Edgar Filing: METROPCS COMMUNICATIONS INC

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

¨	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		20-0836269
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2250 Lakeside Boulevard Richardson, Texas		75082-4304
(Address of principal executive offices)		(Zip Code)

(214) 570-5800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On October 30, 2009, there were 352,400,702 shares of the registrant’s common stock, $0.0001 par value, outstanding.

METROPCS COMMUNICATIONS, INC.

Quarterly Report on Form 10-Q

Table of Contents


		Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008		1
Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2009 and 2008		2
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008		3
Notes to Condensed Consolidated Interim Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3. Quantitative and Qualitative Disclosures About Market Risk		53
Item 4. Controls and Procedures		54

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		55
Item 1A. Risk Factors		55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		*
Item 3. Defaults Upon Senior Securities		*
Item 4. Submission of Matters to a Vote of Security Holders		*
Item 5. Other Information		*
Item 6. Exhibits		61
SIGNATURES		62

*	No reportable information under this item.

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(Unaudited)


	September 30, 2009			December 31, 2008
CURRENT ASSETS:
Cash and cash equivalents	$	955,578		$	697,948
Short-term investments		224,928			3
Inventories, net		88,124			155,955
Accounts receivable (net of allowance for uncollectible accounts of $1,883 and $4,106 at September 30, 2009 and December 31, 2008, respectively)		47,780			34,666
Prepaid charges		88,792			56,347
Deferred charges		38,595			49,716
Deferred tax assets		1,832			1,832
Other current assets		23,642			47,417

Total current assets		1,469,271			1,043,884

Property and equipment, net		3,097,625			2,847,751
Restricted cash and investments		13,437			4,575
Long-term investments		3,846			5,986
FCC licenses		2,451,544			2,406,596
Microwave relocation costs		19,282			16,478
Other assets		107,884			96,878

Total assets	$	7,162,889		$	6,422,148


CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	483,436		$	568,432
Current maturities of long-term debt		18,174			17,009
Deferred revenue		164,313			151,779
Other current liabilities		5,371			5,136

Total current liabilities		671,294			742,356

Long-term debt, net		3,590,688			3,057,983
Deferred tax liabilities		481,732			389,509
Deferred rents		74,443			56,425
Redeemable ownership interest		7,457			6,290
Other long-term liabilities		103,644			135,262

Total liabilities		4,929,258			4,387,825

COMMITMENTS AND CONTINGENCIES (See Note 13)

STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.0001 per share, 100,000,000 shares authorized; no shares of preferred stock issued and outstanding at September 30, 2009 and December 31, 2008		—			—
Common Stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 352,254,300 and 350,918,272 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively		35			35
Additional paid-in capital		1,622,483			1,578,972
Retained earnings		631,568			487,849
Accumulated other comprehensive loss		(20,455	)		(32,533	)

Total stockholders’ equity		2,233,631			2,034,323

Total liabilities and stockholders’ equity	$	7,162,889		$	6,422,148

The accompanying notes are an integral part of these condensed consolidated financial statements.

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except share and per share information)

(Unaudited)


	For the three months ended September 30,						For the nine months ended September 30,
	2009			2008			2009			2008
REVENUES:
Service revenues	$	812,340		$	610,691		$	2,305,888		$	1,771,222
Equipment revenues		83,253			76,030			244,646			256,660

Total revenues		895,593			686,721			2,550,534			2,027,882

OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense of $88,232, $58,484, $240,803 and $160,202, shown separately below)		298,288			219,423			812,596			614,036
Cost of equipment		199,092			160,538			651,511			520,783
Selling, general and administrative expenses (excluding depreciation and amortization expense of $10,745, $9,147, $31,294 and $25,617, shown separately below)		138,460			116,654			417,191			334,448
Depreciation and amortization		98,977			67,631			272,097			185,819
Loss (gain) on disposal of assets		2,569			1,822			(8,328	)		4,471

Total operating expenses		737,386			566,068			2,145,067			1,659,557


Income from operations		158,207			120,653			405,467			368,325

OTHER EXPENSE (INCOME):
Interest expense		70,391			42,950			199,358			136,032
Accretion of put option in majority-owned subsidiary		395			317			1,168			937
Interest and other income		(853	)		(5,164	)		(1,881	)		(20,418	)
Impairment loss on investment securities		374			2,956			1,827			20,037

Total other expense		70,307			41,059			200,472			136,588

Income before provision for income taxes		87,900			79,594			204,995			231,737

Provision for income taxes		(14,350	)		(34,714	)		(61,276	)		(96,873	)


Net income	$	73,550		$	44,880		$	143,719		$	134,864


Other comprehensive income:
Unrealized gains on available-for-sale securities, net of tax		776			—			665			798
Unrealized losses on cash flow hedging derivatives, net of tax		(8,570	)		(3,202	)		(12,197	)		(7,863	)
Reclassification adjustment for losses on cash flow hedging derivatives included in net income, net of tax		8,792			3,570			23,610			8,271


Comprehensive income	$	74,548		$	45,248		$	155,797		$	136,070


Net income per common share:
Basic	$	0.21		$	0.13		$	0.41		$	0.39

Diluted	$	0.21		$	0.13		$	0.40		$	0.38

Weighted average shares:
Basic		352,182,656			349,983,692			351,732,660			349,069,936

Diluted		355,359,436			355,883,935			356,511,560			355,573,339

The accompanying notes are an integral part of these condensed consolidated financial statements.

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	For the nine months ended September 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	143,719		$	134,864
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		272,097			185,819
Provision for uncollectible accounts receivable		191			14
Deferred rent expense		17,765			14,268
Cost of abandoned cell sites		6,148			3,603
Stock-based compensation expense		35,767			30,254
Non-cash interest expense		8,176			1,875
(Gain) loss on disposal of assets		(8,328	)		4,471
Gain on sale of investments		(272	)		—
Impairment loss on investment securities		1,827			20,037
Accretion of asset retirement obligations		3,716			2,244
Accretion of put option in majority-owned subsidiary		1,168			937
Deferred income taxes		85,070			93,484
Changes in assets and liabilities:
Inventories		67,831			26,644
Accounts receivable, net		(13,305	)		(7,511	)
Prepaid charges		(22,123	)		(17,854	)
Deferred charges		11,121			(3,702	)
Other assets		9,565			(298	)
Accounts payable and accrued expenses		171,442			21,381
Deferred revenue		12,438			16,069
Other liabilities		(24,599	)		1,308

Net cash provided by operating activities		779,414			527,907

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(636,522	)		(660,771	)
Change in prepaid purchases of property and equipment		(10,211	)		10,526
Proceeds from sale of property and equipment		4,836			502
Purchase of investments		(374,227	)		—
Proceeds from sale of investments		150,000			37
Change in restricted cash and investments		(13,112	)		—
Purchases of and deposits for FCC licenses		(15,517	)		(314,567	)
Proceeds from exchange of FCC licenses		949			—
Cash used in business acquisitions		—			(25,163	)
Microwave relocation costs		(1,050	)		(1,798	)

Net cash used in investing activities		(894,854	)		(991,234	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		(100,368	)		15,809
Proceeds from 9¹/4% Senior Notes		492,250			—
Debt issuance costs		(11,925	)		—
Repayment of debt		(12,000	)		(12,000	)
Payments on capital lease obligations		(2,680	)		—
Proceeds from exercise of stock options		7,793			9,702

Net cash provided by financing activities		373,070			13,511


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		257,630			(449,816	)
CASH AND CASH EQUIVALENTS, beginning of period		697,948			1,470,208

CASH AND CASH EQUIVALENTS, end of period	$	955,578		$	1,020,392

The accompanying notes are an integral part of these condensed consolidated financial statements.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

1. Basis of Presentation:

The accompanying unaudited condensed consolidated interim financial statements include the balances and results of operations of MetroPCS Communications, Inc. (“MetroPCS”) and its consolidated subsidiaries (collectively, the “Company”). MetroPCS indirectly owns, through its wholly-owned subsidiaries, 85% of the limited liability company member interest in Royal Street Communications, LLC (“Royal Street Communications”). The consolidated financial statements include the balances and results of operations of MetroPCS and its wholly-owned subsidiaries as well as the balances and results of operations of Royal Street Communications and its wholly-owned subsidiaries (collectively, “Royal Street”). The Company consolidates its interest in Royal Street in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 (Topic 810, “Consolidation”), because Royal Street is a variable interest entity and the Company will absorb all of Royal Street’s expected losses. All intercompany accounts and transactions between MetroPCS and its wholly-owned subsidiaries and Royal Street have been eliminated in the consolidated financial statements. The redeemable ownership interest in Royal Street is included in long-term liabilities. The condensed consolidated balance sheets as of September 30, 2009 and December 31, 2008, the condensed consolidated statements of income and comprehensive income and cash flows for the periods ended September 30, 2009 and 2008, and the related footnotes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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. The Company reports these fees on a gross basis in service revenues and cost of service on the accompanying statements of income and comprehensive income. For the three months ended September 30, 2009 and 2008, the Company recorded $47.5 million and $31.1 million, respectively, of FUSF, E-911 and other fees. For the nine months ended September 30, 2009 and 2008, the Company recorded $124.1 million and $87.7 million, respectively, of FUSF, E-911 and other fees. Sales, use and excise taxes are reported on a net basis in selling, general and administrative expenses on the accompanying statements of income and comprehensive income.

2. Share-based Payments:

In accordance with ASC 718 (Topic 718, “Compensation – Stock Compensation”), the Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments, which includes stock options granted and restricted stock awards to employees. The Company records stock-based compensation expense in cost of service and selling, general and administrative expenses. Stock-based compensation expense was $12.4 million and $10.8 million for the three months ended September 30, 2009 and 2008, respectively. Cost of service for the three months ended September 30, 2009 and 2008 includes $1.1 million and $0.9 million, respectively, of stock-based compensation. For the three months ended September 30, 2009 and 2008, selling, general and administrative expenses include $11.3 million and $9.9 million, respectively, of stock-based compensation. Stock-based compensation expense was approximately $35.8 million and $30.3 million for the nine months ended September 30, 2009 and 2008, respectively. Cost of service for the nine months ended September 30, 2009 and 2008 includes $3.1 million and $2.1 million, respectively, of stock-based compensation. For the nine months ended September 30, 2009 and 2008, selling, general and administrative expenses include approximately $32.7 million and $28.2 million, respectively, of stock-based compensation.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Restricted Stock Awards

Restricted stock awards are share awards that entitle the holder to receive shares of the Company’s common stock which become fully tradable upon vesting. During the three and nine months ended September 30, 2009, pursuant to the Amended and Restated MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan, the Company issued 25,600 and 1,380,710 restricted stock awards, respectively, to certain employees. The restricted stock awards granted generally vest on a four-year vesting schedule with 25% vesting on the first anniversary date of the award and the remainder pro-rata on a monthly or quarterly basis thereafter. The Company determined the grant-date fair value of the restricted stock awards granted to be $19.8 million based on the closing price of the Company’s common stock on the New York Stock Exchange on the grant dates. The estimated compensation cost of the restricted stock awards, which is equal to the fair value of the awards on the date of grant, will be recognized on a ratable basis over the four-year vesting period.

3. Short-term Investments:

The Company invests its cash balances in, among other things, securities issued and fully guaranteed by the United States or any state, money market funds meeting certain criteria, and demand deposits. These investments are subject to credit, liquidity, market and interest rate risk. At September 30, 2009, the Company had invested a significant portion of its cash and cash equivalents in money market funds consisting of U.S. Treasury securities with an original maturity of 90 days or less.

The Company’s short-term investments consist of securities classified as available-for-sale, which are stated at fair value. The securities include U.S. Treasury securities with an original maturity of over 90 days. Unrealized gains, net of related income taxes, for available-for-sale securities are reported in accumulated other comprehensive loss, a component of stockholders’ equity, until realized. The estimated fair values of investments are based on quoted market prices as of the end of the reporting period.

Short-term investments, with an original maturity of over 90 days, consisted of the following (in thousands):


	As of September 30, 2009
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Aggregate Fair Value
Equity Securities	$	7	$	—	$	(5	)	$	2
U.S. Treasury Securities		224,498		428		—			224,926

Total short-term investments	$	224,505	$	428	$	(5	)	$	224,928


	As of December 31, 2008
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Aggregate Fair Value
Equity Securities	$	7	$	—	$	(4	)	$	3

Total short-term investments	$	7	$	—	$	(4	)	$	3

The cost and aggregate fair values of short-term investments by contractual maturity at September 30, 2009 were as follows (in thousands):

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

4. Derivative Instruments and Hedging Activities:

On November 21, 2006, MetroPCS Wireless, Inc. (“Wireless”) entered into a three-year interest rate protection agreement to manage the Company’s interest rate risk exposure and fulfill a requirement of Wireless’ senior secured credit facility, as amended, (the “Senior Secured Credit Facility”), pursuant to which Wireless may borrow up to $1.7 billion. The agreement covers a notional amount of $1.0 billion and effectively converts this portion of Wireless’ variable rate debt to fixed-rate debt at an annual rate of 7.169%. The interest rate protection agreement expires on February 1, 2010. This financial instrument is reported in other long-term liabilities at fair market value of $15.6 million as of September 30, 2009.

On April 30, 2008, Wireless entered into an additional two-year interest rate protection agreement to manage the Company’s interest rate risk exposure. The agreement was effective on June 30, 2008 and covers an aggregate notional amount of $500.0 million and effectively converts this portion of Wireless’ variable rate debt to fixed rate debt at an annual rate of 5.464%. The monthly interest settlement periods began on June 30, 2008. This agreement expires on June 30, 2010. This financial instrument is reported in other long-term liabilities at fair market value of approximately $10.5 million as of September 30, 2009.

In March 2009, Wireless entered into three separate two-year interest rate protection agreements to manage the Company’s interest rate risk exposure. These agreements are effective on February 1, 2010 and cover a notional amount of $1.0 billion and effectively convert this portion of Wireless’ variable rate debt to fixed rate debt at a weighted average annual rate of 4.381%. The monthly interest settlement periods will begin on February 1, 2010. These agreements expire on February 1, 2012. These financial instruments are reported in other long-term liabilities at fair market value of approximately $9.9 million as of September 30, 2009.

The primary risk managed by using derivative instruments is interest rate risk. Interest rate protection agreements are entered into to manage interest rate risk associated with the Company’s variable-rate borrowings. The interest rate protection agreements have been designated as cash flow hedges. If a derivative is designated as a cash flow hedge and the hedging relationship qualifies for hedge accounting under the provisions of ASC 815 (Topic 815, “Derivatives and Hedging”) the effective portion of the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss) and reclassified to interest expense in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of a derivative qualifying for hedge accounting is recognized in earnings in the period of the change. For the three months ended September 30, 2009, the change in fair value did not result in ineffectiveness.

At the inception of the cash flow hedges and quarterly thereafter, the Company performs an assessment to determine whether changes in the fair values or cash flows of the derivatives are deemed highly effective in offsetting changes in the fair values or cash flows of the hedged transaction. If at any time subsequent to the inception of the cash flow hedges, the assessment indicates that the derivative is no longer highly effective as a hedge, the Company will discontinue hedge accounting and recognize all subsequent derivative gains and losses in results of operations. The Company estimates that approximately $35.5 million of net losses that are reported in accumulated other comprehensive loss at September 30, 2009 are expected to be reclassified into earnings within the next 12 months.

