, the Leap Wireless Operating Companies are in the early stages
of developing and deploying their respective telecommunications systems. Such
systems require significant expenditures, a substantial portion of which are
incurred before corresponding revenues are generated. In addition, the degree to
which the Company and its operating companies are expected to be leveraged will
lead to significant interest expense and principal repayment obligations with
respect to outstanding indebtedness. The Company therefore expects to incur
significant expenses in advance of generating revenues, and as a result, to
incur substantial additional losses in the foreseeable future. There can be no
assurance that the Company or any of the Leap Wireless Operating Companies will
achieve or sustain profitability in the near term or at all.

International Risks

The Company is subject to numerous risks as a result of its international
activities. The Leap Wireless Operating Companies are dependent, in large part,
on the economies of the markets in which they have operations. Those markets and
other markets in which the Company may operate are in countries with economies
in various stages of development or structural reform, some of which are subject
to rapid fluctuations in currency exchange rates, consumer prices, inflation,
employment levels and gross domestic product. The Company and the Leap Wireless
Operating Companies are exposed to market risk from changes in foreign currency
exchange rates and interest rates, and are subject to other currency, economic
and political risks, which could impact their results of operations and
financial condition.

Financial Statement Preparation

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Investments in the Leap Wireless Operating Companies

The Company uses the equity method to account for investments in corporate
entities in which it has less than 50% voting interest. Under the equity method,
the investment is originally recorded at cost and adjusted to recognize the
Company's share of net earnings

F-36
<PAGE> 120
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

or losses of the investee, limited to the extent of the Company's investment in,
advances to and financial guarantees for the investee. Such earnings or losses
of the Company's investees are adjusted to reflect the amortization of any
differences between the carrying value of the investment and the Company's
equity in the net assets of the investee. For those unconsolidated subsidiaries
where Leap Wireless and its wholly owned subsidiaries are the only contributors
of assets, equity in net losses of wireless operating companies includes 100% of
the losses of the equity investee. To accommodate the reporting of the
unconsolidated Leap Wireless Operating Companies, the Company has adopted a one-
month lag for the recognition of the Company's share of net earnings or losses
of such investments.

Long-Lived Assets

The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
total amount of an asset may not be recoverable. An impairment loss would be
recognized when estimated future cash flows expected to result from the use of
the asset and its eventual disposition are less than its carrying amount.

Foreign Currency

Results of operations for international investments are translated using
average exchange rates during the period, while assets and liabilities are
translated using end-of-period rates. The resulting exchange gains or losses are
accumulated in the "cumulative translation adjustment" account, a component of
stockholder's equity. The functional currency of the Company's foreign investees
that operate in highly inflationary economies is the U.S. Dollar. The monetary
assets and liabilities of these foreign investees are translated into U.S.
Dollars at the exchange rate in effect at the balance sheet date. Revenues,
expenses, gains and losses are translated at the average exchange rate for the
period, and non-monetary assets and liabilities are translated at historical
rates. Resulting remeasurement gains or losses of these foreign investees are
recognized in the combined results of operations. The effects of translating the
financial position and results of operations of local currency operations have
not been significant to the Company's financial statements. Gains and losses
resulting from the Company's foreign currency transactions have not been
significant in relation to its operations.

Income Taxes

Historically, the Company's operations have been included in the
consolidated income tax returns filed by QUALCOMM. Income tax expense in the
Company's financial statements has been calculated on a separate tax return
basis.

Current income tax benefit is the amount expected to be receivable for the
current year. A deferred tax asset and/or liability is computed for both the
expected future impact of differences between the financial statement and tax
bases of assets and liabilities and for the expected future tax benefit to be
derived from tax loss and tax credit carry forwards.

F-37
<PAGE> 121
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be "more likely than not" realized in future
tax returns. Tax rate changes are reflected in income in the period such changes
are enacted.

Basic and Diluted Net Loss Per Common Share

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("FAS 128"), "Earnings per Share,"
which the Company has adopted to compute the basic and diluted net loss per
common share ("EPS") amount for each of the periods presented.

The Company had no shares of common stock outstanding prior to September
23, 1998. The basic and diluted net loss per common share was calculated by
dividing the net loss for each of the periods presented by the 17,647,685 shares
of Common Stock the Company issued at Distribution. Stock options for 5,542,740
shares issued subsequent to the Distribution Date, the conversion of QUALCOMM's
Trust Convertible Preferred Securities which are convertible into shares of
QUALCOMM Common Stock and 2,271,060 shares of the Company's Common Stock, and
the exercise of a warrant to be issued to QUALCOMM for approximately 5,500,000
shares of common stock (See Note 11) have not been considered in calculating the
basic and diluted net loss per common share because their effect would be
anti-dilutive. As a result, the Company's basic and diluted net loss per common
share are the same.

Reporting Comprehensive Income

Effective September 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 ("FAS 130"), "Reporting Comprehensive Income."
These financial statements have been adjusted to reflect the adoption of FAS 130
as of September 1, 1995. FAS 130 requires the Company to report in the financial
statements, in addition to net income (loss), comprehensive income (loss) and
its components including, as applicable, foreign currency items, minimum pension
liability adjustments and unrealized gains and losses on certain investments in
debt and equity securities.

Future Accounting Requirements

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 ("FAS 131"), "Disclosures about Segments of an Enterprise and Related
Information," which the Company will be required to adopt for fiscal year 1999.
This statement establishes standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Under FAS 131, operating segments are to
be determined consistent with the way that management organizes and evaluates
financial information internally for making operating decisions and assessing
performance. The Company has not determined the impact of the adoption of this
new accounting standard on its financial statement disclosures.

F-38
<PAGE> 122
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging
Activities," which the Company will be required to adopt for fiscal year 2001.
This statement establishes a new model for accounting for derivatives and
hedging activities. Under FAS 133, all derivatives must be recognized as assets
and liabilities and measured at fair value. The Company has not determined the
impact of the adoption of this new accounting standard on its consolidated
financial position or results of operations.

NOTE 2. RESTATEMENT

Chase Telecommunications Holdings, Inc.

In March 1999, Leap Wireless' concept for a flat-rate local area service
targeted at the mass consumer market was launched under an agreement that
requires the management of a subsidiary of Chase Telecommunications Holdings,
Inc.'s ("Chase") to control the business until Leap Wireless' proposed
acquisition of substantially all of the assets of Chase receives all necessary
governmental approvals and is complete. As a result of this launch and the
satisfaction of certain contingencies to the parties' obligation under the asset
purchase agreement between the Company and Chase, the Company adopted the equity
method of accounting for its investment in Chase in the third quarter of fiscal
1999 (see Note 11). Accordingly, all prior periods presented in these financial
statements have been adjusted retroactively in accordance with generally
accepted accounting principles to give effect to the equity method of
accounting. The Company recorded equity losses from this investment of $12.1
million and $4 million during the years ended August 31, 1998 and 1997,
respectively.

NOTE 3. INVESTMENTS AND LOANS TO UNCONSOLIDATED LEAP WIRELESS OPERATING
COMPANIES

The Company and its consolidated subsidiaries have equity interests in
companies that directly or indirectly hold wireless telephone licenses or are
seeking such licenses. Its participation in each company differs and the Company
does not have majority interests in such companies. The Company's ability to
withdraw funds, including dividends, from its participation in such investments
is dependent in many cases on receiving the consent of lenders and of the other
participants, over which the Company has no control. The

F-39
<PAGE> 123
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company and its consolidated subsidiaries have investments in Leap Wireless
Operating Companies consisting of the following:

<TABLE>
<CAPTION>
PERCENTAGE OF OWNERSHIP
AUGUST 31,
------------------------
1998 1997
------ ------
<S> <C> <C>
EQUITY INVESTEE
Chase Telecommunications, Inc (U.S.)..................... 7.2% 7.2%
Chilesat Telefonia Personal S.A. (Chile)................. 50% 50%
Pegaso Telecomunicaciones, S.A. de C.V. (Mexico)......... 49% --
Metrosvyaz Limited (Russia).............................. 50% --
Orrengrove Investments Limited (Russia).................. 50% --
</TABLE>

Condensed financial information for the Leap Wireless Operating Company
during the period under which the Company accounted for the investment under the
equity method is summarized as follows (in thousands):

<TABLE>
<CAPTION>
AUGUST 31,
------------------------
1998 1997
---------- ----------
(RESTATED) (RESTATED)
<S> <C> <C>
Current assets......................................... $ 82,575 $ 38,550
Non-current assets..................................... 263,543 144,493
Current liabilities.................................... (99,134) (14,123)
Non-current liabilities................................ (178,491) (149,303)
--------- ---------
Total partners' and stockholders' capital......... 68,493 19,617
Other partners' and stockholders' share of capital..... 9,208 2,631
--------- ---------
Company's share of capital............................. 77,701 22,248
Goodwill and other intangible items.................... 20,018 20,019
--------- ---------
Equity investments in unconsolidated wireless
operating companies............................... $ 97,719 $ 42,267
========= =========
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED
AUGUST 31,
------------------------
1998 1997
---------- ----------
(RESTATED) (RESTATED)
<S> <C> <C>
Revenue................................................. $ 22 $ --
Operating expenses...................................... (20,739) (5,234)
Other income (expense), net............................. (22,373) (18,108)
-------- --------
Net loss.............................................. (43,090) (23,342)
Other partners' and stockholders' share of net loss..... (19,402) (19,549)
-------- --------
Company's share of net loss............................. (23,688) (3,793)
Amortization of goodwill and other intangible items..... -- --
-------- --------
Equity in net loss of unconsolidated wireless
Operating companies................................ $(23,688) $ (3,793)
======== ========
</TABLE>

F-40
<PAGE> 124
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of August 31, 1998, the Leap Wireless Operating Companies had not
commenced commercial revenue generating operations. Any income derived resulted
principally from earnings on investments and cash.

Chase Telecommunications, Inc.

In December 1996, the Company purchased $4 million of Chase Class B Common
Stock, representing 7.2% of the outstanding capital stock of Chase. The Company
is accounting for its investment under the cost method of accounting. It is not
practicable to estimate the fair value of the investment as Chase is a closely
held domestic corporation and is not publicly traded.

In June 1998, the Company agreed to provide a $25 million working capital
facility to Chase. Borrowings under the facility are subject to interest at
prime plus 4 1/2% and are to be repaid by June 2006. Borrowings are
collateralized by substantially all of the assets of Chase. At August 31, 1998,
borrowings under the facility totaled $12.1 million, including $307,000 of
accrued interest. The Company has committed, subject to certain conditions and
exceptions, to convert the facility into $25 million of redeemable preferred
stock in Chase. The Company received warrants, in connection with this
financing, to acquire up to an additional 8.5% of the currently outstanding
Chase equity.

Although Chase has commenced limited commercial operations, it is a
development stage company that will require significant financing to expand its
Personal Communications Services ("PCS") network build-out and to meet its
payment obligations relating to the purchase of PCS licenses covering the
Tennessee region from the FCC. Chase's failure to obtain sufficient financing or
to meet its obligations to the FCC could adversely affect the value of the
Company's investment in Chase. There can be no assurance that Chase will be
successful in obtaining sufficient financing for its network build-out or in
meeting its payment obligations to the FCC. See Note 11.

Chilesat Telefonia Personal, S.A.

In February 1997, the Company entered into a subscription and shareholders
agreement to purchase $42 million of voting preferred shares representing a 50%
ownership interest in a privately held corporate joint venture, Chilesat
Telefonia Personal, S.A. ("Chilesat"), a development stage company. The Company
holds its shares in Chilesat via a wholly-owned subsidiary, Inversiones Leap
Wireless Chile, S.A. ("Inversiones"), formerly named Inversiones QUALCOMM Chile,
S.A., which held no other assets and had no liabilities as of August 31, 1998.
The remaining 50% ownership interest represented by voting common shares is
owned by Telex-Chile S.A. and its subsidiary Chilesat S.A. (together
"Telex-Chile"). See Note 11. The preferred shares are entitled to a liquidation
preference equal to the original purchase price per share if Chilesat is
liquidated by April 2003. The Company accounts for its investment under the
equity method of accounting. As of August 31, 1998, Chilesat had completed its
initial network build-out, but operational activity was not significant. The
Company recorded $3.1 million in equity losses

F-41
<PAGE> 125
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

resulting from this investment during fiscal 1998 and $207,000 in equity income
during fiscal 1997

During June 1998, the Company and Inversiones entered into agreements with
Chilesat to provide $35 million in short-term loans, convertible into common
equity if not repaid on or before January 31, 1999. If converted, the Company
and Inversiones would hold voting shares of approximately 65% of Chilesat. This
conversion is available to the Company and Inversiones only if the loans are not
repaid on or before January 31, 1999. Chilesat currently contemplates that it
will issue a $35 million capital call by January 1999 which may be used to repay
the convertible loan or to provide for additional operating expenses. If
Telex-Chile makes at least a $17.5 million cash contribution before January 31,
1999 pursuant to such capital call, the Company and Inversiones have committed
to convert $17.5 million of the short-term loans to equity. At August 31, 1998,
borrowings under the loan totaled $25.2 million.

Telex-Chile has been unable to make principal repayments on its outstanding
loans and is under standstill agreements with many of its significant lenders.
However, Telex-Chile has informed the Company that it has the intention to, and
will have the ability to, fund its $17.5 million portion of the capital call
prior to January 31, 1999.

Under its licensing agreement with the Chilean government, Chilesat is
obligated to meet certain network build-out milestones by December 1998 and has
provided a $58 million letter of credit to support the payment of government
fines if the build-out milestones are not met. The Company has guaranteed
reimbursement to the issuing bank of the Company's proportional share, based on
its ownership interest, of any government fines paid under the letter of credit.
Additionally, the Company has pledged its shares in Chilesat to the issuing bank
as collateral for the letter of credit agreement. In the event the failure to
meet the network build-out milestones are the direct result of QUALCOMM's
failure to supply and install equipment under its existing supply contract,
QUALCOMM may be required to reimburse the Company its portion of the fine.

Pegaso Telecomunicaciones, S.A. de C.V.

In April 1998, the Company, through a wholly-owned subsidiary, QUALCOMM PCS
Mexico, Inc., entered into a joint venture agreement pursuant to which it
obtained a 49% ownership interest in a newly formed development stage company,
Pegaso Telecomunicaciones, S.A. de C.V. ("PEGASO"), a Mexico corporation. In May
of 1998, PEGASO obtained the right to acquire PCS licenses throughout Mexico.

During 1998, the Company advanced a portion of PEGASO's start-up working
capital requirements, including expenses incurred during the PCS spectrum
auction. At August 31, 1998, advances totaled $11.1 million. As a result of
start-up expenses incurred by PEGASO, the Company reported $2.4 million in
equity losses during fiscal 1998. In addition to the advances of working
capital, in June 1998, the Company provided a loan of $27.4 million to PEGASO.
The purpose of the loan was to fund a portion of the first PCS license payment.
Interest on the loan will accrue at a rate of 10% and has been added to the
principal amount of the loan outstanding. The Company converted the advances and

F-42
<PAGE> 126
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

the loan including accrued interest into common stock in September 1998 (see
Notes 9 and 11).

Metrosvyaz Limited

During October 1997, the Company became a 70% common owner in a start-up
joint venture, QUALCOMM Telecommunications Ltd. ("QUALCOMMTel Cayman"), a Cayman
Islands corporation. Upon its formation, QUALCOMMTel Cayman had no significant
assets or liabilities. The 30% minority interest is held by Tiller International
Limited ("Tiller"), a private investment company. In the event that QUALCOMMTel
Cayman makes a capital call on its stockholders to provide equity contributions,
at the request of Tiller, the Company is required to fund 100% of Tiller's share
of the equity contributions. Such advances by the Company for Tiller are
collateralized by Tiller's shares in QUALCOMMTel Cayman and carry an interest
rate of LIBOR plus 3% with principal and interest to be repayable from 80% of
future net earnings of QUALCOMMTel Cayman. QUALCOMMTel Cayman is intended to be
an intermediate holding company to facilitate the Company's business prospects
for wireless local loop (fixed) telephone service in the Russian Federation.

In August 1998, QUALCOMMTel Cayman became a 50% owner and partner in
Metrosvyaz Limited ("Metrosvyaz"), a newly-formed joint venture with Teletal
Limited ("Teletal"). As of the formation, Metrosvyaz had no assets or
liabilities and no historical operating activity. Concurrent with the formation
of Metrosvyaz, QUALCOMM entered into a $175 million, eight year, multiple
drawdown loan facility under which Metrosvyaz would be able to borrow funds,
subject to certain terms and conditions, to support its business plan, including
equipment purchases, and working capital needs. The $175 million facility is
related to a $500 million financing commitment entered into by QUALCOMM in
February 1998. As of the Distribution Date, QUALCOMMTel Cayman has assumed $72.4
million of the $175 million financing obligation from QUALCOMM. Furthermore, of
the original $500 million commitment, the Company expects that $150 million of
financing will be provided by QUALCOMMTel Cayman, with the remaining $350
million to be provided by QUALCOMM as vendor financing.

The $175 million facility carries a 13% interest rate and borrowings are
generally repayable approximately four years from the date of the draw subject
to a final repayment in August 2006 of any outstanding draws then outstanding.
Borrowings under the facility are collateralized by substantially all the assets
of Metrosvyaz. During 1998, QUALCOMMTel Cayman paid $6.6 million of start-up
related costs on behalf of Metrosvyaz. These advances were later converted to a
draw under the $72.4 million loan facility. Because the loan facility from
QUALCOMMTel Cayman is the only source of working capital for Metrosvyaz at this
time, and because the equity of QUALCOMMTel Cayman is 100% funded by the
Company, the Company will fully consolidate the net earnings and losses of
Metrosvyaz until such time the Company recoups its investment. Accordingly, and
as a direct result of these start-up costs, the Company recorded $6.1 million in
equity losses resulting from its investment during fiscal 1998.

F-43
<PAGE> 127
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Orrengrove Investments Limited

In August 1998, the Company became a 70% common owner in a start-up joint
venture, QUALCOMM Telecommunications Ltd. ("QUALCOMMTel Isle of Man"), an Isle
of Man corporation. QUALCOMMTel Isle of Man holds a 50% investment in Orrengrove
Investments Limited ("Orrengrove"). The 30% minority interest of QUALCOMMTel
Isle of Man not owned by the Company is held by Tiller and the 50% of Orrengrove
not held by QUALCOMMTel Isle of Man is held by Teletal.

In August 1998, Orrengrove purchased 60% of the common stock of Transworld
Telecommunications, Inc., Transworld Communications Services, Inc., and
Transworld Communications (Bermuda), Ltd. (the "Transworld Companies") for an
aggregate purchase price of $51.8 million. The Transworld Companies together are
telecommunications companies in the development stage formed in part to help
create a modern telecommunications infrastructure for the Russian Federation and
the countries of the former East Bloc. The Transworld Companies have developed
and are completing the installation of a satellite-based communications system
for long-distance voice, video and data services using their exclusive rights to
Russian Loutch II satellite capacity. Orrengrove will account for the
acquisition under the purchase method of accounting. Because the Company funded
the acquisition of the Transworld Companies in the form of a promissory note
with Orrengrove, and because the equity of QUALCOMMTel Isle of Man is 100%
funded by the Company, the Company will fully consolidate the net earnings and
losses of Orrengrove until such time the Company recoups its investment. See
Note 11.

NOTE 4. OTHER ASSETS

In June 1998, the Company purchased all the shares of OzPhone Pty Limited
("OzPhone"), an Australian company, for $564,000. OzPhone then acquired several
wireless communication licenses to provide digital mobile and wireless local
loop services in Australia. The total cost of the licenses was approximately
$6.2 million.

NOTE 5. EMPLOYEE BENEFIT PLANS

Prior to August 31, 1998, the Company did not have any employees dedicated
solely to its affairs. QUALCOMM employees who expended efforts on behalf of the
Company participated in QUALCOMM employee benefit plans. The Company has formed
employee benefit plans including an equity incentive plan which will provide for
the grant of various types of equity-based compensation to employees of the
Company, an incentive stock option plan, a non-qualified stock option plan and a
non-employee directors' stock option plan to provide for the grant of options to
purchase shares of the Company's Common Stock to non-employee directors of the
Company (See Notes 10 and 11).

F-44
<PAGE> 128
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6. INCOME TAXES

The Company has not recorded provisions for federal and state income taxes
for fiscal 1998, 1997 and 1996 due to net operating losses ("NOL") during those
years. The Company will not be able to utilize NOL carryforwards generated prior
to the Distribution, as such NOLs will remain with QUALCOMM.

At August 31, 1998, 1997 and 1996, the Company had total deferred tax
assets of approximately $14.5 million, $0.6 million and $0.2 million,
respectively, which consisted of NOL carryforwards. Due to the uncertainty
surrounding the ultimate realization of such deferred tax assets, the Company
has provided a valuation allowance for the entire balance.

At August 31, 1998, the Company had NOL carryforwards available to offset
future income for federal income tax reporting purposes of approximately $10.7
million, $0.4 million and $0.1 million, which expire in years 2017, 2011 and
2010, respectively. State NOL carryforwards of approximately $3.2 million and
$0.1 million at August 31, 1998 expire in years 2002 and 2001, respectively.

NOTE 7. LOAN PAYABLE TO BANK

In July 1998, Inversiones borrowed $9.0 million under a note payable to a
bank in Chile. The note bears interest at a rate of 8.56% per annum and all
amounts borrowed are due to be repaid by February 1999. See Note 11.

NOTE 8. COMMITMENTS

The Company has made guarantees and commitments to invest additional equity
and working capital into certain of the Leap Wireless Operating Companies. As of
August 31, 1998, these commitments totaled approximately $150.3 million. Prior
to the Distribution, these commitments were funded by QUALCOMM. Upon
Distribution, the Company expects to fund its commitments with borrowings under
the Credit Agreement.

The Company has entered into an agreement to lease its facility and certain
equipment under non-cancelable operating leases, with terms ranging from five to
seven years. Future minimum lease payments in each of the next five years from
fiscal 1999 through 2003 are approximately $700,000 each year, and $1.3 million
cumulative thereafter.

NOTE 9. SUBSEQUENT EVENTS, PRIOR TO THE DISTRIBUTION

Loans Payable to Banks

In September 1998, Inversiones QUALCOMM funded an additional $3.4 million
under its loan agreement with Chilesat utilizing additional bank debt. As of the
Distribution Date, the Company and Inversiones QUALCOMM had loans totaling $28.6
million to Chilesat, with remaining commitments to fund $6.4 million. See Note
11.

F-45
<PAGE> 129
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pegaso Telecomunicaciones, S.A. de C.V.

In September 1998, the Company provided $60.7 million of funding and
converted its advances and loan, with accrued interest, into common stock of
PEGASO. The Company's total investment in PEGASO after these transactions was
$100 million. On the same date, other investors also subscribed for and
purchased common stock of PEGASO such that, after these transactions, the total
par value of the common equity of PEGASO was $300 million. As a result, the
Company's ownership interest in PEGASO has been diluted from 49% to 33%.

Loan to Related Party

In September 1998, the Company provided a $17.5 million loan (the "Pegaso
Loan") to Pegaso Comunicaciones y Servicios, S.A. de C.V., a Mexican company
96%-owned by Mr. Alejandro Burillo Azcarraga, a member of the Company's Board of
Directors. The Pegaso Loan bears interest at the rate of 13% per annum. The
first principal installment of $7.5 million, plus accrued interest, was repaid
on October 29, 1998 as scheduled, and the second principal installment of $10
million, plus accrued interest, is due on or before December 31, 1998. The
purpose of the Pegaso Loan was to facilitate investment by Pegaso Comunicaciones
y Servicios, S.A. de C.V. in PEGASO, the joint venture in which the Company has
an interest, and to ensure that the investors in PEGASO made all capital
contributions to PEGASO that were required for the acquisition of the Mexican
licenses on September 30, 1998. The Pegaso Loan is guaranteed by Mr. Burillo and
is secured by a pledge of all of the shares of Pegaso Comunicaciones y
Servicios, S.A. de C.V. and Mr. Burillo's interest in an unrelated joint venture
with QUALCOMM to operate a satellite tracking, management and two-way
communications systems for the trucking industry in Mexico.

Metrosvyaz Limited

In September 1998, QUALCOMTel Cayman invested $3.1 million of equity in
Metrosvyaz. In addition, the Company made an additional loan of $10.7 million
under its loan facility with Metrosvyaz. As of the Distribution Date,
QUALCOMMTel Cayman had loans totaling $17.3 million to Metrosvyaz, with a
remaining commitment of $55.1 million.

NOTE 10. SUBSEQUENT EVENTS, POST DISTRIBUTION

Chase Telecommunications Holdings, Inc.

During October and November 1998, Chase borrowed an additional $8.6 million
under the working capital facility it has with the Company. Borrowings by Chase
to date total $20.4 million, with a remaining loan commitment of $4.6 million.

F-46
<PAGE> 130
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Chilesat Telefonia Personal, S.A.

In November 1998, Inversiones QUALCOMM funded the remaining $3.3 million
under its loan agreement with Chilesat utilizing additional bank debt. The
Company has a remaining commitment of $3.1 million under its loan agreement with
Chilesat.

Credit Agreement

The Company has made borrowings under the Credit Agreement with QUALCOMM
subsequent to the Distribution Date. In September 1998, the Company borrowed
$5.3 million under the working capital sub-facility to pay QUALCOMM the 2% fee
on the $265 million facility. The Company also borrowed a net total of $15.8
million under the investment capital sub-facility to make further investment and
loans to certain of the Leap Wireless Operating Companies.

Adoption of Employee Benefit Plans

Employee Savings and Retirement Plan. In September 1998, the Company
adopted a 401(k) plan that allows eligible employees to contribute up to 15% of
their salary, subject to annual limits. The Company matches a portion of the
employee contributions and may, at its discretion, make additional contributions
based upon earnings.

Stock Option Plans. In September 1998, the Company adopted the 1998 Stock
Option Plan (the "Plan") that allows the Board of Directors to grant options to
selected employees, directors and consultants to the Company to purchase shares
of the Company's common stock. The Plan provides for the grant of both incentive
and non-qualified stock options. Incentive stock options are exercisable at a
price not less than 100% of the fair market value of the common stock on the
date of grant. Non-qualified stock options are exercisable at a price not less
than 85% of the fair market value of the common stock on the date of grant.
Generally, options vest over a five year period and are exercisable for up to
ten years from the grant date. The Company also adopted a Non-Employee Directors
Stock Option Plan, under which options to purchase common stock are granted to
non-employee directors on an annual basis. The options are exercisable at a
price equal to the fair market value of the common stock on the date of grant,
vest over a five year period and are exercisable for up to ten years from the
grant date.

Employee Stock Purchase Plan. In September 1998, the Company adopted an
employee stock purchase plan for all eligible employees to purchase shares of
common stock at 85% of the lower of the fair market value of such stock on the
first or the last day of each offering period. Employees may authorize the
Company to withhold up to 15% of their compensation during any offering period,
subject to certain limitations.

