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ANNUAL REPORT 2011
MetroPCS Communications, Inc.
NYSE: PCS
www.metropcs.com

Table of contents

  • Page 1
    ANNUAL REPORT 2011 MetroPCS Communications, Inc. NYSE: PCS www.metropcs.com

  • Page 2
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  • Page 3
    ... economic conditions. In 2011, we expanded our products and services and continued the build out of our 4G LTE network. By year end 2011 we had launched 4G LTE services in all of our major metropolitan areas. We also launched a $40 4G LTE smartphone plan that gives our customers the best value...

  • Page 4
    ... growth of our customer base as well as the success of our Wireless For All service plans. Our Adjusted EBITDA was over $1.3 billion, up 13 percent over 2010, and our operating income grew to $748 million. During the year we maintained our low cost structure, while also bearing the costs of our 4G...

  • Page 5
    ... endeavors to provide our customers with outstanding service at unmatched value. We have aligned our marketing, media, and sales strategies to effectively communicate our value to consumers. Our new campaign theme "Everyone is Moving to Metro" represents our belief that we have a compelling offer to...

  • Page 6
    ...and are focused on improving long-term value. I am grateful to our shareholders for their continued support, the Board for their prudent governance, and to our employees for their hard work and dedication. All of us at MetroPCS take pride in building a company that creates value for our shareholders...

  • Page 7
    ... of dividends. Fiscal year ending December 31. Copyright© 2012 S&P, a division of The McGraw -Hill Companies Inc. All rights reserved. Copyright© 2012 Dow Jones & Co. All rights reserved. 4/07 MetroPCS Communications, Inc. NYSE Composite S&P 500 Dow Jones US Mobile Telecommunications TSM 3Q09 40...

  • Page 8
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  • Page 9
    ... fiscal year ended December 31, 2011 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-33409 METROPCS COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Delaware (State or...

  • Page 10
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  • Page 11
    ... and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services PART IV Item 15. Exhibits, Financial Statement Schedules SIGNATURES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Consolidated Balance Sheets Consolidated Statements of Income and...

  • Page 12
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  • Page 13
    ... promotional activity, competitive differentiators, our strategy and business plans, customer expectations, our projections of capital expenditures for 2012, continued wireline displacements, the effect of future inflation on our operations, the effect of changes in aggregate fair value of financial...

  • Page 14
    ...our business and the ability of our suppliers to perform, develop and timely provide us with technological developments, products and services we need to remain competitive; possible disruptions or intrusions of our billing, operational support, and customer care systems and networks which may limit...

  • Page 15
    ... a duty to provide such data in the future or to update such data if and when such data is updated. This report may contain trademarks, service marks and trade names of companies and organizations other than us. MetroPCS related brands, product names, company names, trademarks, service marks, images...

  • Page 16
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  • Page 17
    ... usage basis. Starting in January 2010, we began offering our wireless broadband mobile services using rate plans that include all applicable taxes and regulatory fees. We believe we offer a compelling value proposition to our customers. Our average per minute cost to our customers for our wireless...

  • Page 18
    ... broadband mobile service plans that allow customers to enjoy voice, text and web access services at fixed monthly rates, including all applicable taxes and regulatory fees, starting as low as $40 per month. Remain one of the lowest cost wireless service providers in the United States. We plan to...

  • Page 19
    ... customers who purchase services for additional handsets on the same account. In January 2011, we introduced new 4G LTE service plans that allow customers to enjoy voice, text and web access services at fixed monthly rates starting as low as $40 per month. For additional usage fees, we also provide...

  • Page 20
    ... to create and provide products, services and communications that drive growth while optimizing our marketing return on investment and minimizing the cost to acquire customers. Our marketing campaigns emphasize that MetroPCS offers simple, affordable, predictable and flexible service plans. MetroPCS...

  • Page 21
    ... agreements with relevant local exchange carriers, or LECs, in our service areas. We currently use third-party providers for domestic and international long distance services, international SMS, and the majority of our backhaul services. Network Technology Communications between the customer...

  • Page 22
    ... network than ours and we believe at lower prices than we pay for roaming for access to service out of our service areas. These MVNOs offer increasingly competitive service plans similar to the service plans we provide in addition to offering more traditional prepaid plans that charge by the minute...

