Metro PCS 2009 Annual Report Download - page 73

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Company Overview
Except as expressly stated, the financial condition and results of operations discussed throughout Management’s
Discussion and Analysis of Financial Condition and Results of Operations are those of MetroPCS Communications,
Inc. and its consolidated subsidiaries, including MetroPCS Wireless, Inc. and Royal Street Communications, LLC.
References to “MetroPCS,” “MetroPCS Communications,” “our Company,” “the Company,” “we,” “our,” “ours”
and “us” refer to MetroPCS Communications, Inc., a Delaware corporation, and its wholly-owned subsidiaries.
We are a wireless telecommunications carrier that currently offers wireless broadband mobile services primarily
in the greater Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York,
Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota metropolitan areas. In 2005,
Royal Street Communications, LLC, or Royal Street Communications, and with its wholly-owned subsidiaries, or
collectively, Royal Street, was granted licenses by the Federal Communications Commission, or FCC, in Los
Angeles and various metropolitan areas throughout northern Florida. We own 85% of the limited liability company
member interest in Royal Street Communications, but may only elect two of the five members of Royal Street
Communications’ management committee. We have a wholesale arrangement with Royal Street under which we
purchase up to 85% of the engineered capacity of Royal Street’s systems allowing us to sell our standard products
and services under the MetroPCS brand to the public. Additionally, upon Royal Street’s request, we have provided
and will provide financing to Royal Street under a loan agreement. As of December 31, 2009, the maximum amount
that Royal Street could borrow from us under the loan agreement was approximately $1.6 billion of which Royal
Street had net outstanding borrowings of approximately $1.1 billion through December 31, 2009. On February 17,
2010, we executed an amendment to the loan agreement, which increased the amount available to Royal Street under
the loan agreement by an additional $874.0 million. Royal Street has incurred an additional $14.0 million in net
borrowings through February 28, 2010.
As a result of the significant growth we have experienced since we launched operations, our results of operations
to date are not necessarily indicative of the results that can be expected in future periods. Moreover, we expect that
our number of customers will continue to increase, which will continue to contribute to increases in our revenues
and operating expenses.
We sell products and services to customers through our Company-owned retail stores as well as indirectly
through relationships with independent retailers. We offer service which allows our customers to place unlimited
local calls from within our local service area and to receive unlimited calls from any area while in our local service
area, under simple and affordable flat-rate monthly service plans. In 2009, our service plans started at $30 per month
and the subscriber was obligated to pay all applicable taxes and regulatory fees associated with the service. In
January 2010, we introduced a new family of service plans, which include all applicable taxes and regulatory fees,
offering nationwide voice, text and web services beginning at $40 per month. For an additional $5 to $20 per
month, our customers may select alternative service plans that offer additional features on an unlimited basis. For
additional usage fees, we also provide certain other value-added services. All of these plans require payment in
advance for one month of service. If no payment is made in advance for the following month of service, service is
suspended at the end of the month that was paid for by the customer and, if the customer does not pay within thirty
days, the customer is terminated. Our flat-rate plans differentiate our service from the more complex plans and
long-term contract requirements of traditional wireless carriers. In addition, the above products and services are
offered by us under the MetroPCS brand in the metropolitan areas where we purchase services from Royal Street.
Critical Accounting Policies and Estimates
The following discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America, or GAAP. You should read this discussion and analysis in conjunction
with our consolidated financial statements and the related notes thereto contained elsewhere in this report. The
preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that
affect the reported amounts of certain assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities at the date of the financial statements. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the circumstances, the results of which form the