Executive Retirement Plan. In September 1998, the Company adopted a
voluntary retirement plan that allows eligible executives to defer up to 100% of
their income on a pretax basis. On a quarterly basis, participants receive up to
a 10% match of their deferral in the form of the Company's common stock based on
the then current market price, to be

F-47
<PAGE> 131
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

issued to the participant upon eligible retirement. The income deferred and the
Company match are unsecured and subject to the claims of general creditors of
the Company.

Purchase of Wireless Telecommunications License.

NOTE 11. SUBSEQUENT EVENTS (UNAUDITED)

Chase Telecommunications, Inc.

In December 1998, the Company agreed to purchase substantially all the
assets of Chase for $6.3 million, plus a warrant to purchase 1% of the common
stock in a wholly-owned subsidiary of the Company for $1.0 million, transfer of
the Company's stock ownership and warrants to purchase stock in Chase and
certain contingent earn outs. This acquisition involves the transfer of licenses
which are subject to approval by the FCC, therefore the final closing of the
transaction will not occur unless approval by the FCC is obtained.

The Company and Chase have agreed in principle to increase the maximum
principal amount that may be drawn under the working capital facility to Chase
to $45 million.

Chilesat Telefonia Personal, S.A.

On April 19, 1999, Inversiones acquired all of the shares of Chilesat that
it did not already own from Telex-Chile. Prior to the acquisition, Inversiones
owned 50% of the shares of Chilesat. The remaining 50% of the shares of Chilesat
were owned by Telex-Chile. Inversiones acquired the remaining 50% of the shares
of Chilesat from Telex Chile for $28 million in cash and a $22 million,
non-interest bearing note payable to Telex-Chile due on May 11, 2002. The
Company obtained $28 million for the cash payment to Telex-Chile through
additional borrowings under its credit agreement with QUALCOMM. The Company
intends that Chilesat continue to operate its wireless telephone system in Chile
and work to expand its network capacity and increase its business.

Orrengrove Investments Ltd.

F-48
<PAGE> 132
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

exploring long-term alternatives to the lost satellite transmission capacity. As
a result of these events, Orrengrove and the Transworld Companies have
recognized an impairment loss of approximately $16.9 million in the third
quarter ending May 31, 1999 to write-off certain satellite related assets and to
write-down to fair value its license to carry long-distance traffic. The value
of the license was determined to have been impaired in part due to the current
financial conditions in Russia.

Pegaso Telecomunicaciones, S.A. de C.V.

In May 1999, Pegaso entered into a $100 million loan agreement. The Company
has agreed to pay 33% of Pegaso's obligations under this loan agreement in the
event of Pegaso's default.

Purchase of Wireless Telecommunications Licenses

In July 1999, the FCC issued an opinion and order that had the effect of
granting the Company status as a designated entity qualified to hold licenses of
C-Block and F-Block PCS spectrum in the United States and that approved the
Company's application for the transfer of four wireless telecommunications
licenses from AirGate Wireless, L.L.C. and the Company's purchase of 36 wireless
telecommunications licenses in the U.S. government's re-auction of PCS spectrum.
The approval was subject to several conditions, including the Company taking
steps so that by January 2001, QUALCOMM holds no more than 50% of Leap Wireless'
outstanding debt obligations.

Loans Payable to Banks

Between July and November 1998, Inversiones borrowed a further $3.3 million
from a bank in Chile. In February 1999, Inversiones was granted a one-year
extension for the payment of the loans totaling $15.7 million. The renewed loans
of $9 million and $6.7 million, along with capitalized interest and fees, bear
interest at rates of 8.1% and 8.5% per annum, respectively, and are due to be
repaid in February 2000.

QUALCOMM Credit Agreement

At May 31, 1999, the Company had borrowed $8.6 million under the working
capital sub-facility, including $5.3 million to pay QUALCOMM a 2% facility fee.
At May 31, 1999, the Company had borrowed $82.0 million under the investment
capital sub-facility to make further loans to and investments in the Leap
Wireless Operating Companies. At May 31, 1999, the rate of interest was
generally 10.25%. Interest will be payable quarterly beginning September 30,
2001 and, prior to such time, accrued interest shall be added to the principal
amount outstanding. At May 31, 1999, $2.8 million of capitalized and accrued
interest had been added to the Credit Agreement.

F-49
<PAGE> 133
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stockholder Rights Plan

On September 9, 1998, the Company's Board of Directors adopted a
Stockholder Rights Plan (the "Rights Plan"). Pursuant to the Rights Plan, the
Board of Directors declared a dividend, payable on September 16, 1998, of one
preferred purchase right (a "Right") for each share of Common Stock, $.0001 par
value, of the Company outstanding at the close of business on September 11,
1998. Similar Rights will generally be issued in respect to Common Stock
subsequently issued. Each Right entitles the registered holder to purchase from
the Company a one one-thousandth share of Series A Junior Participating
Preferred Stock, $0.0001 par value per share, at a purchase price of $90
(subject to adjustment). The Rights are exercisable only if a person or group
(an "Acquiring Person"), other than QUALCOMM with respect to its exercise of the
warrant granted to it in connection with the Distribution, acquires beneficial
ownership of 15% or more of the Company's outstanding shares of Common Stock.
Upon exercise, holders other than an Acquiring Person, will have the right
(subject to termination) to receive the Company's Common Stock or other
securities having a market value (as defined) equal to twice the purchase price
of the Right. The Rights, which expire on September 10, 2008, are redeemable in
whole, but not in part, at the Company's option at any time for a price of $0.01
per Right.

Stock Purchase Warrant

Adoption of Cricket Communications Stock Option Plan

F-50
<PAGE> 134
LEAP WIRELESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Change in Infrastructure Supplier

In May 1999, QUALCOMM sold its CDMA wireless infrastructure division to
Telefonaktiebolaget LM Erricsson (pbl) ("Ericsson"). As a result, Ericsson and
its subsidiaries are likely to become primary suppliers of network
infrastructure equipment to Leap Wireless and its operating companies. In
connection with the sale, Ericsson assumed most of QUALCOMM's obligations to
Leap Wireless and its operating companies under existing infrastructure supply
agreements.

Sale of OzPhone

In August 1999, the Company agreed to sell all of the shares of OzPhone for
approximately $16.3 million.

F-51
<PAGE> 135

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Chilesat Telefonia Personal S.A.
(Company in the development stage)

In our opinion, the accompanying balance sheets and the related statements
of income and comprehensive income, of cash flows and of changes in
shareholders' equity present fairly, in all material respects, the financial
position of Chilesat Telefonia Personal S.A. (Company in the development stage)
at December 31, 1998 and 1997, and the results of its operations and cash flows
for year ended December 31, 1998, for the period from inception (March 3, 1997)
to December 31, 1997, and for the period from inception (March 3, 1997) to
December 31, 1998, in conformity with generally accepted accounting principles
of the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards of the United States of America which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

At December 31, 1998, the Company had negative working capital of US$49.7
million. At that date, US$36.6 million of the current liabilities relate to debt
payable to related parties who have the option to convert such debt into shares
should Chilesat Telefonia Personal S.A. be unable to meet its obligations. As a
result of its negative working capital, the Company has not complied with
certain financial conditions of the credit agreement described in Note 8.

PRICE WATERHOUSE

Santiago, Chile,
February 25, 1999 except as to Note 14 b) which is as of March 16, 1999

F-52
<PAGE> 136

CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

BALANCE SHEET
EXPRESSED IN THOUSANDS OF US DOLLARS

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, ------------------
1999 1998 1997
--------------- -------- -------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................... $ 1,058 $ 942 $24,875
Accounts receivable -- trade................... 1,404 1,017 --
Accounts receivable from related company....... -- -- 10
Other accounts receivable...................... 119 134 133
Recoverable taxes.............................. 3,308 6,480 6,228
Inventories.................................... 1,421 4,419 --
Other current assets........................... 1,348 779 695
-------- -------- -------
Total current assets........................ 8,658 13,771 31,941
PROPERTY, PLANT AND EQUIPMENT, NET............... 123,061 124,800 40,093
OTHER ASSETS..................................... 641 712 4
-------- -------- -------
Total assets................................ $132,360 $139,283 $72,038
======== ======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Interest payable............................... $ 6,962 $ -- $ --
Interest payable to related companies.......... 2,603 6,957 543
Accounts and note payable...................... 27,033 1,804 380
Accounts and notes payable to related
companies................................... 37,167 52,572 247
Accrued liabilities and withholdings........... 911 2,160 960
-------- -------- -------
Total current liabilities................... 74,676 63,493 2,130
-- -- --
LONG-TERM LIABILITIES
Note payable................................... 43,326 -- --
Note payable to related company................ -- 49,807 23,655
Other long-term liabilities.................... 8,491 8,496 4,579
-------- -------- -------
Total long-term liabilities................. 51,817 58,303 28,234
-- -- --
COMMITMENTS AND CONTINGENCIES.................... -- -- --
SHAREHOLDERS' EQUITY
Preferred stock (8,400,000 shares authorized,
issued and outstanding, with no par value;
liquidation preference up to stated
value)...................................... 42,000 42,000 42,000
Common stock (8,400,000 shares authorized,
issued and outstanding, with no par
value)...................................... 1,964 1,964 1,964
Other capital contributions.................... 940 493 --
(Deficit) surplus accumulated during the
development stage........................... (33,601) (21,943) 55
Accumulated other comprehensive losses......... (5,436) (5,027) (2,345)
-------- -------- -------
Total shareholders' equity.................. 5,867 17,487 41,674
-- -- --
Total liabilities and shareholders'
equity.................................... $132,360 $139,283 $72,038
======== ======== =======
</TABLE>

The accompanying Notes 1 to 14 form an integral part of these financial
statements.

F-53
<PAGE> 137

CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

STATEMENT OF INCOME AND COMPREHENSIVE INCOME
EXPRESSED IN THOUSANDS OF US DOLLARS

<TABLE>
<CAPTION>
FOR THE THREE MONTH FOR THE PERIOD FROM THE PERIOD FROM
PERIOD ENDED FOR THE FROM INCEPTION INCEPTION (MARCH 3, 1997) TO
----------------------- YEAR ENDED (MARCH 3, 1997) -----------------------------
MARCH 31, MARCH 31, DECEMBER 31, TO DECEMBER 31, MARCH 31, DECEMBER 31,
1999 1998 1998 1997 1999 1998
----------- --------- ------------ --------------- ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Sales.................... $ 2,386 $ -- $ 1,284 $ -- $ 3,670 $ 1,284
Cost of sales............ (1,273) -- (1,570) -- (2,843) (1,570)
-------- ------- -------- ------- -------- --------
Gross margin........... 1,113 -- (286) -- 827 (286)
Remunerations and other
staff costs............ (1,408) (735) (3,916) -- (5,324) (3,916)
Sales commissions........ (600) -- (882) -- (1,482) (882)
Marketing expenses....... (196) (352) (3,619) -- (3,815) (3,619)
General and administrative
expenses................. (1,204) (81) (2,736) (659) (4,599) (3,395)
Depreciation and
amortization........... (4,148) (14) (3,743) (4) (7,895) (3,747)
-------- ------- -------- ------- -------- --------
Net operating loss..... (6,443) (1,182) (15,182) (663) (22,288) (15,845)
-------- ------- -------- ------- -------- --------
NON-OPERATING RESULTS
Interest income.......... 46 623 1,058 2,022 3,126 3,080
Interest expense......... (2,702) (7) (3,295) -- (5,997) (3,295)
Currency exchange
losses................. (2,649) (1,242) (4,186) (1,280) (8,115) (5,466)
Other income
(expenses)............. 90 (4) (393) (24) (327) (417)
-------- ------- -------- ------- -------- --------
Non-operating (loss)
income............... (5,215) (630) (6,816) 718 (11,313) (6,098)
-------- ------- -------- ------- -------- --------
Net (loss) income...... (11,658) (1,812) (21,998) 55 (33,601) (21,943)
OTHER COMPREHENSIVE INCOME
Currency translation
adjustment............. (409) (1,390) (2,682) (2,345) (5,436) (5,027)
-------- ------- -------- ------- -------- --------
Comprehensive loss....... $(12,067) $(3,202) $(24,680) $(2,290) $(39,037) $(26,970)
======== ======= ======== ======= ======== ========
</TABLE>

The accompanying Notes 1 to 14 form an integral part of these financial
statements.

F-54
<PAGE> 138

CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

STATEMENT OF CASH FLOWS
EXPRESSED IN THOUSANDS OF US DOLLARS

<TABLE>
<CAPTION>
FOR THE THREE MONTH FOR THE PERIOD FROM THE PERIOD FROM
PERIOD ENDED FOR THE FROM INCEPTION INCEPTION (MARCH 3, 1997) TO
--------------------- YEAR ENDED (MARCH 3, 1997) ----------------------------
MARCH 31, MARCH 31, DECEMBER 31, TO DECEMBER 31, MARCH 31, DECEMBER 31,
1999 1998 1998 1997 1999 1998
--------- --------- ------------ --------------- ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING
ACTIVITIES
Net (loss) income.................. $(11,658) $ (1,812) $(21,998) $ 55 $(33,601) $(21,943)
Adjustments to reconcile to net
cash used in operating
activities:
Depreciation and
amortization................. 4,148 14 3,743 4 7,895 3,747
Use of the network and signal
distribution services........ 447 -- 493 -- 940 493
Changes in working capital:
Accounts receivable -- trade... (387) (880) (1,017) -- (1,404) (1,017)
Accounts receivable from
related companies............ -- -- 10 (10) -- --
Other accounts receivable...... 15 -- (1) (133) (119) (134)
Recoverable taxes.............. 3,172 1,520 (252) (6,171) (3,251) (6,423)
Inventories.................... 3,161 -- -- -- 3,161 --
Other current assets........... (569) (5,269) (118) (695) (1,382) (813)
Accounts and note payable...... 3,403 494 1,424 380 5,207 1,804
Accrued interest and accounts
payable to related
companies.................... 972 -- 7,168 511 8,651 7,679
Accrued liabilities and
withholdings................. (1,249) (890) 1,200 957 908 2,157
-------- -------- -------- -------- -------- --------
Cash flow used in operating
activities................... 1,455 (6,823) (9,348) (5,102) (12,995) (14,450)
-------- -------- -------- -------- -------- --------
CASH FLOW FROM INVESTING
ACTIVITIES
Acquisitions of property, plant and
equipment........................ (4,033) (22,349) (37,766) (14,383) (56,182) (52,149)
Other.............................. 71 4 (708) (4) (641) (712)
-------- -------- -------- -------- -------- --------
Cash flow used in investing
activities................... (3,962) (22,345) (38,474) (14,387) (56,823) (52,861)
-------- -------- -------- -------- -------- --------
CASH FLOW FROM FINANCING
ACTIVITIES
Notes payable to related
companies........................ -- 13,207 20,271 -- 20,271 20,271
Capital increase................... -- -- -- 42,000 42,000 42,000
Other long-term liabilities........ -- 1,377 3,917 4,579 8,496 8,496
-------- -------- -------- -------- -------- --------
Cash flow provided by financing
activities................... -- 14,584 24,188 46,579 70,767 70,767
-------- -------- -------- -------- -------- --------
Net (decrease) increase in cash........ (2,507) (14,584) (23,634) 27,090 949 3,456
Effect of exchange rate changes on
cash................................. 2,623 (52) (299) (2,215) 109 (2,514)
-------- -------- -------- -------- -------- --------
(Decrease) increase in cash and cash
equivalents.......................... 116 (14,636) (23,933) 24,875 1,058 942
Cash and cash equivalents at the
beginning of the period.............. 942 24,875 24,875 -- -- --
-------- -------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD................ $ 1,058 $ 10,239 $ 942 $ 24,875 $ 1,058 $ 942
======== ======== ======== ======== ======== ========
</TABLE>

F-55
<PAGE> 139

CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

STATEMENT OF CASH FLOWS
EXPRESSED IN THOUSANDS OF US DOLLARS

SUPPLEMENTAL CASH FLOW INFORMATION

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES

The following non-cash transactions occurred during the periods presented:

<TABLE>
<CAPTION>
FOR THE PERIOD FROM THE PERIOD FROM
FOR THE THREE MONTH FOR THE FROM INCEPTION INCEPTION (MARCH 3, 1997) TO
PERIOD ENDED YEAR ENDED (MARCH 3, 1997) ----------------------------
MARCH 31, DECEMBER 31, TO DECEMBER 31, MARCH 31, DECEMBER 31,
1999 1998 1997 1999 1998
------------------- ------------ --------------- ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Long-term financing received from
related company to purchase
fixed assets and inventories... $ -- $ 14,745 $ 23,655 $ 38,400 $ 38,400
Short-term financing received
from related company to
purchase fixed assets and
inventories.................... -- 42,707 -- 42,707 42,707
Long-term financing to purchase
fixed assets and inventories... 1,578 -- -- 1,578 --
Purchase of fixed assets from
party providing financing...... (1,415) (53,067) (23,655) (78,137) (76,722)
Purchase of inventories from
party providing financing...... (163) (4,385) -- (4,548) (4,385)
------- -------- -------- -------- --------
$ -- $ -- $ -- $ -- $ --
======= ======== ======== ======== ========
</TABLE>

As indicated in Note 1, Chilesat S.A. contributed non-cash assets and
liabilities to the joint venture on March 3, 1997. The net assets contributed at
that date are summarized as follows:

<TABLE>
<S> <C>
Current assets.............................................. $ 57
Property, plant and equipment............................... 2,189
Current liabilities......................................... (282)
------
Net assets contributed.................................. $1,964
======
</TABLE>

The accompanying Notes 1 to 14 form an integral part of these financial
statements.

F-56
<PAGE> 140

CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

STATEMENT OF SHAREHOLDERS' EQUITY
EXPRESSED IN THOUSANDS OF US DOLLARS

<TABLE>
<CAPTION>
(DEFICIT)
SURPLUS
ACCUMULATED ACCUMULATED
NUMBER OF NUMBER OF OTHER DURING THE OTHER
PREFERRED COMMON PREFERRED COMMON CAPITAL DEVELOPMENT COMPREHENSIVE
SHARES SHARES STOCK STOCK CONTRIBUTIONS STAGE LOSSES TOTAL
--------- --------- --------- ------ ------------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital increase at
inception on March 3,
1997...................... 8,400,000 8,400,000 $ 42,000 $1,964 -- -- -- $ 43,964
Share subscriptions
receivable................ -- -- (42,000) -- -- -- -- (42,000)
Payment of share
subscriptions
receivable................ -- -- 42,000 -- -- -- -- 42,000
Net income for the period... -- -- -- -- -- $ 55 -- 55
Currency translation
adjustment................ -- -- -- -- -- -- $(2,345) (2,345)
-- -- -- -- -- -- -- --
Balance at December 31,
1997...................... 8,400,000 8,400,000 $ 42,000 $1,964 -- $ 55 $(2,345) $ 41,674
========= ========= ======== ====== ==== ======== ======= ========
Balance at January 1,
1998...................... 8,400,000 8,400,000 $ 42,000 $1,964 -- $ 55 $(2,345) $ 41,674
Other contributed capital... -- -- -- -- $493 -- -- 493
Net loss for the period..... -- -- -- -- -- (21,998) -- (21,998)
Currency translation
adjustment................ -- -- -- -- -- -- (2,682) (2,682)
-- -- -- -- -- -- -- --
Balance at December 31,
1998...................... 8,400,000 8,400,000 $ 42,000 $1,964 $493 $(21,943) $(5,027) $ 17,487
========= ========= ======== ====== ==== ======== ======= ========
Balance at January 1,
1999...................... 8,400,000 8,400,000 $ 42,000 $1,964 $493 $(21,943) $(5,027) $ 17,487
Other contributed capital
(unaudited)............... -- -- -- 447 -- -- 447
Net loss for the period
(unaudited)............... -- -- -- -- -- (11,658) -- (11,658)
Currency translation
adjustment (unaudited).... -- -- -- -- -- -- (409) (409)
--------- --------- -------- ------ ---- -------- ------- --------
Balance at March 31, 1999
(unaudited)............... 8,400,00 8,400,000 $ 42,000 $1,964 $940 $(33,601) $(5,436) $ 5,867
========= ========= ======== ====== ==== ======== ======= ========
</TABLE>

The accompanying Notes 1 to 14 form an integral part of these financial
statements.

F-57
<PAGE> 141

CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998

NOTE 1. THE COMPANY

Chilesat Telefonia Personal S.A. (the "Company") is a joint venture created
on March 3, 1997 by Telex-Chile S.A. and its subsidiary Chilesat S.A. (together
"Chilesat") and Inversiones Leap Wireless Chile S.A. ("Inversiones", formerly
Inversiones Qualcomm S.A.) for the purpose of building and operating a mobile
PCS telephone system (personal communication system) in Chile. Inversiones is a
wholly-owned subsidiary of Leap Wireless International, Inc.

Pursuant to the terms of the Subscription and Shareholders' Agreement
("Shareholders' Agreement"), Chilesat and Inversiones hold all of the
outstanding common and preferred shares of the Company, respectively. Each
partner has a 50% ownership in the joint venture. Each partner has the right to
elect two representatives to the Board of Directors and a fifth independent
director is elected by a vote of at least 75% of the shareholders. Approval of
4/5 of the directors is required for a number of significant operating and
management decisions. The common directors are entitled to nominate the general
manager, and the preferred directors are entitled to nominate the CFO. However,
approval of the nominations requires approval by 4/5 of the directors.

During 1998, an amendment was made to the Shareholders' Agreement and
Qualcomm Incorporated transferred and assigned its interest in Inversiones to
Leap Wireless International, Inc. All terms and conditions of the shareholders
agreement are now binding on Leap Wireless International Inc.

Because Chilesat's contributions to the joint venture were non-cash assets
and liabilities whose fair values were not readily determinable, the non-cash
assets and liabilities contributed were recorded at their predecessor basis.

As one of the non-cash assets contributed, Chilesat provided a contract
entitling the Company to the right to use a part of Chilesat's network for a
period of 11.5 years and the right to receive signal distribution services for
the same period. The contract is for the Company's sole and exclusive use of
signal transmissions. Chilesat is responsible for meeting the Company's
transmission requirements as well as the supervision, control, maintenance and
repair of the network. Chilesat also contributed the already existing entity
Chilesat Telefonia Personal S.A., among whose assets was the PCS license to
operate in Chile.

The Company is the holder of one of three national licenses to provide PCS
services in Chile. These services were required to be ready for operations under
the conditions of the license by June 23, 1998 in the case of the geographical
area covered by Chile's Fourth to Tenth regions and by December 23, 1998 for the
remainder of the country. The Company completed construction of its mobile PCS
telephone system infrastructure by the required dates. The Company entered into
a System Equipment Purchase Agreement with Qualcomm Incorporated whereby
Qualcomm Incorporated will provide manufacturing, engineering, equipping,
integrating, installing, testing and technical assistance for the mobile PCS
telephone system.

F-58
<PAGE> 142
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

Under the terms of the Shareholders' Agreement, the Company will purchase
from Qualcomm Incorporated all network hardware and software marketed by
Qualcomm Incorporated and at least 50% of all mobile and fixed handsets
purchased by the Company for a period expiring in September 2000. Similarly,
until the later of five years following the formation of the joint venture or
the date on which Inversiones ceases to hold preferred shares representing more
than 24% of the capital stock of the Company, the Shareholders agree to cause
the Company to use only IS95 CDMA technology.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) General

Chilesat Telefonia Personal S.A. is a development stage company as defined
in accordance with Statement of Financial Accounting Standards No. 7 due to the
fact that the Company has not yet generated significant revenues from commercial
operations. As indicated in Note 1, the Company has completed the construction
of its mobile PCS telephone system infrastructure and testing of the
installations between Chile's Fourth and Tenth regions with friendly users
commenced in July 1998. The mobile PCS telephone system began operations in
September 1998. The infrastructure necessary to cover the remainder of Chile was
operational in December 1998.

The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States ("US GAAP"). The preparation
of financial statements in accordance with US GAAP requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.

(b) Period of financial statements

The financial statements for the Company are presented for the year ended
December 31, 1998 with comparative amounts for the period from the date of
formation of the joint venture on March 3, 1997 through December 31, 1997. The
unaudited financial statements for three months ended March 31, 1999 are
presented.

The financial statements give effect to the translation of the Chilean peso
financial statements of the Company (not submitted herewith) to United States
dollars. All asset and liability accounts have been translated (after
eliminating the effects of accounting for inflation in Chile) at the Observed
Exchange Rates determined by the Central Bank of Chile at March 31, 1999,
December 31, 1998 and 1997 of Ch$484.08, Ch$472.41 and Ch$439.18 per US$1,
respectively. Capital stock has been translated at historic Observed Exchange
Rates. Income and expense accounts have been translated at average monthly
Observed Exchange Rates. The net effects of translation are recorded in the
cumulative

F-59
<PAGE> 143
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

translation adjustment account as a component of Accumulated other comprehensive
losses in the Company's equity.

(d) Monetary assets and liabilities in other currencies

Monetary assets and liabilities denominated in foreign currency have been
translated at year-end exchange rates. The effects of such translation have been
recorded as exchange gains or losses in the statement of income. Certain assets
and liabilities are denominated in UFs (Unidades de Fomento). The UF is a
Chilean inflation-indexed, peso-denominated monetary unit which is set daily in
advance based on changes in the Consumer Price Index. The adjustment to the
closing value of UF-denominated assets and liabilities have also been recorded
as part of Currency exchange losses in the statement of income.

(e) Revenue recognition

Revenue has been accrued at year end for the portion of fixed charge
services earned to date. The Company also recognizes revenues for traffic in
excess of the amounts attributable to the fixed charge contracts in the month
such revenues are billed. The effects of the unbilled revenues at period end not
recognized are not significant.

(f) Uncollectable accounts

The Company records an allowance for uncollectable accounts receivable with
respect to those amounts estimated not to be recoverable.

(g) Inventory

Inventory is comprised of handsets and accessories not yet placed into
service which are stated at the lower of historical cost, determined under a
first-in, first-out unit flow assumption, or market.

(h) Property, plant and equipment

Property, plant and equipment are recorded at acquisition cost plus
capitalized interest and direct costs incurred during the construction phase of
the mobile PCS telephone system. Depreciation is applied using the straight-line
method over the estimated useful lives of the assets once the assets are placed
in service. Depreciation with respect to the infrastructure of the mobile PCS
telephone system was applied beginning in September 1998.

(i) Advertising

It is the Company's policy to record the cost of advertising as it is
incurred. For the year ended December 31, 1998, the Company recorded
US$3,619,000 (US$338,000 in

F-60
<PAGE> 144
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

1997) as advertising expense. For the three months ended March 31, 1999
(unaudited), the Company recorded US$197,000 as advertising expense.