Cross-default Provisions

The Company’s interest rate protection agreements contain cross-default provisions to the Company’s Senior Secured Credit Facility. The Company’s Senior Secured Credit Facility allows interest rate protection agreements to become secured if the counterparty to the agreement is a current lender under the facility. If the Company were to default on the Senior Secured Credit Facility, it would trigger these provisions, and the counterparties to the interest rate protection agreements could request immediate payment on interest rate protection agreements in net liability positions, similar to their existing rights as a lender. There are no collateral requirements in the interest rate protection agreements. The aggregate fair value of interest rate protection agreements with cross-default provisions that are in a net liability position on September 30, 2009 is $36.0 million.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Fair Values of Derivative Instruments


(in thousands)	Liability Derivatives
	As of September 30, 2009				As of December 31, 2008
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value

Derivatives designated as hedging instruments under ASC 815
Interest rate protection agreements	Other long-term liabilities	$	(36,016	)	Other long-term liabilities	$	(54,963	)

Total derivatives designated as hedging instruments under ASC 815		$	(36,016	)		$	(54,963	)

The Effect of Derivative Instruments on the Condensed Consolidated Statement of Income and Comprehensive Income

For the Three Months Ended September 30,


Derivatives in ASC 815 Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	2009			2008				2009			2008

Interest rate protection agreements	$	(13,954	)	$	(5,151	)	Interest expense	$	(14,581	)	$	(6,283	)

Total	$	(13,954	)	$	(5,151	)		$	(14,581	)	$	(6,283	)

The Effect of Derivative Instruments on the Condensed Consolidated Statement of Income and Comprehensive Income

For the Nine Months Ended September 30,


Derivatives in ASC 815 Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	2009			2008				2009			2008

Interest rate protection agreements	$	(19,914	)	$	(12,747	)	Interest expense	$	(38,862	)	$	(13,946	)

Total	$	(19,914	)	$	(12,747	)		$	(38,862	)	$	(13,946	)

5. Property and Equipment:

Property and equipment, net, consisted of the following (in thousands):


	September 30, 2009			December 31, 2008
Construction-in-progress	$	263,050		$	898,454
Network infrastructure		3,565,330			2,522,206
Office equipment and software		134,377			63,848
Leasehold improvements		53,470			47,784
Furniture and fixtures		13,418			10,273
Vehicles		422			311

		4,030,067			3,542,876
Accumulated depreciation and amortization		(932,442	)		(695,125	)


Property and equipment, net	$	3,097,625		$	2,847,751

6. FCC Licenses and Microwave Relocation Costs:

The Company operates wireless broadband mobile networks under licenses granted by the Federal Communications Commission (“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. In June 2008, the Company acquired a 700 MHz license that also can be used to provide similar services. The PCS licenses previously included, and the AWS licenses currently include, the obligation and resulting costs to relocate existing fixed microwave users of the

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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 incurred costs related to microwave relocation in constructing its PCS and AWS networks.

The 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 and one-half 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 (Topic 350, “Intangibles-Goodwill and Other”), 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 September 30, 2009.

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 indefinite-lived intangible assets using a direct value methodology in accordance with ASC 805 (Topic 805, “Business Combinations”). The direct value approach determines fair value using a discounted cash flow model. Cash flow projections and assumptions, although subject to a degree of uncertainty, are based on a combination of the Company’s historical performance and trends, its business plans and management’s estimate of future performance, giving consideration to existing and anticipated competitive economic conditions. Other assumptions include the Company’s weighted average cost of capital and long-term rate of growth for its business. The Company believes that its estimates are consistent with assumptions that marketplace participants would use to estimate fair value. The Company corroborates its determination of fair value of the indefinite-lived intangible assets, using the discounted cash flow approach described above, with other market-based valuation metrics. An impairment loss would be recorded as a reduction in the carrying value of the related indefinite-lived intangible assets and charged to results of operations.

For the purpose of performing the annual impairment test as of September 30, 2009, the indefinite-lived intangible assets were aggregated and combined into a single unit of accounting in accordance with ASC 350 based on the management of the business on a national scope. The Company believes that utilizing its indefinite-lived intangible assets as a group represents the highest and best use of the assets, and the value of the indefinite-lived intangible assets would not be significantly impacted by a sale of one or a portion of the indefinite-lived intangible assets, among other factors. Previously, the Company’s indefinite-lived intangible assets were segregated by regional clusters for the purpose of performing the annual impairment test. As of September 30, 2009, in accordance with the requirements in ASC 350, these intangibles were separately tested for impairment prior to being combined as a single unit of accounting. No impairment was recognized as the fair value of each indefinite-lived intangible asset was in excess of its carrying value as of September 30, 2009. Although the Company does not expect its estimates or assumptions to change significantly in the future, the use of different estimates or assumptions within the discounted cash flow model when determining the fair value of the indefinite-lived intangible assets or using a methodology other than a discounted cash flow model could result in different values for the indefinite-lived intangible assets and may affect any related impairment charge. The most significant assumptions within the Company’s discounted cash flow model are the discount rate, the projected growth rate and management’s future business plans. A one percent decline in annual revenue growth rates, a one percent decline in annual net cash flows or a one percent increase in discount rate would not result in an impairment related to the combined single unit of accounting as of September 30, 2009.

Furthermore, if any of the indefinite-lived intangible assets are subsequently determined to have a finite useful life, such assets would be tested for impairment in accordance with ASC 360 (Topic 360, “Property, Plant, and Equipment”), and the intangible assets would then be amortized prospectively over the estimated remaining useful life. There also have been no subsequent indicators of impairment including those indicated in ASC 360, and accordingly, no subsequent interim impairment tests were performed.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Other Spectrum Acquisitions

During the three and nine months ended September 30, 2009, the Company closed on various agreements for the acquisition and exchange of spectrum in the net aggregate amount of approximately $4.3 million and $14.6 million in cash, respectively.

7. Accounts Payable and Accrued Expenses:

Accounts payable and accrued expenses consisted of the following (in thousands):


	September 30, 2009		December 31, 2008
Accounts payable	$	119,476	$	148,309
Book overdraft		4,385		104,752
Accrued accounts payable		136,614		178,085
Accrued liabilities		21,285		15,803
Payroll and employee benefits		25,459		34,047
Accrued interest		87,046		33,521
Taxes, other than income		81,838		46,705
Income taxes		7,333		7,210


Accounts payable and accrued expenses	$	483,436	$	568,432

8. Long-term Debt:

Long-term debt consisted of the following (in thousands):


	September 30, 2009			December 31, 2008
9¹/4% Senior Notes	$	1,950,000		$	1,400,000
Senior Secured Credit Facility		1,552,000			1,564,000
Capital Lease Obligations		142,025			91,343


Total long-term debt		3,644,025			3,055,343
Add: unamortized (discount) premium on debt		(35,163	)		19,649


Total debt		3,608,862			3,074,992
Less: current maturities		(18,174	)		(17,009	)


Total long-term debt	$	3,590,688		$	3,057,983

9¹/4% Senior Notes

On November 3, 2006, Wireless completed the sale of $1.0 billion of principal amount of 9¹/4% Senior Notes due 2014, (the “Initial Notes”). On June 6, 2007, Wireless completed the sale of an additional $400.0 million of 9¹/4% Senior Notes due 2014 (the “Additional Notes”) under the existing indenture governing the Initial Notes at a price equal to 105.875% of the principal amount of such Additional Notes. On January 20, 2009, Wireless completed the sale of an additional $550.0 million of 9¹/4% Senior Notes due 2014 (the “New 9¹/4% Senior Notes” and, together with the Initial Notes and Additional Notes, the “9¹/4% Senior Notes”) under a new indenture substantially similar to the indenture governing the Initial Notes at a price equal to 89.50% of the principal amount of such New 9¹/4% Senior Notes resulting in net proceeds of approximately $480.3 million.

The 9¹/4% Senior Notes are unsecured obligations and are guaranteed by MetroPCS, MetroPCS, Inc., and all of Wireless’ direct and indirect wholly-owned subsidiaries, but are not guaranteed by Royal Street. Interest is payable on the 9¹/4% Senior Notes on May 1 and November 1 of each year. Wireless may, at its option, redeem some or all of the 9¹/4% Senior Notes at any time on or after November 1, 2010 for the redemption prices set forth in the indentures governing the 9¹/4% Senior Notes. In addition, prior to November 1, 2009, Wireless may, at its option, redeem up to 35% of the aggregate principal amount of the 9¹/4% Senior Notes with the net cash proceeds of certain sales of equity securities. Wireless may also, at its option, prior to November 1, 2010, redeem some or all of the notes at the “make whole” price set forth in the indentures governing the 9¹/4% Senior Notes.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Senior Secured Credit Facility

On November 3, 2006, Wireless entered into the Senior Secured Credit Facility, which consists of a $1.6 billion term loan facility and a $100.0 million revolving credit facility. On November 3, 2006, Wireless borrowed $1.6 billion under the Senior Secured Credit Facility. The term loan facility is repayable in quarterly installments in annual aggregate amounts equal to 1% of the initial aggregate principal amount of $1.6 billion.

The facilities under the Senior Secured Credit Facility are guaranteed by MetroPCS, MetroPCS, Inc. and each of Wireless’ direct and indirect present and future wholly-owned domestic subsidiaries. The facilities are not guaranteed by Royal Street, but Wireless pledged the promissory note that Royal Street has given it in connection with amounts borrowed by Royal Street from Wireless and the limited liability company member interest held in Royal Street Communications. The Senior Secured Credit Facility contains customary events of default, including cross-defaults. The obligations are also secured by the capital stock of Wireless as well as substantially all of Wireless’ present and future assets and the capital stock and substantially all of the assets of each of its direct and indirect present and future wholly-owned subsidiaries (except as prohibited by law and certain permitted exceptions), but excludes Royal Street.

