e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended June 30, 2007
OR
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|
o |
|
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: 1-15325
SUNCOM WIRELESS HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
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|
Delaware
(State or other jurisdiction of
incorporation or organization)
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|
23-2974475
(I.R.S. employer
identification no.) |
1100 Cassatt Road
Berwyn, Pennsylvania 19312
(Address and zip code of principal executive offices)
(610) 651-5900
(Registrants telephone number, including area code)
Indicate by a 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 þ No o
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
As of July 20, 2007, 59,228,826 shares of the registrants Class A common stock, par value $0.01
per share, were outstanding.
SUNCOM WIRELESS HOLDINGS, INC.
SECOND QUARTER REPORT
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUNCOM WIRELESS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(Unaudited)
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|
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|
|
|
June 30, |
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December 31, |
|
|
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2007 |
|
|
2006 |
|
ASSETS: |
|
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|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
55,638 |
|
|
$ |
37,683 |
|
Short-term investments |
|
|
127,300 |
|
|
|
157,600 |
|
Restricted cash and restricted short-term investments |
|
|
1,711 |
|
|
|
1,668 |
|
Accounts receivable, net of allowance for doubtful accounts of $8,741 and $8,895, respectively |
|
|
94,235 |
|
|
|
96,255 |
|
Accounts receivable roaming partners |
|
|
17,493 |
|
|
|
14,811 |
|
Inventory, net |
|
|
28,205 |
|
|
|
27,441 |
|
Prepaid expenses |
|
|
22,990 |
|
|
|
16,446 |
|
Assets held for sale |
|
|
377 |
|
|
|
11,446 |
|
Other current assets |
|
|
6,655 |
|
|
|
11,960 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
354,604 |
|
|
|
375,310 |
|
|
|
|
|
|
|
|
|
|
Long-term assets: |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
453,198 |
|
|
|
480,880 |
|
Intangible assets, net |
|
|
777,794 |
|
|
|
794,250 |
|
Other long-term assets |
|
|
10,742 |
|
|
|
4,419 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,596,338 |
|
|
$ |
1,654,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
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Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
78,935 |
|
|
$ |
71,602 |
|
Accrued liabilities |
|
|
55,344 |
|
|
|
89,134 |
|
Current portion of long-term debt |
|
|
2,792 |
|
|
|
2,810 |
|
Other current liabilities |
|
|
26,994 |
|
|
|
24,937 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
164,065 |
|
|
|
188,483 |
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|
|
|
|
|
|
|
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|
Long-term debt: |
|
|
|
|
|
|
|
|
Capital lease obligations |
|
|
389 |
|
|
|
531 |
|
Senior secured term loan |
|
|
241,250 |
|
|
|
242,500 |
|
Senior notes |
|
|
714,977 |
|
|
|
714,341 |
|
|
|
|
|
|
|
|
Senior long-term debt |
|
|
956,616 |
|
|
|
957,372 |
|
|
|
|
|
|
|
|
|
|
Subordinated notes |
|
|
12,205 |
|
|
|
732,365 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
|
968,821 |
|
|
|
1,689,737 |
|
|
|
|
|
|
|
|
|
|
Deferred income taxes, net |
|
|
146,993 |
|
|
|
143,124 |
|
Deferred revenue |
|
|
1,520 |
|
|
|
1,766 |
|
Deferred gain on sale of property and equipment |
|
|
57,866 |
|
|
|
46,173 |
|
Other |
|
|
5,551 |
|
|
|
2,468 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,344,816 |
|
|
|
2,071,751 |
|
|
|
|
|
|
|
|
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|
Commitments and contingencies |
|
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|
|
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Stockholders equity (deficit): |
|
|
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|
|
|
|
|
Preferred stock, $0.01 par value, 70,000,000 shares authorized; no shares issued or outstanding
as of June 30, 2007 and December 31, 2006 |
|
|
|
|
|
|
|
|
Class A common stock, $0.01 par value, 580,000,000 shares authorized, 59,341,576 shares issued
and 59,228,826 shares outstanding as of June 30, 2007; and 520,000,000 shares authorized,
6,511,238 shares issued and 6,333,119 shares outstanding as of December 31, 2006 (see Note 2) |
|
|
592 |
|
|
|
633 |
|
Class B non-voting common stock, $0.01 par value, no shares authorized as of June 30, 2007;
60,000,000 shares authorized; 792,610 shares issued and outstanding as of December 31, 2006 |
|
|
|
|
|
|
79 |
|
Additional paid-in capital |
|
|
1,502,822 |
|
|
|
611,961 |
|
Accumulated deficit |
|
|
(1,250,151 |
) |
|
|
(1,027,824 |
) |
Class A common stock held in trust |
|
|
|
|
|
|
(173 |
) |
Deferred compensation |
|
|
|
|
|
|
173 |
|
Class A common stock held in treasury, at cost (112,750 and 178,119 shares, respectively) |
|
|
(1,741 |
) |
|
|
(1,741 |
) |
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
251,522 |
|
|
|
(416,892 |
) |
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit) |
|
$ |
1,596,338 |
|
|
$ |
1,654,859 |
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
3
SUNCOM WIRELESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
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|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
$ |
195,674 |
|
|
$ |
164,430 |
|
|
$ |
382,109 |
|
|
$ |
319,897 |
|
Roaming |
|
|
25,099 |
|
|
|
19,519 |
|
|
|
47,101 |
|
|
|
40,985 |
|
Equipment |
|
|
21,681 |
|
|
|
22,739 |
|
|
|
46,164 |
|
|
|
47,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
242,454 |
|
|
|
206,688 |
|
|
|
475,374 |
|
|
|
408,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service (excluding the below amortization and
excluding depreciation and asset disposal of $18,134 and
$82,856 for the three months ended June 30, 2007 and 2006,
respectively, and $39,147 and $184,527 for the six months
ended June 30, 2007 and 2006, respectively) |
|
|
66,262 |
|
|
|
66,717 |
|
|
|
129,194 |
|
|
|
134,665 |
|
Cost of equipment |
|
|
34,792 |
|
|
|
32,270 |
|
|
|
73,659 |
|
|
|
71,491 |
|
Selling, general and administrative (excluding depreciation
and asset disposal of $2,801 and $1,675 for the three months
ended June 30, 2007 and 2006, respectively, and $5,934 and
$3,503 for the six months ended June 30, 2007 and 2006,
respectively) |
|
|
91,626 |
|
|
|
83,385 |
|
|
|
180,666 |
|
|
|
172,012 |
|
Termination benefits and other related charges |
|
|
|
|
|
|
658 |
|
|
|
|
|
|
|
1,556 |
|
Depreciation and asset disposal |
|
|
20,935 |
|
|
|
84,531 |
|
|
|
45,081 |
|
|
|
188,030 |
|
Amortization |
|
|
7,243 |
|
|
|
10,689 |
|
|
|
15,077 |
|
|
|
22,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
220,858 |
|
|
|
278,250 |
|
|
|
443,677 |
|
|
|
589,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
21,596 |
|
|
|
(71,562 |
) |
|
|
31,697 |
|
|
|
(181,367 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(29,635 |
) |
|
|
(38,167 |
) |
|
|
(67,969 |
) |
|
|
(75,909 |
) |
Interest and other income |
|
|
2,422 |
|
|
|
3,313 |
|
|
|
4,826 |
|
|
|
7,407 |
|
Loss on debt-for-equity exchange |
|
|
(182,868 |
) |
|
|
|
|
|
|
(182,868 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes |
|
|
(188,485 |
) |
|
|
(106,416 |
) |
|
|
(214,314 |
) |
|
|
(249,869 |
) |
Income tax provision |
|
|
(4,504 |
) |
|
|
(3,991 |
) |
|
|
(7,602 |
) |
|
|
(7,743 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
($192,989 |
) |
|
|
($110,407 |
) |
|
|
($221,916 |
) |
|
|
($257,612 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share (basic and diluted) |
|
|
($5.80 |
) |
|
|
($16.07 |
) |
|
|
($11.02 |
) |
|
|
($37.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic and diluted) |
|
|
33,246,761 |
|
|
|
6,868,498 |
|
|
|
20,143,932 |
|
|
|
6,852,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
4
SunCom Wireless Holdings, Inc.