(j) Income taxes

Income taxes have been recorded in accordance with Statement of Financial
Accounting Standards No. 109 (FAS 109). Income taxes payable for the current
year are recorded in current liabilities, if applicable. Future taxes arising
from differences between the amounts shown for assets and liabilities in the
balance sheet and the tax basis of those assets and liabilities at the balance
sheet date have been recorded as deferred income taxes. Deferred income tax
assets are reduced by a valuation allowance if, based on the weight of available
evidence, it is more likely than not that some portion or all of the deferred
income tax assets will not be realized.

(k) Long-lived assets

The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the total amount of an asset may not be
recoverable. An impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its eventual disposition
are less than its carrying amount.

(l) Network use and signal distribution services

It is the Company's policy to systematically recognize expense for the use
of the network and signal distribution services provided by a related party as
per an independent valuation on a straight-line basis over the remaining life of
the contract as other capital contributions (Note 11c).

(m) Cash equivalents

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents, including securities
purchased under resale agreements. Securities purchased under agreements to
resell include investments in instruments issued by the Central Bank of Chile
acquired under resale agreements, and are stated at cost plus accrued interest.

F-61
<PAGE> 145
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

Cash and cash equivalents are summarized as follows:

<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
AS OF MARCH 31, ---------------
1999 1998 1997
--------------- ---- -------
(UNAUDITED)
<S> <C> <C> <C>
Cash and bank deposits........................ $ 586 $452 $ 899
Time deposits................................. -- 490 10,195
Securities purchased under agreements to
resell...................................... -- -- 13,736
Other......................................... 472 -- 45
------ ---- -------
$1,058 $942 $24,875
====== ==== =======
</TABLE>

(n) Recent accounting pronouncements

Statement of Financial Accounting Standards No. 133 (FAS 133), Accounting
for Derivative Instruments and Hedging Activities, is effective for fiscal years
beginning after June 15, 1999. This standard establishes accounting and
reporting standards for derivatives instruments, and for hedging activities. It
requires that an entity recognize all derivatives on the balance sheet at fair
value. Generally, changes in the fair value of derivatives must be recognized in
income when they occur, the only exception being derivatives that qualify as
hedges in accordance with the Standards. If a derivative qualifies as a hedge, a
company can elect to use "hedge accounting" to eliminate or reduce the
income-statement volatility that would arise from reporting changes in a
derivative's fair value in income. The type of accounting to be applied varies
depending on the nature of the exposure that is being hedged. In some cases,
income-statement volatility is avoided by an entity's recording changes in the
fair value of the derivative directly in shareholders' equity. In other cases,
changes in the fair value of the derivative continue to be reported in earnings
as they occur, but the impact is counterbalanced by the entity adjusting the
carrying value of the asset or liability that is being hedged. This standard is
not expected to have an effect on the reporting of the Company for the three
months ended March 31, 1999 (unaudited), the year ended December 31, 1998 and
period ended December 31, 1997 as it did not hold derivative instruments during
such periods. The effects of FAS 133 in future periods will depend upon whether
the Company enters into transactions in such periods involving derivative
instruments.

F-62
<PAGE> 146
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

NOTE 3. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

At December 31, 1998 and March 31, 1999 (unaudited), the Company held no
securities purchased under agreements to resell. Securities purchased under
agreements to resell at December 31, 1997 are summarized as follows:

<TABLE>
<CAPTION>
UNDERLYING
FINANCIAL INSTITUTION FINANCIAL INSTRUMENT AMOUNT MATURITY DATE
- --------------------- -------------------------------- ------- -----------------
<S> <C> <C> <C>
Banco de A. Edwards.. Central Bank of Chile Debentures $ 6,417 February 10, 1998
Banco de A. Edwards.. Central Bank of Chile Debentures 6,491 February 12, 1998
Banco de A. Edwards.. Central Bank of Chile Debentures 828 February 19, 1998
-------
Total..... $13,736
=======
</TABLE>

At December 31, 1997, the underlying financial instruments were in the
custody of the counter party to the agreements. Central Bank of Chile Debentures
are generally considered to be low-risk securities and are generally not subject
to significant market volatility.

NOTE 4. RECOVERABLE TAXES

Recoverable taxes at December 31, 1998 relate to value added taxes (VAT) of
US$6,480,000 (US$6,228,000 in 1997), incurred on the purchases of property,
plant and equipment required for the Company's mobile PCS telephone system and
goods and services. Recoverable taxes at March 31, 1999 (unaudited) were
US$3,308,000. VAT relating to the purchases of capital goods may be recovered in
cash by the Company in accordance with Chilean law. Other VAT is recovered by
offset against VAT raised on services rendered.

NOTE 5. INVENTORY

Inventory is summarized as follows:

<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
1999 1998
--------------- ------------------
(UNAUDITED)
<S> <C> <C>
Handsets...................................... $ 749 $3,137
Accessories................................... 672 1,282
------ ------
$1,421 $4,419
====== ======
</TABLE>

F-63
<PAGE> 147
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

NOTE 6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are summarized as follows:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, ------------------
1999 1998 1997
--------------- -------- -------
(UNAUDITED)
<S> <C> <C> <C>
Land.......................................... $ 332 $ 340 $ 140
Buildings and infrastructure.................. 113,849 114,926 39,771
Machinery and equipment....................... 13,033 10,138 88
Other......................................... 3,637 3,100 98
Less: Accumulated depreciation................ (7,790) (3,704) (4)
-------- -------- -------
Total net........................... $123,061 $124,800 $40,093
======== ======== =======
</TABLE>

Estimated useful lives of assets are:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Machinery and equipment..................................... 2-10
Other....................................................... 5-10
</TABLE>

For the year ended December 31, 1998, the Company capitalized US$4,830,000
(US$1,508,000 in 1997) of interest as part of the cost of construction of the
mobile PCS Telephone System. The was no interest capitalized for the three month
period ended March 31, 1999.

NOTE 7. ACCRUED LIABILITIES AND WITHHOLDINGS

Accrued liabilities and withholdings are summarized as follows:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, ------------------
1999 1998 1997
--------------- ------- -----
(UNAUDITED)
<S> <C> <C> <C>
Construction in progress..................... $ -- $1,365 $597
Advertising and marketing expenses........... 167 321 278
Employee vacations........................... 152 203 33
Other........................................ 592 271 52
---- ------ ----
Total.............................. $911 $2,160 $960
==== ====== ====
</TABLE>

F-64
<PAGE> 148
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

NOTE 8. RELATED COMPANY TRANSACTIONS

(a) Balances with related companies and Qualcomm Incorporated

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, --------------------
COMPANY RELATIONSHIP 1999 1998 1997
------- ------------ --------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Accounts receivable from related
company:
Chilesat Servicios
Empresariales S.A. .................. Affiliate $ -- $ -- $ 10
======== ======== ========
Interest payable to related companies:
Qualcomm Incorporated(1)............... -- $ -- $ (5,326) $ (543)
Leap Wireless International, Inc....... Affiliate (1,042) (528) --
Inversiones Leap Wireless Chile
S.A. ................................ Shareholder (1,561) (1,103) --
-------- -------- --------
$ (2,603) $ (6,957) $ (543)
======== ======== ========
Accounts and notes payable to related
companies:
Chilesat Servicios Empresariales
S.A. ................................ Affiliate (170) $ (134) $ --
Chilesat S.A........................... Shareholder (1,869) (733) (196)
Qualcomm Incorporated(1)............... -- -- (16,555) --
Leap Wireless International, Inc....... Affiliate (14,745) (14,745) --
Inversiones Leap Wireless Chile
S.A. ................................ Shareholder (20,271) (20,271) --
Telex-Chile S.A........................ Shareholder (35) (29) (12)
Telsys S.A............................. Affiliate (77) (105) (39)
-------- -------- --------
$(37,167) $(52,572) $ (247)
======== ======== ========
Note payable to related company --long-
term:
Qualcomm Incorporated(1)............... -- $ -- $(49,807) $(23,655)
======== ======== ========
</TABLE>

- -------------------------
(1) Qualcomm Incorporated ceased to be an affiliate on September 23, 1998.

(b) Related company transactions

<TABLE>
<CAPTION>
FOR THE THREE MONTH AMOUNT OF
PERIOD ENDED TRANSACTIONS
MARCH 31, -----------------
COMPANY RELATIONSHIP TRANSACTION 1999 1998 1997
------- ------------ ----------- ------------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Chilesat Servicios Affiliate Reimbursement of costs $ -- $ -- $ 47
Empresariales S.A. incurred on their
behalf
Reimbursement of costs 42 130 --
incurred in
connection with
construction
Chilesat S.A. Shareholder Reimbursement of costs 646 586 589
incurred in
connection with
construction
Rental of office space 533 171 30
</TABLE>

F-65
<PAGE> 149
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

<TABLE>
<CAPTION>
FOR THE THREE MONTH AMOUNT OF
PERIOD ENDED TRANSACTIONS
MARCH 31, -----------------
COMPANY RELATIONSHIP TRANSACTION 1999 1998 1997
------- ------------ ----------- ------------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Leap Wireless Affiliate Financing of purchases -- 14,745 --
International, Inc. from Qualcomm Inc.
Accrued interest on 514 528 --
note payable
Inversiones Leap Shareholder Financing -- 20,271 --
Wireless Chile S.A. Accrued interest on 458 1,103 --
note payable
Telex-Chile S.A. Shareholder Reimbursement of costs 9 29 49
incurred in
connection with
construction
Telsys S.A. Affiliate Computer services 15 965 39
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Qualcomm Purchase of equipment $ -- $57,452 $23,655
Incorporated(1) and inventory
Financing of purchases -- 42,707 23,655
Accrued interest on -- 4,783 543
note payable
</TABLE>

- -------------------------
(1) Qualcomm Incorporated ceased to be an affiliate on September 23, 1998.

(d) Notes payable to Qualcomm Incorporated and related companies

As a means of financing the purchase of infrastructure equipment from
Qualcomm Incorporated, the Company entered into a Deferred Payment Agreement
whereby Qualcomm Incorporated defers collection for the equipment subject to the
terms and conditions set forth in the Agreement. The assets of the Company
collateralize the obligation. The shares of the Company have also been pledged
by Telex-Chile and Chilesat in guaranty of the note payable to Qualcomm
Incorporated.

Under the terms of the agreement, Qualcomm Incorporated will make loans for
the equipment, software and services it provides to the Company up to a maximum
of US$59.5 million. The original Deferred Payment Agreement was amended on June
24, 1998 to allow for an additional commitment of US$14.7 million of principal
as a means of financing of goods and services relating to the PCS system and
US$25.0 million of principal as a means of financing the acquisition of
subscriber equipment. The rest of the terms and conditions outlined in the
original Deferred Payment Agreement remain unchanged. Loans bear interest based
either upon a LIBOR or Base Rate or the Eurodollar. The obligation to repay
these loans and interest is evidenced by promissory notes. Interest accrues on
the principal but remains unpaid, with accrued interest added monthly to the
outstanding principal amount of the applicable loan until the first principal
payment, at which time interest is payable on the same dates as the principal
payments.

F-66
<PAGE> 150
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

Principal and interest on the US$14.7 million is due in full on January 31,
1999. In addition, a conversion right, discussed below, was added to the
agreement relating to this amount. This commitment was subsequently transferred
by Qualcomm Incorporated, as allowed by the Deferred Payment Agreement, to Leap
Wireless International, Inc.

In addition, a Working Capital Loan agreement was entered into on June 24,
1998 with Inversiones for US$20.3 million of principal for the purpose of
financing the final phase of construction, working capital requirements and
operating expenses during the start-up and early operation phase of the PCS
system. Principal and accrued interest is due in full on January 31, 1999 (Note
14). Interest rates and other terms and conditions of this agreement match those
of the Deferred Payment Agreement, including the conversion right described
below.

In the event that the Company fails to pay the outstanding principal
balance plus any accrued interest thereon, or Chilesat fails to contribute to
the Company an aggregate amount of not less than fifty percent of the aggregate
outstanding balance of the additional commitment and the Working Capital Loan on
or before January 31, 1999 pursuant to a capital call by the Company, then, at
any time after January 31, 1999 and on or before July 31, 1999, at Leap Wireless
International, Inc.'s sole option in the case of the additional commitment and
Inversiones' sole option in the case of the Working Capital Loan, the
outstanding balance shall be convertible into shares of the Company's common
stock (Note 14). This option expires in the event that the outstanding balance
is paid in full prior to the conversion date.

The notes payable at December 31, 1998 are comprised of LIBOR loans and
bear interest at LIBOR + 3%. The scheduled principal repayments are as follows:

<TABLE>
<CAPTION>
DEFERRED PAYMENT ADDITIONAL WORKING
AGREEMENT COMMITMENT CAPITAL LOAN 1998
---------------- ---------- ------------ --------
<S> <C> <C> <C> <C>
1999...................... $16,555 $14,745 $20,271 $ 51,571
2000...................... 18,361 18,361
2001...................... 16,646 -- -- 16,646
2002...................... 14,199 -- -- 14,199
2003...................... 601 -- -- 601
------- ------- ------- --------
Total........... $66,362 $14,745 $20,271 $101,378
======= ======= ======= ========
</TABLE>

At March 31, 1999 (unaudited), the scheduled repayments for the deferred
payment agreement increased by US$1,578,000. There was no change in the
additional commitment and working capital loan.

F-67
<PAGE> 151
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

The terms of the financing arrangements with Qualcomm Incorporated,
Inversiones and Leap Wireless International, Inc. include certain positive and
negative covenants, the most significant of which are as follows:

The Company shall not

(i) Incur any additional encumbrances or liens

(ii) Create any indebtedness other than indebtedness incurred for the
purposes of partial or full repayment of the notes payable.

(iii) Incur operating lease obligations greater than one year and
exceeding US$1 million for any twelve month period.

(iv) Consolidate or merge with another entity.

(v) Guarantee any indebtedness.

(vi) Acquire stock or the assets of any other person.

(vii) Advance funds.

(viii) Become liable for a capital lease obligation exceeding US$1
million.

(ix) Enter into transactions with affiliates, except arm's length
transactions in the ordinary course of business.

(x) Invest in other than investment grade instruments.

(xi) Declare or pay cash dividends or make distributions in excess of
30% of excess cash flows during the third and fourth annual periods of
operations of the Company, increasing to 50% after period 4.

(xii) Maintain funded debt to total capitalization greater than 0.65,
0.71 and 0.75 in annual periods 1, 2 and 3 and thereafter, respectively.

(xiii) Permit Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA") to be less than US$1.

(xiv) Permit funded debt to EBITDA to exceed 23.91, 4.74, 3.32 and 2.4
in annual periods 2, 3, 4 and 5, respectively.

(xv) Permit EBITDA to interest expense to be less than 0.47, 2.38,
3.00 and 3.00 in annual periods 2, 3, 4 and 5, respectively.

(xvi) Incur capital expenditures greater than US$116 million until the
Company has more than 50,000 subscribers, at which time the threshold
increases.

The Company is not in compliance with some of these covenants (Note
14).

F-68
<PAGE> 152
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

NOTE 9. OTHER LONG-TERM LIABILITIES

This balance is mainly comprised of deferred customs duties of US$8.4
million at December 31, 1998 (US$4.6 million at December 31, 1997).

Under Chilean law, the payment of customs duties levied on machinery and
equipment can be deferred over a period of up to seven years. The balance at
December 31, 1998 represents amounts owing at maturity including accrued
interest. The scheduled repayments are as follows:

<TABLE>
<S> <C>
2000........................................................ $1,337
2001........................................................ 1,081
2002........................................................ 1,555
2003........................................................ 1,266
2004 and thereafter......................................... 3,206
------
Total............................................. 8,445
Other....................................................... 51
------
Total other long-term liabilities................. $8,496
======
</TABLE>

At March 31, 1999 (unaudited), the deferred customs duties and other
long-term liabilities were US$8,454,000 and US$37,000, respectively.

NOTE 10. INCOME TAXES

The Company has not made a provision for current income taxes payable as it
incurred tax losses for the year ended December 31, 1998.

At December 31, 1998, income tax loss carryforwards of approximately
US$24.3 million (US$5.2 million at December 31, 1997), were available to apply
against income tax liabilities in future years. Under Chilean law, such income
tax loss carryforwards never expire.

At March 31, 1999 (unaudited), income tax loss carryforwards were
approximately US$35.1 million.

F-69
<PAGE> 153
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

Deferred income taxes are summarized as follows:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, ------------------
1999 1998 1997
--------------- -------- ------
(UNAUDITED)
<S> <C> <C> <C>
Assets:
Provisions..................................... $ 132 $ 71 $ --
Tax loss carryforwards......................... 5,259 3,649 785
Allowance for income tax loss carryforwards.... (5,391) (3,720) (655)
------- ------- -----
Deferred income tax assets........... -- -- 130
------- ------- -----
Liabilities:
Other.......................................... -- -- (130)
------- ------- -----
Deferred income tax liabilities.............. -- -- (130)
------- ------- -----
Net deferred income taxes.................... $ -- $ -- $ --
======= ======= =====
</TABLE>

Because the Company has only recently begun commercial operations and has
no history of generating taxable income against which tax loss carryforwards
would be applied, an allowance was recorded at December 31, 1998 with respect to
those tax loss carryforwards which, based on the weight of available evidence,
are not likely to be realized.

NOTE 11. SHAREHOLDERS' EQUITY

(a) Authorized capital

Authorized capital stock of the Company is comprised of 8,400,000 Series A
preferred shares and 8,400,000 Series B ordinary shares. Inversiones holds all
the outstanding preferred shares whereas Chilesat holds all the ordinary shares.
The preference with respect to the preferred shares consists of the right to be
paid before any other series of shares in the event of liquidation of the
Company up to the amount of the stated value of the preferred shares. The
preference has a duration of 6 years as from April 10, 1997, after which all
shareholders shall have equal rights with respect to the liquidation of the
Company.

(b) Dividends

Chilean law permits the payment of dividends only in Chilean pesos and
these are limited to the retained earnings balances in the Company's statutory
financial statements at each calendar year end. As the Company has an
accumulated deficit at December 31, 1998 and 1997 in its statutory financial
statements, it is prohibited from declaring and paying dividends until such time
that it generates sufficient retained earnings.

F-70
<PAGE> 154
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

Pursuant to the terms of the Shareholders' Agreement, Inversiones agreed to
subscribe for 8,400,000 Series A preferred shares in exchange for its cash
contribution of US$42 million and Chilesat agreed to subscribe for 8,400,000
Series B ordinary shares for its contribution of a contract for the right to use
a part of Chilesat's network and signal distribution services, the PCS license
and certain net assets. Inversiones contributed the funds into an escrow account
on March 3, 1997 and a receivable balance for share subscriptions was recorded.
With the exception of US$1.5 million of funds made available to the Company, the
funds were not to be distributed to it until official publication of the
awarding of the PCS license. The awarding of the PCS license was published and
the Company received the funds in June, 1997, at which time the share
subscription receivable was settled. An independent valuation of the contract
for the right to use a part of Chilesat's network and signal distribution
services was undertaken and the appraised valued is being systematically
recognized as capital contributions on a straight-line basis over the remaining
life of the contract commencing on September 20, 1998, the date operations
began. Other capital contributions in 1998 amounted to US$493,000 (none in
1997).

At the Extraordinary Meeting held on June 24, 1998, the shareholders agreed
to an increase in the Company's capital from Ch$26.638 million (US$56.4 million)
divided into 8,400,000 Series A preferred shares and 8,400,000 Series B common
shares, to Ch$44.498 million (US$94.2 million) divided into 8,400,000 Series A
preferred shares and 16,000,000 Series B common shares, with no par value, which
will be offered to existing shareholders in proportion to their shareholdings,
and which must be totally subscribed and paid within a period of three years
from the date of the meeting.

Should Telex-Chile S.A. and Chilesat S.A. not subscribe their proportion of
the new issue, they will cede their subscription rights to Inversiones.

At their Extraordinary meeting held on December 30, 1998, the shareholders
agreed to increase the company's capital by the equivalent in Chilean pesos of
US$254 million by the issue of 32,987,013 Series B common shares to be
subscribed and paid, within a maximum period of three years, at a price
equivalent to US$7.70 per share on the date of payment. On agreeing to issue the
shares, the Board of Directors must set the price for their subscription and
payment at an amount equivalent to the US$7.70 per share mentioned previously
plus a restatement of 10% per annum, or 5% per quarter, for the period elapsed
between this date and the date of payment. The excess over the US$7.70 per share
is to be credited to the "Share Premium Account".

(d) Call and put options

As part of an amendment to the Shareholders' Agreement, Chilesat and
Inversiones, each have an option to require the issuance by the Company of
shares of common stock at the Exercise Price to be subscribed by Chilesat and
Inversiones in proportion to their holdings in the capital stock of the Company.
This option may be exercised for common stock with an aggregate value at the
Exercise Price of up to US$35 million. The Exercise

F-71
<PAGE> 155
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

Price shall be determined as of the exercise date and shall be the sum of (i)
$5.00 per share plus (ii) 10% per annum plus an increasing premium on the
original $5.00 price thereof equal to 5% additional for each quarter after the
calendar quarter ending June 30, 1997. The option expires upon the exercise of
the conversion rights (Note 8 c).

If either Chilesat or Inversiones do not subscribe the shares of stock to
which it is entitled as a result of the exercise of the capital call option, it
shall be subject to dilution. Such shares of common stock as are not exercised
by Chilesat or Inversiones shall be subject to subscription at the Exercise
Price by the other party (or such third party investor as a party may propose),
subject to the non-subscribing party's written consent, which may not be
unreasonably withheld and which may not be withheld with the purpose of
preventing the capital increase.

If Chilesat answers such capital call by making a cash capital contribution
to the Company of not less than fifty percent of the balance due on the
convertible loans on or before January 31, 1999, Inversiones will make its
portion of the capital call by converting fifty percent of the balance due on
the convertible loans into capital equity of the Company at the same price as
paid by Chilesat for equity in the capital call.

Inversiones has an option to sell its preferred shares to Chilesat in the
event that the Company is no longer using Qualcomm technology in its mobile PCS
telephone system.

NOTE 12. FAIR VALUE

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments at December 31, 1998 and 1997, when the
estimate of such value is practicable:

- Cash and cash equivalents, recoverable taxes and accrued liabilities and
withholdings have been stated at carrying value which is equivalent to
fair value.

- The fair values of the note payable to related company and other
long-term liabilities were based on interest rates currently available to
the Company for debt with similar terms and remaining maturities. The
carrying value of the note payable to related company approximates fair
value because the terms of the loan agreement require that the stated
rate of interest be periodically adjusted to the market rate.

F-72
<PAGE> 156
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

The estimated fair value of the Company's financial instruments are
summarized as follows:

<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31, AT DECEMBER 31,
1999 1998 1997
--------------------- --------------------- ---------------------
CARRYING CARRYING CARRYING
AMOUNTS FAIR VALUE AMOUNTS FAIR VALUE AMOUNTS FAIR VALUE
-------- ---------- -------- ---------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash and cash
equivalents......... $ 1,058 $ 1,058 $ 942 $ 942 $24,875 $24,875
Recoverable taxes...... 3,308 3,308 6,480 6,480 6,228 6,228
------- ------- ------- ------- ------- -------
Total.......... $ 4,366 $ 4,366 $ 7,422 $ 7,422 $31,103 $31,103
======= ======= ======= ======= ======= =======
Liabilities:
Accrued liabilities and
withholdings........ $ 911 $ 911 $ 2,160 $ 2,160 $ 960 $ 960
Note payable........... 43,326 43,326 -- -- -- --
Note payable to related
company............. -- -- 49,807 49,807 23,655 23,655
Other long-term
liabilities......... 8,491 6,121 8,496 6,013 4,579 3,117
------- ------- ------- ------- ------- -------
Total.......... $52,728 $50,358 $60,463 $57,980 $29,194 $27,732
======= ======= ======= ======= ======= =======
</TABLE>

NOTE 13. COMMITMENTS AND CONTINGENCIES

(a) Operating leases

At December 31, 1998, the Company had entered into operating leases
relating to the rental of sites for towers and antennas required for the
operation of its mobile PCS telephone system. The following is a schedule by
year of future minimum rental payments required under operating leases that have
initial or remaining noncancelable lease terms in excess of one year at December
31, 1998:

<TABLE>
<S> <C>
1999................................................... $1,068
2000................................................... 1,066
2001................................................... 1,082
2002................................................... 1,063
2003................................................... 1,040
2004 to 2008........................................... 3,457
2009................................................... 526
------
Total........................................ $9,302
======
</TABLE>

Rental expense for the year ended December 31, 1998 was US$602,000
(US$91,000 in 1997). Rental expense for the three months ended March 31, 1999
(unaudited) was US$267,000.

F-73
<PAGE> 157
CHILESAT TELEFONIA PERSONAL S.A.
(COMPANY IN THE DEVELOPMENT STAGE)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

(b) Security for debt

The Company has pledged it PCS license as security against the notes
payable to Qualcomm Incorporated.

Telex-Chile S.A. and Chilesat S.A. have pledged 83,920 and 8,316,080 Series
B common shares of the Company, respectively, as security for 50% of the notes
payable to Qualcomm Incorporated.

NOTE 14. SUBSEQUENT EVENTS

(a On February 15, 1999, Inversiones communicated to the Company that it
had incurred an Event of Default as a result of its failure to repay a US$20.3
million short-term Working Capital Loan plus interest accrued thereon granted on
June 24, 1998 (Note 8) and noncompliance with certain loan covenants. At the
time of granting the loan, Inversiones subscribed to a capital increase and
reserved its right to capitalize the loan, an option that, in addition to other
potential actions to obtain repayment, is still open.

Similarly, on February 15, 1999, Leap Wireless International, Inc. informed
both the Company and Telex-Chile S.A. that the former has incurred an Event of
Default with respect to the Deferred Payment Agreement, as a result of which the
amount of US$14.7 million plus interest accrued thereon is due and payable.
Telex-Chile S.A. is guarantor of 50% of this amount. As in the previous case,
the creditor has an option to capitalize this debt or to pursue payment through
other means.

(b) Subsequently on March 2, 1999, Leap Wireless International, Inc. and
Inversiones indicated their withdrawal of the above-mentioned communications
reserving the right to notify the defaults again in the future. On March 16,
1999, Leap Wireless International, Inc. and Inversiones communicated defaults on
the short-term Working Capital Loan of US$20.3 million plus interest accrued
thereon and the Deferred Payment Agreement of US$14.7 million plus interest
accrued thereon on the same terms as expressed above.

(c) (Unaudited) On April 12, 1999, an agreement was entered into between
the shareholders whereby Chilesat sold its ownership interest in the Company to
Inversiones for US$28 million in cash and US$22 million, three year,
non-interest bearing debt. On April 19, 1999, the Company agreed to pay
Inversiones' obligation to Chilesat S.A. and, in return, the Company was
relieved of the obligation to pay certain amounts to Inversiones.

