Metro PCS 2007 Annual Report Download - page 107

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
F-8
1. Organization and Business Operations:
MetroPCS Communications, Inc. (“MetroPCS”), a Delaware corporation, together with its consolidated
subsidiaries (the “Company”), is a wireless telecommunications carrier that offers wireless broadband personal
communication services (“PCS”). As of December 31, 2007, the Company offered services primarily in the
metropolitan areas of Atlanta, Dallas/Ft. Worth, Detroit, Los Angeles, Miami, San Francisco, Sacramento and
Tampa/Sarasota/Orlando. The Company sells products and services to customers through Company-owned retail
stores as well as through relationships with independent retailers.
Prior to December 31, 2005, MetroPCS qualified as a very small business designated entity (“DE”). MetroPCS
met the DE control requirements of the Federal Communications Commission (“FCC”) by issuing Class A Common
Stock entitling its holders to 50.1% of the stockholders’ votes and the right to designate directors holding a majority
of the voting power of MetroPCS’ Board of Directors. During 2005, MetroPCS was no longer required to maintain
its eligibility as a DE. In accordance with the existing stockholder agreement, the Class A Common Stock
automatically converted into common stock of MetroPCS on December 31, 2005 on a one-for-one basis and the
holders of the Class A Common Stock relinquished affirmative control of MetroPCS.
On November 24, 2004, MetroPCS, through its wholly-owned subsidiaries and C9 Wireless, LLC, an
independent third-party, formed a limited liability company called Royal Street Communications, LLC (“Royal
Street Communications”), to bid on spectrum auctioned by the FCC in Auction No. 58. The Company owns 85% of
the limited liability company member interest of Royal Street Communications, but may only elect two of the five
members of Royal Street Communications’ management committee (See Note 3). The consolidated financial
statements include the balances and results of operations of MetroPCS and its wholly-owned subsidiaries as well as
the balances and results of operations of Royal Street Communications and its wholly-owned subsidiaries
(collectively, “Royal Street”). The Company consolidates its interest in Royal Street in accordance with Financial
Accounting Standards Board (“FASB”) Interpretation No. 46-R, “Consolidation of Variable Interest Entities,”
(“FIN 46(R)”). Royal Street qualifies as a variable interest entity under FIN 46(R) because the Company is the
primary beneficiary of Royal Street and will absorb all of Royal Street’ s expected losses. The redeemable minority
interest in Royal Street is included in long-term liabilities. All intercompany accounts and transactions between the
Company and Royal Street have been eliminated in the consolidated financial statements.
On March 14, 2007, the Company’ s Board of Directors approved a 3 for 1 stock split of the Company’ s common
stock effected by means of a stock dividend of two shares of common stock for each share of common stock issued
and outstanding on that date. All share, per share and conversion amounts relating to common stock and stock
options included in the accompanying consolidated financial statements have been retroactively adjusted to reflect
the stock split.
On April 24, 2007, MetroPCS consummated its initial public offering (the “Offering”) of 57,500,000 shares of
common stock priced at $23.00 per share (less underwriting discounts and commissions). MetroPCS offered
37,500,000 shares of common stock and certain of MetroPCS’ existing stockholders offered 20,000,000 shares of
common stock in the Offering, which included 7,500,000 shares sold by MetroPCS’ existing stockholders pursuant
to the underwriters’ exercise of their over-allotment option. Concurrent with the Offering, all outstanding shares of
preferred stock, including accrued but unpaid dividends, were converted into 150,962,644 shares of common stock.
The shares began trading on April 19, 2007 on the New York Stock Exchange under the symbol “PCS”.
2. Summary of Significant Accounting Policies:
Consolidation
The accompanying consolidated financial statements include the balances and results of operations of MetroPCS
and its wholly- and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation.