Metro PCS 2008 Annual Report Download - page 126

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
F-24
The Company has an agreement with Alcatel Lucent, to provide it with PCS and AWS CDMA system products
and services, including without limitation, wireless base stations, switches, power, cable and transmission equipment
and services with an initial term through the earlier to occur of (1) December 31, 2011, or (2) the date on which the
Company has purchased or licensed products, services and licensed materials under the agreement equal to a sum
which it currently expects to spend for products, services, or licensed material from Alcatel Lucent from June 6,
2005 through December 31, 2011. The agreement provides for both exclusive and non-exclusive pricing for PCS
and AWS CDMA products and the agreement may be renewed at the Company’s option on an annual basis for three
additional years after its initial term expires. If the Company fails to continue purchasing its PCS and AWS CDMA
products exclusively from Alcatel Lucent, it may have to pay certain liquidated damages based on the difference in
prices between exclusive and non-exclusive prices, which would be material to the Company. As of December 31,
2008, the Company had issued purchase orders in the amount of approximately $21.6 million for products, materials
and services that the Company expects to be delivered during the three months ended March 31, 2009.
AWS Licenses Acquired in Auction 66
Spectrum allocated for AWS currently is utilized by a variety of categories of commercial and governmental
users. To foster the orderly clearing of the spectrum, the FCC adopted a transition and cost sharing plan pursuant to
which incumbent non-governmental users could be reimbursed for relocating out of the band and the costs of
relocation would be shared by AWS licensees benefiting from the relocation. The FCC has established a plan where
the AWS licensee and the incumbent non-governmental user are to negotiate voluntarily for three years and then, if
no agreement has been reached, the incumbent licensee is subject to mandatory relocation where the AWS licensee
can force the incumbent non-governmental licensee to relocate at the AWS licensee’s expense. The spectrum
allocated for AWS currently is utilized also by governmental users. The FCC rules provide that a portion of the
money raised in Auction 66 will be used to reimburse the relocation costs of governmental users from the AWS
band. However, not all governmental users are obligated to relocate and some such users may delay relocation for
some time. For the years ended December 31, 2008 and 2007, the Company incurred approximately $6.4 million
and $0.9 million in microwave relocation costs, respectively.
FCC Katrina Order
In October 2007, the FCC adopted rules which, if they had taken effect, would have required the Company to
maintain emergency backup power for a minimum of twenty-four hours for certain of the Company’s equipment
that is normally powered from local commercial power located inside mobile switching offices, and eight hours for
certain of the Company’s equipment that is normally powered from local commercial power and at other locations,
including cell sites and DAS nodes. Various aspects of the rules were challenged in court and before the Office of
Management and Budget, or OMB. As a result, the rules have not taken effect and are not being enforced, and the
FCC has indicated that it plans to seek comment on revised backup power rules applicable to wireless providers. The
Company is unable to predict with any certainty the likely outcome of any proceeding regarding backup power
rules. Any new rules may require the Company to purchase additional equipment, spend additional capital, seek and
receive additional state and local permits, authorizations and approvals, and incur additional operating expenses to
comply with the new rules and such costs could be material. In addition, if the Company is required to secure
additional state or local permits or authorizations, it could delay the construction of any new cell sites or DAS
systems and launch of services in new metropolitan areas.
Litigation
The Company is involved in litigation from time to time, including litigation regarding intellectual property
claims, that the Company considers to be in the normal course of business. The Company is not currently party to
any pending legal proceedings that it believes would, individually or in the aggregate, have a material adverse effect
on the Company’s financial condition, results of operations or liquidity.