Consolidated Statements of Stockholders Equity (Deficit)
(Dollars in thousands)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Class A |
|
|
Non-Voting |
|
|
Additional |
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
|
|
Stockholders |
|
|
|
Common |
|
|
Common |
|
|
Paid-In |
|
|
Deferred |
|
|
Held in |
|
|
Treasury |
|
|
Accumulated |
|
|
Equity |
|
|
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Compensation |
|
|
Trust |
|
|
Stock |
|
|
Deficit |
|
|
(Deficit) |
|
Balance at December 31, 2006 |
|
$ |
633 |
|
|
$ |
79 |
|
|
$ |
611,961 |
|
|
$ |
173 |
|
|
$ |
(173 |
) |
|
$ |
(1,741 |
) |
|
$ |
(1,027,824 |
) |
|
$ |
(416,892 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adoption of FASB
Interpretation No. 48 (FIN 48) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(411 |
) |
|
|
(411 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation, net of
forfeitures |
|
|
7 |
|
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of deferred
compensation plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(173 |
) |
|
|
173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Class B to Class
A |
|
|
79 |
|
|
|
(79 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse stock split |
|
|
(647 |
) |
|
|
|
|
|
|
647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issuance in connection
with debt-for-equity exchange |
|
|
520 |
|
|
|
|
|
|
|
889,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
889,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash compensation |
|
|
|
|
|
|
|
|
|
|
1,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(221,916 |
) |
|
|
(221,916 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007 |
|
$ |
592 |
|
|
$ |
|
|
|
$ |
1,502,822 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(1,741 |
) |
|
$ |
(1,250,151 |
) |
|
$ |
251,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005 |
|
$ |
627 |
|
|
$ |
79 |
|
|
$ |
607,849 |
|
|
$ |
145 |
|
|
$ |
(145 |
) |
|
$ |
(1,375 |
) |
|
$ |
(690,446 |
) |
|
$ |
(83,266 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation, net of
forfeitures |
|
|
6 |
|
|
|
|
|
|
|
(6 |
) |
|
|
5 |
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash compensation |
|
|
|
|
|
|
|
|
|
|
3,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(366 |
) |
|
|
|
|
|
|
(366 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(257,612 |
) |
|
|
(257,612 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2006 |
|
$ |
633 |
|
|
$ |
79 |
|
|
$ |
610,864 |
|
|
$ |
150 |
|
|
$ |
(150 |
) |
|
$ |
(1,741 |
) |
|
$ |
(948,058 |
) |
|
$ |
(338,223 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
SUNCOM WIRELESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2007 |
|
|
2006 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
|
($221,916 |
) |
|
|
($257,612 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities, net of effects from divestitures: |
|
|
|
|
|
|
|
|
Depreciation, asset disposal and amortization |
|
|
60,158 |
|
|
|
210,223 |
|
Deferred income taxes |
|
|
6,489 |
|
|
|
7,171 |
|
Accretion of interest |
|
|
2,069 |
|
|
|
2,215 |
|
Bad debt expense |
|
|
14,100 |
|
|
|
10,065 |
|
Non-cash compensation |
|
|
1,099 |
|
|
|
3,021 |
|
Loss on debt-for-equity exchange |
|
|
182,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(16,949 |
) |
|
|
(10,707 |
) |
Inventory |
|
|
(764 |
) |
|
|
7,561 |
|
Prepaid expenses and other current assets |
|
|
(7,422 |
) |
|
|
(5,831 |
) |
Intangible and other assets |
|
|
(5,199 |
) |
|
|
(807 |
) |
Accounts payable |
|
|
5,018 |
|
|
|
(1,473 |
) |
Accrued payroll and liabilities |
|
|
(5,961 |
) |
|
|
(6,547 |
) |
Deferred revenue |
|
|
661 |
|
|
|
2,829 |
|
Accrued interest |
|
|
(17,814 |
) |
|
|
(46 |
) |
Other liabilities |
|
|
(536 |
) |
|
|
(2,421 |
) |
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(4,099 |
) |
|
|
(42,359 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of available for sale securities |
|
|
(337,950 |
) |
|
|
(436,604 |
) |
Proceeds from sale of available for sale securities |
|
|
368,250 |
|
|
|
540,800 |
|
Proceeds from sale of assets |
|
|
27,530 |
|
|
|
1,590 |
|
Payment of direct costs on business transactions |
|
|
(451 |
) |
|
|
(54 |
) |
Capital expenditures |
|
|
(16,347 |
) |
|
|
(42,173 |
) |
Other |
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
41,032 |
|
|
|
63,522 |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Payments under senior secured term loan |
|
|
(1,250 |
) |
|
|
(1,250 |
) |
Change in bank overdraft |
|
|
(9,474 |
) |
|
|
(6,270 |
) |
Principal payments under capital lease obligations |
|
|
(160 |
) |
|
|