  • Page 23
    ... features or services to our existing service plans, or make other changes to our service plans, including pricing and usage, or offer promotions or other price concessions to customers. Seasonality Our customer activity is influenced by seasonal effects related to traditional retail selling periods...

  • Page 24
    ... requirements under which we must operate; the timing, nature and scope of network construction; the rates, terms and conditions of our service; the restrictions or limitations that may apply to our services or the services we must offer; the information we provide to our customers and the manner in...

  • Page 25
    ... provide a network platform that is generally open to third-party wireless devices and applications, or an Open Network Platform, by allowing consumers to use the handset of their choice and to download and use the applications of their choice, subject to certain network management conditions that...

  • Page 26
    ... use for mobile wireless broadband services or to change the rules relating to already licensed spectrum, which may allow new or existing licensees to provide services comparable to the services we provide. License term The broadband PCS licenses held by us have an initial term of ten years...

  • Page 27
    ... facilities to provide service to 25% of the licensed area within five years of their initial license grant date, or otherwise make a showing of substantial service. AWS licenses are required to construct facilities to provide substantial service by the end of the initial 15-year license term. The...

  • Page 28
    ... in future FCC auctions or to acquire spectrum. CMRS classification. Certain of our wireless broadband mobile services are classified at the federal level as CMRS. The FCC regulates providers of CMRS services as common carriers, which subjects us to many requirements under the Communications Act...

  • Page 29
    ... to us because we provide service in a limited number of metropolitan areas in the United States and must rely on other carriers in order to offer roaming services outside our existing metropolitan areas. All the service plans we now offer to new subscribers (and to all existing customers who opt-in...

  • Page 30
    ...Internet access service providers, requires providers to make available relevant information regarding network management practices to the consumers who purchase their services, and to content, application and service providers who seek access to a carrier's network. In other respects, the new rules...

  • Page 31
    ... changes and possible future limitations in the program. If we are approved, these payments would be an additional revenue source that we could use to support the services we provide in high cost areas or to certain low income customers. The FCC also adopted in October 2011 a Mobility Fund using...

  • Page 32
    ... which wireless broadband mobile carriers may be required to offer priority E-911 services to the public safety agencies under certain circumstances. While we may in certain instances be able to recover the expenses associated with E-911, certain states in which we do business may limit or eliminate...

  • Page 33
    ... states where we provide service have been authorized by the FCC to engage in limited numbering administration. Our ability to access telephone numbers on a timely basis is important for our ability to continue to grow our business. Regulatory fees. We are obligated to pay certain annual regulatory...

  • Page 34
    ... Office recently initiated a proceeding to determine what exemptions will be in effect for the next three year period. We have implemented a service called MetroFlash that enables new customers under certain circumstances to unlock and reprogram their existing CDMA handsets so that they will operate...

  • Page 35
    ... charged by any CMRS provider. As a result, we are free to establish rates and offer new products and services with minimum state regulation. However, states and local agencies may regulate "other terms and conditions" of wireless service, and certain states where we operate have adopted rules and...

  • Page 36
    ... areas where we operate. The competitive pressures of the wireless telecommunications industry may continue to cause other carriers to offer unlimited service plans or service plans with increasingly large bundles of minutes of use or unlimited use at increasingly lower prices on a national coverage...

  • Page 37
    ...change our service plans in response to customer demands, preferences and demographic trends, increase our handset subsidies, increase our dealer payments, and increase our marketing and distribution costs, which could have a material adverse effect on our business, financial condition and operating...

  • Page 38
    ... adverse effect on our business, financial condition and operating results. We may face additional competition from existing or new entrants as a result of future governmental allocations or reallocations of spectrum, future FCC auctions of spectrum and/or through legislative change or actions...

  • Page 39
    ... or intend to offer to our customers in the near term, we have limited experience with our customers' demands for high-speed data services, as well as the number of customers for such services or the effect of any new services that we may plan to launch in the future on our networks. In addition...

  • Page 40
    ... plans or lower our prices, or engage in network management technologies and practices our customers may not want or like. If we are unable to meet the customer demand for our CDMA and 4G LTE data services, it could have a material adverse effect on our business, financial condition and operating...

  • Page 41
    ... to increase our customer base, meet the requirements of our customers' usage of our services or to offer new services and as a result we could lose customers or revenues, which could have a material adverse effect on our business, financial condition, and operating results. Finally, Congress...

  • Page 42
    ... acquired business, technologies, services, spectrum, products, operations and personnel of the acquired businesses while maintaining uniform standards, controls, policies and procedures; difficulty converting customers to or retaining customers with our network, services, customer care and billing...

  • Page 43
    ... not limited to the different types of products and services offered and the prices and range of service plans and products; service content, features, data speeds, technology, coverage, compatible handset options, distribution, service areas, network operability and quality; customer perceptions...

  • Page 44
    ... of which could have a material adverse effect on our business, financial condition and operating results. Similarly, if our vendors deliver new products and services that do not work or work as anticipated, fail to meet customer expectations, or fail to operate properly, we may not receive revenue...

  • Page 45
    ... affect our business, financial condition and operating results. Our customers do not have long-term contracts and can discontinue their service at any time without penalty or advance notice to us. Our rate of customer churn can be affected by a number of factors, including, but not limited to, the...

  • Page 46
    ... reduce the cash available to construct and operate new metropolitan areas, to expand coverage and capacity in existing metropolitan areas, or to upgrade our networks to new technologies, all of which could have a material adverse effect on our business, financial condition and operating results. We...

  • Page 47
    ... future technological changes and to offer, on a timely basis, products, services, applications and content that meet our customer demands. For us to keep pace with these technological changes and remain competitive, we may continue to make significant capital expenditures in our networks, acquire...

  • Page 48
    ...and pricing desired by customers. These risks could reduce our customer growth, increase our costs of providing services and increase our churn, which could have a material adverse effect on our business, financial condition and operating results. We also are planning to utilize Voice over Long Term...

  • Page 49
    ... we make on our services, or require us to cease providing such services on an unlimited basis. A termination of existing roaming agreements or a significant increase in the prices we pay for roaming could have a material adverse effect on our business, financial condition and operating results...

  • Page 50
    ... on us or limit our ability to provide our services in a cost effective or profitable way. Any changes in regulation, new policy initiatives, increased taxes or any other changes in state or federal law may have an adverse effect on our business, financial condition and operating results. We may...

  • Page 51
    ...to be able to bill our customers, provide customer care, grow our business, report financial results, or manage our business and we may have increased churn, all of which could have a material adverse effect on our business, financial condition and operating results. Substantially all of our network...

  • Page 52
    ...agreements with other providers at comparable rates could have a material adverse effect on our business, financial condition or operating results. We rely heavily on indirect distribution channels. Unlike many of our competitors that rely upon "big box" retailers, company owned stores, direct sales...

  • Page 53
    ...new companies to distribute our products and services, or we may be forced to increase the amount of payments we make to our indirect distribution agents. If any of these occur, it could have a material adverse effect on our business, financial condition and operational results. We utilize a limited...

  • Page 54
    Future regulatory changes may also affect our ability to enter into new or maintain existing roaming agreements on competitive terms. Our ability to replicate other carriers' roaming service offerings at rates that will make us, or allow us to be, competitive is uncertain at this time. The FCC has ...

  • Page 55
    ... pay these higher rates and/or purchase services from others, engage in direct connection, or pay terminating compensation charges in the absence of negotiated agreements, which may result in higher costs, which could have a material adverse effect on our business, financial condition, and operating...

  • Page 56
    ... impose other charges or fees on our business, such as recurring spectrum usage or licensing fees. Many states also apply transaction-based taxes to sales of our products and services and to our purchases of telecommunications services from various carriers. In addition, state regulators and local...

  • Page 57
    ...adverse effect on our business, financial condition and operating results. System failures, security breaches and the unauthorized use of or interference with our information technology systems and networks could cause delays or interruptions of service, unauthorized use or dissemination of customer...

  • Page 58
    ...of our network are not fully redundant and our disaster relief plans may not be adequate or timely. The resulting interruption or failure to provide our services, including the harm to our reputation, could have a material adverse effect on our business, financial condition and operating results. As...

  • Page 59
    ... or gain new customers, expose us to significant liability, sanctions, fines and litigation, increase churn and have a resulting material adverse effect on our business, financial condition and operating results. Risks Related to Legal and Regulatory Matters Our ability to provide service to our...