The interest rate on the outstanding debt under the Senior Secured Credit Facility is variable. The rate as of September 30, 2009 was 6.463% (see Note 4).

Capital Lease Obligations

The Company has entered into various non-cancelable capital lease agreements, with varying expiration terms through 2024. Assets and future obligations related to capital leases are included in the accompanying condensed consolidated balance sheets in property and equipment and long-term debt, respectively. Depreciation of assets held under capital leases is included in depreciation and amortization expense. As of September 30, 2009, the Company had approximately $142.0 million of capital lease obligations, with $2.2 million and $139.8 million recorded in current maturities of long-term debt and long-term debt, respectively.

Restricted Cash and Investments

During the three months ended September 30, 2009, the Company replaced $12.5 million of previously existing letters of credit drawn under the Senior Secured Credit Facility with letters of credit that are cash collateralized. The cash collateral is reported in restricted cash and investments in the accompanying condensed consolidated balance sheets.

9. Fair Value Measurements:

The Company has adopted the provisions of ASC 820 (Topic 820, “Fair Value Measurements and Disclosures”), for financial assets and liabilities. ASC 820 became effective for financial assets and liabilities on January 1, 2008. The Company adopted the provisions of ASC 820 for non-financial assets and liabilities upon its effectiveness on January 1, 2009. ASC 820 defines fair value, thereby eliminating inconsistencies in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations.

ASC 820 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

•

Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

•

Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

•

Level 3 - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use.

ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The Company’s financial assets and liabilities measured at fair value on a recurring basis include cash and cash equivalents, short and long-term investments securities and derivative financial instruments.

Included in the Company’s cash and cash equivalents are cash on hand, cash in bank accounts, investments in money market funds consisting of U.S. Treasury securities with an original maturity of 90 days or less. Included in the Company’s short-term investments are securities classified as available-for-sale, which are stated at fair value. The securities include U.S. Treasury securities with an original maturity of over 90 days. Fair value is determined based on observable quotes from banks and unadjusted quoted market prices from identical or similar securities in an active market at the reporting date. Significant inputs to the valuation are observable in the active markets and are classified as Level 1 in the hierarchy.

Included in the Company’s long-term investments securities are certain auction rate securities, some of which are secured by collateralized debt obligations with a portion of the underlying collateral being mortgage securities or related to mortgage securities. Due to the lack of availability of observable market quotes on the Company’s investment portfolio of auction rate securities, the fair value was estimated based on valuation models that rely exclusively on unobservable Level 3 inputs including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The valuation of the Company’s 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 securities as well as the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral values, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity. Significant inputs to the investments valuation are unobservable in the active markets and are classified as Level 3 in the hierarchy.

Included in the Company’s derivative financial instruments are interest rate swaps. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs such as interest rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps are observable in the active markets and are classified as Level 2 in the hierarchy.

The following table summarizes assets and liabilities measured at fair value on a recurring basis at September 30, 2009, as required by ASC 820 (in thousands):


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	955,578	$	—	$	—	$	955,578
Short-term investments		224,928		—		—		224,928
Restricted cash and investments		13,437		—		—		13,437
Long-term investments		—		—		3,846		3,846

Total assets at fair value	$	1,193,943	$	—	$	3,846	$	1,197,789


Liabilities
Derivative liabilities	$	—	$	36,016	$	—	$	36,016

Total liabilities at fair value	$	—	$	36,016	$	—	$	36,016

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

The following table summarizes the changes in fair value of the Company’s Level 3 assets, as required by ASC 820 (in thousands):


Fair Value Measurements of Assets Using Level 3 Inputs	Long-Term Investments
	Three Months Ended September 30, 2009			Nine Months Ended September 30, 2009
Beginning balance	$	3,837		$	5,986
Total losses (gains) (realized or unrealized):
Included in earnings		374			1,827
Included in accumulated other comprehensive loss		(383	)		313
Transfers in and/or out of Level 3		—			—
Purchases, sales, issuances and settlements		—			—

Ending balance at September 30, 2009	$	3,846		$	3,846


	Three Months Ended September 30, 2009			Nine Months Ended September 30, 2009
Losses included in earnings that are attributable to the change in unrealized losses relating to those assets still held at the reporting date as reported in impairment loss on investment securities in the condensed consolidated statements of income and comprehensive income	$	374		$	1,827

The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities.

The estimated fair values of the Company’s financial instruments are as follows (in thousands):


	September 30, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Secured Credit Facility	$	1,552,000	$	1,495,740	$	1,564,000	$	1,251,200
9¹/4% Senior Notes		1,950,000		1,993,875		1,400,000		1,239,000
Cash flow hedging derivatives		36,016		36,016		54,963		54,963
Short-term investments		224,928		224,928		3		3
Long-term investments		3,846		3,846		5,986		5,986

10. Income Taxes:

The Company accrued gross interest expense and penalties of $0.2 million and $0.6 million on unrecognized tax benefits during the three and nine months ended September 30, 2009, exclusive of the decrease in uncertain tax positions discussed below. A state unrecognized tax benefit decreased this quarter due to the expiration of a statute of limitations. The decrease of the gross unrecognized tax benefit was $13.2 million and the related gross interest and penalties were $13.4 million. The net decrease in unrecognized tax benefits was $18.1 million, which is net of federal and state impact. In another state jurisdiction, an examination is currently ongoing and the Company believes it is reasonably possible that the amount of unrecognized tax benefits in that state could significantly decrease within the next 12 month period. The gross unrecognized tax benefit for this position could decrease in an amount up to $2.8 million and the related gross interest and penalties could decrease in an amount up to $2.7 million. The potential net decrease in unrecognized tax benefits could be up to $3.9 million, which is net of federal and state tax impact. The Company does not anticipate that a change in unrecognized tax benefits would result in a material change to the Company’s financial position.

The Internal Revenue Service (“IRS”) is currently examining the 2005 and 2006 tax years of Royal Street Communications. Management does not anticipate the audit will result in changes to the Company’s tax position.

During 2008, the Company invested in renewable energy products. The Company accounts for its renewable energy investment tax credits in accordance with ASC 740 (Topic 740, “Income Taxes”). ASC 740 provides an accepted accounting method for investment tax credits, known as the tax reduction method or the flow-through method, and treats the investment tax credit as a reduction of income tax expense in the year generated.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

11. Common Stock Options Issued to Directors:

Non-employee members of MetroPCS’ Board of Directors receive compensation for serving on the Board of Directors, as provided in MetroPCS’ Non-Employee Director Remuneration Plan (the “Remuneration Plan”). The Remuneration Plan provides that each non-employee director’s annual retainer, meeting fees and committee paid event fees will be paid in cash and each director will receive options to purchase common stock.

12. Net Income Per Common Share:

The following table sets forth the computation of basic and diluted net income per common share for the periods indicated (in thousands, except share and per share data):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Basic EPS:
Net income applicable to common stock	$	73,550		$	44,880		$	143,719		$	134,864
Amount allocable to common shareholders		99.6	%		100.0	%		99.6	%		100.0	%

Rights to undistributed earnings	$	73,272		$	44,880		$	143,175		$	134,864

Weighted average shares outstanding—basic		352,182,656			349,983,692			351,732,660			349,069,936

Net income per common share—basic	$	0.21		$	0.13		$	0.41		$	0.39

Diluted EPS:
Rights to undistributed earnings	$	73,272		$	44,880		$	143,175		$	134,864

Weighted average shares outstanding—basic		352,182,656			349,983,692			351,732,660			349,069,936
Effect of dilutive securities:
Stock options		3,176,780			5,900,242			4,778,900			6,503,403

Weighted average shares outstanding—diluted		355,359,436			355,883,934			356,511,560			355,573,339

Net income per common share—diluted	$	0.21		$	0.13		$	0.40		$	0.38

In accordance with ASC 260 (Topic 260, “Earnings Per Share”), unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents, whether paid or unpaid, are considered a “participating security” for purposes of computing earnings or loss per common share and the two-class method of computing earnings per share is required for all periods presented.