F-74
<PAGE> 158

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Orrengrove Investments Ltd.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statement of operations, of cash flows and of stockholders' deficit
present fairly, in all material respects, the financial position of Orrengrove
Investments Ltd. and its subsidiaries (the Company) (a development stage
company) at December 31, 1998, and the results of their operations and their
cash flows for the period from July 27, 1998 (inception) to December 31, 1998,
in conformity with generally accepted accounting principles in the United States
of America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards in the United States of
America which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.

As explained in Note 10 to the consolidated financial statements, the
Company has been notified of an operational failure of certain third party
equipment used to provide satellite transmission capacity to its customers. If
the Company is not able to replace the satellite transmission capacity or
implement a long-term alternative, this operational failure may have a material
adverse effect on the Company's financial position, results of operations, and
cash flows.

PRICEWATERHOUSECOOPERS LLP

McLean, Virginia
April 30, 1999

F-75
<PAGE> 159

ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $35,659
Other current assets...................................... 202
-------
Total current assets................................. 35,861
Property and equipment, net................................. 5,279
Intangible assets, net...................................... 14,402
Other assets................................................ 8
-------
Total assets......................................... $55,550
=======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.................. $ 5,389
-------
Total current liabilities............................ 5,389
Note payable to related party............................... 54,758
-------
Total liabilities.................................... 60,147
-------
Commitments and contingencies (Notes 9 and 10)
Minority interest........................................... 679
-------
Stockholders' deficit:
Common stock, no par value per share; authorized, issued
and outstanding 1,000 shares........................... 2
Deficit accumulated during the development stage.......... (5,278)
-------
Total stockholders' deficit.......................... (5,276)
-------
Total liabilities and stockholders' deficit.......... $55,550
=======
</TABLE>

F-76
<PAGE> 160

ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JULY 27, 1998
(INCEPTION) TO
DECEMBER 31,
1998
--------------
<S> <C>
Loss on investment in joint venture......................... $ (670)
General and administrative expenses......................... (3,624)
Interest expense............................................ (2,958)
Interest income............................................. 791
-------
Loss before minority interest............................. (6,461)
Minority interest........................................... (1,183)
-------
Net loss.................................................. $(5,278)
=======
</TABLE>

F-77
<PAGE> 161

ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JULY 27, 1998
(INCEPTION) TO
DECEMBER 31,
1998
---------------
<S> <C>
Cash flows from development activities:
Net loss.................................................. $(5,278)
Adjustments to reconcile net loss to net cash used in
development activities:
Depreciation and amortization........................ 1,145
Minority interest.................................... (1,183)
Loss on investment in joint venture.................. 670
Changes in assets and liabilities:
Increase in current and other assets.............. (228)
Decrease in accounts payable and accrued
liabilities.................................... (2,483)
Increase in accrued interest -- note payable to
related party.................................. 2,958
-------
Net cash used in development activities........... (4,399)
-------
Cash flow from investing activities:
Purchases of property and equipment....................... (2,741)
Acquisition of Transworld Companies, net of cash
acquired............................................... 5,997
-------
Net cash provided by investing activities......... 3,256
-------
Cash flows from financing activities:
Issuance of note payable to related party................. 36,800
Issuance of common stock.................................. 2
-------
Net cash provided by financing activities......... 36,802
-------
Net increase in cash and cash equivalents................... 35,659
Cash and cash equivalents, beginning of period.............. --
-------
Cash and cash equivalents, end of period.................... $35,659
=======
Supplemental disclosure of non-cash investing and financing
activities:
Issuance of note payable to related party to convert
short-term note payable converted upon acquisition of
Transworld Companies................................... $15,000
=======
</TABLE>

F-78
<PAGE> 162

ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
JULY 27, 1998 (INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK DURING THE
---------------- DEVELOPMENT
SHARES AMOUNT STAGE TOTALS
------ ------ ----------- -------
<S> <C> <C> <C> <C>
Balance at July 27, 1998
(inception)......................... -- $-- $ -- $ --
Issuance of common stock for cash... 1,000 2 2
Net loss............................ (5,278) (5,278)
----- -- ------- -------
Balance at December 31, 1998.......... 1,000 $2 $(5,278) $(5,276)
===== == ======= =======
</TABLE>

F-79
<PAGE> 163

ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

1. THE COMPANY

Orrengrove Investments Ltd. ("Orrengrove"), was incorporated in the
Republic of Cyprus on July 27, 1998 as a wholly owned subsidiary of QUALCOMM
Telecommunications Ltd. ("QUALCOMMTel"), an Isle of Man company. In August 1998,
Orrengrove acquired a 60% interest in Transworld Telecommunications, Inc.,
Transworld Communications Services, Inc. and Transworld Communications
(Bermuda), Ltd. (collectively the "Transworld Companies"). The Transworld
Companies were created to build and operate a modern long distance
telecommunications business that provides domestic long distance, backhaul, and
broadband services such as high speed internet access to the Commonwealth of
Independent States ("CIS"), formerly known as the Soviet Union. In October 1998,
QUALCOMMTel, a majority owned subsidiary of Leap Wireless International, Inc.
("Leap Wireless") entered into an agreement with Teletal Limited, a company
affiliated with ITAR-TASS, the Russian government's prime news agency and a
party with certain rights granted to it by the Russian government to assist in
the privatization and expansion of telecommunications in Russia. QUALCOMMTel
transferred to Teletal Limited a 50% ownership in Orrengrove under the terms of
the agreement to the joint venture in exchange for Teletal Limited's commitment
to assist in the development of the Transworld Companies long distance
telecommunications business. Orrengrove and its majority owned subsidiaries (the
"Company") operates in emerging economies, which by nature have an uncertain
economic, political and regulatory environment. The general risks of conducting
business in the Russian Federation and other CIS developing countries include
the possibility for rapid changes in government policies and regulations,
economic conditions, the tax regime and foreign currency regulations.

The Company is the holder of certain licenses to provide telecommunication
services in 48 regions of the CIS as well as exclusive rights to the signal
transmission capacity on each of two Russian Loutch II satellites. The first
satellite was launched into orbit in October 1995 to serve an area containing
over 85% of the population of the Russia Federation plus major portions of the
Baltic States, Ukraine, Byelorussia and other CIS countries (see Note 10 for
subsequent event). The Company is currently evaluating whether to exercise its
rights to the capacity on the second satellite which will require the Company to
share in the cost of its launch. Limited service between Moscow and Perm, a
region of 3 million people 1,200 km west of Moscow, began in December 1998.
Further expansion plans are being evaluated.

2. DEVELOPMENT STAGE ACTIVITIES AND DEPENDENCY ON ADDITIONAL FINANCING

The Company is a development stage enterprise which has incurred operating
losses and negative cash flows from network development and operations since
inception. To date, the Company has focused primarily on the development of its
telecommunications network, including the construction of its system hub in
Moscow and its earth station network, and the implementation of its sales and
marketing strategy. Before the Company can begin significant revenue generating
operations, it must first enter into agreements with either long-distance
companies, in order to carry some of their long-distance traffic, and/or the
local phone companies throughout the CIS. The Company is currently in such

F-80
<PAGE> 164
ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

negotiations. The extent to which this is or is not accomplished and the terms
and timing of executing these contracts may have a significant impact on the
business, financial conditions and results of operations.

The Company's principal license agreement to provide telecommunication
services within the Russian Federation expires in April 2002, and is subject to
certain services related obligations standard for the industry. Although no
assurance can be given that such license will be renewed beyond its expiration
date, the Company believes that such license can be renewed routinely.

The Company is dependent on the signal transmission capacity of the Loutch
II satellite in orbit and satellite communication earth stations to provide its
satellite based communication services. The Company may encounter problems,
delays and expenses, many of which may be beyond the Company's control. These
may include, but are not limited to, in-orbit failures (see Note 10 for
subsequent event), launch delays and launch failures of additional or
replacement signal transmission capacity, problems related to technical
developments of the system, and regulatory compliance. Any interruption or
delays in service caused by any of the foregoing matters would adversely affect
the Company.

The development of the Company's business and the deployment of its
services and systems will require significant additional capital expenditures, a
substantial portion of which will need to be incurred before the realization of
significant revenues. Together with associated start-up operating expenses,
these capital expenditures will result in substantial negative cash flow until
an adequate revenue-generating customer base is established.

The Company expects to meet its cash requirements for existing operations
and network construction through fiscal 1999 from available cash balances. The
Company will be seeking additional sources of financing to fund activities after
1999. Alternatives under consideration include additional debt, equity financing
or other sources. There can be no assurance that the Company will be successful
in raising additional capital in sufficient amounts to fund its strategic
objectives, or that such funds, if available, will be available on terms that
the Company will consider acceptable. Failure to raise sufficient funds may
require the Company to modify, delay or abandon some of its planned future
expansion or expenditures, which could have a material adverse effect on the
Company's business, financial condition and results of operations.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Company's consolidated financial statements reflect the financial
position, results of operations, cash flows and changes in stockholders' deficit
of Orrengrove and its majority-owned subsidiaries prepared in accordance with
generally accepted accounting principles in the United States of America. The
ownership of the other interest holder is reflected as minority interest. All
significant inter-company accounts and transactions have

F-81
<PAGE> 165
ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

been eliminated. The financial statements of the Company have been presented for
the period since its inception on July 27, 1998.

FINANCIAL STATEMENT PREPARATION

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.

INVESTMENT IN JOINT VENTURE

The Company has a 50% equity investment in Tass Loutch Telecom (TLT), a
joint venture. The Company uses the equity method to account for investments in
corporate entities in which it has voting interest of 20% to 50% or in which it
otherwise exercises significant influence. Under the equity method, the
investment is originally recorded at cost and adjusted to recognize the
Company's share of net earnings or losses of TLT, limited to the extent of the
Company's investment in, advances to and financial guarantees for TLT. The
Company is the only contributor of assets, and therefore loss on investment in
joint venture included in the statement of operations includes 100% of the
losses of TLT. To date, TLT has incurred recurring losses which have reduced the
Company's investment in TLT to zero.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is calculated on a
straight-line basis over the lesser of the estimated useful lives, generally
ranging from five to ten years for telecommunications equipment and three to
seven years for furniture, fixtures and equipment and other property.
Construction in process reflects amounts incurred for the configuration and
build-out of telecommunications equipment not yet placed in service.

INTANGIBLE ASSETS

Intangible assets, resulting primarily from the acquisition of the
Transworld Companies (see Note 4), comprising of telecommunications licenses of
$8,061,000 and rights to satellite signal transmission capacity of $7,327,000,
are being amortized on a straight-line basis over their estimated remaining
useful lives ranging from three to five years. For the period ended December 31,
1998, amortization expense of $986,000 was recorded on the rights to satellite
capacity (see Note 10 for subsequent event). The telecommunications licenses
begin amortizing upon commencement of service.

F-82
<PAGE> 166
ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

LONG-LIVED ASSETS

INCOME TAXES

The Company accounts for income taxes in accordance with the liability
method. Deferred income taxes are recognized for tax consequences in future
years for differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end, based on enacted laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce net deferred tax assets to the amount expected to be
realized. The provision for income taxes consists of the current tax provision
and the change during the period in deferred tax assets and liabilities.

FOREIGN CURRENCY

The functional currency of the Company's foreign operations is United
States dollars. The Company maintains most of the cash balances in dollar
denominated bank accounts and has no significant foreign currency monetary
assets and liabilities at December 31, 1998. Gains and losses resulting from the
Company's foreign currency transactions are included in the consolidated
statement of operations, and to date have been minimal.

The Company does not currently hedge against foreign currency fluctuations
although the Company may take such steps in the future. Under current practices,
the Company's results of operations could be adversely affected by fluctuations
in exchange rates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

At December 31, 1998, the carrying amounts of the Company's cash and cash
equivalents, accounts payable , and notes payable approximate fair value due to
the short-term maturities of these balances.

RECENT ACCOUNTING PRONOUNCEMENTS

As of December 31, 1998, Statement of Financial Accounting Standards No.
130, ("SFAS 130"), Reporting Comprehensive Income, has been adopted by the
Company. SFAS 130 establishes standards for the reporting and display of
comprehensive income (loss) and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. "Comprehensive
income (loss)" is defined in this statement as the change in equity (net assets)
of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period (including net income (loss)) except those resulting

F-83
<PAGE> 167
ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

from investments by owners and distributions to owners. The adoption of this new
standard did not impact the Company's financial statements because there were no
differences between net loss and comprehensive loss.

In addition, during 1998, Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133) was
issued. This statement establishes a new model for accounting for derivatives
and hedging activities. Under SFAS 133, all derivatives must be recognized as
assets and liabilities and measured at fair value. SFAS 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The Company has
not determined the impact of the adoption of this new accounting standard on its
consolidated financial position or results of operations.

4. ACQUISITION OF THE TRANSWORLD COMPANIES

On August 4, 1998, the Company acquired a 60% common ownership interest in
the Transworld Companies for an aggregate purchase price of $51,800,000,
consisting of a $36,800,000 cash payment to the Transworld Companies and the
conversion to equity of a $15,000,000 short-term loan payable to Leap Wireless,
which was previously issued by the former parent of the Transworld Companies.
The acquisition was recorded under the purchase method of accounting, and
accordingly, the results of operations of the Transworld Companies are included
in the consolidated financial statements since the date of acquisition. The sum
of the fair values of the identifiable assets acquired, which include
telecommunications licenses and rights to satellite capacity, less liabilities
assumed, exceeded the cost of the acquisition. The fair values of those
identifiable assets acquired were reduced by a proportionate part of the excess
to determine their assigned values.

The purchase price has been allocated to the assets acquired and the
liabilities assumed based upon the fair values on the date of acquisition as
follows (in thousands):

<TABLE>
<S> <C>
Current assets, other than cash............................. $ 41
Property and equipment...................................... 2,697
Intangible assets........................................... 15,388
Other assets................................................ 611
Accounts payable and other expenses......................... (7,872)
Note payable to related party............................... (15,000)
Minority interest........................................... (1,862)
--------
Net cash received from acquisition.......................... $ (5,997)
========
</TABLE>

F-84
<PAGE> 168
ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5. PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Telecommunications equipment.............................. $1,448
Construction-in-progress.................................. 3,524
Leasehold improvements.................................... 81
Furniture, fixtures and office equipment.................. 385
------
5,438
Accumulated depreciation.................................. (159)
------
$5,279
======
</TABLE>

The Company's telecommunications equipment and construction-in-progress are
primarily maintained in a foreign country. Construction in progress consists of
earth stations, not yet completed and operational as of December 31, 1998. See
Note 10 for subsequent event.

6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Accounts payable and other................................ $ 299
Consulting fee-related party (Note 7)..................... 2,500
Consulting fee-third party................................ 2,590
------
$5,389
======
</TABLE>

7. RELATED PARTY TRANSACTIONS

NOTE RECEIVABLE FROM A RELATED PARTY

Since inception, the Company has advanced certain amounts to another
investor in TLT for the investor's share of TLT's expenses in exchange for a
note receivable. The Company has advanced approximately $400,000 to the related
party through

December 31, 1998. The note receivable was written off prior to December
31, 1998 since the related party was unable to fund it's share of the losses in
the joint venture.

PAYABLE TO RELATED PARTY

The Company was required to pay a consulting fee, bonus, and severance
totaling $2,500,000 to the majority shareholder of the former parent of the
Transworld Companies.

F-85
<PAGE> 169
ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

The $2,500,000 was included in the purchase price allocation (See Note 4) and
payment was made in March 1999.

NOTE PAYABLE TO RELATED PARTY

On July 29, 1998, the Company entered into a $51,800,000 collateralized
Promissory Note agreement with Leap Wireless, for the purpose of purchasing the
Transworld Companies. Terms of the Promissory Note provide for repayment of
principal and accrued interest by paying Leap the greater of 1) 70% of the cash
or other assets received by the Company from any sources, including the
Transworld Companies, 2) 70% of the cash or other assets available for
distribution to the Company's stockholders or 3) in the event of a final
distribution from the Transworld Companies, 100% of the cash or other assets
available for distribution to the Company's stockholders until principal and
accrued interest is paid in full. Interest accrues quarterly in arrears at the
rate of 13%, per annum, with any unpaid interest being added to the outstanding
principal. For the period ended December 31, 1998, interest of $2,958,000 has
been accrued, but not paid. This amount is included in note payable to related
party on the consolidated balance sheet as of December 31, 1998. The Promissory
Note provides for certain restrictions related to dividends, redemptions and
merger, and is collateralized by substantially all the assets of the Company.

8. INCOME TAXES

The Company has not recorded provisions for income taxes for the period
from July 27, 1998 (inception) to December 31, 1998 due to net operating losses
during the period.

The following is a reconciliation from the statutory Cyprus income tax rate
to the Company's effective rate of income tax expense for the period ended:

<TABLE>
<CAPTION>
PERIOD FROM
JULY 27, 1998
(INCEPTION) TO
DECEMBER 31,
1998
--------------
<S> <C>
Cyprus tax at statutory rate.............................. 25%
Minority interest......................................... (4)%
Net change in valuation allowance......................... (24)%
Effect of foreign operations.............................. 3%
---
Effective tax rate........................................ --%
===
</TABLE>

F-86
<PAGE> 170
ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

The tax effect of temporary differences which gives rise to significant
portions of the deferred tax assets as of December 31, 1998, are as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Net operating loss carryforwards.......................... $ 2,968
Net capitalized start-up costs............................ 717
-------
3,685
Less: valuation allowance................................. (3,685)
-------
$ --
=======
</TABLE>

Realization of net deferred tax assets is dependent on the Company's
ability to generate taxable income, which is uncertain. Accordingly, a full
valuation allowance was recorded against these assets as of December 31, 1998.

As of December 31, 1998, the Company had net operating loss carryforwards
of approximately $8.5 million for income tax purposes that begin to expire in
various years between 2003 and 2017.

There may be limitations on the annual utilization amount of these net
operating losses as a result of certain changes in ownership that have occurred
since the Company's inception.

9. COMMITMENTS AND CONTINGENCIES

TRANSPONDER AGREEMENTS

The Company obtained, through a number of agreements, the rights to utilize
certain Russian Loutch I and Loutch II satellite capacity. The agreements give
the Company rights to the capacity on satellites under the Loutch I and Loutch
II programs for up to 20 years.

The Company has an agreement with Commercial Company Mercury Ltd.
("Mercury"), the commercial subsidiary of a Russian satellite provider, for the
sole and exclusive use of two transponders on each of the first two Loutch II
satellites. At December 31, 1998, approximately $5,300,000 had been paid to
Mercury to modify the transponders on the first Loutch II satellite for
commercial use. A remaining commitment of approximately $1,700,000 due under
this contract is contingent upon Mercury completing certain milestones related
to the launch of the second satellite.

CONSTRUCTION-IN-PROGRESS

The Company has ordered the construction of six earth stations, plus
certain upgrades and spares, under an agreement with a third party. The
agreement established a price guarantee until September 1999 at approximately
$1,000,000 per earth station. In accordance with this agreement, approximately
$3,500,000 has been paid to December 31, 1998.

F-87
<PAGE> 171
ORRENGROVE INVESTMENTS LTD. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

LEASE COMMITMENTS

The Company leases certain office space in the United States and
internationally under non-cancelable operating lease agreements. Rent expense
for the period July 27, 1998 (inception) to December 31, 1998 was approximately
$200,000. Future minimum lease payments under all non-cancelable operating lease
arrangements as of December 31, 1998 are as follows:

<TABLE>
<S> <C>
1999....................................................... $ 404,000
2000....................................................... 414,000
2001....................................................... 327,000
2002....................................................... 1,000
2003....................................................... --
----------
Total............................................ $1,146,000
==========
</TABLE>

LEGAL MATTERS

The Company is a party to various legal actions and administrative
proceedings arising in the normal course of business. In the opinion of
Company's management, disposition of these matters is not expected to have a
material adverse effect on the financial position, results of operations or cash
flows of the Company.

10. SUBSEQUENT EVENT

On April 5, 1999, the Company was notified by Mercury Telesat ("Mercury"),
provider of the satellite signal transmission capacity, that there was an
operational failure of all transponders on the Loutch II satellite. Mercury's
prognosis indicates that the transponders' operational status will not be
restored. The Transworld Companies have already identified and put into
operation a short-term terrestrial transmission solution by leasing fiber
capacity and are exploring long-term alternatives to the lost satellite
transmission capacity.

11. SUBSEQUENT EVENT (UNAUDITED)

As a result of the operational failure of the transponder, Orrengrove and
the Transworld Companies recognized in June 1999 an impairment loss of
approximately $16.9 million for the write-off of certain satellite related
assets and write-down to fair value the book value of the license to carry
long-distance traffic.

F-88
<PAGE> 172

REPORT OF INDEPENDENT ACCOUNTANTS

Mexico City, February 15, 1999

To the Board of Directors and Shareholders of
Pegaso Telecomunicaciones, S. A. de C. V.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of stockholders' equity
present fairly, in all material respects, the financial position of Pegaso
Telecomunicaciones, S. A. de C. V. and its subsidiaries at December 31, 1998 and
the results of their operations, their cash flows and the changes in their
stockholders' equity for the period from June 24, 1998 (date of incorporation)
to December 31, 1998, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United Sates of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.

As stated in Note 1 to the consolidated financial statements, Pegaso
Telecomunicaciones, S. A. de C. V. was incorporated on June 24, 1998, and at the
date of issuance of this report, was in the development stage.

PricewaterhouseCoopers

Guillermo Pineda M.

F-89
<PAGE> 173

PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEET
DECEMBER 31,1998
THOUSANDS OF U.S. DOLLARS

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 30,313
Recoverable value added tax................................. 9,531
Other accounts receivable................................... 344
Prepaid advertising......................................... 6,256
Other current assets........................................ 219
--------
Total current assets........................................ 46,663
PROPERTY, FURNITURE AND TELECOMMUNICATIONS
EQUIPMENT -- Net.......................................... 132,296
PUBLIC TELECOMMUNICATIONS NETWORK CONCESSION................ 233,530
--------
Total assets........................................... $412,489
========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables.............................................. $113,209
Notes payable to affiliated company......................... 5,941
Other accounts payable and accrued expenses................. 5,256
Income tax payable.......................................... 321
--------
Total current liabilities.............................. 124,727
LONG-TERM BANK LOANS........................................ 19,090
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Capital stock............................................... 300,000
Accumulated deficit incurred in development stage........... (31,328)
--------
268,672
--------
Total liabilities and stockholders' equity............. $412,489
========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-90
<PAGE> 174

PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF INCOME FOR THE PERIOD
FROM JUNE 24, 1998 (DATE OF INCORPORATION)
TO DECEMBER 31, 1998
THOUSANDS OF U.S. DOLLARS

<TABLE>
<S> <C>
General and administrative expenses......................... $(30,168)
Interest income............................................. 1,194
Other income................................................ 441
Foreign exchange loss on remeasurement of financial
statements................................................ (2,474)
--------
Loss before income tax...................................... (31,007)
Current income tax.......................................... (321)
--------
Loss for the period......................................... $(31,328)
========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-91
<PAGE> 175

PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 24, 1998 (DATE OF INCORPORATION)
TO DECEMBER 31, 1998
THOUSANDS OF U.S. DOLLARS

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the period......................................... $ (31,328)
---------
Adjustment to reconcile loss to net cash used in operating
activities:
Not affecting resources:
Depreciation and amortization............................... 78
Foreign exchange loss on remeasurement of financial
statements................................................ 2,474
Recoverable value added tax................................. (9,443)
Other accounts receivable................................... (341)
Prepaid advertising......................................... (67)
Other current assets........................................ (217)
Other accounts payable and accrued expenses................. 5,432
Income tax payable.......................................... 321
---------
Total adjustments........................................... (1,763)
---------
Net cash used in operating activities....................... (33,091)
---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, furniture and telecommunications
equipment................................................. (77)
Public telecommunications network concession................ (233,530)
---------
Net cash used in investing activities....................... (233,607)
---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Capital stock issued........................................ 300,000
---------
Net cash provided by financing activities................... 300,000
---------
Effect of exchange rate change on cash...................... (2,989)
---------
Cash and cash equivalents at end of period.................. $ 30,313
=========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid........................................... $ --
Interest paid (net of amount capitalized)................... 14
Prepaid advertising contracted with notes payable........... 5,941
Property, furniture and telecommunications equipment
acquired through financing................................ 132,297
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-92
<PAGE> 176

PEGASO TELECOMUNICACIONES, S.A. DE C.V.
(DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF STOCKHOLDERS' EQUITY FOR THE
PERIOD FROM JUNE 24, 1998 (DATE OF INCORPORATION)
TO DECEMBER 31, 1998
THOUSANDS OF U.S. DOLLARS

<TABLE>
<CAPTION>
ACCUMULATED
DEFICIT
INCURRED
CAPITAL IN DEVELOPMENT
STOCK STAGE TOTAL
-------- -------------- --------
<S> <C> <C> <C>
Issuance of stock at inception on June 24,
1998........................................ $ 11 $ 11
Additional capital stock issued on June 30 and
September 28, 1998.......................... 299,989 299,989
Loss for the period........................... $(31,328) (31,328)
-------- -------- --------
Balances at December 31, 1998................. $300,000 $(31,328) $268,672
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-93
<PAGE> 177

PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS)

NOTE 1. OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES

Pegaso Telecomunicaciones, S. A. de C. V. (Telecomunicaciones) (a
development stage enterprise), a Mexican holding company, was incorporated on
June 24, 1998, for a duration of 99 years. At December 31, 1998, the
stockholders and their participation in Telecomunicaciones were as follows:

<TABLE>
<CAPTION>
STOCKHOLDER PARTICIPATION(%)
----------- ----------------
<S> <C>
Mexican stockholders:
Corporativo del Valle de Mexico, S. A. de C. V.............. 10.00
Pegaso Comunicaciones y Servicios, S. A. de C. V............ 9.66
Alejandro Burillo Azcarraga................................. 5.34
Foreign stockholders:
Qualcomm PCS Mexico, Inc.................................... 33.33
International Equity Investments, Inc....................... 18.33
LAIF X, Ltd................................................. 16.67
NI Media Equity, LLC........................................ 6.67
------
100.00
======
</TABLE>

Up to September 23, 1998, Qualcomm PCS Mexico, Inc. was a wholly owned
subsidiary of Qualcomm Incorporated (Qualcomm). On that date, as a consequence
of Qualcomm's spin-off of Leap Wireless International (Leap Wireless), Qualcomm
transferred the Qualcomm PCS Mexico, Inc. shares to Leap Wireless.

At December 31, 1998, Telecomunicaciones and its subsidiaries
(collectively, the "Company") held 100% of the capital stock of the following
Mexican subsidiaries:

<TABLE>
<CAPTION>
COMPANY BUSINESS
------- --------
<S> <C>
Pegaso PCS, S. A. de C. V. (PCS) Scheduled to provide telephone
services to the general public.

Pegaso Recursos Humanos, S. A. de C. V. Provides administrative
(Recursos Humanos) services to affiliated
companies.

