Metro PCS 2007 Annual Report Download - page 85

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market funds meeting certain criteria, and demand deposits. These investments are subject to credit, liquidity,
market and interest rate risk. At December 31, 2007, we had invested substantially all of our cash and cash
equivalents in money market funds consisting of U.S. treasury securities.
We hold investments of $133.9 million in certain auction rate securities some of which are secured by
collateralized debt obligations with a portion of the underlying collateral being mortgage securities or related to
mortgage securities. Consistent with our investment policy guidelines, the auction rate securities investments held
by us all had AAA credit ratings at the time of purchase. With the liquidity issues experienced in global credit and
capital markets, the auction rate securities held by us at December 31, 2007 have experienced multiple failed
auctions as the amount of securities submitted for sale in the auctions has exceeded the amount of purchase orders.
In addition, three auction rate securities held by us have been placed on credit watch. However, as of January 31,
2008, all of the auction rate securities held by us still retain a AAA/Aaa rating as reported by Standard and Poors
and Moody’ s Investors Service.
The estimated market value of our auction rate security holdings at December 31, 2007 was approximately $36.1
million, which reflects a $97.8 million adjustment to the principal value of $133.9 million. Although the auction rate
securities continue to pay interest according to their stated terms, based on statements received from our broker and
an analysis of other-than-temporary impairment factors, we have recorded an impairment charge of $97.8 million
during the year ended December 31, 2007, reflecting the portion of auction rate security holdings that we have
concluded have an other-than-temporary decline in value. Historically, given the liquidity created by the auctions,
our auction rate securities were presented as current assets under short-term investments on our balance sheet. Given
the failed auctions, our auction rate securities are illiquid until there is a successful auction for them. Accordingly,
the entire amount of such remaining auction rate securities has been reclassified from current to non-current assets
and is presented in long-term investments on our balance sheet as of December 31, 2007. The $97.8 million
impairment charge does not have a material impact on our liquidity and is not included in our approximately $1.5
billion in cash and cash equivalents as of December 31, 2007. If uncertainties in the credit and capital markets
continue or these markets deteriorate further, we may incur additional impairments to its auction rate securities.
Management believes that any future additional impairment charges will not have a material effect on our liquidity.
On April 24, 2007, MetroPCS Communications consummated an initial public offering of its common stock.
MetroPCS Communications sold 37,500,000 shares of common stock at a price per share of $23.00 (less
underwriting discounts and commissions), which resulted in net proceeds to MetroPCS Communications of
approximately $818.3 million. In addition, selling stockholders sold an aggregate of 20,000,000 shares of common
stock, including 7,500,000 shares sold pursuant to the exercise by the underwriters of their over-allotment option.
MetroPCS Communications did not receive any proceeds from the sale of shares of common stock by the selling
stockholders; however, MetroPCS Communications did receive proceeds of approximately $3.8 million from the
exercise of options to acquire common stock which was sold in the initial public offering. Concurrent with the initial
public offering by MetroPCS Communications, all outstanding shares of preferred stock of MetroPCS
Communications, including accrued but unpaid dividends as of April 23, 2007, were converted into
150,962,644 shares of common stock. We intend to use the net proceeds from the initial public offering primarily to
build out our network and launch our services in certain of our recently acquired Auction 66 Markets as well as for
general corporate purposes. On June 6, 2007, MetroPCS Wireless, Inc. consummated the sale of the additional notes
in the aggregate principal amount of $400 million. The proceeds from the sale of the additional notes were
approximately $421.0 million which we intend to use for general corporate purposes.
Our strategy has been to offer our services in major metropolitan areas and their surrounding areas, which we
refer to as operating segments. We continue to seek opportunities to enhance our current operating segments and to
provide service in new geographic areas, and from time to time, we may purchase spectrum and related assets from
third parties or the FCC. We participated as a bidder in FCC Auction 66 and in November 2006 we were granted
eight licenses for a total aggregate purchase price of approximately $1.4 billion.
As a result of the acquisition of the spectrum licenses from Auction 66 and the opportunities that these licenses
provide for us to expand our operations into major metropolitan markets, we will require significant additional
capital in the future to finance the construction and initial operating costs associated with such licenses. We
generally do not intend to commence the construction of any individual license area until we have sufficient funds
available to provide for the related construction and operating costs associated with such license area. We currently
plan to focus on building out approximately 40 million of the total population in our Auction 66 Markets with a
primary focus on the New York, Philadelphia, Boston and Las Vegas metropolitan areas. Of the approximate
40 million total population, we are targeting launch of operations with an initial covered population of