Under the restricted stock award agreements, unvested shares of restricted stock have rights to receive non-forfeitable dividends. For the three and nine months ended September 30, 2009, the Company has calculated basic and diluted earnings per share under both the treasury stock method and the two-class method. There was not a significant difference in the per share amounts calculated under the two methods, and the two-class method is disclosed. There were no restricted stock awards issued prior to January 1, 2009. For the three and nine months ended September 30, 2009, 1.3 million restricted common shares issued to employees have been excluded from the computation of basic net income per common share since the shares are not vested and remain subject to forfeiture.

For the three months ended September 30, 2009 and 2008, 23.0 million and 13.0 million, respectively, of stock options were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive. For the nine months ended September 30, 2009 and 2008, 15.7 million and 11.5 million, respectively, of stock options were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive.

13. Commitments and Contingencies:

The Company has entered into pricing agreements with various handset manufacturers for the purchase of wireless handsets at specified prices. The terms of these agreements expire on various dates through December 31, 2009. The total aggregate commitment outstanding under these pricing agreements is approximately $7.0 million as of September 30, 2009.

In September 2009, Wireless entered into a Master Procurement Agreement (“MPA”) with a network infrastructure and equipment provider under which the provider will sell and license to Wireless on a non-exclusive basis long-term evolution (“LTE”)

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

system products and services ( the “LTE Products and Services”). The initial term of the MPA, unless earlier terminated in accordance with the terms of the MPA, continues to the earlier to occur of four years or the date which Wireless has purchased a minimum number of certain products under the MPA. Upon the conclusion of the initial term, at Wireless’ sole option, the MPA may be renewed on an annual basis for up to five one-year renewal terms. The MPA includes discounts and incentives for Wireless’ purchase and licensing of LTE Products and Services, and provides that, except in certain circumstances, Wireless will make certain prepayments for LTE Products and Services during the first fourteen months of the initial term. Except as may be otherwise permitted at certain times under the MPA, if Wireless (i) terminates the MPA before the end of the Initial Term without cause or Wireless does not renew the MPA after the Initial Term and (ii) has not purchased a minimum number of certain products, Wireless will be obligated to pay for certain products previously delivered and accepted and may also have to pay certain liquidated damages.

AWS Licenses Acquired in Auction 66

Spectrum allocated for AWS currently is utilized by a variety of categories of commercial and governmental users. To foster the orderly clearing of the spectrum, the FCC adopted a transition and cost sharing plan pursuant to which incumbent non-governmental users could be reimbursed for relocating out of the band and the costs of relocation would be shared by AWS licensees benefiting from the relocation. The FCC has established a plan where the AWS licensee and the incumbent non-governmental user are to negotiate voluntarily for three years and then, if no agreement has been reached, the incumbent licensee is subject to mandatory relocation where the AWS licensee can force the incumbent non-governmental licensee to relocate at the AWS licensee’s expense. The spectrum allocated for AWS currently is utilized also by governmental users. The FCC rules provide that a portion of the money raised in Auction 66 will be used to reimburse the relocation costs of governmental users from the AWS band. However, not all governmental users are obligated to relocate and some such users may delay relocation for some time. For the three months ended September 30, 2009 and 2008, the Company incurred approximately $0.8 million and $1.1 million in microwave relocation costs, respectively. For the nine months ended September 30, 2009 and 2008, the Company incurred approximately $2.8 million and $2.0 million in microwave relocation costs, respectively.

Litigation

The Company is involved in litigation from time to time, including litigation regarding intellectual property claims, that the Company considers to be in the normal course of business. The Company is not currently party to any pending legal proceedings that it believes would, individually or in the aggregate, have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

14. Supplemental Cash Flow Information:

Non-cash investing activities

The Company’s accrued purchases of property and equipment were approximately $11.1 million and $49.2 million for the nine months ended September 30, 2009 and 2008, respectively. Included within the Company’s accrued purchases are estimates by management for construction services received based on a percentage of completion.

Assets acquired under capital lease obligations were $51.8 million and $29.4 million for the nine months ended September 30, 2009 and 2008, respectively.

During the nine months ended September 30, 2009, the Company exchanged $19.9 million in carrying value of FCC licenses with other parties. The FCC licenses received in these transactions were recorded at fair value.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

15. Related-Party Transactions:

One of the Company’s current directors is a managing director of various investment funds affiliated with one of the Company’s greater than 5% stockholders. These funds own in the aggregate an approximate 17% interest in a company that provides services to the Company’s customers, including handset insurance programs and roadside assistance services. 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 related party. Accruals for the fees that the Company collected from its customers are included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets. The Company had the following transactions with this related party (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Fees received by the Company as compensation for providing billing and collection services	$	2.0	$	1.8	$	5.8	$	5.3
Handsets sold to the related party		4.3		2.0		11.5		9.4


	September 30, 2009		December 31, 2008
Accruals for fees collected from customers	$	4.1	$	3.7
Receivables from the related party included in accounts receivable		1.9		0.8

One of the Company’s current directors is the chairman of an equity firm that holds various investment funds affiliated with one of the Company’s greater than 5% stockholders. The equity firm is affiliated with a current director of a company that provides wireless caller ID with name services to the Company. The Company paid approximately $0.3 million and $0.6 million to the company for these services during the three and nine months ended September 30, 2009, respectively.

One of the Company’s current directors is a managing director of various investment funds affiliated with one of the Company’s greater than 5% stockholders. These funds own in the aggregate an approximate 15.6% interest in a company that provides advertising services to the Company. The Company paid approximately $1.3 million and $1.2 million to the company for these services during the three months ended September 30, 2009 and 2008, respectively. The Company paid approximately $3.8 million and $3.4 million to the company for these services during the nine months ended September 30, 2009 and 2008, respectively.

One of the Company’s greater than 5% stockholders owns in the aggregate an approximate 23% interest in a company that provides cell site and switch interconnect transport services to the Company. The Company paid approximately $0.1 million and $0.1 million to the company for these services during the three months ended September 30, 2009 and 2008, respectively. The Company paid approximately $0.4 million and $0.1 million to the company for these services during the nine months ended September 30, 2009 and 2008, respectively.

One of the Company’s current directors is a managing director of various investment funds affiliated with one of the Company’s greater than 5% stockholders. These funds own in the aggregate an approximate 64.1% interest in a company that provides distributed antenna systems (“DAS”) leases and maintenance to the Company. In addition, another of the Company’s current directors is a general partner of various investment funds. These funds own in the aggregate an approximate 14% interest in the same company. These DAS leases are accounted for as capital and operating leases in the Company’s financial statements. Transactions associated with these leases are included in various line items in the accompanying condensed consolidated balance sheets and condensed consolidated statements of income and comprehensive income. The Company had the following transactions with this related party (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Operating lease payments and related expenses included in cost of service	$	3.9	$	1.3	$	9.3	$	3.4
Capital lease maintenance expenses included in cost of service		0.4		—		1.2		—
DAS equipment depreciation included in depreciation expense		3.2		0.7		10.2		1.0
Capital lease interest included in interest expense		2.9		0.5		8.6		0.7

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)


	September 30, 2009		December 31, 2008
Network service fees included in prepaid charges	$	4.8	$	1.8
DAS equipment included in property and equipment, net		171.2		79.7
Deferred network service fees included in other assets		41.7		35.2
Lease payments and related fees included in accounts payable and accrued expenses		5.1		1.0
Current portion of capital lease obligations included in current maturities of long-term debt		1.8		0.8
Non-current portion of capital lease obligations included in long-term debt, net		112.6		75.8
Deferred DAS service fees included in other long-term liabilities		1.6		0.6

16. Segment Information:

Operating segments are defined by ASC 280 (Topic 280, “Segment Reporting”) as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chairman of the Board, President and Chief Executive Officer.

As of September 30, 2009, the Company had thirteen operating segments based on geographic region within the United States: Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota. Each of these operating segments provide wireless broadband mobile voice and data services and products to customers in its service areas. These services include unlimited local and long distance calling, voicemail, caller ID, call waiting, enhanced directory assistance, text messaging, picture and multimedia messaging, domestic and international long distance, international text messaging, ringtones, games and content applications, unlimited directory assistance, ring back tones, nationwide roaming, mobile Internet browsing, mobile instant messaging, push e-mail, location based services, social networking services and other value-added services.

The Company aggregates its operating segments into two reportable segments: Core Markets and Northeast Markets. Effective January 1, 2009, the Company implemented a change to the composition of its reportable segments under ASC 280. The historical quarterly information for the three and nine months ended September 30, 2008 presented below has been retrospectively adjusted to reflect this change.