(151 |
) |
Payment of direct costs on debt-for-equity exchange |
|
|
(8,078 |
) |
|
|
(2,886 |
) |
Purchase of treasury stock |
|
|
|
|
|
|
(366 |
) |
Other |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(18,978 |
) |
|
|
(10,923 |
) |
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
17,955 |
|
|
|
10,240 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
37,683 |
|
|
|
16,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
55,638 |
|
|
$ |
26,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Change in capital expenditures included in accounts payable |
|
$ |
2,661 |
|
|
|
($1,284 |
) |
Change in direct transaction costs included in accrued expenses |
|
|
(517 |
) |
|
|
|
|
Fair value of equity issued in the debt-for-equity exchange |
|
|
889,685 |
|
|
|
|
|
Carrying value of debt retired in the debt-for-equity exchange |
|
|
(720,977 |
) |
|
|
|
|
Write-off of deferred financing costs in connection with the
debt-for- equity exchange |
|
|
896 |
|
|
|
|
|
See accompanying notes to financial statements.
6
SUNCOM WIRELESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007
1. Basis of Presentation
The accompanying consolidated financial statements are unaudited and have been prepared by
management. In the opinion of management, these consolidated financial statements contain all of
the adjustments, consisting of normal recurring adjustments, necessary to state fairly, in
summarized form, the financial position and the results of operations of SunCom Wireless Holdings,
Inc. (Holdings) and its wholly-owned subsidiaries (collectively, the Company). SunCom
Wireless refers to SunCom Wireless, Inc., an indirect wholly-owned subsidiary of Holdings. The
results of operations for the three and six months ended June 30, 2007 may not be indicative of the
results that may be expected for the year ending December 31, 2007. The financial information
presented herein should be read in conjunction with the audited consolidated financial statements
for the year ended December 31, 2006, which include information and disclosures not included
herein.
All significant intercompany accounts or balances have been eliminated in consolidation.
Certain reclassifications have been made to prior period financial statements to conform to
the current period presentation.
2. Debt-for-Equity Exchange
The construction of the Companys network and the marketing and distribution of wireless
communications products and services have required, and will continue to require, substantial
capital. Capital outlays have included license acquisition costs, capital expenditures for network
construction, funding of operating cash flow losses and other working capital costs, debt service
and financing fees and expenses. The Company will have additional capital requirements, which
could be substantial, for future upgrades and advances in new technology.
Therefore, on January 31, 2007, Holdings, SunCom Wireless and SunCom Wireless Investment
Company LLC, a Delaware limited liability company and a wholly-owned subsidiary of Holdings, and
certain holders of the 93/8% Senior Subordinated Notes due 2011 and 83/4% Senior Subordinated Notes due
2011 of SunCom Wireless, or collectively the SunCom Wireless Subordinated Notes, entered into an
Exchange Agreement, which was amended on May 15, 2007. Pursuant to the amended Exchange Agreement,
on May 15, 2007, the holders of the SunCom Wireless Subordinated Notes that were parties thereto
exchanged $731.6 million principal amount of their outstanding SunCom Wireless Subordinated Notes
for an aggregate of approximately 52.0 million shares of Holdings Class A common stock. The 52.0
million shares reflect a 1-for-10 reverse stock split that was effected immediately prior to the
exchange pursuant to the merger described below. As a result of the exchange, the holders of the
outstanding SunCom Wireless Subordinated Notes participating in the exchange received in the
aggregate (in respect of their SunCom Wireless Subordinated Notes tendered in the exchange)
approximately 87.9% of Holdings outstanding Class A common stock on a fully-diluted basis.
Following the exchange, the existing holders of Holdings Class A common stock owned approximately
12.1% of Holdings Class A common stock on a fully-diluted basis.
In connection with the Exchange Agreement, the holders of the SunCom Wireless Subordinated
Notes agreed to exit consents that removed, effective as of the closing of the exchange,
substantially all of the restrictive covenants and certain of the events of default from the
indentures governing the SunCom Wireless Subordinated Notes.