  • Page 60
    ...of service, customer disclosures, and customer support that wireless carriers provide and the FCC and several agencies have proposed or enacted new and potentially burdensome regulations in this area. Recently, several state commissions also took a proactive role in reviewing a major wireless merger...

  • Page 61
    ...can offer our customers, requiring us to change our business strategy and service plans. A failure to meet, or maintain compliance with, federal, state or local regulations, laws, rules or ordinances also could have a material adverse effect on our business, financial condition and operating results...

  • Page 62
    ... our business by limiting our ability to manage our customers' use of our network, requiring us to provide third party access to our networks on terms and conditions that jeopardize our flat-rate, unlimited usage pricing plans or constrain our ability to offer innovative differentiated services, or...

  • Page 63
    ... offering. These changes frequently occur irrespective of the operating performance of the affected companies. Hence, the trading price of our common stock could fluctuate based upon factors that have little or nothing to do with our business, financial condition and operating results. The price...

  • Page 64
    ...cause us to lose customers, or cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock, all of which could have a material adverse effect on our business, financial condition and operating results. Any restatement...

  • Page 65
    ... to pursue new opportunities, expand our service, upgrade our networks, engage in acquisitions, or purchase additional spectrum, thus limiting our ability to expand our business which could have a material adverse effect on our business, financial condition and operating results. To service our debt...

  • Page 66
    ... to produce cash from operations is subject to a number of risks, including introduction of new products and services by us or our competitors, changes in service plans or pricing by us or our competitors, or promotional offers; our ability to maintain our current cost structure; and our ability...

  • Page 67
    ... to roll out new services or to upgrade our networks to new technologies; limiting our ability to purchase additional spectrum or develop new metropolitan areas in the future; reducing the amount of cash available for working capital needs, capital expenditures for existing and new markets and other...

  • Page 68
    ... intended to protect stockholders in the event of an unfair or coercive offer to acquire our Company and to provide our board of directors with adequate time to evaluate unsolicited offers. The Rights Plan may prevent or make takeovers or unsolicited corporate transactions more difficult. The Rights...

  • Page 69
    ..., Michigan; Las Vegas, Nevada; Hawthorne, New York; Ft. Washington, Pennsylvania; and Plano, Texas. As of December 31, 2011, we also operated 162 retail stores throughout our metropolitan areas. Our executive offices, all of our regional offices, switch sites, retail stores and virtually all of our...

  • Page 70
    ... the symbol "PCS." Prior to April 19, 2007, there was no established public trading market for our common stock. The following table sets forth for the periods indicated the high and low composite per share prices as reported by the New York Stock Exchange. High Fiscal year ended December 31, 2010...

  • Page 71
    ... fees. Recent Sales of Unregistered Securities None. Share Repurchases The following table provides information about shares acquired from employees during the fourth quarter of 2011 as payment of withholding taxes in connection with the vesting of restricted stock: Total Number of Shares Purchased...

  • Page 72
    ...'s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" in this report. Year Ended December 31, 2011 Statement of Operations Data: Revenues: Service revenues Equipment revenues Total revenues Operating expenses: Cost of service (excluding depreciation and...

  • Page 73
    ... (1) See Note 15 to the consolidated financial statements included elsewhere in this report for an explanation of the calculation of basic and diluted net income per common share. The calculation of basic and diluted net income per common share for the year ended December 31, 2007 and 2008 is not...

  • Page 74
    ... customers who purchase services for additional handsets on the same account. In January 2011, we introduced new 4G LTE service plans that allow customers to enjoy voice, text and web access services at fixed monthly rates starting as low as $40 per month. For additional usage fees, we also provide...

  • Page 75
    ... from customers with mid-cycle plan changes where service has been provided prior to the receipt of payment based on billing terms. We estimate allowances for uncollectible accounts from independent retailers based on the length of time the receivables are past due, the current business environment...

  • Page 76
    ... modified. We adjust the reserves in light of changing facts and circumstances. Our effective tax rate includes the impact of income tax related reserve positions and changes to income tax reserves that we consider appropriate. A number of years may elapse before a particular matter for which we...

  • Page 77
    ... Assets We operate 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. We hold personal communications services, or PCS, licenses, advanced wireless services, or AWS...

