Metro PCS 2010 Annual Report Download - page 91

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third parties or the FCC. We believe that our existing cash, cash equivalents and short-term investments and our
anticipated cash flows from operations will be sufficient to fully fund planned expansion.
The construction of our network and the marketing and distribution of our wireless communications products and
services have required, and will continue to require, substantial capital investment. Capital outlays have included
license acquisition costs, capital expenditures for construction, increasing the capacity, or upgrade of our network
infrastructure, including network infrastructure for 4G LTE, costs associated with clearing and relocating non-
governmental incumbent licenses, funding of operating cash flow losses incurred as we launch services in new
metropolitan areas and other working capital costs, debt service and financing fees and expenses. Our capital
expenditures for the years ended December 31, 2010, 2009 and 2008 were approximately $790.4 million, $831.7
million and $954.6 million, respectively. The expenditures for the twelve months ended December 31, 2010 were
primarily associated with our efforts to increase the service area and capacity of our existing network and the
upgrade of our network to 4G LTE. The expenditures for the twelve months ended December 31, 2009 and 2008
were primarily associated with the construction of the network infrastructure in the Philadelphia, New York and
Boston metropolitan areas and our efforts to increase the service area and capacity of our existing network. We
believe the increased service area and capacity in existing markets will improve our service offerings, helping us to
attract additional customers and retain existing customers resulting in increased revenues.
As of December 31, 2010, we owed an aggregate of approximately $3.5 billion under our senior secured credit
facility, 7Ǭ% Senior Notes and 6ǫ% Senior Notes as well as $254.3 million under our capital lease obligations.
Our senior secured credit facility defines consolidated Adjusted EBITDA as: consolidated net income plus
depreciation and amortization; gain (loss) on disposal of assets; non-cash expenses; gain (loss) on extinguishment of
debt; provision for income taxes; interest expense; and certain expenses of MetroPCS Communications, Inc. minus
interest and other income and non-cash items increasing consolidated net income.
We consider consolidated Adjusted EBITDA, as defined above, to be an important indicator to investors because
it provides information related to our ability to provide cash flows to meet future debt service, capital expenditures
and working capital requirements and fund future growth. We present consolidated Adjusted EBITDA because
covenants in our senior secured credit facility contain ratios based on this measure. Other wireless carriers may
calculate consolidated Adjusted EBITDA differently. If our consolidated Adjusted EBITDA were to decline below
certain levels, covenants in our senior secured credit facility that are based on consolidated Adjusted EBITDA,
including our maximum senior secured leverage ratio covenant, may be violated and could cause, among other
things, an inability to incur further indebtedness and in certain circumstances a default or mandatory prepayment
under our senior secured credit facility. Our maximum senior secured leverage ratio is required to be less than 4.5 to
1.0 based on consolidated Adjusted EBITDA plus the impact of certain new markets. The lenders under our senior
secured credit facility use the senior secured leverage ratio to measure our ability to meet our obligations on our
senior secured debt by comparing the total amount of such debt to our consolidated Adjusted EBITDA, which our
lenders use to estimate our cash flow from operations. The senior secured leverage ratio is calculated as the ratio of
senior secured indebtedness to consolidated Adjusted EBITDA, as defined by our senior secured credit facility. For
the twelve months ended December 31, 2010, our senior secured leverage ratio was 1.54 to 1.0, which means for
every $1.00 of consolidated Adjusted EBITDA, we had $1.54 of senior secured indebtedness. In addition,
consolidated Adjusted EBITDA is also utilized, among other measures, to determine management’s compensation
under their annual cash performance awards. Consolidated Adjusted EBITDA is not a measure calculated in
accordance with GAAP, and should not be considered a substitute for operating income, net income, or any other
measure of financial performance reported in accordance with GAAP. In addition, consolidated Adjusted EBITDA
should not be construed as an alternative to, or more meaningful than cash flows from operating activities, as
determined in accordance with GAAP.
The following table shows the calculation of our consolidated Adjusted EBITDA, as defined in our senior secured
credit facility, for the years ended December 31, 2010, 2009 and 2008.