•

Core Markets, which include Atlanta, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, Orlando/Jacksonville, Sacramento, San Francisco and Tampa/Sarasota, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and currently exhibit similar financial performance and economic characteristics.

•

Northeast Markets, which include Boston, New York and Philadelphia, are aggregated because they are reviewed on an aggregate basis by the chief operating decision maker, they are similar in respect to their products and services, production processes, class of customer, method of distribution, and regulatory environment and have similar expected long-term financial performance and economic characteristics.

General corporate overhead, which includes expenses such as corporate employee labor costs, rent and utilities, legal, accounting and auditing expenses, is allocated equally across all operating segments. Corporate marketing and advertising expenses

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

are allocated equally to the operating segments, beginning in the period during which the Company launches service in that operating segment. Expenses associated with the Company’s national data center and national operations center are allocated based on the average number of customers in each operating segment. There are no transactions between reportable segments.

Interest and certain other expenses, interest income and income taxes are not allocated to the segments in the computation of segment operating results for internal evaluation purposes.


Three Months Ended September 30, 2009	Core Markets		Northeast Markets			Other			Total
	(in thousands)
Service revenues	$	740,053	$	72,287		$	—		$	812,340
Equipment revenues		68,538		14,715			—			83,253
Total revenues		808,591		87,002			—			895,593
Cost of service (1)		239,928		58,360			—			298,288
Cost of equipment		157,074		42,018			—			199,092
Selling, general and administrative expenses (1)		105,378		33,082			—			138,460
Segment Adjusted EBITDA (Deficit) (2)		315,810		(43,631	)		—
Depreciation and amortization		65,403		24,145			9,429			98,977
Loss (gain) on disposal of assets		2,499		(45	)		115			2,569
Stock-based compensation expense		9,599		2,827			—			12,426
Income (loss) from operations		238,309		(70,558	)		(9,544	)		158,207
Interest expense		—		—			70,391			70,391
Accretion of put option in majority-owned subsidiary		—		—			395			395
Interest and other income		—		—			(853	)		(853	)
Impairment loss on investment securities		—		—			374			374
Income (loss) before provision for income taxes		238,309		(70,558	)		(79,851	)		87,900

Three Months Ended September 30, 2008	Core Markets		Northeast Markets			Other			Total
	(in thousands)
Service revenues	$	607,460	$	3,231		$	—		$	610,691
Equipment revenues		73,910		2,120			—			76,030
Total revenues		681,370		5,351			—			686,721
Cost of service (1)		198,327		21,096			—			219,423
Cost of equipment		154,739		5,799			—			160,538
Selling, general and administrative expenses (1)		100,303		16,351			—			116,654
Segment Adjusted EBITDA (Deficit) (2)		236,328		(35,440	)		—
Depreciation and amortization		61,047		2,295			4,289			67,631
Loss on disposal of assets		1,819		3			—			1,822
Stock-based compensation expense		8,327		2,455			—			10,782
Income (loss) from operations		165,135		(40,193	)		(4,289	)		120,653
Interest expense		—		—			42,950			42,950
Accretion of put option in majority-owned subsidiary		—		—			317			317
Interest and other income		—		—			(5,164	)		(5,164	)
Impairment loss on investment securities		—		—			2,956			2,956
Income (loss) before provision for income taxes		165,135		(40,193	)		(45,348	)		79,594

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)


Nine Months Ended September 30, 2009	Core Markets		Northeast Markets			Other			Total
	(in thousands)
Service revenues	$	2,161,450	$	144,438		$	—		$	2,305,888
Equipment revenues		211,120		33,526			—			244,646
Total revenues		2,372,570		177,964			—			2,550,534
Cost of service (1)		668,480		144,116			—			812,596
Cost of equipment		533,635		117,876			—			651,511
Selling, general and administrative expenses (1)		319,936		97,255			—			417,191
Segment Adjusted EBITDA (Deficit) (2)		878,227		(173,224	)		—
Depreciation and amortization		192,700		56,316			23,081			272,097
Loss (gain) on disposal of assets		9,379		(40	)		(17,667	)		(8,328	)
Stock-based compensation expense		27,708		8,059			—			35,767
Income (loss) from operations		648,440		(237,559	)		(5,414	)		405,467
Interest expense		—		—			199,358			199,358
Accretion of put option in majority-owned subsidiary		—		—			1,168			1,168
Interest and other income		—		—			(1,881	)		(1,881	)
Impairment loss on investment securities		—		—			1,827			1,827
Income (loss) before provision for income taxes		648,440		(237,559	)		(205,886	)		204,995

Nine Months Ended September 30, 2008	Core Markets		Northeast Markets			Other			Total
	(in thousands)
Service revenues	$	1,767,992	$	3,230		$	—		$	1,771,222
Equipment revenues		254,514		2,146			—			256,660
Total revenues		2,022,506		5,376			—			2,027,882
Cost of service (1)		575,039		38,997			—			614,036
Cost of equipment		514,928		5,855			—			520,783
Selling, general and administrative expenses (1)		295,370		39,078			—			334,448
Segment Adjusted EBITDA (Deficit) (2)		660,882		(72,013	)		—
Depreciation and amortization		169,062		3,023			13,734			185,819
Loss on disposal of assets		4,465		3			3			4,471
Stock-based compensation expense		23,713		6,541			—			30,254
Income (loss) from operations		463,642		(81,580	)		(13,737	)		368,325
Interest expense		—		—			136,032			136,032
Accretion of put option in majority-owned subsidiary		—		—			937			937
Interest and other income		—		—			(20,418	)		(20,418	)
Impairment loss on investment securities		—		—			20,037			20,037
Income (loss) before provision for income taxes		463,642		(81,580	)		(150,325	)		231,737

(1)

Cost of service for the three months ended September 30, 2009 and 2008 includes approximately $1.1 million and $0.9 million, respectively, of stock-based compensation disclosed separately. Cost of service for the nine months ended September 30, 2009 and 2008 includes $3.1 million and $2.1 million, respectively, of stock-based compensation disclosed separately. Selling, general and administrative expenses for the three months ended September 30, 2009 and 2008 includes $11.3 million and $9.9 million, respectively, of stock-based compensation disclosed separately. Selling, general and administrative expenses for the nine months ended September 30, 2009 and 2008 includes $32.7 million and $28.2 million, respectively, of stock-based compensation disclosed separately.

(2)

Core and Northeast Markets Adjusted EBITDA (Deficit) is presented in accordance with ASC 280 as it is the primary financial measure utilized by management to facilitate evaluation of the Company’s ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

The following table reconciles segment Adjusted EBITDA (Deficit) for the three and nine months ended September 30, 2009 and 2008 to consolidated income before provision for income taxes:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(in thousands)
Segment Adjusted EBITDA (Deficit):
Core Markets Adjusted EBITDA	$	315,810		$	236,328		$	878,227		$	660,882
Northeast Markets Adjusted EBITDA Deficit		(43,631	)		(35,440	)		(173,224	)		(72,013	)

Total		272,179			200,888			705,003			588,869
Depreciation and amortization		(98,977	)		(67,631	)		(272,097	)		(185,819	)
(Loss) gain on disposal of assets		(2,569	)		(1,822	)		8,328			(4,471	)
Stock-based compensation expense		(12,426	)		(10,782	)		(35,767	)		(30,254	)
Interest expense		(70,391	)		(42,950	)		(199,358	)		(136,032	)
Accretion of put option in majority-owned subsidiary		(395	)		(317	)		(1,168	)		(937	)
Interest and other income		853			5,164			1,881			20,418
Impairment loss on investment securities		(374	)		(2,956	)		(1,827	)		(20,037	)

Consolidated income before provision for income taxes	$	87,900		$	79,594		$	204,995		$	231,737

17. Guarantor Subsidiaries:

In connection with Wireless’ sale of the 9¹/4% Senior Notes and the entry into the Senior Secured Credit Facility, MetroPCS, MetroPCS Inc., and each of Wireless’ direct and indirect present and future wholly-owned domestic subsidiaries (the “guarantor subsidiaries”), provided guarantees on the 9¹/4% Senior Notes and Senior Secured Credit Facility. These guarantees are full and unconditional as well as joint and several. Certain provisions of the Senior Secured Credit Facility and the indentures relating to the 9¹ /4% Senior Notes restrict the ability of Wireless to loan funds to MetroPCS. However, Wireless is allowed to make certain permitted payments to MetroPCS under the terms of the Senior Secured Credit Facility and the indentures relating to the 9¹/4% Senior Notes. Royal Street (the “non-guarantor subsidiaries”) is not a guarantor of the 9¹/4% Senior Notes or the Senior Secured Credit Facility.