Pegaso Comunicaciones y Sistemas, S. A. de C. V. Holds the concessions and the
(Comunicaciones y Sistemas) telecommunications equipment
for telephone services to be
provided by PCS.
</TABLE>

The Company is engaged in providing nationwide telephone services in
Mexico, for which Comunicaciones y Sistemas holds the concessions granted by the
Ministry of Communications (Secretaria de Comunicaciones y Transportes) (SCT) on
October 7, 1998. At the date of issuance of these consolidated financial
statements, the Company was in the development stage.

F-94
<PAGE> 178
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

Activities during the development stage are primarily developing the
telecommunication network and in organizing the administrative structure to
provide telephone services.

The concession includes the rights to install, operate and exploit a
nationwide public telecommunications network for a period of up to 20 years,
with an option for the Company to extend the concession at the end of the
20-year period. See Note 5.

The Company's development from the date of incorporation has been financed
by capital contributions made by the stockholders and through two lines of
credit with a limit of $590,000. See Note 6. These lines of credit are
collateralized by all Company properties, rights and assets. The recoverability
of the Company's investment is dependent upon future events, including, but not
limited to, the stability of the Mexican economic environment, obtaining
adequate financing for the Company's development program and the achievement of
a level of operating revenues that is sufficient to support the Company's cost
structure.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements include to the
adjustment and remeasurement of the Mexican peso consolidated financial
statements prepared in conformity with accounting principles generally accepted
in Mexico. Such financial statements constitute a suitable basis for adjustment
and remeasurement into US Dollars and for purposes of expressing them in
conformity with accounting principles generally accepted in the United States of
America.

Following are the significant accounting policies, as adjusted:

a. Consolidation

The accompanying financial statements include the accounts of
Telecomunicaciones and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

b. Cash Equivalents

Cash equivalents are recorded at cost, which approximates market value, and
include all investments purchased with original maturities of three months or
less.

c. Property, Furniture and Telecommunications Equipment

Property, furniture and telecommunications equipment are recorded at cost.

Depreciation is calculated by the straight-line method, based on the
estimated useful lives of said items, ranging from three to ten years. See Note
4.

F-95
<PAGE> 179
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

Leasehold improvements are capitalized at cost and the corresponding
amortization is calculated by the straight-line method, based on the lease
period.

d. Public Telecommunications Network Concession

The public telecommunications network concession includes the cost of the
radio-electric frequency band concession, and is recorded at cost.

e. Income Taxes

Current income tax is the amount of income tax expected to be payable for
the current period. A deferred tax asset or liability is computed for both the
expected future impact of differences between the financial statement and tax
bases of assets and liabilities and for the expected future tax benefit to be
derived from tax loss carryforwards. A valuation allowance is established for
deferred tax assets not expected to be realized.

f. Employee Benefits

Seniority premiums, to which employees are entitled upon termination of
employment after fifteen years of service, are recognized as expenses of the
years in which the services are rendered. Because the Company is in the
development stage, this effect is not significant, and therefore no liability
has been recognized.

Severance obligations to personnel for dismissal or death are charged to
income in the period incurred.

g. Translation

For the purposes of translating its Mexican peso financial statements to
U.S. dollars in accordance with Statement of Financial Accounting Standard No.
52, the Company considers its functional currency to be the U.S. dollar, since
substantially all its costs and all its financing are incurred in U.S. dollar.
Monetary assets and liabilities are translated into U.S. dollars at the exchange
rate in effect at the balance sheet date. Revenues, expenses, gains and losses
are translated at the average exchange rate for the period, and non-monetary
assets are translated at historical rates. The resulting remeasurement gains or
losses are included in the statement of income.

As of January 1, 1999, Mexico is no longer considered a hyperinflationary
economy. The Company is currently evaluating the functional currency and a
possible change from the U.S. dollar to local currency (the Mexican peso).

F-96
<PAGE> 180
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

h. Capitalized Interest Cost

Property, furniture and telecommunications equipment, as well as the public
telecommunications network concession, include the capitalization of the
interest costs related to their acquisition.

i. Advertising Costs

Television advertising time purchased in advance is expensed when the
advertising time is used. All other advertising costs are expensed as incurred.

j. Long-lived Assets

The Company assesses potential impairments of its long-lived assets when
there is evidence that events or changes in circumstances have made recovery of
the asset's carrying value unlikely. An impairment loss would be recognized when
the sum of the expected future net undiscounted cash flows, grouped at the
lowest identifiable level where the cash flows are independent of cash flows
generated by other groups, is less than the carrying amount of the asset. No
such impairment losses have been recorded by the Company.

k. Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.

l. New Accounting Requirements

The Company adopted the provision of Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities", issued by the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
(AcSEC). In accordance with this pronouncement, all start-up activities and
organization costs incurred in 1998 were expensed and are included within
general and administrative expenses in the consolidated statement of income.

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" (SFAS 130) issued by the
Financial Accounting Standards Board (FASB). SFAS 130 establishes new rules for
the reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. For the period ended December 31,
1998, the Company has not generated components of other comprehensive income.

F-97
<PAGE> 181
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

The AcSEC issued the Statement of Position 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use" (SOP 98-1) in March
1998. The statement is effective for fiscal periods beginning after December 15,
1998, with earlier application encouraged. SOP 98-1 provides authoritative
guidance for the capitalization of external direct costs of materials and
services, payroll costs for employees devoting time to software projects, and
interest costs. The Company does not expect the adoption of SOP 98-1 to
significantly impact the financial statements.

On June 15, 1998, the FASB issued SFAS No 133, "Accounting for Derivative
Instruments and Hedging Activities", (SFAS 133). This statement establishes a
new model for accounting for derivatives and hedging activities and supercedes
and amends a number of existing standards. SFAS 133 is effective for fiscal
years beginning after June 15, 1999, but earlier application is permitted as of
the beginning of any fiscal quarter subsequent to June 15, 2000. Upon the
statement's initial application, all derivatives are required to be recognized
in the balance sheet as either assets or liabilities, and measured at fair
value. In addition, all hedging relationships must be designated, reassessed and
documented pursuant to the provisions of SFAS 133. The Company is not currently
involved in derivative or hedging activities. As a result, management does not
believe that the adoption of this statement will significantly impact the
financial statements of the Company.

NOTE 3. TRANSACTIONS AND BALANCES WITH AFFILIATED COMPANIES AND OTHER RELATED
PARTIES

On the next page is a summary of the main transactions and balances with
affiliated companies and other related parties for the period ended December 31,
1998.

<TABLE>
<CAPTION>
TRANSACTIONS FOR
THE PERIOD ENDED BALANCE AT
DECEMBER 31, 1998 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Equipment purchases from Qualcomm............. $80,100(1)
Interest on advances from stockholders........ 1,697
Professional fees charged by stockholders..... 586
Advertising services from Grupo Televisa, S.
A........................................... 6,256 $5,941(2)
Rent payments to stockholders................. 40
</TABLE>

- -------------------------
(1) Qualcomm ceased being an affiliated company on September 23, 1998 (see Note
1).

(2) This amount is reflected as notes payable to affiliated company in the
consolidated balance sheet. Equal principal amounts are payable on a
quarterly basis up to September 15, 1999. These notes are non-interest
bearing.

F-98
<PAGE> 182
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

NOTE 4. PROPERTY, FURNITURE AND TELECOMMUNICATIONS EQUIPMENT

<TABLE>
<CAPTION>
ANNUAL
DEPRECIATION RATE
(%)
-----------------
<S> <C> <C>
Furniture and equipment................................ $ 630 10
Computer equipment..................................... 156 30
Transportation equipment............................... 248 25
Leasehold improvements................................. 969 30
--------
2,003
Accumulated depreciation and amortization.............. (78)
--------
1,925
Land................................................... 85
Telecommunications equipment in the process of
installation......................................... 104,874
Construction in progress............................... 2,234
Advance payments to Alcatel Indetel Industria de
Telecomunicaciones, S. A. de C. V. (Alcatel)......... 11,478
Advance payments to Qualcomm........................... 9,023
Advance payments to other suppliers.................... 2,677
--------
$132,296
========
</TABLE>

Telecommunications equipment in the process of installation includes $3,114
of capitalized interest.

NOTE 5. PUBLIC TELECOMMUNICATIONS NETWORK CONCESSION

On October 7, 1998, the Company obtained the concession to frequency bands
of the radio-electric spectrum to provide nationwide wireless fixed and mobile
access telecommunications services. The cost of the concession shown in the
consolidated balance sheet includes $1,278 of capitalized interest.

Concessions include the rights to provide the following:

- Fixed or mobile wireless telephone service.

- Transmission or reception of signals, images, voice, sounds or
information of any nature through the network, and additional services
authorized by the SCT.

- Access to data networks, videos, audio and videoconferences.

F-99
<PAGE> 183
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

The concession agreements contain the following financial covenants:

a. The minimum capital stock must be $120,000.

b. The ratio of total liabilities to stockholders' equity should not
exceed 2.78 during the first five years of operations.

At December 31, 1998, these covenants were satisfactorily complied with.

NOTE 6. FINANCING CONTRACTS

The Company has entered into certain agreements for the acquisition of
telecommunications equipment, services, and installation consultancy. These
commitments will be covered through the financing contracts which are summarized
on the next page.

<TABLE>
<CAPTION>
EQUIPMENT SUPPLIER FINANCING AGENT MAXIMUM AMOUNT
------------------ --------------- --------------
<S> <C> <C>
Qualcomm Qualcomm managed by
ABN AMRO Bank N. V $310,000(1)
Alcatel Syndicated loan managed
by Citibank International, Plc 280,000(2)
--------
$590,000
========
</TABLE>

- -------------------------
(1) This line of credit is to be utilized as follows:

<TABLE>
<CAPTION>
CREDIT TERM MAXIMUM AMOUNT
------ ---- --------------
<S> <C> <C>
Credit 1 From the date of authorization to $200,000
December 31, 2000
Credit 2 From January 1, 2001 to 90,000
December 31, 2002
Additional credit From the date of authorization to 20,000
December 31, 2002
--------
$310,000
========
</TABLE>

Advances under credits 1 and 2 are composed of "A" and "B" tranches.
Tranche "A", which is for the financing of equipment purchases, is being
provided by the Export Import Bank of the United States (EXIM Bank) and is
subject to interest at the LIBOR plus 1.5 points. Tranche "B" is for the
financing of customs duties (excluding value added taxes) and
transportation costs and is subject to interest at the LIBOR plus 4.5
points. Interest is to be paid at various intervals ranging from monthly to
biannually, depending upon which credit and tranche the amount has been
disbursed from.

At December 31, 1998, no advances have been made under this line of credit.
The short term trade payables balance shown in the consolidated balance
sheet includes

F-100
<PAGE> 184
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

liabilities of $72,521 and $32,868 payable to Qualcomm and Qualcomm
Wireless Services (Mexico), S. A. de C. V., respectively. These
dollar-denominated amounts are expected to be paid through advances on the
line-of-credit facilities.

(2) This line of credit is to be utilized as follows:

<TABLE>
<CAPTION>
CREDIT TERM MAXIMUM AMOUNT
------ ---- --------------
<S> <C> <C>
Credit 1 From the date of authorization to $170,000
December 31, 2000
Credit 2 From January 1, 2001 to 100,000
December 31, 2002
Additional Credit From the date of authorization to 10,000
December 31, 2000
--------
$280,000
========
</TABLE>

These loans are subject to interest at the Eurodollar rate (5.2 % at
December 31, 1998) plus 4.5 points, adjusted monthly. The interest is to be
paid on a quarterly basis. At December 31,1998, $19,090 was outstanding
under this line of credit (Credit 1) and is included in long-term bank
loans. This amount will be paid as follows:

<TABLE>
<CAPTION>
DECEMBER 31, AMOUNT
------------ -------
<S> <C>
2002.................................................. $ 3,818
2003.................................................. 5,727
2004.................................................. 9,545
-------
$19,090
=======
</TABLE>

Principal payments of "A" and "B" tranches of credit managed by ABM AMRO
Bank N. V. will be negotiated in good faith and must be agreed upon by both
the parties prior to disbursement. Principal payment for other lines of
credit will be made on the dates and in the proportions shown below:

<TABLE>
<CAPTION>
PORTION PAYABLE ON DECEMBER 31,
YEAR IN WHICH THE --------------------------------------------
DISBURSEMENT WAS MADE 2002 2003 2004 2005 2006 2007
--------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1998 and 1999............... 20% 30% 50%
2000........................ 20% 30% 50%
2001........................ 20% 30% 50%
2002........................ 20% 30% 50%
</TABLE>

In order to collateralize the obligations derived from the financing
contracts, the Company has pledged all properties, rights and assets, as
described in Note 1.

F-101
<PAGE> 185
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

The lines of credit establish the following main obligations and
restrictions for the Company:

a. Disbursements from the lines of credit should be utilized only for
the acquisition of telecommunication equipment from Qualcomm and Alcatel.

b. The capital stock should be increased by two contributions of
$50,000 each, by July 31, 1999 and on August 30, 2000, respectively.

c. Neither dividend payments nor capital distributions should be made
during the loan periods.

NOTE 7. STOCKHOLDERS' EQUITY

Telecomunicaciones was incorporated on June 24, 1998, with a contribution
of $11 for the subscription of 100,000 common shares, each with a par value of
one Mexican peso.

On June 30, 1998, the Company exchanged the original 100,000 common shares
for 1,000 shares with no par value. On the same date, the Company received from
its stockholders $1 in exchange for the issuance of an additional 200 common
shares.

On September 28, 1998, the Company received $299,988 in exchange for the
issuance of 7,499,388 Series "A", Class II shares, 7,199,412 Series "B", Class
II shares, and 15,300,000 Series "N" Class II shares.

At December 31, 1998, the authorized capital stock is 30,000,000
no-par-value shares, all of which are issued and outstanding, as follows:

<TABLE>
<CAPTION>
NUMBER OF
SHARES DESCRIPTION AMOUNT
- ---------- ----------- --------
<C> <S> <C>
Class I (fixed minimum portion):
612 Series A $ 6
588 Series B 6
Class II (variable portion):
7,499,388 Series A 74,994
7,199,412 Series B 71,994
15,300,000 Series N 153,000
- ---------- --------
30,000,000 $300,000
========== ========
</TABLE>

Series "N", Class "II"shares have limited voting rights.

In the event of a capital stock reduction, the portion of capital stock
exceeding contributions made is subject to income tax, payable by the Company,
equivalent to 53.85% of such excess.

F-102
<PAGE> 186
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

NOTE 8. INCOME TAX, ASSET TAX AND EMPLOYEES' STATUTORY PROFIT SHARING

For the period ended December 31, 1998, Telecomunicaciones generated a net
tax loss of $4,976 and two of its subsidiaries a net tax loss of $8,394. The
other subsidiary, Recursos Humanos, had taxable income of $944 and as a result,
the Company has recognized a current tax provision of $321 in the consolidated
financial statements. The Company has obtained authorization from the Treasury
Ministry (Secretaria de Hacienda y Credito Publico) (SHCP) to determine its
income tax and asset tax on a consolidated basis starting in 1999.

The tax loss carryforwards of $13,370 can be inflation indexed by applying
the Mexican National Consumer Price Index from the date on which losses arise
through the date of their utilization. Such restated tax loss carryforwards can
be offset against future taxable profits, and expire in the year 2008.

The tax effect of temporary differences that give rise to deferred tax
assets and liabilities are as follows:

<TABLE>
<S> <C>
Interest and consultancy fees capitalized................... $ (4,978)
Preoperating expenses....................................... 13,706
Tax loss carryforwards...................................... 13,370
--------
$ 22,098
========
</TABLE>

The statutory income tax rate for 1998 was 34%. The following items
represent the principal differences between income taxes computed at the
statutory tax rate and the Company's provision for income taxes for the period
ended December 31, 1998:

<TABLE>
<S> <C>
Tax at statutory rate....................................... (34)%
Foreign exchange loss on remeasurement of financial
statements................................................ 3%
Permanent items, including inflationary effects............. 7%
Interest and consultancy fees capitalized................... (5)%
Preoperating expenses....................................... 15%
Valuation allowance......................................... 15%
---
Effective income tax rate................................... 1%
===
</TABLE>

Asset tax is determined by applying the rate of 1.8% to the net amount of
certain assets and liabilities, and is payable only when asset tax exceeds
income tax due. For the period ended December 31, 1998, the Company was not
subject to the payment of asset tax.

For the period ended at December 31, 1998, the Company was not subject to
the payment of employees' statutory profit sharing.

F-103
<PAGE> 187
PEGASO TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
(DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS) (CONTINUED)

NOTE 9. COMMITMENTS

As of December 31,1998, the Company is leasing offices and other spaces
related to its activity, under operating agreements expiring through 2003.
Future minimum lease payments under such leases amount to approximately $8,158,
as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1999................................................... $2,490
2000................................................... 1,743
2001................................................... 1,429
2002................................................... 1,407
2003................................................... 1,089
------
$8,158
======
</TABLE>

Lease payments for the period ended December 31,1998 recorded in the
Statement of Income amounted to $824.

NOTE 10. FINANCIAL INSTRUMENTS

The fair value of the Company's cash and cash equivalents, recoverable
taxes, other accounts receivable, trade payables, income taxes and other
accounts payable and accrued expenses approximate the carrying value due to the
short-maturity of these instruments.

The estimated fair value and carrying value of other financial instruments
at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------- ------
<S> <C> <C>
Notes payable to affiliated company................. $5,941 $5,823
Long-term bank loans................................ 19,090 19,090
</TABLE>

NOTE 11. SUBSEQUENT EVENT (UNAUDITED)

In May 1999, the Company entered into an agreement with a loan syndicate to
borrow up to $100 million for working capital purposes. The loan bears interest
at a variable rate equal to the Eurodollar rate plus six percent (6%) or a base
rate plus five percent (5%), provided that in each case, the applicable margin
shall increase by one-half of one percent (0.5%) on each interest adjustment
date. This loan is due for repayment in November 2000.

F-104
<PAGE> 188

- ------------------------------------------------------
- ------------------------------------------------------

WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM WHAT IS
IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT THAT DIFFERS FROM WHAT
IS IN THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS NOT AN
OFFER TO SELL, NOR IS IT SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS
COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY CHANGE AFTER THAT
DATE.

-------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 2
Risk Factors.............................. 8
Forward-Looking Statements................ 20
Relationship Between Leap Wireless and
QUALCOMM After the Distribution......... 20
QUALCOMM Trust Convertible Preferred
Securities.............................. 25
Use of Proceeds........................... 26
Plan of Distribution...................... 26
Price Range of Common Stock............... 26
Dividend Policy........................... 27
Capitalization............................ 27
Dilution.................................. 27
Selected Consolidated Historical and
Unaudited Pro Forma Financial Data...... 29
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 31
Business.................................. 44
Management................................ 64
Certain Relationships and Related
Transactions............................ 71
Security Ownership of Certain Beneficial
Owners.................................. 72
Description of Leap Wireless Capital
Stock................................... 74
Description of Rights Agreement........... 76
Liability and Indemnification of Directors
and Officers............................ 79
Shares Eligible for Future Sale........... 80
Experts................................... 81
Legal Matters............................. 81
Where to Find Additional Information...... 81
Index to Financial Statements............. F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,271,060 SHARES

LEAP WIRELESS
INTERNATIONAL, INC.
COMMON STOCK
-------------------------

PROSPECTUS
-------------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 189

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION OF LEAP WIRELESS

Under the Conversion Agreement, QUALCOMM agreed to pay all expenses of Leap
Wireless, including professional fees, incurred in connection with the
registration of the issuance of Leap Wireless common stock being registered by
this prospectus. The following table sets forth all expenses payable by the
Registrant in connection with the initial registration of the issuance of our
common stock being registered by this prospectus. Additional expenses will be
incurred from time to time to maintain this Registration Statement which will
also be paid by QUALCOMM. All the amounts shown are estimates except for the SEC
registration fee.

<TABLE>
<S> <C>
Registration fee........................................... $ 4,602.40
Printing and engraving expenses............................ 50,000.00
Legal fees and expenses.................................... 70,000.00
Accounting fees and expenses............................... 65,000.00
Miscellaneous.............................................. 5,397.60
----------
Total............................................ $ 195,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS

Officers and directors of Leap Wireless are covered by certain provisions
of the DGCL, the charter, the bylaws and insurance policies which serve to
limit, and, in certain instances, to indemnify them against, certain liabilities
which they may incur in such capacities. None of such provisions would have
retroactive effect for periods before the distribution of Leap Wireless, and
Leap Wireless is not aware of any claim or proceeding in the last three years,
or any threatened claim, which would have been or would be covered by these
provisions. These various provisions are described below.

Elimination of Liability in Certain Circumstances. In June 1986, Delaware
enacted legislation which authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. This duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all significant information
reasonably available to them. Absent the limitations now authorized by such
legislation, directors are accountable to corporations and their stockholders
for monetary damages for conduct constituting negligence or gross negligence in
the exercise of their duty of care. Although the statute does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The charter limits the
liability of Directors to Leap Wireless or its stockholders (in their capacity
as directors but not in their capacity as officers) to the fullest extent
permitted by such legislation. Specifically, the directors of Leap Wireless will
not be personally liable for monetary damages for breach of a director's
fiduciary duty as director, except for liability: (1) for any breach of the
director's duty of loyalty to Leap Wireless or its stockholders; (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) for unlawful payments of dividends or unlawful share
repurchases or redemptions as provided in Section 174 of the DGCL; or (4) for
any transaction from which the director derived an improper personal benefit.

II-1
<PAGE> 190

Indemnification and Insurance. As a Delaware corporation, Leap Wireless has
the power, under specified circumstances generally requiring the director or
officer to act in good faith and in a manner he reasonably believes to be in or
not opposed to Leap Wireless' best interests, to indemnify its directors and
officers in connection with actions, suits or proceedings brought against them
by a third party or in the name of Leap Wireless, by reason of the fact that
they were or are such directors or officers, against expenses, judgments, fines
and amounts paid in settlement in connection with any such action, suit or
proceeding. The bylaws generally provide for mandatory indemnification of Leap
Wireless' directors and officers to the full extent provided by Delaware
corporate law. In addition, Leap Wireless has entered into indemnification
agreements with its directors and officers which generally provide for mandatory
indemnification under circumstances for which indemnification would otherwise be
discretionary under Delaware law.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In June 1998, Leap Wireless sold 1,000 shares of common stock to QUALCOMM
for $.10 in a transaction exempt from the registration requirements of the
Securities Act of 1933 under Section 4(2). In connection with the distribution
of Leap Wireless, Leap Wireless also issued a warrant to purchase 5,500,000
shares of common stock to QUALCOMM in a transaction exempt from the registration
requirements of the Securities Act of 1933 under Section 4(2). The warrant was
subsequently amended to reduce the number of shares which may be acquired upon
exercise of the warrant to 4,500,000.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS

(a) EXHIBITS.

II-2
<PAGE> 191

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
4.3(2) Rights Agreement, dated as of September 14, 1998, between
the Registrant and Harris Trust Company of California
5.1* Opinion of Latham & Watkins
10.1* Separation and Distribution Agreement, dated as of September
23, 1998, between QUALCOMM and the Registrant
10.1.1(8) First Amendment to Separation and Distribution Agreement,
dated August 6, 1999, between Registrant and QUALCOMM
10.2* Credit Agreement, dated as of September 23, 1998, between
QUALCOMM and the Registrant
10.3* Tax Matters Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.4* Interim Services Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.5* Master Agreement Regarding Equipment Acquisition, dated as
of September 23, 1998, between QUALCOMM and the Registrant
10.5.1(8) First Amendment to Master Agreement Regarding Equipment
Procurement, dated as of August 6, 1999, between Registrant
and QUALCOMM
10.6* Employee Benefits Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.7* Conversion Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.8* Assignment and Assumption Agreement, dated as of September
23, 1998, between QUALCOMM and the Registrant
10.9(7) 1998 Stock Option Plan, as amended through April 13, 1999
10.10(1) Form of non-qualified/incentive stock option under the 1998
Stock Option Plan
10.11(1) Form of non-qualified stock option under the 1998 Stock
Option Plan to be granted to QUALCOMM option holders in
connection with the distribution of Registrant's common
stock
10.12(1) Form of Registrant's 1998 Non-Employee Directors' Stock
Option Plan
10.13(1) Form of non-qualified stock option under the 1998
Non-Employee Directors' Stock Option Plan
10.14(1) Form of Registrant's Employee Stock Purchase Plan
10.15(1) Assignment and Assumption of Lease dated August 11, 1998
between QUALCOMM and Vaxa International, Inc.
10.16(1) Form of Indemnity Agreement to be entered into between the
Registrant and its directors and officers
10.17(4) Loan Agreement dated September 28, 1998, by and between
Pegaso Comunicaciones y Servicios, S.A de C.V. and
Registrant
10.18(4) Promissory Note dated September 25, 1998, payable to
Registrant by Pegaso Comunicaciones y Servicios, S.A de C.V.
10.19(4) Pledge Agreement, dated September 28, 1998, by and among the
Guarantors, the Issuers and Registrant
10.20(5) Asset Purchase Agreement dated December 24, 1998, by and
among Chase Telecommunications Holdings, Inc., Anthony
Chase, Richard McDugald and Registrant
10.21.1(6) Stock Purchase Agreement dated April 12, 1999, by and among
Inversiones Leap Wireless Chile S.A., Telex -- Chile S.A.,
and Chilesat S.A.
</TABLE>

II-3
<PAGE> 192

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.21.2(7) Novation and Assumption of Payment Obligation Agreement,
dated May 11, 1999, by and among Chilesat Telefonia Personal
S.A., Inversiones Leap Wireless Chile S.A. and Chilesat S.A.
(In Spanish and accompanied by a translation in English)
10.22(8) Cricket Communications, Inc. 1999 Stock Option Plan
10.23(8) Form of non-qualified/incentive stock option under the
Cricket Communications, Inc. 1999 Stock Option Plan
10.24(8) Employment offer letter to Susan G. Swenson from Registrant,
dated July 9, 1999
21.1* Subsidiaries of the Registrant
23.1(8) Consent of PricewaterhouseCoopers LLP, independent
accountants
23.2(8) Consent of Price Waterhouse, independent accountants
23.3(8) Consent of PricewaterhouseCoopers LLP, independent
accountants
23.4(8) Consent of PricewaterhouseCoopers, independent accountants
23.5* Consent of Latham & Watkins. Reference is made to exhibit
5.1
24.1* Power of Attorney (included in signature page)
</TABLE>

- -------------------------
* Previously filed.

(1) Filed as an exhibit to Registrant's Registration Statement on Form 10, as
amended (File No. 0-29752), and incorporated herein by reference.

(2) Filed as an exhibit to Registrant's Current Report on Form 8-K dated
September 14, 1998, and incorporated herein by reference.

(3) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1999, as filed with the Securities and Exchange
Commission on April 14, 1999, and incorporated herein by reference.

(4) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1998, as filed with the Securities and Exchange
Commission on November 30, 1998, as amended, and incorporated herein by
reference.

(5) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended November 30, 1998, as filed with the Securities and Exchange
Commission on January 14, 1999, and incorporated herein by reference.