  • Page 78
    ... options grants for the years ended December 31, 2011 and 2010: Year Ended December 31, 2011 2010 Expected dividends Expected volatility Risk-free interest rate Expected lives in years Weighted-average fair value of options: Granted at fair value Weighted-average exercise price of options: Granted...

  • Page 79
    ... within 7 days of purchase and less than 60 minutes of use. Customers who returned their phones under the Metro Promise are reflected as a reduction to gross customer additions. Customers' monthly service payments are due in advance every month. Our customers must pay their monthly service amount by...

  • Page 80
    ... no federal income taxes. For the years ended December 31, 2011, 2010 and 2009 we paid $4.5 million, approximately $2.9 million and $3.1 million, respectively, of state income tax. Seasonality Our customer activity is influenced by seasonal effects related to traditional retail selling periods and...

  • Page 81
    ...cost of service is primarily attributable to a 15% growth in our customer base and the deployment of additional network infrastructure, including network infrastructure for 4G LTE, during the twelve months ended December 31, 2011 as well as additional roaming expenses associated with Metro USA. Cost...

  • Page 82
    ... taxes, tax credits and state legislative changes. For the year ended December 31, 2010, our effective tax rate differs from the statutory federal rate of 35.0% due to net state and local taxes, tax credits and nondeductible expenses. Provision for income taxes for the years ended December 31, 2011...

  • Page 83
    ... year ended December 31, 2010 from $350.1 million for the year ended December 31, 2009. The increase is primarily attributable to an increase in upgrade handset sales to existing customers accounting for $85.9 million. This increase was partially offset by lower average price of handsets activated...

  • Page 84
    ...assets related to certain network technology that was retired and replaced with newer technology during the year ended December 31, 2010. Non-Operating Items Year Ended December 31, 2010 (in thousands) 2009 Change Interest expense Loss on extinguishment of debt Provision for income taxes Net income...

  • Page 85
    ...for the year ended December 31, 2009. The decrease in churn was primarily related to the acceptance of our Wireless for All tax and regulatory fee inclusive service plans including a decline in false churn as we no longer offer the first month of service for free. Our customer activity is influenced...

  • Page 86
    ... in CPU for the year ended December 31, 2010 was primarily driven by the increase in handset subsidies for upgrades by existing customers, the inclusion of regulatory fees in our Wireless for All service plans as well as costs associated with our 4G LTE network upgrade. Adjusted EBITDA. Adjusted...

  • Page 87
    ... promotionally priced handsets. The following tables reconcile total revenues used in the calculation of ARPU to service revenues, which we consider to be the most directly comparable GAAP financial measure to ARPU. Year Ended December 31, 2011 2010 (in thousands, except average number of customers...

  • Page 88
    Year Ended December 31, 2011 2010 2009 (in thousands, except gross customer additions and CPGA) Calculation of Cost Per Gross Addition (CPGA): Selling expenses Less: Equipment revenues Add: Impact to service revenues of promotional activity Add: Equipment revenue not associated with new customers ...

  • Page 89
    ... total costs used in the calculation of CPU to cost of service, which we consider to be the most directly comparable GAAP financial measure to CPU. Year Ended December 31, 2011 2010 2009 (in thousands, except average number of customers and CPU) Calculation of Cost Per User (CPU): Cost of service...

  • Page 90
    ... fund future growth. The following tables illustrate the calculation of Adjusted EBITDA and reconcile Adjusted EBITDA to net income and cash flows from operating activities, which we consider to be the most directly comparable GAAP financial measures to Adjusted EBITDA. Year Ended December 31, 2011...

  • Page 91
    ...38,618 327,321 $ Year Ended December 31, 2011 2010 (in thousands) 2009 Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA: Net cash provided by operating activities Adjustments: Interest expense Non-cash interest expense Interest income Other (income) expense, net Other...

  • Page 92
    ...expense, net Provision for uncollectible accounts receivable Deferred rent expense Cost of abandoned cell sites Gain on sale and maturity of investments Accretion of asset retirement obligations Provision for income taxes Deferred income taxes Changes in working capital Adjusted EBITDA Liquidity and...

  • Page 93
    ... 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, 2011, 2010 and 2009 were $889...