The Exchange Agreement contained covenants, which called for the board of directors of
Holdings to be reconstituted immediately following the closing of the exchange, to include Michael
Kalogris and Scott Anderson, both current directors of Holdings, as well as eight new directors who
have been designated by various of the holders of the SunCom Wireless Subordinated Notes that were
parties to the Exchange Agreement. Also pursuant to the Exchange Agreement, Holdings agreed to
pursue strategic alternatives, including the potential sale of substantially all of its business.
Also on January 31, 2007, concurrent with the execution of the Exchange Agreement, Holdings
entered into an Agreement and Plan of Merger with SunCom Merger Corp., a Delaware corporation and
direct wholly-owned subsidiary of Holdings formed for the purpose of entering into the merger
agreement (Merger Sub). On May 15, 2007, pursuant to the merger agreement, Merger Sub merged with
and into Holdings, with Holdings continuing as the surviving corporation in the merger. In the
merger, each issued and outstanding share of Class A common stock of Holdings was converted into
0.1 share of Class A common stock of Holdings, as the surviving corporation in the merger. Each
issued and outstanding share of common stock of Merger Sub was cancelled in the exchange for no
consideration. The merger was consummated prior to the consummation of the transactions
contemplated by the Exchange Agreement. The merger was effected, among other reasons, to implement
a 1-for-10 reverse stock split and to ensure that Holdings had sufficient authorized shares of
Class A common stock to complete the exchange. The par value of the common stock was not affected
by the reverse stock split and remained at $0.01 per share. Consequently, the aggregate par value
of the issued Class A common stock was reduced by reclassifying the par value amount of the
eliminated
7
SUNCOM WIRELESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
shares of common stock to additional paid-in capital in the Companys consolidated balance
sheets. The Company has paid cash in lieu of any fractional shares to which a holder of Class A
common stock would otherwise be entitled as a result of the reverse stock split. The number of
authorized shares of Class A common stock remains unchanged, and all shares and per share amounts
have been adjusted in the consolidated financial statements and in the notes to the consolidated
financial statements for all periods presented to reflect the reverse stock split. Prior period
additional paid-in capital and Class A common stock balances have not been adjusted on the
consolidated balance sheet to reflect the reverse stock split.
During January 2007, and in connection with the exchange, J.P. Morgan SBIC LLC and Sixty Wall
Street SBIC Fund L.P. transferred all of their shares of Holdings Class B non-voting common stock
(which constituted all remaining outstanding shares of Class B non-voting common stock) to their
affiliates, J.P. Morgan Capital, L.P. and Sixty Wall Street Fund, L.P., respectively. Such
entities then converted all of such shares of Class B non-voting common stock into shares of Class
A common stock.
As a result of the debt-for-equity transaction, the Company recorded a loss of $182.9 million,
or $5.50 and $9.08 per basic and diluted share for the three and six months ended June 30, 2007,
respectively. The loss resulted from exchanging 52,028,376 shares of Holdings Class A common
stock, with a value of $889.7 million based on a stock price of
$17.10 per share on the close date, for $731.6
million principal amount of the SunCom Wireless Subordinated Notes, which had a carrying value of
$721.0 million as of the date of the exchange. In addition, the Company wrote-off $0.9 million of
unamortized debt issuance costs and $13.3 million of transaction costs related to the exchange.
3. New Accounting Pronouncements
In September 2006, the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, which is effective for
fiscal years beginning after November 15, 2007. The statement was issued to define fair value,
establish a framework for measuring fair value, and expand disclosures about fair value
measurements. The Company is currently assessing the effect, if any, this statement will have on
its financial statements or its results of operations.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities, including an amendment of FASB Statement No. 115. This statement
permits entities to choose to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair value. Unrealized gains and losses on
items for which the fair value option has been elected are reported in earnings. This statement
does not affect any existing accounting literature that requires certain assets and liabilities to
be carried at fair value. This statement is effective for fiscal years beginning after November
15, 2007. The Company does not expect this statement to have a material effect on its financial
statements or its results of operations.
4. Stock-Based Compensation
Holdings grants restricted stock under its Amended and Restated Stock and Incentive Plan and
its Directors Stock and Incentive Plan to provide incentives to key employees and non-management
directors and to further align the interests of such individuals with those of its stockholders.