(6) Filed as an exhibit to Registrant's Current Report on Form 8-K dated May 4,
1999, and incorporated herein by reference.

(7) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1999, as filed with the Securities and Exchange
Commission on July 15, 1999, and incorporated herein by reference.

(8) Filed herewith.

(b) SCHEDULES.

Not applicable.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant under provisions described in Item 14 or otherwise, the registrant
has been advised that in the opinion of

II-4
<PAGE> 193

the SEC such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

The undersigned Registrant by this prospectus undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(2) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the SEC
under Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.

(3) To include any significant information regarding the plan of
distribution not previously disclosed in the registration statement or
any significant change to such information in the registration
statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-5
<PAGE> 194

SIGNATURES

Under the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Post-Effective Amendment No. 2 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, County of San Diego, State of California,
on August 9, 1999.

By: /s/ TOM WILLARDSON
-----------------------------------
Tom Willardson
Senior Vice President, Finance and
Treasurer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Harvey P. White and James E. Hoffmann and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments, exhibits thereto and other documents in connection
therewith) to this Registration Statement and any subsequent registration
statement filed by the registrant pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, which relates to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Under the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 2 to Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HARVEY P. WHITE* Chief Executive August 9, 1999
- --------------------------------------------------- Officer and Director
Harvey P. White

/s/ TOM WILLARDSON Senior Vice August 9, 1999
- --------------------------------------------------- President, Finance
Tom Willardson and Treasurer

/s/ THOMAS J. BERNARD* Vice Chairman, August 9, 1999
- --------------------------------------------------- President --
Thomas J. Bernard International
Business Division and
Director
</TABLE>

II-6
<PAGE> 195

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ SUSAN G. SWENSON* President and August 9, 1999
- --------------------------------------------------- Director
Susan G. Swenson

Director
- ---------------------------------------------------
Alejandro Burillo Azcarraga

Director
- ---------------------------------------------------
Robert C. Dynes

Director
- ---------------------------------------------------
Scot B. Jarvis

/s/ JOHN J. MOORES Director August 9, 1999
- ---------------------------------------------------
John J. Moores

/s/ MICHAEL B. TARGOFF* Director August 9, 1999
- ---------------------------------------------------
Michael B. Targoff

/s/ JEFFREY P. WILLIAMS* Director August 9, 1999
- ---------------------------------------------------
Jeffrey P. Williams

*By: /s/ JAMES E. HOFFMAN
---------------------------------------------
James E. Hoffman
Attorney-in-Fact
</TABLE>

II-7
<PAGE> 196

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1(1) Form of Amended and Restated Charter of the Registrant
3.2(1) Form of Amended and Restated Bylaws of the Registrant
3.3(2) Form of Certificate of Designation of Series A Junior
Participating preferred stock of the Registrant
4.1(1) Form of Common Stock Certificate
4.2.1(3) Letter, dated as of May 5, 1999, from QUALCOMM Incorporated
("QUALCOMM") to the Registrant
4.2.2(8) Superceding Warrant, dated as of August 9, 1999, issued to
QUALCOMM
4.2.3(8) Form of Voting Agreement, dated as of April 1, 1999, between
the Registrant and various officers and directors of
QUALCOMM Incorporated
4.2.4(8) Amended and Restated Agreement Concerning Share Ownership,
dated as of August 4, 1999, between Registrant and QUALCOMM
Incorporated
4.3(2) Rights Agreement, dated as of September 14, 1998, between
the Registrant and Harris Trust Company of California
5.1* Opinion of Latham & Watkins
10.1* Separation and Distribution Agreement, dated as of September
23, 1998, between QUALCOMM and the Registrant
10.1.1(8) First Amendment to Separation and Distribution Agreement,
dated as of August 6, 1999, between Registrant and QUALCOMM
10.2* Credit Agreement, dated as of September 23, 1998, between
QUALCOMM and the Registrant
10.3* Tax Matters Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.4* Interim Services Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.5* Master Agreement Regarding Equipment Acquisition, dated as
of September 23, 1998, between QUALCOMM and the Registrant
10.5.1(8) First Amendment to Master Agreement Regarding Equipment
Procurement, dated as of August 6, 1999, between Registrant
and QUALCOMM
10.6* Employee Benefits Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.7* Conversion Agreement, dated as of September 23, 1998,
between QUALCOMM and the Registrant
10.8* Assignment and Assumption Agreement, dated as of September
23, 1998, between QUALCOMM and the Registrant
10.9(7) 1998 Stock Option Plan, as amended through April 13, 1999
10.10(1) Form of non-qualified/incentive stock option under the 1998
Stock Option Plan
10.11(1) Form of non-qualified stock option under the 1998 Stock
Option Plan to be granted to QUALCOMM option holders in
connection with the distribution of Registrant's common
stock
10.12(1) Form of Registrant's 1998 Non-Employee Directors' Stock
Option Plan
10.13(1) Form of non-qualified stock option under the 1998
Non-Employee Directors' Stock Option Plan
10.14(1) Form of Registrant's Employee Stock Purchase Plan
</TABLE>

<PAGE> 197

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.15(1) Assignment and Assumption of Lease dated August 11, 1998
between QUALCOMM and Vaxa International, Inc.
10.16(1) Form of Indemnity Agreement to be entered into between the
Registrant and its directors and officers
10.17(4) Loan Agreement dated September 28, 1998, by and between
Pegaso Comunicaciones y Servicios, S.A de C.V. and
Registrant
10.18(4) Promissory Note dated September 25, 1998, payable to
Registrant by Pegaso Comunicaciones y Servicios, S.A de C.V.
10.19(4) Pledge Agreement, dated September 28, 1998, by and among the
Guarantors, the Issuers and Registrant
10.20(5) Asset Purchase Agreement dated December 24, 1998, by and
among Chase Telecommunications Holdings, Inc., Anthony
Chase, Richard McDugald and Registrant
10.21.1(6) Stock Purchase Agreement dated April 12, 1999, by and among
Inversiones Leap Wireless Chile S.A., Telex -- Chile S.A.,
and Chilesat S.A.
10.21.2(7) Novation and Assumption of Payment Obligation Agreement,
dated May 11, 1999, by and among Chilesat Telefonia Personal
S.A., Inversiones Leap Wireless Chile S.A. and Chilesat S.A.
(In Spanish and accompanied by a translation in English)
10.22(8) Cricket Communications, Inc. 1999 Stock Option Plan
10.23(8) Form of non-qualified/incentive stock option under the
Cricket Communications, Inc. 1999 Stock Option Plan
10.24(8) Employment offer letter to Susan G. Swenson from Registrant,
dated July 9, 1999
21.1* Subsidiaries of the Registrant
23.1(8) Consent of PricewaterhouseCoopers LLP, independent
accountants
23.2(8) Consent of Price Waterhouse, independent accountants
23.3(8) Consent of PricewaterhouseCoopers LLP, independent
accountants
23.4(8) Consent of PricewaterhouseCoopers, independent accountants
23.5* Consent of Latham & Watkins. Reference is made to exhibit
5.1
24.1* Power of Attorney (included in signature page)
</TABLE>

- -------------------------
* Previously filed.

(1) Filed as an exhibit to Registrant's Registration Statement on Form 10, as
amended (File No. 0-29752), and incorporated herein by reference.

(2) Filed as an exhibit to Registrant's Current Report on Form 8-K dated
September 14, 1998, and incorporated herein by reference.

<PAGE> 1

EXHIBIT 4.2.2

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

SUPERCEDING
WARRANT TO PURCHASE 4,500,000 SHARES
OF COMMON STOCK OF
LEAP WIRELESS INTERNATIONAL, INC.
(VOID AFTER SEPTEMBER 23, 2008)

This certifies that QUALCOMM Incorporated, a Delaware corporation, or
its assigns ("QUALCOMM" or the "Holder"), for value received, is entitled to
purchase from LEAP WIRELESS INTERNATIONAL, INC., a Delaware corporation (the
"Company"), having a place of business at 10307 Pacific Center Court, San Diego,
California, up to 4,500,000 fully paid and nonassessable shares (as adjusted for
the stock split to be effected on or about September 14, 1998) of the Company's
Common Stock ("Common Stock") at a per share price (the "Stock Purchase Price")
equal to the average price of the last sales price per share of the Company's
Common Stock on the Nasdaq National Market for each of the five (5) consecutive
trading days (provided if no such sale is made on any of such trading days, then
the last sales price per share for such day(s) shall be deemed to be the last
sales price per share on the closest preceding day on which a sale was made)
beginning with and including September 23, 1998 (the "Effective Date"), any time
or from time to time up to and including 5:00 p.m. (Pacific time) on the date
that is ten (10) years from the date of this Warrant (the "Expiration Date"),
subject to the terms and conditions of this Warrant hereinafter set forth. The
Company agrees that it will calculate the Stock Purchase Price as soon as
practicable (which calculation shall be subject to approval by the Holder, which
may not unreasonably be withheld); and upon presentation of this Warrant to the
Company by the Holder, the Company shall attach to this Warrant a Schedule that
sets forth the Stock Purchase Price and the calculation thereof (and such
Schedule shall constitute a part hereof).

This Warrant is subject to the following terms and conditions:

1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.

1.1 GENERAL. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered
properly endorsed, a completed, executed Form of Subscription shall have been
delivered, and payment shall have been made for such shares in

<PAGE> 2

accordance with the Subscription Form in the form of cash, cancellation of
indebtedness of the Company, delivery to the Company of Common Stock of the
Company having a fair market value as of the date of exercise equal to the Stock
Purchase Price times the number of shares to be received upon exercise, or in
any other form of consideration approved by the Board of Directors of the
Company. Certificates for the shares of Common Stock so purchased, together with
any other securities or property to which the Holder hereof is entitled upon
such exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of less than all the
shares which may be purchased under this Warrant, the Company shall cancel this
Warrant and execute and deliver a new Warrant or Warrants of like tenor for the
balance of the shares purchasable under the Warrant surrendered upon such
purchase to the Holder hereof within a reasonable time. Each stock certificate
so delivered shall be in such denominations of Common Stock as may be requested
by the Holder hereof and shall be registered in the name of such Holder.

1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of the Company's Common
Stock is greater than the Stock Purchase Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to convert this Warrant (in whole or in part) into shares equal to the
value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Form of Subscription and notice of such
election in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:

X = Y (A-B)
-------
A

Where X = the number of shares of Common Stock to be issued to the
Holder

Y = the number of shares of Common Stock
purchasable under the Warrant or, if only a portion
of the Warrant is being exercised, the portion of
the Warrant being canceled (at the date of such
calculation)

A = the fair market value of one share of the
Company's Common Stock (at the date of such
calculation)

B = Stock Purchase Price (as adjusted to the date
of such calculation)

For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined as follows:

2
<PAGE> 3

(a) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall be deemed to be
the average of the closing or last reported sale prices of the Common Stock on
such exchange or market over the five (5) day period ending five business days
prior to the date the Holder surrenders this Warrant at the principal office of
the Company together with the properly endorsed Form of Subscription (the
"Determination Date");

(b) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing or last reported sale prices of the Common Stock over the five (5)
day period ending five business days prior to the Determination Date;

(c) If there is no public market for the Common Stock,
or if a public market has existed for a period less than is necessary for a date
mentioned under subsection (a) or (b) above, then fair market value shall be
determined by mutual agreement of the holder of this Warrant and the Company,
and if the holder and the Company are unable to so agree, at the Company's sole
expense by an investment banker of national reputation selected by the Company
and reasonably acceptable to the holder of this Warrant.

2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed. The Company will not take
any action which would result in any adjustment of the Stock Purchase Price (as
set forth in Section 3 hereof) if the total number of shares of Common Stock
issuable after such action upon exercise of all outstanding warrants, together
with all shares of Common Stock then outstanding and all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding, would exceed the total number of shares
of Common Stock then authorized by the Company's Certificate of Incorporation.

3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The
Stock Purchase Price and the number of shares purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price

3
<PAGE> 4

resulting from such adjustment, the number of shares obtained by multiplying the
Stock Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment, and dividing the product thereof by the Stock Purchase Price
resulting from such adjustment.

3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.

3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

(a) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution, or

(b) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement
(other than shares of Common Stock issued as a stock split or adjustments in
respect of which shall be covered by the terms of Section 3.1 above);

then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the case referred to in clause (b) above) which such Holder would hold on the
date of such exercise had he been the holder of record of such Common Stock as
of the date on which holders of Common Stock received or became entitled to
receive such shares or all other additional stock and other securities and
property. Notwithstanding the foregoing, in the case of a dividend or
distribution described in clause (b) above and any subsequent exercise
hereunder, the Company's Board of Directors may by resolution determine with
respect to such exercise, in its sole discretion, instead of the adjustment
provided above, to adjust the Stock Purchase Price in accordance with the
formula set forth below and to adjust the number of shares of Common Stock
purchasable pursuant hereto upon such exercise as provided in the lead-in
paragraph to this Section 3:

4
<PAGE> 5

B' = B x A - F
-----
A

where:

B' = the adjusted Stock Purchase Price

B = the current Stock Purchase Price

A = the fair market value of one share of Common Stock (at the date of
the exercise)

F = the fair market value at the date of exercise of the securities or
property distributed in respect of one share of Common Stock as determined in
good faith by the Board of Directors of the Company.

3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby. In the event of
any Organic Change, appropriate provision shall be made by the Company with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation, registration rights
and provisions for adjustments of the Stock Purchase Price and of the number of
shares purchasable and receivable upon the exercise of this Warrant) shall
thereafter be applicable, in relation to any shares of stock, securities or
assets thereafter deliverable upon the exercise hereof. The Company will not
effect any such consolidation, merger or sale unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or the corporation purchasing such assets shall assume by
written instrument reasonably satisfactory in form and substance to the Holder,
executed and mailed or delivered to the registered Holder hereof at the last
address of such Holder appearing on the books of the Company, the obligation to
deliver to such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase.

3.4 CERTAIN EVENTS. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the

5
<PAGE> 6

Board of Directors of the Company shall make an adjustment in the number and
class of shares available under the Warrant, the Stock Purchase Price or the
application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Stock Purchase Price the total number,
class and kind of shares as he would have owned had the Warrant been exercised
prior to the event and had he continued to hold such shares until after the
event requiring adjustment.

3.5 NOTICES OF CHANGE.

(a) Immediately upon any adjustment in the number or
class of shares subject to this Warrant or of the Stock Purchase Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.

(b) The Company shall give written notice to the Holder
at least 30 business days prior to the date on which the Company closes its
books or takes a record for determining rights to receive any dividends or
distributions, or any offer for subscription pro rata to the holders of Common
Stock any additional shares of stock of any class or any other rights.

(c) The Company shall also give written notice to the
Holder at least 30 business days prior to the date on which an Organic Change
shall take place.

4. REGISTRATION RIGHTS.

4.1 DEFINITIONS. As used in this Section 4, the following
terms shall have the following respective meanings:

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

"FORM S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

"HOLDER" means any person owning of record Registrable Securities
(as defined in Section 4) that have not been sold to the public or any assignee
of record of such Registrable Securities (as defined in Section 4) in accordance
with Section 4.9 hereof.

"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

"REGISTRABLE SECURITIES" means (a) Common Stock of the Company
issued or issuable upon exercise of this Warrant; and (b) any Common Stock of
the

6
<PAGE> 7

Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to the Common Stock issuable upon exercise of this Warrant, or in
exchange for or in replacement of, such above-described securities.

"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or issuable upon exercise of this Warrant, or (b) are issuable
pursuant to then exercisable or convertible securities.

"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 4.2, 4.3 and 4.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of a
single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).

"SEC" or "COMMISSION" means the Securities and Exchange
Commission.

"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.

"SHARES" shall mean the Company's Common Stock issued upon
exercise of this Warrant.

4.2 DEMAND REGISTRATION.

(a) Subject to the conditions of this Section 4.2, if
the Company shall receive a written request from the Holders of a majority of
the Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Securities Act covering the
registration of at least a majority of the Registrable Securities then
outstanding (or a lesser percent if the anticipated aggregate offering price,
net of underwriting discounts and commissions, would exceed $5,000,000), then
the Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 4.2, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered.

(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 4.2 or any request pursuant to Section 4.4 and the Company shall
include such information in the written notice referred to in Section 4.2(a) or
Section 4.4(a), as applicable. In such event, the

7
<PAGE> 8

right of any Holder to include its Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 4.2 or Section 4.4, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Securities)
then the Company shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated first to the Company and
then to the Holders of such Registrable Securities on a pro rata basis based on
the total number of Registrable Securities requested to be registered by all
such Holders (including the Initiating Holders); provided, however, that after
the first firm commitment underwritten public offering effected by the Company
following the Effective Date (the "First Public Offering"), the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration and in no event shall
the number of Registrable Securities to be included in such underwriting and
registration by the Initiating Holders be reduced to less than thirty percent
(30%) of such Registrable Securities requested to be included in the
registration. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.

(i) during the one year period following the
Effective Date;

(ii) after the Company has effected one (1)
registration pursuant to this Section 4.2, and such registration has been
declared or ordered effective; or

(iii) if the Initiating Holders propose to dispose
of shares of Registrable Securities that may be immediately registered on Form
S-3 pursuant to a request made pursuant to Section 4.4 below.

4.3 PIGGYBACK REGISTRATIONS. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30) days prior to
the filing of any registration statement under the Securities Act for purposes
of a public offering of securities of the Company (including, but not limited
to, registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable

8
<PAGE> 9

Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.

(a) UNDERWRITING. If the registration statement under
which the Company gives notice under this Section 4.3 is for an underwritten
offering, the Company shall so advise the Holders of Registrable Securities. In
such event, the right of any such Holder to be included in a registration
pursuant to this Section 4.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of the Agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated first to the Company and then to the
Holders on a pro rata basis based on the total number of Registrable Securities
requested to be registered by such Holders; provided however, that after the
First Public Offering, no such reduction shall reduce the amount of securities
of the selling Holders included in the registration to less than thirty percent
(30%) of the total amount of Registrable Securities requested to be included in
such registration by such Holders. If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by written notice
to the Company and the underwriter, delivered at least ten (10) business days
prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder which is a partnership or
corporation, the partners, retired partners and shareholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing person shall be deemed to be a
single "Holder", and any pro rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," and requested to be
registered by such Holder as defined in this sentence.

(b) RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 4.3 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 4.5 hereof.

9
<PAGE> 10

4.4 FORM S-3 REGISTRATION. In case the Company shall receive
from any Holder or Holders of Registrable Securities a written request or
requests that the Company effect a registration on Form S-3 or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, and the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed $5,000,000, the Company will:

(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities; and

(b) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance pursuant to this Section 4.4:

(i) if Form S-3 (or any successor or similar
form) is not available for such offering by the Holders, or

(ii) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.

(c) Subject to the foregoing, the Company shall file a
Form S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 4.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 4.2 or 4.3, respectively.

4.5 EXPENSES OF REGISTRATION. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 4.2 or any registration under
Section 4.3 or Section 4.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 4.2 or
4.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to a requested registration pursuant to Section
4.2, in which event such right

10
<PAGE> 11

shall be forfeited by all Holders). If the Holders are required to pay the
Registration Expenses, such expenses shall be borne by the holders of securities
(including Registrable Securities) requesting such registration in proportion to
the number of shares for which registration was requested. If the Company is
required to pay the Registration Expenses of a withdrawn offering pursuant to
clause (a) above, then the Holders shall not forfeit their rights pursuant to
Section 4.2 or Section 4.4 to a demand registration.

4.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect
the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:

(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one (1) year
or, if earlier, until the Holder or Holders have completed the distribution
related thereto. The Company shall not be required to file, cause to become
effective or maintain the effectiveness of any registration statement that
contemplates a distribution of securities on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act.

(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
paragraph (a) above.

(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

(d) Use its reasonable best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to

11
<PAGE> 12

be delivered under the Securities Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.

(g) Use its best efforts to furnish, on the date that
such Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.

4.7 DELAY OF REGISTRATION; FURNISHING INFORMATION.

(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 4.

(b) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 4.2, 4.3 or
4.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.

4.8 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under Sections 4.2, 4.3 or 4.4:

(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities

12
<PAGE> 13

law or any rule or regulation promulgated under the Securities Act, the Exchange
Act or any state securities law in connection with the offering covered by such
registration statement; and the Company will pay as incurred to each such
Holder, partner, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 4.8(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.

(b) To the extent permitted by law, each Holder will,
if Registrable Securities held by such Holder are included in the securities as
to which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 4.8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity provided by any Holder under this Section 4.8 exceed the net proceeds
from the offering received by such Holder.

(c) Promptly after receipt by an indemnified party
under this Section 4.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 4.8,
deliver to the indemnifying party a written

13
<PAGE> 14

notice of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 4.8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 4.8.

(d) If the indemnification provided for in this Section
4.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, that in no event shall any contribution by
a Holder hereunder exceed the proceeds from the offering received by such
Holder.

(e) The obligations of the Company and Holders under
this Section 4.8 shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this Warrant. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.

4.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 4 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(a) is a subsidiary, parent, general partner, limited partner, retired partner,
member or retired member of a Holder, or (b) acquires at least one million
(1,000,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall

14
<PAGE> 15

furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned and (ii) such transferee shall agree to be subject to all
restrictions set forth in this Agreement.

4.10 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder registration rights that would
prevent the Company from honoring the registration rights of Holders described
herein.

4.11 AGREEMENT TO FURNISH INFORMATION. Each Holder agrees to
execute and deliver such other agreements as may be reasonably requested by the
Company or the underwriter which are consistent with the foregoing or which are
necessary to give further effect thereto. In addition, if requested by the
Company or the representative of the underwriters of Common Stock (or other
securities) of the Company, each Holder shall provide, within ten (10) days of
such request, such information as may be required by the Company or such
representative in connection with the completion of any public offering of the
Company's securities pursuant to a registration statement filed under the
Securities Act. The obligations described in this Section 4.11 shall not apply
to a registration relating solely to employee benefit plans on Form S-1 or Form
S-8 or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future.

4.12 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:

(a) Make and keep public information available, as
those terms are understood and defined in SEC Rule 144 or any similar or
analogous rule promulgated under the Securities Act, at all times after the
registration by the Company of its Common Stock or any other securities under
the Exchange Act or the effective date of the first registration filed by the
Company for an offering of its securities to the general public;

(b) File with the SEC, in a timely manner, all reports
and other documents required of the Company under the Exchange Act; and

(c) So long as a Holder owns any Registrable
Securities, furnish to such Holder forthwith upon request: a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144 of the Securities Act, and of the Exchange Act (at any time after it has
become subject to such reporting requirements); a copy of the most recent annual
or quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of

15
<PAGE> 16

any rule or regulation of the SEC allowing it to sell any such securities
without registration.

4.13 MARKET STANDOFF. Each Holder hereby agrees that it shall
not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (excluding shares to be
distributed by QUALCOMM in accordance with the Separation and Distribution
Agreement between QUALCOMM and the Company dated on or about the date hereof)
for a period of ninety (90) days following the effective date of a registration
statement of the Company filed under the Securities Act of 1933, as amended,
provided that the officers and directors of the Company enter into similar
agreements.

5. MISCELLANEOUS

5.1 ISSUE TAX. The issuance of certificates for shares of
Common Stock upon the exercise of the Warrant shall be made without charge to
the Holder of the Warrant for any issue tax (other than any applicable income
taxes) in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being exercised.

5.2 CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any warrant or of any shares of Common
Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.

5.3 AUTOMATIC EXERCISE. To the extent this Warrant is not
previously exercised, and if the fair market value of one share of the Company's
Common Stock is greater than the Stock Purchase Price then in effect, this
Warrant shall be deemed automatically exercised pursuant to Section 1 (even if
not surrendered) immediately before its expiration. To the extent this Warrant
or any portion thereof is deemed automatically exercised pursuant to this
Section 5.3, the Company agrees to promptly notify the holder hereof of the
number shares of Common Stock, if any, the holder hereof is entitled to receive
by reason of such automatic exercise, and the Holder shall have 30 days from the
receipt of such notice to determine whether such automatic exercise shall be
made pursuant to Section 1.1 or 1.2 hereof.

5.4 NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
shareholder of the Company or any other matters or any rights whatsoever as a
shareholder of the Company. Except as may be set forth herein, no cash dividends
or interest shall be payable or accrued in respect of this Warrant or the
interest represented hereby or the shares purchasable hereunder until, and only
to the extent that, this Warrant shall have been exercised. No provisions
hereof, in the absence of affirmative action by the holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
holder hereof, shall give

16
<PAGE> 17

rise to any liability of such Holder for the Stock Purchase Price or as a
shareholder of the Company, whether such liability is asserted by the Company or
by its creditors.

5.5 WARRANTS TRANSFERABLE. Subject to compliance with
applicable federal and state securities laws, this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the holder
hereof (except for transfer taxes), upon surrender of this Warrant properly
endorsed. Each taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company, at the Company's option, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.

5.6 RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The
rights and obligations of the Company, of the holder of this Warrant and of the
holder of shares of Common Stock issued upon exercise of this Warrant, shall
survive the exercise of this Warrant.

5.7 MODIFICATION AND WAIVER. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.

5.8 NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to such Holder at
its address as shown on the books of the Company, attention: Chief Executive
Officer, or to the Company at the address indicated therefor in the first
paragraph of this Warrant, or such other address as either may from time to time
provide to the other.

5.9 BINDING EFFECT ON SUCCESSORS. This Warrant shall be
binding upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Common Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to the
benefit of the successors and assigns of the holder hereof.

5.10 DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.

5.11 LOST WARRANTS. The Company represents and warrants to the
Holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the

17
<PAGE> 18

loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

5.12 FRACTIONAL SHARES. No fractional shares shall be issued
upon exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the holder entitled to such fraction a sum in cash equal
to such fraction multiplied by the then effective Stock Purchase Price.

5.13 NO IMPAIRMENT OF RIGHTS. The Company will not, by
amendment of its Charter or through any other means, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.

5.14 FCC ISSUES. Notwithstanding any other provision of this
Warrant, Holder hereby agrees that it will not exercise the Warrant or any
portion thereof in a manner that would (i) preclude the Company from qualifying
as a "Publicly Traded Corporation With Widely Disbursed Voting Power" (a
"PTCWWDVP") under 47 CFR 24.720(m) as a result of the Company not satisfying the
provisions of 47 CFR 24.720(m)(2), or (ii) cause any change in the Company's
status as a "very small business" designated entity as defined by the rules and
regulations of the Federal Communications Commission (the "FCC") (to the extent
the Company thereupon would not be qualified to hold or acquire, directly or
indirectly, C-Block and F-Block broadband PCS licenses as to which it is or
would be, directly or indirectly, the licensee), and any such exercise shall be
invalid ab initio to the extent such exercise would preclude such qualification
or cause any such change. Holder acknowledges and agrees that in determining
whether any exercise of the Warrant or any portion thereof would preclude the
qualification referred to in clause (i) or cause any change referred to in
clause (ii) of this Section 5.14, Holder will expressly include in its ownership
calculations all shares of Company capital stock held by or which after the date
of this Warrant are acquired by (whether by gift, purchase, pursuant to stock
options, warrants or convertible securities, or otherwise acquired by or
received by in any manner), any officers or directors (inside or outside) of the
Holder.