The following information presents condensed consolidating balance sheets as of September 30, 2009 and December 31, 2008, condensed consolidating statements of income for the three and nine months ended September 30, 2009 and 2008, and condensed consolidating statements of cash flows for the nine months ended September 30, 2009 and 2008 of the parent company (MetroPCS), the issuer (Wireless), the guarantor subsidiaries and the non-guarantor subsidiaries (Royal Street). Investments in subsidiaries held by the parent company and the issuer have been presented using the equity method of accounting.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Balance Sheet

As of September 30, 2009


	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CURRENT ASSETS:
Cash and cash equivalents	$	640,524		$	292,270		$	678	$	22,106		$	—		$	955,578
Short-term investments		224,928			—			—		—			—			224,928
Inventories, net		—			79,691			8,433		—			—			88,124
Accounts receivable, net		—			47,679			—		101			—			47,780
Prepaid charges		—			28,257			53,057		7,478			—			88,792
Deferred charges		—			38,595			—		—			—			38,595
Deferred tax assets		—			1,832			—		—			—			1,832
Current receivable from subsidiaries		—			364,703			—		12,605			(377,308	)		—
Other current assets		189			(724	)		22,972		1,205			—			23,642

Total current assets		865,641			852,303			85,140		43,495			(377,308	)		1,469,271
Property and equipment, net		—			17,198			2,646,151		434,276			—			3,097,625
Restricted cash and investments		—			13,112			—		325			—			13,437
Long-term investments		3,846			—			—		—			—			3,846
Investment in subsidiaries		763,617			2,068,677			—		—			(2,832,294	)		—
FCC licenses		—			3,801			2,154,144		293,599			—			2,451,544
Microwave relocation costs		—			—			19,282		—			—			19,282
Long-term receivable from subsidiaries		—			824,786			—		—			(824,786	)		—
Other assets		—			43,919			38,506		25,459			—			107,884

Total assets	$	1,633,104		$	3,823,796		$	4,943,223	$	797,154		$	(4,034,388	)	$	7,162,889

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	—		$	156,288		$	301,253	$	25,895		$	—		$	483,436
Current maturities of long-term debt		—			16,000			2,144		30			—			18,174
Current payable to subsidiaries		—			—			12,605		364,703			(377,308	)		—
Deferred revenue		—			25,600			138,713		—			—			164,313
Advances to subsidiaries		(600,698	)		(1,119,543	)		1,720,241		—			—			—
Other current liabilities		—			75			5,264		32			—			5,371

Total current liabilities		(600,698	)		(921,580	)		2,180,220		390,660			(377,308	)		671,294
Long-term debt		—			3,450,838			138,129		1,721			—			3,590,688
Long-term payable to subsidiaries		—			—			—		824,786			(824,786	)		—
Deferred tax liabilities		171			481,561			—		—			—			481,732
Deferred rents		—			—			64,638		9,805			—			74,443
Redeemable ownership interest		—			7,457			—		—			—			7,457
Other long-term liabilities		—			41,903			53,360		8,381			—			103,644

Total liabilities		(600,527	)		3,060,179			2,436,347		1,235,353			(1,202,094	)		4,929,258
COMMITMENTS AND CONTINGENCIES (See Note 13)
STOCKHOLDERS’ EQUITY:
Preferred stock		—			—			—		—			—			—
Common stock		35			—			—		—			—			35
Additional paid-in capital		1,622,483			—			—		20,000			(20,000	)		1,622,483
Retained earnings (deficit)		631,568			785,400			2,506,876		(458,199	)		(2,834,077	)		631,568
Accumulated other comprehensive (loss) income		(20,455	)		(21,783	)		—		—			21,783			(20,455	)

Total stockholders’ equity		2,233,631			763,617			2,506,876		(438,199	)		(2,832,294	)		2,233,631

Total liabilities and stockholders’ equity	$	1,633,104		$	3,823,796		$	4,943,223	$	797,154		$	(4,034,388	)	$	7,162,889

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Balance Sheet

As of December 31, 2008


	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CURRENT ASSETS:
Cash and cash equivalents	$	598,823		$	78,121		$	624	$	20,380		$	—		$	697,948
Inventories, net		—			144,784			11,171		—			—			155,955
Accounts receivable, net		—			34,579			—		87			—			34,666
Prepaid charges		—			17,994			32,274		6,079			—			56,347
Deferred charges		—			49,716			—		—			—			49,716
Deferred tax asset		—			1,832			—		—			—			1,832
Current receivable from subsidiaries		—			244,212			—		10,467			(254,679	)		—
Other current assets		426			4,472			41,945		577			—			47,420

Total current assets		599,249			575,710			86,014		37,590			(254,679	)		1,043,884
Property and equipment, net		—			18,174			2,430,597		398,980			—			2,847,751
Restricted cash and investments		—			—			4,250		325			—			4,575
Long-term investments		5,986			—			—		—			—			5,986
Investment in subsidiaries		610,581			1,760,327			—		—			(2,370,908	)		—
FCC licenses		—			—			2,112,997		293,599			—			2,406,596
Microwave relocation costs		—			—			16,478		—			—			16,478
Long-term receivable from subsidiaries		250,000			796,462			—		—			(1,046,462	)		—
Other assets		—			37,391			34,544		24,943			—			96,878

Total assets	$	1,465,816		$	3,188,064		$	4,684,880	$	755,437		$	(3,672,049	)	$	6,422,148

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	—		$	195,619		$	344,325	$	28,488		$	—		$	568,432
Current maturities of long-term debt		—			16,000			990		19			—			17,009
Current payable to subsidiaries		—			—			10,467		244,212			(254,679	)		—
Deferred revenue		—			30,011			121,768		—			—			151,779
Advances to subsidiaries		(568,507	)		(1,365,057	)		1,933,564		—			—			—
Other current liabilities		—			30			5,106		—			—			5,136

Total current liabilities		(568,507	)		(1,123,397	)		2,416,220		272,719			(254,679	)		742,356
Long-term debt		—			2,967,649			88,906		1,428			—			3,057,983
Long-term payable to subsidiaries		—			250,000			—		796,462			(1,046,462	)		—
Deferred tax liabilities		—			389,509			—		—			—			389,509
Deferred rents		—			—			49,850		6,575			—			56,425
Redeemable ownership interest		—			6,290			—		—			—			6,290
Other long-term liabilities		—			87,432			41,377		6,453			—			135,262

Total liabilities		(568,507	)		2,577,483			2,596,353		1,083,637			(1,301,141	)		4,387,825
COMMITMENTS AND CONTINGENCIES (See Note 13)
STOCKHOLDERS’ EQUITY:
Preferred stock		—			—			—		—			—			—
Common stock		35			—			—		—			—			35
Additional paid-in capital		1,578,972			—			—		20,000			(20,000	)		1,578,972
Retained earnings (deficit)		487,849			643,955			2,088,527		(348,200	)		(2,384,282	)		487,849
Accumulated other comprehensive (loss) income		(32,533	)		(33,374	)		—		—			33,374			(32,533	)

Total stockholders’ equity		2,034,323			610,581			2,088,527		(328,200	)		(2,370,908	)		2,034,323

Total liabilities and stockholders’ equity	$	1,465,816		$	3,188,064		$	4,684,880	$	755,437		$	(3,672,049	)	$	6,422,148

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Three Months Ended September 30, 2009


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	813,265		$	42,088		$	(43,013	)	$	812,340
Equipment revenues		—			4,335			78,918			—			—			83,253

Total revenues		—			4,335			892,183			42,088			(43,013	)		895,593
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			314,582			26,719			(43,013	)		298,288
Cost of equipment		—			4,086			195,006			—			—			199,092
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			249			132,984			5,227			—			138,460
Depreciation and amortization		—			73			85,634			13,270			—			98,977
Loss (gain) on disposal of assets		—			—			2,731			(162	)		—			2,569

