Metro PCS 2010 Annual Report Download - page 116

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
F-10
handsets in the Company’s retail locations are recognized at the point of sale. Handsets shipped to indirect retailers
are recorded as deferred revenue and deferred charges upon shipment by the Company and are recognized as
equipment revenues and related costs when service is activated by its customers. Revenues and related costs from
the sale of accessories are recognized at the point of sale. The costs of handsets and accessories sold are recorded in
cost of equipment at average cost.
Sales incentives offered without charge to customers related to the sale of handsets are recognized as a reduction
of revenue when the related equipment revenue is recognized. Through January 2010, customers had the right to
return handsets within 30 days or 60 minutes of usage, whichever occurred first. In January 2010, the Company
amended the terms of its return policy to allow customers the right to return handsets within 7 days and 60 minutes
of usage.
Federal Universal Service Fund (“FUSF”), E-911, and various other fees are assessed by various governmental
authorities in connection with the services that the Company provides to its customers. Beginning in January 2010,
the Company introduced a new family of service plans, which include all applicable taxes and regulatory fees (“tax
inclusive plans”). The Company reports regulatory fees for the tax inclusive plans in cost of service on the
accompanying consolidated statements of income and comprehensive income. When the Company separately
assesses these regulatory fees on its customers for those service plans that do not include taxes or regulatory fees,
the Company reports these regulatory fees on a gross basis in service revenues and cost of service on the
accompanying consolidated statements of income and comprehensive income. For the years ended December 31,
2010, 2009 and 2008, the Company recorded approximately $81.8 million, $171.3 million and $135.6 million,
respectively, of FUSF, E-911, and other fees on a gross basis. Sales, use and excise taxes for all service plans are
reported on a net basis in selling, general and administrative expenses on the accompanying statements of income
and comprehensive income.
FCC Licenses
The Company operates wireless broadband mobile networks under licenses granted by the FCC for a particular
geographic area on spectrum allocated by the FCC for terrestrial wireless broadband services. The Company holds
personal communications services (“PCS”) licenses granted or acquired on various dates, and in November 2006,
the Company acquired a number of advanced wireless services (“AWS”) licenses which can be used to provide
services comparable to the wireless broadband mobile services provided by the Company, and other advanced
wireless services. The Company’s license holdings have also grown to include a 700 MHz license which can be used
to provide services comparable to those which can be offered over the AWS spectrum. The PCS licenses previously
included, and the AWS licenses currently include, the obligation and resulting costs to relocate existing fixed
microwave users of the Company’s licensed spectrum if the Company’s use of its spectrum interferes with their
systems and/or reimburse other carriers (according to FCC rules) that relocated prior users if the relocation benefits
the Company’s system. Accordingly, the Company incurs costs related to microwave relocation in constructing its
PCS and AWS networks.
FCC Licenses on the accompanying consolidated balance sheets, which includes the Company’s microwave
relocation costs, are recorded at cost. Although PCS, AWS and 700 MHz licenses are issued with a stated term, ten
years in the case of the PCS licenses, fifteen years in the case of the AWS licenses and approximately ten years for
700 MHz licenses, the renewal of PCS, AWS and 700 MHz licenses is generally a routine matter without substantial
cost and the Company has determined that no legal, regulatory, contractual, competitive, economic, or other factors
currently exist that limit the useful life of its PCS, AWS and 700 MHz licenses. As such, under the provisions of
ASC 350, the Company does not amortize PCS, AWS and 700 MHz licenses and microwave relocation costs
(collectively, its “indefinite-lived intangible assets”) as they are considered to have indefinite lives and together
represent the cost of the Company’s spectrum. The carrying value of FCC licenses and microwave relocation costs
was $2.5 billion as of December 31, 2010.
In accordance with the requirements of ASC 350, the Company performs its annual indefinite-lived intangible
assets impairment test as of each September 30th or more frequently if events or changes in circumstances indicate
that the carrying value of the indefinite-lived intangible assets might be impaired. The impairment test consists of a
comparison of the estimated fair value with the carrying value. The Company estimates the fair value of its