18
<PAGE> 19

This superceding warrant replaces and supercedes a substantially
similar warrant dated April 1, 1999 which in turn replaces and supersedes a
warrant dated March 9, 1999 to purchase 4,500,000 shares of the Company's common
stock which in turn replaced and superceded a substantially similar warrant
dated September 23, 1999 to purchase 5,500,000 shares of the Company's common
stock.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 9th day of August,
1999.

LEAP WIRELESS INTERNATIONAL, INC.
a Delaware corporation

By: /s/ DANIEL O. PEGG
-------------------------------------
Daniel O. Pegg
Sr. Vice President

ATTEST:

By: /s/ JAMES E. HOFFMANN
------------------------------------------
James E. Hoffmann
Senior Vice President, General Counsel
and Secretary

19
<PAGE> 20

EXHIBIT A

SUBSCRIPTION FORM

Date: ________________, 19___

Leap Wireless International, Inc.
10307 Pacific Center Court
San Diego, California 92121
Attn: President

Ladies and Gentlemen:

[ ] The undersigned hereby elects to exercise the warrant issued to it by
Leap Wireless International, Inc. (the "Company") and dated ___________
(the "Warrant") and to purchase thereunder ____________________________
shares of Common Stock of the Company (the "Shares") at the Stock
Purchase Price.

The undersigned hereby elects to pay the Purchase Price in the following manner:

[ ] cash

[ ] cancellation of indebtedness of the Company

[ ] delivery to the Company of other common stock of the Company
having a fair market value as of the date of exercise equal to
the Stock Purchase Price times the number of shares to be
acquired upon exercise

[ ] other form of consideration approved by the Board of Directors of
the Company

[ ] The undersigned hereby elects to convert _______________________
percent (____%) of the value of the Warrant pursuant to the provisions
of Section 1.2 of the Warrant.

Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.

Very truly yours,

________________________________________

By: ____________________________________

Title: _________________________________

<PAGE> 1
Exhibit 4.2.3

FORM OF VOTING AGREEMENT

This VOTING AGREEMENT (this "Agreement"), dated as of April 1, 1999,
is by and among Leap Wireless International, Inc., a Delaware corporation (the
"Company") and the persons listed on the counterpart signature pages hereto
(herein referred to collectively as the "Investors" and individually as an
"Investor"). In order to facilitate the Company's approval under the rules,
policies and orders of the Federal Communications Commission (the "FCC") as a
"Publicly Traded Corporation with Widely Disbursed Voting Power" (a "PTC") and a
"very small business" designated entity eligible to hold C-Block or F-Block PCS
licenses, the Investors have agreed to execute and deliver this Agreement.

The parties hereby agree as follows:

1. Voting of Stock. For as long as (i) the Company or Cricket
Holdings, Inc. ("Cricket") desires to remain qualified as a PTC or as a "very
small business" designated entity eligible to hold C-Block or F-Block PCS
licenses, as those terms are defined under the rules, policies or orders of the
FCC, and (ii) if and to the extent that, in the written opinion (which may be a
reasoned opinion) of the Company's outside regulatory counsel, which counsel
shall be reasonably satisfactory to QUALCOMM Incorporated on behalf of the
Investors, an Investor's ability to vote shares of the Company's capital stock
(considered singly or in the aggregate with the other Investors and other
holders of the Company's capital stock) would otherwise disqualify the Company
or Cricket as a PTC or as a "very small business" designated entity eligible to
hold C-Block or F-Block PCS licenses, each such Investor (prior to the close of
voting but after the votes of all other outstanding voting securities which are
not subject to this Agreement have been tallied) shall cause all such shares of
the Company's capital stock which Investor has the right to vote to be voted in
proportion to the aggregate affirmative and negative votes of the other
outstanding voting securities of the Company, in respect of each proposal
submitted for a vote or written consent of the Company's stockholders.

2. After-Acquired Shares. All of the provisions of this Agreement
shall apply to all shares of the Company's capital stock now owned by or which
may be issued or transferred hereafter to any of the Investors, including
without limitation, all shares issued upon exercise of any warrant or stock
option, all shares issued pursuant to any events described in Section 3 below,
and any shares acquired by gift, privately negotiated transactions, open market
purchases or in any other manner whatsoever.

3. Recapitalizations, Exchanges, Etc. Affecting the Company's Stock.
The provisions of this Agreement shall apply, to the fullest extent set forth
herein, to any and all shares of capital stock of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets, or
otherwise) that may be issued in respect of, in exchange for, or in substitution
of the Company's Common Stock and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, recapitalizations and the like
occurring

1
<PAGE> 2
after the date hereof.

4. Injunctive Relief. In the event of a breach or threatened breach
of this Agreement by any Investor, the parties agree that money damages, alone,
may be an inadequate remedy, and that the Company may apply for injunctive and
other equitable relief, including an order for specific performance, to prevent
or remedy such breach.

5. Miscellaneous.

(a) Successors, Assigns and Transferees. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, heirs, legatees, successors and assigns.

(b) Disputes. Any controversy or dispute between the Company,
on the one hand, and any Investor or Investors, on the other hand, arising under
this Agreement, including the enforceability of this arbitration clause, shall
be settled by binding arbitration before a single arbitrator in San Diego,
California in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, Expedited Procedures. The governing law of such
arbitration shall be as set forth in Section 5(c) hereof. Judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

(c) Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to choice of
law or conflicts of law principles.

(d) Contravention. If any provision of this Agreement
contravenes any applicable law or regulation, the remainder of the Agreement
shall be given effect as though such provision was not present, and in a manner
so as to achieve the objective of such provision as nearly as possible without
contravening the law.

(e) Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.

(f) Amendment. This Agreement may be amended, modified or
supplemented only by written agreement of the party or parties hereto against
whom enforcement of such amendment, modification or supplement is sought.

2
<PAGE> 3
[COUNTERPART SIGNATURE PAGE TO VOTING AGREEMENT]

IN WITNESS WHEREOF, the parties have executed this Voting Agreement
as of the date first written above.

LEAP WIRELESS INTERNATIONAL, INC.

By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------

CORPORATE INVESTORS

By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------

INDIVIDUAL INVESTORS

By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------

<PAGE> 1

EXHIBIT 4.2.4

AMENDED AND RESTATED
AGREEMENT CONCERNING SHARE OWNERSHIP

This AMENDED and RESTATED AGREEMENT CONCERNING SHARE OWNERSHIP (this
"Agreement"), dated as of August 4, 1999 is by and between QUALCOMM
Incorporated, a Delaware corporation ("QUALCOMM") and Leap Wireless
International, Inc., a Delaware corporation ("Leap Wireless") and amends and
restates the Agreement Concerning Share Ownership dated April 1, 1999. For good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, QUALCOMM and Leap Wireless hereby agree as follows:

1. Share Ownership. From and after the date of this Agreement, for
so long as the Company or Cricket Holdings, Inc. seeks to remain qualified as a
"Publicly Traded Corporation With Widely Disbursed Voting Power" (a "PTC") or as
a "very small business" designated entity eligible to hold C-Block or F-Block
PCS licenses, as those terms are defined in the rules, policies and orders of
the Federal Communications Commission (the "FCC"), QUALCOMM shall not purchase,
receive or otherwise hold (whether by purchase, gift, pursuant to options,
warrants or convertible securities, or otherwise) any shares of Leap Wireless
Common Stock in excess of 15% of the Leap Wireless Common Stock, unless, in the
written opinion (which may be a reasoned opinion) of Leap Wireless' outside
regulatory counsel, which counsel shall be reasonably satisfactory to QUALCOMM,
such purchase, receipt or holding will not disqualify Leap Wireless as a PTC or
as a "very small business" designated entity eligible to hold C-Block or F-Block
PCS licenses.

2. Officers and Directors. QUALCOMM acknowledges and agrees that in
determining whether QUALCOMM has acquired or will acquire 15% or more of the
Leap Wireless Common Stock which would disqualify Leap Wireless or Cricket
Holdings, Inc. as a PTC or as a "very small business" designated entity eligible
to hold C-Block or F-Block PCS licenses, QUALCOMM will expressly include in its
ownership calculations all shares of Leap Wireless capital stock held by or
which after the date of this Agreement are acquired by (whether by purchase,
gift, pursuant to options, warrants or convertible securities or otherwise), any
officers or directors of QUALCOMM.

3. Compliance Program. With Leap Wireless' reasonable assistance,
from and continuing after the date of this Agreement, QUALCOMM shall develop,
implement and maintain a compliance program in order to permit QUALCOMM to
monitor the number of Leap Wireless shares, options or warrants or other
securities convertible into Leap Wireless Common Stock held or otherwise
acquired by its officers and directors to ensure QUALCOMM's ongoing compliance
with the provisions of Sections 1 and 2 of this Agreement and Section 5.14 of
that certain Warrant dated September 23, 1998, as amended, issued by Leap
Wireless to QUALCOMM. Under this compliance program, (i) QUALCOMM will
periodically instruct its officers and directors to report immediately to
QUALCOMM any acquisitions or other receipt of additional Leap Wireless shares,
options or warrants or other securities convertible into Leap Wireless Common
Stock held by such individuals, and (ii) QUALCOMM will poll in writing

<PAGE> 2

each of its officers and directors on a monthly basis to confirm such person's
direct and indirect holdings of Leap Wireless Common Stock and to inquire
whether any such individual has acquired or otherwise received, directly or
indirectly, any Leap Wireless shares, options or warrants or other securities
convertible into Leap Wireless Common Stock during the month.

4. Voting Agreement. QUALCOMM shall execute and deliver concurrently
with this Agreement that certain Voting Agreement of even date herewith by and
among Leap Wireless, QUALCOMM and the other parties signatory thereto (the
"Voting Agreement"). In addition, QUALCOMM shall use its reasonable best efforts
to cause its officers and directors to become a party to and promptly execute
and deliver to Leap Wireless the Voting Agreement.

5. Injunctive Relief. In the event of a breach or threatened breach
of this Agreement by QUALCOMM, the parties agree that money damages, alone, may
be an inadequate remedy, and that Leap Wireless may apply for injunctive and
other equitable relief, including an order for specific performance, to prevent
or remedy such breach.

6. Miscellaneous.

(a) Term. The provisions of this Agreement shall continue in
full force and effect until September 23, 2008.

(b) Successors, Assigns and Transferees. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, heirs, legatees, successors and assigns.

(c) Disputes. Any controversy or dispute between Leap Wireless
and QUALCOMM arising under this Agreement, including the enforceability of this
arbitration clause, shall be settled by binding arbitration before a single
arbitrator in San Diego, California in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, Expedited Procedures.
The governing law of such arbitration shall be as set forth in Section 6(c)
hereof. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof.

(d) Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to choice of
law or conflicts of law principles.

(e) Contravention. If any provision of this Agreement
contravenes any applicable law or regulation, the remainder of the Agreement
shall be given effect as though such provision was not present, and in a manner
so as to achieve the objective of such provision as nearly as possible without
contravening the law.

(f) Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when

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<PAGE> 3

executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.

(g) Amendment. This Agreement may be amended, modified or
supplemented only by written agreement of the party or parties hereto against
whom enforcement of such amendment, modification or supplement is sought.

IN WITNESS WHEREOF, the parties have executed this Agreement Concerning
Share Ownership as of the date first written above.

LEAP WIRELESS INTERNATIONAL, INC.

By: /s/ James E. Hoffmann
--------------------------------------
Name: James E. Hoffmann
------------------------------------
Title: Sr. Vice President, General Counsel
-----------------------------------

QUALCOMM INCORPORATED

By: /s/ Steven R. Altman
--------------------------------------
Name: Steve Altman
------------------------------------
Title: Executive Vice President
-----------------------------------

<PAGE> 1

EXHIBIT 10.1.1

FIRST AMENDMENT TO
SEPARATION AND DISTRIBUTION AGREEMENT

THIS FIRST AMENDMENT TO SEPARATION AND DISTRIBUTION AGREEMENT is dated
August 6, 1999 and amends that certain Separation and Distribution Agreement,
dated as of September 23, 1998 (the "Agreement"), by and between QUALCOMM
INCORPORATED ("QUALCOMM") and LEAP WIRELESS INTERNATIONAL, INC. ("Leap").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings assigned to them in the Agreement.

WHEREAS, the parties have agreed to amend certain provisions of the
Agreement and have determined that it is appropriate and desirable to set forth
the amendments to the Separation and the Distribution in this Amendment.

NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:

1. AMENDMENT OF SECTIONS 5.1 AND 5.2. Sections 5.1 and 5.2 of the
Agreement are amended and restated in their entirety to read as follows:

5.1 RESTRICTION ON INTERESTS. During the period commencing at the
Distribution and continuing until January 1, 2004, subject to the
express terms of written agreements to which Leap is a party in
existence at the time of the Distribution:

(a) Leap and its Affiliates shall not acquire Interests,
directly or indirectly, in Persons that deploy (or intend to deploy) a
Wireless System outside the United States unless (i) with respect to
Persons that do not have a pre-existing Wireless System that utilizes a
technology other than cdmaOne, such Person only utilizes or intends to
only utilize cdmaOne for such Wireless System and such Person agrees to
procure infrastructure and subscriber equipment from QUALCOMM in
accordance with the provisions of the Equipment Agreement, or (ii) with
respect to Persons that do have a pre-existing Wireless System that
utilizes a technology other than cdmaOne, the provisions of the last
sentence in this Section 5.1 are complied with as to such Person and
such Person agrees to procure infrastructure and subscriber equipment
from QUALCOMM for such Person's cdmaOne Wireless System in accordance
with the provisions of the Equipment Agreement; and

(b) Leap shall use commercially reasonable efforts to
cause each Related Entity that is not a Leap Affiliate to not acquire
Interests in other Persons that deploy (or intend to deploy) a Wireless
System outside the United States unless such Person only utilizes or
intends to only utilize cdmaOne for such Wireless System and such Person
agrees to procure infrastructure and subscriber equipment from QUALCOMM
in accordance with the provisions of the Equipment Agreement.

Notwithstanding the provisions of this Section 5.1, an Interest may be
acquired in a Person that has a pre-existing Wireless System that
utilizes a technology other than cdmaOne, but only so long as (i) the
proceeds from the acquisition of any such Interest

1
<PAGE> 2

are to be used by such Person solely to support and in connection with
the deployment of a cdmaOne Wireless System, (ii) reasonable efforts are
made to ensure that such proceeds are so utilized, and (iii) unless such
Person is already a party to an equipment requirements agreement with
QUALCOMM (in accordance with the provisions of the Equipment Agreement),
the efforts described above are undertaken to have such Person agree to
procure infrastructure and subscriber equipment in accordance with the
provisions of the Equipment Agreement. The parties agree that this
Section 5.1 shall not restrict Leap's investments in operating companies
in the United States.

5.2 RESTRICTION ON USE OF OTHER TECHNOLOGY Leap agrees that during the
period commencing at the Distribution and continuing until January 1,
2004, subject to the express terms of written agreements to which Leap
is a party in existence at the time of the Distribution:

(c) Leap will solely implement and utilize cdmaOne in
connection with its own (i) deployment and/or use of wireless
infrastructure equipment outside of the United States, and (ii)
distribution and sale of wireless subscriber equipment outside of the
United States, and (iii) provision of wireless communication services in
the world outside of the United States (the activities in clauses "(i)"
through "(iii)" collectively being referred to as the "Wireless
Activities");

(d) Leap will cause its Affiliates that do not have a
pre-existing Wireless System that utilizes a technology other than
cdmaOne to solely implement and utilize, cdmaOne in connection with each
such Affiliate's Wireless Activities;

(e) Leap will cause its Affiliates that do have a
pre-existing Wireless System that utilizes a technology other than
cdmaOne to solely implement and utilize cdmaOne in connection with each
such Affiliate's Wireless Activities to the extent those Wireless
Activities are funded, directly or indirectly, by Leap, and furthermore
Leap shall exercise commercially reasonable efforts to cause such
Affiliates to use cdmaOne or a cdmaOne overlay with respect to any
expansions of each such pre-existing non-cdmaOne Wireless System; and

(f) Leap will use its commercially reasonable efforts to
cause each Related Entity (that is not a Leap Affiliate) to solely
implement and utilize cdmaOne in connection with each such Related
Entity's Wireless Activities.

Except to the extent set forth in clause "(c)" of the immediately
preceding sentence with respect to Affiliates having pre-existing
non-cdmaOne Wireless Systems, (i) in no event will Leap or its
Affiliates implement, utilize or support in any respect global system
for mobile communications ("GSM"), time division multiple access
("TDMA") or any other digital technologies (or variants thereof) in
competition with cdmaOne in connection with the provision of wireless
communication services outside the United States, and (ii) Leap agrees
to exercise its commercially reasonable efforts to cause any Related
Entity not to implement, utilize or support in any respect GSM, TDMA or
any other competing digital technologies (or variants thereof) in
competition with cdmaOne in connection with the provision of wireless
communication services outside the United States. Leap further

2
<PAGE> 3

agrees to, and agrees to cause its Affiliates to, support and promote
cdmaOne based technology for commercial implementation by its corporate
partners and any consortium of which it is a member in connection with
any Wireless Activities engaged in by any such partners and/or consortia
in all parts of the world other than the United States. The parties
agree that this Section 5.2 shall not restrict Leap's investments in
operating companies in the United States or the technology choices of or
equipment deployment by Leap or operating companies in the United
States.

2. EFFECT ON CREDIT AGREEMENT. The Parties agree that there are no
provisions in the Credit Agreement dated as of September 23, 1998 (the "Credit
Agreement"), by and between QUALCOMM, Leap and ABN AMRO BANK N.V., as
Administrative Agent which would have the effect of continuing the obligations
of Leap removed as a result of the amendment set forth in Section 1 above. If
and to the extent that such restrictions do exist in the Credit Agreement, the
Parties terminate and permanently waive such restrictions.

3. FULL FORCE AND EFFECT; ENTIRE AGREEMENT. Except to the extent
expressly provided in this Amendment, the terms and conditions of the Separation
and Distribution Agreement shall remain in full force and effect. This
Amendment, and the Separation and Distribution Agreement constitute and contain
the entire agreement of the parties hereto and supersede any and all prior
agreements, negotiations, correspondence, understandings and communications
between the parties, whether written or oral, respecting the subject matter
hereof.

IN WITNESS WHEREOF, the parties have caused this Separation and
Distribution Agreement to be executed by their duly authorized representatives.

QUALCOMM INCORPORATED:

By: /s/ Steven R. Altman
------------------------------------------
Name: Steve Altman
------------------------------------------
Title: Executive Vice President
-----------------------------------

LEAP WIRELESS INTERNATIONAL, INC.:

<PAGE> 1

EXHIBIT 10.5.1

FIRST AMENDMENT TO
MASTER AGREEMENT REGARDING EQUIPMENT PROCUREMENT

This First Amendment to Master Agreement Regarding Equipment Procurement
("Amendment") is entered into as of August 6, 1999 and amends that certain
Master Agreement Regarding Equipment Procurement (the "Agreement"), made
effective as of the 23rd day of September, 1998 (the "Effective Date"), between
QUALCOMM Incorporated, a Delaware corporation, having an office at 5775
Morehouse Drive, San Diego, California 92121 ("QUALCOMM"), and Leap Wireless
International, Inc., a Delaware corporation, having an office at 10307 Pacific
Center Court, San Diego, California 92121 ("Leap"). Terms used in this Amendment
not otherwise defined herein shall have the meaning ascribed thereto in the
Agreement.

WHEREAS, the parties have agreed to amend certain provisions of the
Agreement pursuant to the terms and conditions of this Amendment; and

WHEREAS, certain provisions of the Agreement have been assigned to and
assumed by Telefonaktiebolaget LM Ericsson and/or its affiliates ("Ericsson"),
and the parties intend, by making the amendments set forth herein, to make no
changes to the rights or obligations (i) of Ericsson under the Agreement as such
rights or obligations pertain to Leap and (ii) of Leap under the Agreement as
such rights or obligations pertain to Ericsson.

1. ELIMINATION OF "LAST LOOK." The parties agree that to the extent the
provisions of Section 3 of the Agreement have the effect of giving to
QUALCOMM a right to receive notification of the bids of others and an
opportunity to reduce its bid to assure its right to supply equipment to
Leap's Operating Companies (the "Last Look Right") in the United States,
the parties hereby amend the Agreement to eliminate the Last Look Right in
the United States. The parties also agree that QUALCOMM has no rights to
sell Products under Section 2 of the Agreement and therefore has no Last
Look Right with respect to Products or otherwise pursuant to the Agreement.

2. NO EFFECT ON ERICSSON OR NON DOMESTIC OPERATORS. The Parties expressly
agree that the terms of this Amendment shall have no effect on the rights
or obligations of Ericsson under the Agreement or on the rights or
obligations of QUALCOMM as they relate to Non-Domestic Operators or on the
rights and obligations of Leap under the Agreement as such rights and
obligations pertain to Ericsson.

3. EFFECT ON CREDIT AGREEMENT. The parties agree that there are no provisions
in the Credit Agreement dated as of September 23, 1998 (the "Credit
Agreement"), by and between QUALCOMM, Leap and ABN AMRO BANK N.V., as
Administrative Agent which would have the effect of continuing the
obligations of Leap removed as a result of the amendment set forth in
Section 1 above. If and to the extent that such restrictions do exist in
the Credit Agreement, the parties terminate and permanently waive such
restrictions.

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<PAGE> 2

4. FULL FORCE AND EFFECT; ENTIRE AGREEMENT. Except to the extent expressly
provided in this Amendment, the terms and conditions of the Agreement shall
remain in full force and effect. This Amendment constitutes and contains
the entire agreement of the parties hereto with respect to the subject
matter hereof and supersedes any and all prior agreements, negotiations,
correspondence, understandings and communications between the parties,
whether written or oral, respecting the subject matter hereof.

IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their duly authorized representatives as of the Effective Date.

Leap Wireless International, Inc., QUALCOMM Incorporated,
a Delaware corporation a Delaware corporation

By: /s/ James E. Hoffmann By: /s/ Steven R. Altman
-------------------------------------- ---------------------------

Print Name: James E. Hoffmann Print Name: Steve Altman
------------------------------ -------------------

Title: Sr. Vice President, General Counsel Title: Executive Vice President
----------------------------------- ------------------------

<PAGE> 1
EXHIBIT 10.22

CRICKET COMMUNICATIONS INC.
1999 STOCK OPTION PLAN

ADOPTED: JUNE 21, 1999
APPROVED BY STOCKHOLDERS: JUNE 21, 1999
TERMINATION DATE: JUNE 20, 2009

1. PURPOSES.

(a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options
are the Employees, Directors and Consultants of the Company and its Affiliates.

(b) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which eligible recipients of Options may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of the following
Options: (i) Incentive Stock Options, and (ii) Nonstatutory Stock Options.

(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Options, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2. DEFINITIONS.

(a) "AFFILIATE" means any person that is a "parent" or "subsidiary" of the
Company, as those terms are defined under Rule 405 of Regulation C promulgated
under the Securities Act.

(b) "BOARD" means the Board of Directors of the Company.

(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c).

(e) "COMMON STOCK" means the common stock of the Company.

(f) "COMPANY" means Cricket Communications Inc., a Delaware corporation.

(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services. However, the term "Consultant" shall not include
Directors of the Company who either are not compensated by the Company for their
services as Directors or who are merely paid a fee by the Company for their
services as Directors.

<PAGE> 2
(h) "CONTINUOUS SERVICE" means that the Optionholder's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
terminated. The Optionholder's Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionholder
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Optionholder renders such
service, provided that there is no termination of the Optionholder's Continuous
Service. For example, an Optionholder's change in status from an Employee to a
Consultant or a Director with no intervening period of time during which the
Optionholder is not an Employee, Director or Consultant will not constitute a
termination of Continuous Service.

(i) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.

(j) "DIRECTOR" means a member of the Board of Directors of the Company.

(k) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

(l) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.

(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable.

(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.

(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

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(p) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.

(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.

(r) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(s) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

(t) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

(u) "OPTIONHOLDER" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.

(v) "OUTSIDE DIRECTOR" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

(w) "PLAN" means this Cricket Communications Inc. 1999 Stock Option Plan.

(x) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.

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<PAGE> 4
(z) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Affiliate.

3. ADMINISTRATION.

(a) ADMINISTRATION BY BOARD. The Board will administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).

(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; what type or combination of types of Option shall be granted; the
provisions of each Option granted (which need not be identical), including the
time or times when a person shall be permitted to receive stock pursuant to an
Option; and the number of shares with respect to which an Option shall be
granted to each such person.

(ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

(iii) To amend the Plan or an Option as provided in Section 11.

(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.

(c) DELEGATION TO COMMITTEE. The Board may delegate administration of the
Plan to a committee composed of not fewer than two (2) members (the
"Committee"), all of the members of which Committee shall be, in the discretion
of the Board, Non-Employee Directors and/or Outside Directors. If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee of two (2) or more Outside
Directors any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Options to eligible persons who (1)
are not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at the
time

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<PAGE> 5
of recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.

(d) The chief executive officer of the Company, or the Board, in that
party's sole discretion, may determine whether Continuous Service shall be
considered terminated in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave. The
term of each Option may be extended at the discretion of the party approving the
leave of absence (not to extend beyond ten (10) years from the date of original
grant) for the period of any such approved leave of absence.

4. SHARES SUBJECT TO THE PLAN.

(a) SHARE RESERVE. Subject to the provisions of Section 10 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Options shall not exceed in the aggregate Seven Million Six Hundred Thousand
Shares (7,600,000) shares of Common Stock.

(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the shares not acquired under such Option shall revert to and
again become available for issuance under the Plan.

(c) SOURCE OF SHARES. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY.

(a) ELIGIBILITY FOR SPECIFIC OPTIONS. Incentive Stock Options may be
granted only to employees of the Company, or its parent or subsidiary
corporations within the meaning of Section 422(b) of the Code, or any successor
provision. Nonstatutory Stock Options may be granted to Employees, Directors and
Consultants.

(b) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be eligible
for the grant of an Option unless the exercise price of such Option is at least
one hundred ten percent (110%) of the Fair Market Value of the Common Stock at
the date of grant and, if such Option is to be an Incentive Stock Option, such
Option is not exercisable after the expiration of five (5) years from the date
of grant.

(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 10
relating to adjustments upon changes in stock, no Employee shall be eligible to
be granted in any calendar year Options covering more than One Million
(1,000,000) shares.

6. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock

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<PAGE> 6
Options or Nonstatutory Stock Options at the time of grant, and a separate
certificate or certificates will be issued for shares purchased on exercise of
each type of Option. The provisions of separate Options need not be identical,
but each Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the following
provisions:

(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted (five (5) years in the case of an Incentive
Stock Option granted to a Ten Percent Stockholder).