  • Page 94
    ... in net income for the year ended December 31, 2011 compared to the same period in 2010, partially offset by an decrease in cash flows provided by changes in working capital during the year ended December 31, 2011 compared to the same period in 2010. Cash provided by operating activities increased...

  • Page 95
    ..., as amended, including limitations on our ability to incur additional debt, make certain restricted payments, sell assets, make certain investments or acquisitions, grant liens and pay dividends. In addition, Wireless is no longer subject to certain financial covenants, including maintaining...

  • Page 96
    ...the upgrade of our network to 4G LTE in select metropolitan areas. During the year ended December 31, 2009, we incurred $831.7 million in capital expenditures. These capital expenditures were primarily for the expansion and improvement of our existing CDMA network infrastructure and costs associated...

  • Page 97
    ... related to unrecognized tax benefits, see Note 14, "Income Taxes," to the consolidated financial statements included in this Report. (2) (3) Inflation We believe that inflation has not materially affected our operations. Effect of New Accounting Standards Effective January 1, 2011, the Company...

  • Page 98
    ...and International Financial Reporting Standards ("IFRS"). The amendment is effective for interim and annual periods beginning after December 15, 2011, and should be applied prospectively. The implementation of this standard will not affect the Company's financial condition, results of operations, or...

  • Page 99
    ... of 2011 and effective as of November 1, 2011, the Company implemented the Inventory Accounting Module of Oracle Enterprise Business Suite. There have been no other changes in the Company's internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2011 that...

  • Page 100
    ... the Public Company Accounting Oversight Board (United States), the consolidated balance sheet and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows as of and for the year ended December 31, 2011 of the Company and our report dated February...

  • Page 101
    ...: Page Audited Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2011 and 2010 Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2011, 2010 and 2009 Consolidated...

  • Page 102
    ... Restated Non-Employee Director Remuneration Plan, effective March 11, 2010 (Filed as Exhibit 10.2 to MetroPCS Communications, Inc.'s Quarterly Report on Form 10-Q filed on May 10, 2010, and incorporated by reference herein). Form of Officer Cash Performance Award Agreement (Filed as Exhibit 10.2 to...

  • Page 103
    ... by reference herein). Amendment No. 3 to the General Purchase Agreement, effective as of December 3, 2007, by and between MetroPCS Wireless, Inc. and Lucent Technologies Inc. (Filed as Exhibit 10.4(d) to MetroPCS Communications, Inc's Annual Report on Form 10-K filed on February 29, 2008, and...

  • Page 104
    ...Communications, Inc.'s Quarterly Report on Form 10-Q filed on August 3, 2011, and incorporated by reference herein). Master Services Agreement effective...Communications, Inc's Annual Report on Form 10-K filed on March 1, 2011... Vice President and Chief Financial Officer of MetroPCS Communications, Inc...

  • Page 105
    ... Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. METROPCS COMMUNICATIONS, INC. Date: February 29, 2012 By: /s/ Roger D. Linquist Roger D. Linquist Chief Executive Officer and Chairman of the Board 94

  • Page 106
    ...) /s/ J. BRAXTON CARTER J. Braxton Carter Chief Financial Officer and Vice Chairman (Principal Financial Officer) /s/ CHRISTINE B. KORNEGAY Christine B. Kornegay Senior Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) /s/ JAMES N. PERRY, JR. James N. Perry...

  • Page 107
    ... Communications, Inc. and subsidiaries (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. These financial statements...

  • Page 108
    ...term investments Inventories Accounts receivable (net of allowance for uncollectible accounts of $601 and $2,494 at December 31, 2011 and 2010, respectively) Prepaid expenses Deferred charges Deferred tax... stock, at cost, 602,881 and 237,818 treasury shares at December 31, 2011 and 2010, respectively...

  • Page 109
    ... Communications, Inc. and Subsidiaries Consolidated Statements of Income and Comprehensive Income For the Years Ended December 31, 2011, 2010 and 2009 (in thousands, except share and per share information) 2011 REVENUES: Service revenues Equipment revenues Total revenues OPERATING EXPENSES: Cost...

  • Page 110
    ...the Years Ended December 31, 2011, 2010 and 2009 (in thousands, except share information) Number of Common Shares BALANCE, January 1, 2009 Exercise of Common Stock options Stock-based compensation expense Tax impact of Common Stock option forfeitures Net income Unrealized gains on available-for-sale...