Total operating expenses		—			4,408			730,937			45,054			(43,013	)		737,386

(Loss) income from operations		—			(73	)		161,246			(2,966	)		—			158,207
OTHER EXPENSE (INCOME):
Interest expense		—			69,184			1,678			33,942			(34,413	)		70,391
Earnings from consolidated subsidiaries		(73,221	)		(122,766	)		—			—			195,987			—
Accretion of put option in majority-owned subsidiary		—			395			—			—			—			395
Interest and other income		(703	)		(34,457	)		(101	)		(5	)		34,413			(853	)
Impairment loss on investment securities		374			—			—			—			—			374

Total other (income) expense		(73,550	)		(87,644	)		1,577			33,937			195,987			70,307
Income (loss) before provision for income taxes		73,550			87,571			159,669			(36,903	)		(195,987	)		87,900
Provision for income taxes		—			(14,350	)		—			—			—			(14,350	)

Net income (loss)	$	73,550		$	73,221		$	159,669		$	(36,903	)	$	(195,987	)	$	73,550

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Three Months Ended September 30, 2008


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	611,590		$	28,336		$	(29,235	)	$	610,691
Equipment revenues		—			1,998			74,032			—			—			76,030

Total revenues		—			1,998			685,622			28,336			(29,235	)		686,721
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			225,440			23,218			(29,235	)		219,423
Cost of equipment		—			1,878			158,660			—			—			160,538
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			120			110,879			5,655			—			116,654
Depreciation and amortization		—			52			57,019			10,560			—			67,631
Loss (gain) on disposal of assets		—			—			1,824			(2	)		—			1,822

Total operating expenses		—			2,050			553,822			39,431			(29,235	)		566,068

(Loss) income from operations		—			(52	)		131,800			(11,095	)		—			120,653
OTHER EXPENSE (INCOME):
Interest expense		—			52,031			(7,864	)		23,459			(24,676	)		42,950
Earnings from consolidated subsidiaries		(43,580	)		(105,136	)		—			—			148,716			—
Accretion of put option in majority-owned subsidiary		—			317			—			—			—			317
Interest and other income		(4,256	)		(25,558	)		53			(79	)		24,676			(5,164	)
Impairment loss on investment securities		2,956			—			—			—			—			2,956

Total other (income) expense		(44,880	)		(78,346	)		(7,811	)		23,380			148,716			41,059
Income (loss) before provision for income taxes		44,880			78,294			139,611			(34,475	)		(148,716	)		79,594
Provision for income taxes		—			(34,714	)		—			—			—			(34,714	)

Net income (loss)	$	44,880		$	43,580		$	139,611		$	(34,475	)	$	(148,716	)	$	44,880

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Nine Months Ended September 30, 2009


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	2,308,579		$	117,756		$	(120,447	)	$	2,305,888
Equipment revenues		—			11,541			233,105			—			—			244,646

Total revenues		—			11,541			2,541,684			117,756			(120,447	)		2,550,534
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			854,485			78,558			(120,447	)		812,596
Cost of equipment		—			10,808			640,703			—			—			651,511
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			734			400,607			15,850			—			417,191
Depreciation and amortization		—			174			234,203			37,720			—			272,097
(Gain) loss on disposal of assets		—			—			(8,432	)		104			—			(8,328	)

Total operating expenses		—			11,716			2,121,566			132,232			(120,447	)		2,145,067

(Loss) income from operations		—			(175	)		420,118			(14,476	)		—			405,467
OTHER EXPENSE (INCOME):
Interest expense		—			201,215			1,894			95,535			(99,286	)		199,358
Earnings from consolidated subsidiaries		(141,445	)		(308,350	)		—			—			449,795			—
Accretion of put option in majority-owned subsidiary		—			1,168			—			—			—			1,168
Interest and other income		(4,101	)		(96,929	)		(125	)		(12	)		99,286			(1,881	)
Impairment loss on investment securities		1,827			—			—			—			—			1,827

Total other (income) expense		(143,719	)		(202,896	)		1,769			95,523			449,795			200,472
Income (loss) before provision for income taxes		143,719			202,721			418,349			(109,999	)		(449,795	)		204,995
Provision for income taxes		—			(61,276	)		—			—			—			(61,276	)

Net income (loss)	$	143,719		$	141,445		$	418,349		$	(109,999	)	$	(449,795	)	$	143,719

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Nine Months Ended September 30, 2008


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	1,774,340		$	68,073		$	(71,191	)	$	1,771,222
Equipment revenues		—			9,401			247,259			—			—			256,660

Total revenues		—			9,401			2,021,599			68,073			(71,191	)		2,027,882
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			620,423			64,804			(71,191	)		614,036
Cost of equipment		—			8,892			511,891			—			—			520,783
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			509			318,124			15,815			—			334,448
Depreciation and amortization		—			159			157,934			27,726			—			185,819
Loss on disposal of assets		—			—			4,439			32			—			4,471

Total operating expenses		—			9,560			1,612,811			108,377			(71,191	)		1,659,557

(Loss) income from operations		—			(159	)		408,788			(40,304	)		—			368,325
OTHER EXPENSE (INCOME):
Interest expense		—			165,672			(25,405	)		69,825			(74,060	)		136,032
Earnings from consolidated subsidiaries		(139,725	)		(324,688	)		—			—			464,413			—
Accretion of put option in majority-owned subsidiary		—			937			—			—			—			937
Interest and other income		(15,176	)		(78,678	)		(11	)		(613	)		74,060			(20,418	)
Impairment loss on investment securities		20,037			—			—			—			—			20,037

Total other (income) expense		(134,864	)		(236,757	)		(25,416	)		69,212			464,413			136,588
Income (loss) before provision for income taxes		134,864			236,598			434,204			(109,516	)		(464,413	)		231,737
Provision for income taxes		—			(96,873	)		—			—			—			(96,873	)

Net income (loss)	$	134,864		$	139,725		$	434,204		$	(109,516	)	$	(464,413	)	$	134,864

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Cash Flows

Nine Months Ended September 30, 2009


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	143,719		$	141,445		$	418,349		$	(109,999	)	$	(449,795	)	$	143,719
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			174			234,203			37,720			—			272,097
Provision for uncollectible accounts receivable		—			191			—			—			—			191
Deferred rent expense		—			—			14,718			3,047			—			17,765
Cost of abandoned cell sites		—			—			3,593			2,555			—			6,148
Stock-based compensation expense		—			—			35,767			—			—			35,767
Non-cash interest expense		—			8,183			(7	)		—			—			8,176
(Gain) loss on disposal of assets		—			—			(8,432	)		104			—			(8,328	)
Gain on sale of investments		(31	)		(241	)		—			—			—			(272	)
Accretion of asset retirement obligations		—			—			3,179			537			—			3,716
Accretion of put option in majority-owned subsidiary		—			1,168			—			—			—			1,168
Impairment loss in investment securities		1,827			—			—			—			—			1,827
Deferred income taxes		—			85,070			—			—			—			85,070
Changes in assets and liabilities		112,620			(369,579	)		(96,256	)		(1,276	)		566,861			212,370

Net cash provided by (used in) operating activities		258,135			(133,589	)		605,114			(67,312	)		117,066			779,414
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		—			3,720			(591,699	)		(49,471	)		928			(636,522	)
Change in prepaid purchases of property and equipment		—			(10,211	)		—			—			—			(10,211	)
Proceeds from sale of plant and equipment		—			—			1,137			4,627			(928	)		4,836
Purchase of investments		(374,227	)		—			—			—			—			(374,227	)
Proceeds from sale of investments		150,000			—			—			—			—			150,000
Change in restricted cash and investments		—			(13,112	)		—			—			—			(13,112	)
Purchases of and deposits for FCC licenses		—			(3,800	)		(11,717	)		—			—			(15,517	)
Proceeds from exchange of FCC licenses		—			—			949			—			—			949
Microwave relocation costs		—			—			(1,050	)		—			—			(1,050	)

Net cash (used in) provided by investing activities		(224,227	)		(23,403	)		(602,380	)		(44,844	)		—			(894,854	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		—			(97,184	)		—			(3,184	)		—			(100,368	)
Proceeds from long-term loan		—			—			—			335,000			(335,000	)		—
Proceeds from 9¹/4% Senior Notes Due 2014		—			492,250			—			—			—			492,250
Debt issuance costs		—			(11,925	)		—			—			—			(11,925	)
Repayment of debt		—			(12,000	)		—			(206,104	)		206,104			(12,000	)
Payments on capital lease obligations		—			—			(2,680