Metro PCS 2008 Annual Report Download - page 67

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58
Revenues
We derive our revenues from the following sources:
Service. We sell wireless broadband mobile services. The various types of service revenues associated with
wireless broadband mobile for our customers include monthly recurring charges for airtime, monthly recurring
charges for optional features (including nationwide long distance, unlimited text messaging, international text
messaging, voicemail, downloads, ringtones, games and content applications, unlimited directory assistance,
enhanced directory assistance, ring back tones, mobile Internet browsing, mobile instant messaging, push e-mail and
nationwide roaming) and charges for long distance service. Service revenues also include intercarrier compensation
and nonrecurring reactivation service charges to customers.
Equipment. We sell wireless broadband mobile handsets and accessories that are used by our customers in
connection with our wireless services. This equipment is also sold to our independent retailers to facilitate
distribution to our customers.
Costs and Expenses
Our costs and expenses include:
Cost of Service. The major components of our cost of service are:
•Cell Site Costs. We incur expenses for the rent of cell sites, network facilities, engineering operations, field
technicians and related utility and maintenance charges.
•Intercarrier Compensation. We pay charges to other telecommunications companies for their transport and
termination of calls originated by our customers and destined for customers of other networks. These variable
charges are based on our customers’ usage and generally applied at pre-negotiated rates with other carriers,
although some carriers have sought to impose such charges unilaterally.
•Variable Long Distance. We pay charges to other telecommunications companies for long distance service
provided to our customers. These variable charges are based on our customers’ usage, applied at pre-
negotiated rates with the long distance carriers.
Cost of Equipment. Cost of equipment primarily includes the cost of handsets and accessories purchased from
third-party vendors to resell to our customers and independent retailers in connection with our services. We do not
manufacture any of this equipment.
Selling, General and Administrative Expenses. Our selling expenses include advertising and promotional costs
associated with marketing and selling to new customers and fixed charges such as retail store rent and retail
associates’ salaries. General and administrative expenses include support functions including, technical operations,
finance, accounting, human resources, information technology and legal services. We record stock-based
compensation expense in cost of service and in selling, general and administrative expenses for expense associated
with employee stock options, which is measured at the date of grant, based on the estimated fair value of the award.
Depreciation and Amortization. Depreciation is applied using the straight-line method over the estimated useful
lives of the assets once the assets are placed in service, which are seven to ten years for network infrastructure
assets, three to ten years for capitalized interest, three to seven years for office equipment, which includes computer
equipment, three to seven years for furniture and fixtures and five years for vehicles. Leasehold improvements are
amortized over the term of the respective leases, which includes renewal periods that are reasonably assured, or the
estimated useful life of the improvement, whichever is shorter.
Interest Expense and Interest Income. Interest expense includes interest incurred on our borrowings, amortization
of debt issuance costs and amortization of discounts and premiums on long-term debt. Interest income is earned
primarily on our cash and cash equivalents.