  • Page 111
    ...Years Ended December 31, 2011, 2010 and 2009 (in thousands) 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Provision for uncollectible accounts receivable Deferred rent expense Cost...

  • Page 112
    ...and Business Operations: MetroPCS Communications, Inc. ("MetroPCS"), a Delaware corporation, together with its consolidated subsidiaries (the "Company"), is a wireless telecommunications carrier that offers wireless broadband mobile services in selected major metropolitan areas in the United States...

  • Page 113
    ... to be uncollectible from customers with mid-cycle plan changes where service has been provided prior to the receipt of payment based on billing terms. The following table summarizes the changes in the Company's allowance for uncollectible accounts (in thousands): 2011 Balance at beginning of...

  • Page 114
    ... related asset and charged to results of operations. Long-Term Investments The Company accounts for its investment securities in accordance with ASC 320 (Topic 320, "Investments - Debt and Equity Securities"). At December 31, 2011, all of the Company's long-term investment securities were reported...

  • Page 115
    ... 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 F-9

  • Page 116
    ...2010 and 2009 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, 2011, 2010 and...

  • Page 117
    ....8 million during the years ended December 31, 2011, 2010 and 2009, respectively. Income Taxes The Company records income taxes pursuant to ASC 740 (Topic 740, "Income Taxes"). ASC 740 uses an asset and liability approach to account for income taxes, wherein deferred taxes are provided for book and...

  • Page 118
    ...Consolidated Financial Statements December 31, 2011, 2010 and 2009 Stock-Based Compensation The Company accounts for share-based awards granted to employees for their services in accordance with ASC 718 (Topic 718, "Compensation - Stock Compensation"). Under ASC 718, share-based compensation cost is...

  • Page 119
    ...'s financial condition, results of operations, or cash flows. 3. Asset Acquisition: In October 2010, the Company entered into an asset purchase agreement to acquire 10 MHz of AWS spectrum and certain related network assets adjacent to the Northeast metropolitan areas for a total purchase price of...

  • Page 120
    ... to Consolidated Financial Statements December 31, 2011, 2010 and 2009 In October 2010, Wireless entered into three separate two-year interest rate protection agreements to manage its interest rate risk exposure under its Senior Secured Credit Facility. These agreements were effective on February...

  • Page 121
    ... cost and the Company has determined that no legal, regulatory, contractual, competitive, economic, or other factors exist as of December 31, 2011 that limit the useful life of its PCS, AWS and 700 MHz licenses. Other Spectrum Acquisitions During the year ended December 31, 2009, the Company closed...

  • Page 122
    ... of the following (in thousands): 2011 Accounts payable Book overdraft Accrued accounts payable Accrued liabilities Payroll and employee benefits Accrued interest Taxes, other than income Income taxes Accounts payable and accrued expenses 8. Long-term Debt: Long-term debt consisted of the following...

  • Page 123
    ... Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 In September 2010, Wireless completed a cash tender offer to purchase $313.1 million of outstanding aggregate principal amount of the Initial Notes and Additional Notes at a price...

  • Page 124
    ... Financial Statements December 31, 2011, 2010 and 2009 applicable to the Tranche B-2 Term Loans or the existing Tranche B-3 Term Loans. The facilities under the Senior Secured Credit Facility are guaranteed by MetroPCS, MetroPCS, Inc. and each of Wireless' direct and indirect present and future...

  • Page 125
    MetroPCS Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact the Company's valuation include changes to credit ratings of the ...

  • Page 126
    ...the Company generally relies on one or two key vendors in each of the following areas: network infrastructure equipment, billing services, payment services, customer care, handset logistics, roaming services and long distance services. Loss of any of these suppliers could adversely affect operations...

  • Page 127
    ... table provides aggregate information about the commitments under the Company's purchase obligations and other agreements as of December 31, 2011 (in thousands): For the Year Ending December 31, 2012 2013 2014 2015 2016 Litigation The Company is involved in litigation from time to time, including...

  • Page 128
    MetroPCS Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Company believes could, individually or in the aggregate, have a material adverse effect on the Company's business, financial condition, results of operations or liquidity. ...

  • Page 129
    ... of traded options, the use of the Black-Scholes option pricing model may not provide a reliable estimate of the fair value of employee stock options. A summary of the status of stock options granted under the Company's Equity Plans as of December 31, 2011, and changes during the period then ended...

