Metro PCS 2009 Annual Report Download - page 79

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our interactive voice response system and customer service center in order to arrange payment. If the customer pays
the amount due within 30 days of the original payment date then the customer’s service is restored. If a hotlined
customer does not pay the amount due within 30 days of the payment date the account is disconnected and counted
as churn. Once an account is disconnected we may charge a $15 reconnect fee upon reactivation to reestablish
service and the revenue associated with this fee is deferred and recognized over the estimated life of the customer.
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 international 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.
•Customer Support. We pay charges to nationally recognized third-party providers for customer care,
billing and payment processing services.
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 and restricted stock awards, 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, up to fifteen years for capital leases, three to eight years for office