Metro PCS 2010 Annual Report Download - page 84

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Cost of Service. Cost of service increased approximately $262.8 million, or approximately 31%, to $1.1 billion
for the year ended December 31, 2009 from approximately $857.3 million for the year ended December 31, 2008.
The increase in cost of service is primarily attributable to an approximate 24% growth in our customer base and the
deployment of additional network infrastructure during the twelve months ended December 31, 2009 and costs
associated with our unlimited international calling product.
Cost of Equipment. Cost of equipment increased $179.6 million, or approximately 26%, to approximately $884.3
million for the year ended December 31, 2009 from approximately $704.7 million for the year ended December 31,
2008. The increase in cost of equipment is primarily attributable to an increase in gross customer additions
accounting for an approximately $145.5 million increase as well as higher upgrade handset costs to existing
customers which led to an approximate $57.5 million increase. These increases were partially offset by the sale of
lower priced handsets accounting for an approximate $30.0 million decrease in cost of equipment.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $120.1
million, or approximately 27%, to $567.7 million for the year ended December 31, 2009 from approximately $447.6
million for the year ended December 31, 2008. Selling expenses increased by approximately $90.0 million for the
year ended December 31, 2009 compared to the year ended December 31, 2008. The increase in selling expenses is
primarily attributable to an approximate $50.1 million increase in marketing and advertising expenses, an
approximate $24.5 million increase in employee related costs and a $6.4 million increase in MetroFLASH®
expense. General and administrative expenses increased $24.8 million for the year ended December 31, 2009 as
compared to the year ended December 31, 2008 primarily due to the growth in our business.
Depreciation and Amortization. Depreciation and amortization expense increased approximately $122.5 million,
or 48%, to $377.8 million for the year ended December 31, 2009 from $255.3 million for the year ended December
31, 2008. The increase is related primarily to network infrastructure assets that were placed into service during the
twelve months ended December 31, 2009 to support the continued growth and expansion of our network.
(Gain) loss on Disposal of Assets. Gain on disposal of assets increased approximately $23.6 million, or
approximately 125%, to approximately $4.7 million for the year ended December 31, 2009 from a loss on disposal
of assets of $18.9 million for the year ended December 31, 2008. The gain recognized during the year ended
December 31, 2009 was due primarily to asset sales and FCC license exchanges consummated during the year,
partially offset by the disposal of assets related to certain network technology that was retired and replaced with
newer technology during the year ended December 31, 2009. The loss on disposal of assets for the year ended
December 31, 2008 related to certain network equipment and construction costs that were retired.
Non-Operating Items
2009 2008 Change
(in thousands)
Interest expense ...........................................................................................................................
.
$ 270,285 $ 179,398 51%
Interest income ............................................................................................................................
.
(2,870) (22,947) (87)%
Impairment loss on investment securities ....................................................................................
.
2,386 30,857 (92)%
Provision for income taxes...........................................................................................................
.
86,835 129,986 (33)%
Net income ...................................................................................................................................
.
176,844 149,438 18%
Interest Expense. Interest expense increased approximately $90.9 million, or approximately 51%, to
approximately $270.3 million for the year ended December 31, 2009 from approximately $179.4 million for the year
ended December 31, 2008. The increase in interest expense was primarily due to an additional $550.0 million of
9¼% senior notes due 2014, or New 9¼% Senior Notes, that were issued in January 2009 and interest on capital
lease obligations that were placed into service during the year ended December 31, 2009 as well as a decrease in
capitalized interest expense. In addition, our weighted average interest rate increased to 8.23% for the year ended
December 31, 2009 compared to 7.78% for the year ended December 31, 2008, which includes the impact of our
interest rate protection agreements. Average debt outstanding for the year ended December 31, 2009 and 2008 was
$3.5 billion and $3.0 billion, respectively.