  • Page 130
    MetroPCS Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 During the year ended December 31, 2010, 55,625 shares of common stock were tendered to the Company by an employee to cover the income tax obligation allocation with a stock ...

  • Page 131
    ... statements of income and comprehensive income for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands): U.S. federal income tax provision at statutory rate Increase (decrease) in income taxes resulting from: State income taxes, net of federal income tax impact Change...

  • Page 132
    ....6 million of financial reporting net operating loss carryforwards for federal and state income tax purposes, respectively. The Company has no current federal income tax liability as of December 31, 2011 and 2010. The Company's net operating loss carryforwards for federal and state tax purposes were...

  • Page 133
    ... and state net operating losses the Company has available for carryforward to offset future taxable income, or may increase the amount of tax due for the period under audit, resulting in an increase to the effective rate in the year of resolution. A reconciliation of the beginning and ending amount...

  • Page 134
    ...of Royal Street Communications and MetroPCS Finance being reported as guarantor subsidiaries. The following information presents condensed consolidating balance sheet information as of December 31, 2011 and 2010, condensed consolidating statement of income information for the years ended December 31...

  • Page 135
    MetroPCS Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Condensed Consolidating Balance Sheet Information As of December 31, 2011 Guarantor Subsidiaries (in thousands) CURRENT ASSETS: Cash and cash equivalents Inventories Accounts ...

  • Page 136
    MetroPCS Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Condensed Consolidating Balance Sheet Information As of December 31, 2010 Guarantor Subsidiaries (in thousands) CURRENT ASSETS: Cash and cash equivalents Inventories Accounts ...

  • Page 137
    MetroPCS Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Condensed Consolidating Statement of Income Information Year Ended December 31, 2011 Guarantor Subsidiaries (in thousands) REVENUES: Total Revenues OPERATING EXPENSES: Cost of ...

  • Page 138
    MetroPCS Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Condensed Consolidating Statement of Income Information Year Ended December 31, 2009 Guarantor Subsidiaries (in thousands) REVENUES: Total Revenues OPERATING EXPENSES: Cost of ...

  • Page 139
    ... Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Condensed Consolidating Statement of Cash Flows Information Year Ended December 31, 2011 Guarantor Subsidiaries (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided...

  • Page 140
    ... Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Condensed Consolidating Statement of Cash Flows Information Year Ended December 31, 2010 Guarantor Subsidiaries (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided...

  • Page 141
    ... Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Condensed Consolidating Statement of Cash Flows Information Year Ended December 31, 2009 Guarantor Subsidiaries (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided...

  • Page 142
    ... in a company that provides services to the Company's customers, including handset insurance programs. Pursuant to the Company's agreement with this related-party, the Company bills its customers directly for these services and remits the fees collected from its customers for these services to the...

  • Page 143
    ...Consolidated Financial Statements December 31, 2011, 2010 and 2009 Year Ended December 31, 2011 2010 2009 Capital lease payments included in financing activities $ 6.9 $ 2.9 $ 2.8 One of the Company's current directors is an officer of a company whose wholly-owned subsidiaries provide rating...

  • Page 144
    ... Communications, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2011, 2010 and 2009 Three Months Ended March 31, 2010 June 30, 2010 September 30, 2010 December 31, 2010 Total revenues Income from operations Net income Net income per common share - basic Net income...

  • Page 145
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  • Page 146
    ... Company's 2011 Annual Report on Form 10-K filed with the SEC on February 29, 2012 is included in this annual report. A copy of any exhibit listed in the exhibit index to the Company's Annual Report on Form 10-K or any other SEC filing is available free of charge by visiting the investor relations...

  • Page 147
    ... Dallas Gibson, Dunn & Crutcher L.L.P. Stock Symbol New York Stock Exchange: PCS MetroPCS Management Roger D. Linquist Chairman & Chief Executive Officer Thomas C. Keys President & Chief Operating Officer J. Braxton Carter Chief Financial Officer & Vice Chairman Mark A. Stachiw General Counsel...

  • Page 148
    MetroPCS Communications, Inc. NYSE: PCS www.metropcs.com Corporate Headquarters 2250 Lakeside Blvd. Richardson, TX 75082