(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.

(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.

(d) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Optionholder or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.

In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding

6
<PAGE> 7
the foregoing provisions of this subsection 6(e), the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionholder,
shall thereafter be entitled to exercise the Option.

(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(f), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.

(g) VESTING GENERALLY. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.

(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than due to the Optionholder's death or
Disability), the Optionholder may exercise his or her Option, but only within
such period of time as is determined by the Board, and only to the extent
provided in the Option Agreement and not inconsistent with the terms of the
Plan. In no event shall an Option be exercisable after the expiration of the
term of such Option as set forth in the Option Agreement. In the case of an
Incentive Stock Option, the Board shall determine such period of time (not to
exceed three (3) months from the date of termination) when the Option is
granted. If at the date of termination, the Optionholder is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of such Option shall revert to and again become available for issuance
pursuant to Options granted under the Plan to the extent provided under Section
4. If after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, such Option shall terminate,
and the shares covered by such Option, shall revert to and again become
available for issuance pursuant to Options granted under the Plan to the extent
provided under Section 4.

(i) DISABILITY. In the event an Optionholder's Continuous Service
terminates as a result of the Optionholder's Disability, then: (i) the Option
may continue to vest and remain outstanding, if so provided in the Option
Agreement, or (ii) if the Option Agreement does not provide for such
continuation of the Option, then the Optionholder may exercise his or her
Option, but only within twelve (12) months from the date of such termination (or
such shorter period specified in the Option Agreement), and only to the extent
that the Optionholder was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). If, at the date of termination,
the Option does not continue under its original terms and the Optionholder is
not entitled to exercise

7
<PAGE> 8
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance pursuant to
Options granted under the Plan. If, after termination, the Option does not
continue under its original terms and the Optionholder does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance pursuant to Options granted under the Plan to the
extent provided under Section 4.

(ii) DEATH. In the event an Optionholder's Continuous Service
terminates as a result of Optionholder's death or due to the Optionholder's
Disability and such termination due to Disability is followed by the
Optionholder's death, then: (A) the vesting of all unvested shares may be
accelerated as of the date of the death of the Optionholder, if so provided in
the Option Agreement, or (B) if the Option Agreement does not provide for the
acceleration of the vesting of all unvested shares, then the Option may be
exercised, at any time within twelve (12) months following the date of death, or
such shorter period specified in the Option Agreement (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement), by the Optionholder's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent the
Optionholder was entitled to exercise the Option at the date of death. If the
Option Agreement does not provide for the acceleration of the vesting of all
unvested shares and, at the time of death, the Optionholder was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of such Option shall revert to and again become available for issuance
pursuant to Options granted under the Plan to the extent provided under Section
4. If, after death, the Optionholder's estate or a person who acquired the right
to exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
pursuant to Options granted under the Plan to the extent provided under Section
4

(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to an unvested share repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.

7. COVENANTS OF THE COMPANY.

(a) AVAILABILITY OF SHARES. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.

(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under

8
<PAGE> 9
the Securities Act the Plan, any Option or any stock issued or issuable pursuant
to any such Option. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell stock upon exercise of such Options unless and until such authority is
obtained.

(c) FINANCIAL STATEMENTS. The Company will deliver to each Optionholder
financial statements for the Company at least annually to the extent required by
the California Code of Regulations Section 260.140.46.

8. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

9. MISCELLANEOUS.

(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which an Option may first be exercised or the
time during which an Option or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Option stating the time at which it
may first be exercised or the time during which it will vest.

(b) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.

(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Option granted pursuant thereto shall confer upon any
Optionholder or other holder of Options any right to continue to serve the
Company or an Affiliate in the capacity in effect at the time the Option was
granted or shall affect the right of the Company or an Affiliate to terminate:
(i) the employment of an Employee with or without notice and with or without
cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.

(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

9
<PAGE> 10
(e) INVESTMENT ASSURANCES. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if
(iii) the issuance of the shares upon the exercise or acquisition of stock under
the Option has been registered under a then currently effective registration
statement under the Securities Act or (iv) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of an
Option Agreement, the Optionholder may satisfy any tax withholding obligation
(whether imposed on the Company or its Affiliates) relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of stock under the Option; or (iii) delivering to the
Company owned and unencumbered shares of the Common Stock.

10. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) CHANGE IN CAPITAL STOCK. If any change is made in the stock subject to
the Plan, or subject to any Option, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person pursuant to subsection 5(c), and the outstanding Options will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Options. Such adjustments shall be
made by the Board, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)

10
<PAGE> 11
(b) CHANGE IN CONTROL.

(i) In the event of:

(1) the sale of all or substantially all of the Company's
assets,

(2) a merger, consolidation or reorganization of the Company
with or into another corporation or other legal person, other than a merger,
consolidation or reorganization in which fifty percent (50%) or more of the
combined voting power of the then-outstanding securities of the surviving entity
(or if more than one entity survives the transaction, the controlling entity)
immediately after such a transaction are held, directly or indirectly, in the
aggregate by holders of voting securities of the Company immediately prior to
such transaction, or

(3) the acquisition by any person (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than Leap
Wireless International, Inc. or its affiliates (within the meaning of Rule 12b-2
promulgated under the Exchange Act), of beneficial ownership (within the meaning
of Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing more than fifty percent (50%) of the combined
voting power of the then-outstanding securities of the Company (collectively, a
"Change in Control"),

then, (A) any surviving corporation shall assume any Options outstanding under
the Plan or shall substitute similar options for those outstanding under the
Plan (including an option to acquire the same consideration paid to stockholders
in the transaction described in this subsection 10(b)(i)), or (B) such Options
shall continue in full force and effect. In the event any surviving corporation
refuses to assume such Options, or to substitute similar options for those
outstanding under the Plan, then, with respect to Options held by Optionholders
then performing services as Employees, Directors or Consultants, the time at
which such Options may first be exercised in full shall be accelerated and the
Options terminated if not exercised prior to such event and, with respect to any
other Options outstanding under the Plan, such Options shall terminate if not
exercised prior to such event. In the event of a dissolution or liquidation of
the Company, any Options outstanding under the Plan shall terminate if not
exercised prior to such event.

(ii) In addition, with respect to any person who was providing
Continuous Service immediately prior to the consummation of the Change in
Control, any Options (including an option substituted for an Option) held by
such person shall immediately become fully vested and exercisable (and any
repurchase right by the Company with respect to shares acquired by such person
under an Option (or an option substituted for an Option) shall lapse) if such
person's Continuous Service is Involuntarily Terminated Without Cause or
Constructively Terminated within twenty-four (24) months following the Change in
Control. Notwithstanding the preceding sentence, in the event all of the
following occurs: (A) such contemplated Change in Control would occur prior to
the second anniversary of the adoption of this Plan by the Board; (B) such
potential acceleration of vesting (and exercisability) would by itself result in
a contemplated Change in Control that would otherwise be eligible to be
accounted for as a "pooling of interests"

11
<PAGE> 12
accounting transaction to become ineligible for such accounting treatment; and
(C) the potential acquirer of the Company desires to account for such
contemplated Change in Control as a "pooling of interests" transaction, then
such acceleration shall not occur. Additionally, in the event that the
restrictions upon acceleration provided for in the immediately preceding
sentence by itself would result in a contemplated Change in Control to become
ineligible to be accounted for as a "pooling of interests" accounting
transaction, then such restrictions shall be deemed inoperative. Accounting
issues shall be determined by the Company's independent public accountants
applying generally accepted accounting principles.

(iii) "CONSTRUCTIVELY TERMINATED" shall mean the voluntary
termination of employment by Optionholder within ninety (90) days after any of
the following are undertaken without Optionholder's express written consent:

(A) a reduction by the Company in Optionholder's base salary;

(B) the value of the fringe benefits for which an Optionholder
is eligible after a Change of Control is less than the value of the fringe
benefits for which the Optionholder was eligible immediately before the Change
of Control by an amount which is greater than 10% of the Optionholder's base pay
at the time of the comparison (in each case excluding the value of fringe
benefits based on stock based compensation, including stock options and employee
stock purchase plans);

(C) a relocation of Optionholder's primary business office
with the Company to a location more than fifty (50) miles from the location of
the Optionholder's primary business office with the Company prior to the Change
of Control, it being understood that required travel by Optionholder on the
Company's business shall not be deemed to be a relocation of Optionholder's
primary business office;

(D) any breach by the Company of any material agreement
between Optionholder and the Company concerning Optionholder's employment; or

(E) any failure by the Company to obtain the assumption of any
material written contract between Optionholder and the Company concerning
Optionholder's employment by any successor or assign of the Company.

(iv) "INVOLUNTARILY TERMINATED WITHOUT CAUSE" shall mean dismissal
or discharge of Optionholder for any reason other than Cause, death or
Disability.

(v) "CAUSE" shall mean any of the following: (A) an intentional act
which materially injures the Company; (B) an intentional refusal or failure to
follow lawful and reasonable directions of the Board or an individual to whom
Optionholder reports (as appropriate); (C) a failure by Optionholder to perform
to the reasonable satisfaction of the Company; provided, however, an
Optionholder shall be not deemed to be terminated for "cause" pursuant to this
subparagraph (C) unless, prior to his or her termination, the Company notifies

12
<PAGE> 13
the Optionholder in writing that it is not satisfied with his or her performance
and provides the Optionholder a reasonable opportunity to improve his or her
performance to a level reasonably satisfactory to the Company; or (D) a
conviction of a felony involving moral turpitude which is reasonably likely to
inflict or has inflicted material injury on the Company.

11. AMENDMENT OF THE PLAN AND OPTIONS.

(a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 10 relating to
adjustments upon changes in stock, no amendment shall be effective unless timely
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

(d) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.

(e) AMENDMENT OF OPTIONS. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.

12. TERMINATION OR SUSPENSION OF THE PLAN.

(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.

(b) NO IMPAIRMENT OF RIGHTS. Rights and obligations under any Option
granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Optionholder.

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<PAGE> 14
13. EFFECTIVE DATE OF PLAN.

The Plan shall become effective as determined by the Board, but no Option
shall be exercised unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.

<PAGE> 1
EXHIBIT 10.23

CRICKET COMMUNICATIONS INC.

STOCK OPTION GRANT NOTICE

CRICKET COMMUNICATIONS INC. (the "Company"), pursuant to its 1999 Stock Option
Plan (the "Plan") hereby grants to the Optionee named below a stock option to
purchase the number of shares of the Company's common stock set forth below. As
designated below, this stock option either is or is not intended to qualify for
the federal income tax benefits available to an "incentive stock option" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
This option is subject to all of the terms and conditions as set forth herein
and in the Stock Option Agreement and the Plan, which are incorporated herein in
their entirety.

Optionee/Employee #: ________ Grant No.: _____
Date of Grant: ________ Shares Subject to Option: _____
Exercise Price Per Share: ________ Expiration Date: _____
TYPE OF OPTION: ___ Incentive Stock Option ___ Nonstatutory Stock Option

VESTING SCHEDULE

<TABLE>
<CAPTION>
Exercisable Shares Vesting Date Expiration Date
------------------ ------------ ---------------
<S> <C> <C>

</TABLE>

ADDITIONAL TERMS/ACKNOWLEDGMENTS: The undersigned Optionee acknowledges receipt
of, and understands and agrees to the terms of the following: this Grant Notice,
the Stock Option Agreement and the Plan. Optionee further acknowledges that as
of the Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan
set forth the entire understanding between Optionee and the Company regarding
the acquisition of stock in the Company and supersedes all prior oral and
written agreements pertaining to this particular option.

CRICKET COMMUNICATIONS INC. OPTIONEE:

By: Name:
---------------------------- --------------------------------
Harvey P. White

Title: President Date:
--------------------------------
Date:
---------------------------

Attachment I: Option Agreement

Attachment II: 1999 Stock Option Plan

<PAGE> 2
CRICKET COMMUNICATIONS INC.

STOCK OPTION AGREEMENT

Pursuant to the Grant Notice and this Stock Option Agreement, the Company
has granted you an option to purchase the number of shares of the Company's
common stock ("Common Stock") indicated in the Grant Notice at the exercise
price indicated in the Grant Notice. Defined terms not explicitly defined in
this Stock Option Agreement but defined in the Plan shall have the same
definitions as in the Plan.

The details of this option are as follows:

1. Vesting. Subject to the limitations contained herein, this option will
vest as provided in the Grant Notice, provided that vesting will cease
upon the termination of your Continuous Service, unless such termination
is due to Disability or death. If termination of Continuous Service is due
to Disability or death, then this option will continue to vest and remain
outstanding as provided in paragraph 5 below.

2. Method of Payment. Payment of the exercise price by cash (or check) is due
upon exercise of all or any part of this option which has become
exercisable by you. Notwithstanding the foregoing, this option may be
exercised pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock results in either the receipt of cash (or check) by the
Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company. Payment of the exercise price may also be
made by a combination of the above methods.

3. Exercise for Minimum Number of Shares. The minimum number of shares with
respect to which this option may be exercised at any one time is one
hundred (100), except (a) as to an installment subject to exercise, as set
forth in paragraph 1, which amounts to fewer than one hundred (100)
shares, in which case, as to the exercise of that installment, the number
of such shares in such installment shall be the minimum number of shares,
and (b) with respect to the final exercise of this option, this minimum
shall not apply. This option may only be exercised for whole shares.

4. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the
Securities Act or, if such shares are not then so registered, the Company
has determined that such exercise and issuance would be exempt from the
registration requirements of the Securities Act.

5. Term.

(a) The term of this option commences on the Date of Grant (as specified
in the Grant Notice) and expires upon the earliest of:

1
<PAGE> 3
(i) the Expiration Date indicated in the Grant Notice;

(ii) the tenth (10th) anniversary of the Date of Grant; or

(iii) thirty (30) days after the termination of your Continuous
Service for any reason other than Disability or death,
provided that if the option is not exercisable during any part
of such thirty (30) day period solely because of the condition
set forth in paragraph 4 (Securities Law Compliance), then the
option shall not expire until the earlier of the Expiration
Date or until it shall have been exercisable for an aggregate
period of thirty (30) days after the termination of Continuous
Service.

(b) Notwithstanding the foregoing:

(i) If your Continuous Service terminates due to your Disability,
then this option will continue under its original terms and
expire upon the Expiration Date indicated in the Grant Notice.

(ii) If your Continuous Service terminates due to (x) your death,
or (y) your Disability and you subsequently die prior to the
Expiration Date, then this option shall immediately become
fully vested and exercisable for all of the option shares as
of the date of your death. This option will then expire on the
earlier occurring of either the Expiration Date or twelve (12)
months after the date of your death.

(c) If this option is designated an incentive stock option, then to
obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times
beginning on the Date of Grant and ending on the day three (3)
months before the date of exercise, you must be an employee of
the Company or a "parent corporation" or a "subsidiary
corporation" (as those terms are defined in Section 424 of the
Code), except in the event of your death or your Disability. The
Company does not represent or guarantee that this option will
necessarily be treated as an "incentive stock option."

6. Exercise.

(a) You may exercise the vested portion of this option during its term
by delivering a notice of exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the
Company, or to such other person as the Company may designate,
during regular business hours, together with such additional
documents as the Company may then require pursuant to subparagraph
9(e) of the Plan.

(b) By exercising this option you agree that as a condition to any
exercise of this option, the Company may require you to enter an
arrangement providing for the payment by you to the Company of
any tax withholding obligation of the Company arising by reason
of (1) the exercise of this option; (2) the lapse of any

2
<PAGE> 4
substantial risk of forfeiture to which the shares are subject at
the time of exercise; or (3) the disposition of shares acquired
upon such exercise.

(c) If this option is an incentive stock option, then by exercising this
option you agree to notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of
the Common Stock issued upon exercise of this option that occurs
within two (2) years after the Date of Grant or within one (1) year
after such shares of Common Stock are transferred upon exercise of
this option.

7. Transferability. This option is not transferable, except by will or by the
laws of descent and distribution, and is exercisable during your life only
by you.

8. Market Stand-Off Provisions.

(a) In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including
the Company's initial public offering, you shall not sell, make
any short sale of, loan, hypothecate, pledge, grant any option
for the purchase of, or otherwise dispose or transfer for value
or otherwise agree to engage in any of the foregoing transactions
with respect to, any Common Stock (or other equity securities of
the Company) acquired upon the exercise of the Option (the
"Purchased Shares") without the prior written consent of the
Company or its underwriters. Such limitations shall be in effect
for such period of time from and after the effective date of such
registration statement as may be requested by the Company or such
underwriters, but in no event shall such period exceed one
hundred-eighty (180) days.

(b) You shall be subject to the market stand-off provisions of this
Section 8 provided and only if the officers and directors of the
Company are also subject to similar arrangements.

(c) In the event of any stock dividend, stock split, recapitalization or
other change affecting any of the Company's outstanding equity
securities effected as a class without receipt of consideration,
then any new, substituted or additional securities distributed with
respect to the Purchased Shares shall be immediately subject to the
provisions of this Section 8, to the same extent the Purchased
Shares are at such time covered by such provisions.

9. Right Of First Refusal.

(a) Grant. You hereby grant to the Company rights of first refusal (the
"First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares by you. For purposes of this
Section 9, the term "transfer" shall include any sale, assignment or
other disposition for value of the Purchased Shares intended to be
made by you.

3
<PAGE> 5

(b) Notice of Intended Disposition. If you desire to accept a bona fide
third-party offer for the transfer of any or all of the Purchased
Shares (the shares subject to such offer are referred to as the
"Target Shares"), then you shall promptly: (i) deliver to the
Secretary of the Company written notice (the "Disposition Notice")
of the terms and conditions of the offer, including the purchase
price and the identity of the third-party offeror; and (ii) provide
satisfactory proof that the disposition of the Target Shares to such
third-party offeror would not violate the provisions of this
Agreement or the Plan and would be in compliance with applicable
law, including without limitation, all federal and state securities
laws.

(i) thirty (30) days following the Company's receipt of the
Disposition Notice, and

(ii) ten (10) days after the determinative cash valuation has been
made pursuant to this Section 9(c), if the purchase price
specified in the Disposition Notice is payable in property
other than cash or evidences of indebtedness (the "Exercise
Period"),

the Company shall have the right to repurchase any or all of the
Target Shares specified in the Disposition Notice upon the same
terms and conditions specified therein or upon terms and conditions
which do not materially vary from those specified therein. Such
right shall be exercisable by delivery of written notice (the
"Exercise Notice") to you prior to the expiration of such Exercise
Period. If such right is exercised with respect to all the Target
Shares specified in the Disposition Notice, then the Company (or its
assignees) shall effect the repurchase of the Target Shares,
including payment of the purchase price, not more than ten (10) days
after delivery of the Exercise Notice; and at such time you shall
deliver to the Company the certificates representing the Target
Shares to be repurchased, each certificate to be properly endorsed
for transfer. Should the purchase price specified in the Disposition
Notice be payable in property other than cash or evidences of
indebtedness, the Company (or its assignees) shall have the right to
pay the purchase price in the form of cash equal in amount to the
fair value of such property. If you and the Company (or its
assignees) cannot agree on such cash value within ten (10) days
after the Company's receipt of the Disposition Notice, the valuation
shall be made by an appraiser of recognized standing selected by you
and the Company (or its assignees) or, if they cannot agree on an
appraiser within twenty (20) days after the Company's receipt of the
Disposition Notice, each shall select an appraiser of recognized
standing and the two appraisers shall designate a third appraiser of
recognized standing, whose appraisal shall be determinative of such
value. The cost of such appraisal shall be shared equally by you and
the Company.

(d) Non-Exercise of Right. If the Exercise Notice is not given to you at
or prior to the expiration of the Exercise Period, you shall have a
period of sixty (60) days

4
<PAGE> 6
thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition
Notice upon the terms and conditions (including the purchase price)
no more favorable to such third-party offeror than those specified
in the Disposition Notice; provided, however, that any such sale or
disposition must not violate the provisions of this Agreement or the
Plan or applicable law, including all federal and state securities
laws. The third-party offeror shall acquire the Target Shares
subject to the Company's First Refusal Right hereunder, applicable
securities law restrictions and the market stand-off provisions of
Section 8. If Optionee does not effect such sale or disposition of
the Target Shares, the Target shares shall remain subject to this
Section 9 until such right lapses in accordance with Section 9(f).

(e) Partial Exercise of Right. If the Company (or its assignees) makes a
timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the
Disposition Notice, then (i) the Company (or its assignees) shall
effect the repurchase of such portion of the Target Shares,
including payment of the purchase price, not more than ten (10) days
after delivery of the Exercise Notice; and at such time you shall
deliver to the Company the certificates representing the Target
Shares to be repurchased, each certificate to be properly endorsed
for transfer and (ii) you shall have the option, exercisable by
written notice to the Company delivered within sixty (60) days after
the date of the Disposition Notice, to effect the sale of all of the
remaining Target Shares to the third-party offeror identified in the
Disposition Notice, but in full compliance with the requirements of
Section 9(d), as if the Company did not exercise the First Refusal
Right hereunder.

(f) Termination of First Refusal Rights. The First Refusal Right with
respect to any Purchased Shares shall expire upon the consummation
of an initial public offering of the Company's Common Stock which is
registered under the Securities Act.

10. Option Not a Service Contract. This option is not an employment or service
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the service of the
Company or an Affiliate, or of the Company or an Affiliate to continue
your service with the Company or the Affiliate. In addition, nothing in
this option shall obligate the Company or any Affiliates, their
stockholders, Board of Directors, Officers or Employees to continue any
relationship as a Director or Consultant for the Company or any Affiliate.

11. Notices. Any notices provided for in this option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at
the last address you provided to the Company.

12. Restriction on Pledge or Encumbrance. Until the consummation of an initial
public offering of the Company's Common Stock which is registered under
the Securities Act,

5
<PAGE> 7

you shall not pledge or otherwise encumber, nor permit to exist any liens
or other charges against, any of your Purchased Shares.

13. Restrictive Legends and Stop-Transfer Orders. Optionee understands and
agrees that the Company may cause restrictive legends to be placed upon
any certificate(s) evidencing ownership of Purchased Shares relating to
the obligations of and restrictions on the holder thereof arising under
this Agreement and any other legends that may be necessary or
appropriate under state or federal securities laws. Optionee agrees
that, in order to ensure compliance with the restrictions referred to
herein, the Company may issue appropriate "stop transfer" instructions
to its transfer agent, if any, and that, if the Company transfers its
own securities, it may make appropriate notations to the same effect in
its own records.

14. Governing Plan Document. This option is subject to all the provisions of
the Plan, the provisions of which are hereby made a part of this option,
and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions
of this option and those of the Plan, the provisions of the Plan shall
control.

<PAGE> 1
Exhibit 10.24

July 9, 1999

Ms. Sue Swenson
408 Luzon Avenue
Del Mar, CA 92014

Dear Sue:

This letter cancels and supersedes our offer letter dated June 11, 1999.

We are pleased to offer you the position of President of Leap Wireless
International, reporting to Harvey White, Chairman and Chief Executive Officer.
The terms of the offer are as follows:

1. A starting salary of $400,000 annually.

2. You are eligible for our Executive Bonus Plan. Beginning with FY99, you
will have the opportunity to earn an annual bonus of up to 60% of your
base compensation. The bonus payout will occur during the early part of
December following the end of the fiscal year. It will be based upon
company and individual performance.

3. An opportunity to acquire 250,000 shares of Leap Wireless International
stock through our Stock Option Plan. These options vest at the rate of 20%
per year, upon the anniversary of the grant date. The option strike price
will be established on the Friday after you start and will be based on the
closing price of the stock the previous Thursday. These options become
fully vested after five years, have a ten-year life and are subject to all
terms and provisions of the Plan. This grant is subject to approval by
LWI's Compensation Committee of the Board of Directors. Additional details
of the Stock Option Plan will be provided in your stock option grant
letter, which will be presented to you within your first month of
employment.

4. In addition to the Leap Wireless stock option grant, we will also offer
you an opportunity to acquire 350,000 shares of Cricket stock through our
Stock Option Plan. The option price will be $2.00/share. These options
become fully vested after five years, have a ten-year life and are subject
to all terms and provisions of the Plan. This grant is subject to approval
by LWI's Compensation Committee of the Board of Directors. All future
grants will be awarded based on your performance and the success of the
business.
<PAGE> 2
Ms. Sue Swenson
July 9, 1999
Page 2

5. A competitive comprehensive benefits package for your and your dependents.
In addition to these standard benefits, you are also eligible to
participate in our supplement health plan, the Executive Medical
Reimbursement Plan, which reimburses most expenses not covered by our
primary insurer, supplemental life and disability insurance coverage.

6. Eligibility to participate in the Executive Retirement Plan that enables
you to defer up to 100% of base salary and bonus on an annual basis.
Participants receive a 50% match in the form of company stock on up to 20%
of base salary and bonus, less the 401(k) deferral limit allowed by the
Plan. Deferred income is invested in your choice of several Fidelity
Funds. Please refer to the attached plan highlights page for additional
details.

7. A special termination agreement effective for 24 consecutive months
following your date of hire will be provided. Payment will be made upon
involuntary termination of your employment for reasons other than gross
misconduct or gross neglect of duty. The payment will be as follows:

- Twelve months base pay if termination occurs within 12 months of
date of hire.

- Nine months base pay if termination occurs within 13 to 24 months of
date of hire

Assuming a positive response, please return a signed copy of the attached Terms
of Employment. Please note that this offer is valid for seven days from the date
of this letter. If you have any questions, please do not hesitate of call me at
(619) 882-6015.

Congratulations and welcome to the Leap Wireless International team.

Sincerely,

/s/ Leonard C. Stephens

Leonard C. Stephens
Senior Vice President
Human Resources

Enc.

<PAGE> 1
Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1
(333-64459) of our report dated November 19, 1998, except for Note 2 which is as
of July 15, 1999, relating to the consolidated financial statements and
financial statement schedules of Leap Wireless International, Inc., which appear
in such Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
August 5, 1999

<PAGE> 1

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1
(333-64459) of our report dated February 25, 1999 except as to Note 14 b) which
is as of March 16, 1999, relating to the financial statements of Chilesat
Telefonia Personal S.A., which appear in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.

PRICE WATERHOUSE

Santiago, Chile
August 5, 1999

<PAGE> 1
Exhibit 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1
(333-64459) of our report dated April 30, 1999, relating to the consolidated
financial statements of Orrengrove Investments Ltd. and Subsidiaries (a
Development Stage Company), which appear in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.

PRICEWATERHOUSECOOPERS LLP

McLean, Virginia
August 5, 1999

<PAGE> 1

Exhibit 23.4

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1
(333-64459) of our report dated February 15, 1999, relating to the consolidated
financial statements of Pegaso Telecomunicaciones, S.A. de C.V., which appear in
such Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.

PRICEWATERHOUSECOOPERS

Mexico City, Mexico
August 5, 1999