Grants of restricted stock generally are made annually under these stock and incentive plans, and
the grants generally vest over a four-year period.
The Company measures the fair value of restricted stock awards based upon the market price of
Holdings Class A common stock as of the date of grant, and these grants are amortized over their
applicable vesting period using the straight-line method. In accordance with SFAS No. 123(R)
Share-Based Payment, the Company has estimated that its forfeiture rate is 3% based on historical
experience. The Companys net loss for the three months ended June 30, 2007 and 2006 includes
approximately $0.5 million and $0.8 million, respectively, of stock-based compensation expense, and
the Companys net loss for the six months ended June 30, 2007 and 2006 included approximately $1.1
million and $3.0 million, respectively, of stock-based compensation expense. The following table
summarizes the allocation of this compensation expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(Dollars in thousands) |
|
Cost of service |
|
$ |
32 |
|
|
$ |
91 |
|
|
$ |
88 |
|
|
$ |
239 |
|
Selling,
general and administrative expense |
|
|
503 |
|
|
|
734 |
|
|
|
1,011 |
|
|
|
2,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
expense |
|
$ |
535 |
|
|
$ |
825 |
|
|
$ |
1,099 |
|
|
$ |
3,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
SUNCOM WIRELESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following activity occurred under Holdings restricted stock plans for the six months ended
June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
Shares |
|
|
Grant-Date Fair Value |
|
Unvested balance at December 31, 2006 |
|
|
230,213 |
|
|
$ |
23.12 |
|
Granted |
|
|
77,938 |
|
|
|
17.15 |
|
Vested |
|
|
(79,289 |
) |
|
|
30.74 |
|
Forfeited |
|
|
(2,268 |
) |
|
|
21.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested balance at June 30, 2007 |
|
|
226,594 |
|
|
$ |
18.42 |
|
As of June 30, 2007, there was approximately $3.1 million of total unrecognized compensation
costs related to Holdings stock plans. These costs are expected to be recognized over a weighted
average period of 2.5 years. In addition, an aggregate of 94,697 shares were authorized for future
grants under Holdings stock plans as of June 30, 2007.
During the six months ended June 30, 2007 and 2006, the following activity occurred under
Holdings stock plans:
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|
|
2007 |
|
2006 |
Stock awards granted (shares) |
|
|
77,938 |
|
|
|
99,857 |
|
Weighted average grant-date fair value |
|
$ |
17.15 |
|
|
$ |
14.98 |
|
|
|
|
|
|
|
|
|
|
Total fair value of shares vested (in thousands) |
|
$ |
2,438 |
|
|
$ |
3,493 |
|
5. Restricted Cash and Restricted Short-term Investments
Restricted cash and restricted short-term investments represent deposits that are pledged as
collateral for the Companys surety bonds on its cell site leases. As of June 30, 2007, the
Company had total restricted cash and short-term investments of $1.7 million.
6. Property and Equipment
The following table summarizes the Companys property and equipment as of June 30, 2007 and
December 31, 2006, respectively.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2007 |
|
2006 |
|
|
(Dollars in thousands) |
Property and equipment: |
|
|
|
|
|
|
|
|
Land |
|
$ |
313 |
|
|
$ |
313 |
|
Network infrastructure and equipment |
|
|
803,508 |
|
|
|
792,356 |
|
Furniture, fixtures and computer equipment |
|
|
115,999 |
|
|
|
111,852 |
|
Capital lease assets |
|
|
1,424 |
|
|
|
1,424 |
|
Construction in progress |
|
|
14,841 |
|
|
|
16,839 |
|
|
|
|
|
|
|
936,085 |
|
|
|
922,784 |
|
Less accumulated depreciation |
|
|
(482,887 |
) |
|
|
(441,904 |
) |
|
|
|
Property and equipment, net |
|
$ |
453,198 |
|
|
$ |
480,880 |
|
|
|
|
7. Detail of Certain Liabilities
The following table summarizes certain current liabilities as of June 30, 2007 and December 31,
2006, respectively:
9
SUNCOM WIRELESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2007 |
|
2006 |
|
|
(Dollars in thousands) |
Accrued liabilities: |
|
|
|
|
|
|
|
|
Bank overdraft liability |
|
$ |
5,267 |
|
|
$ |
14,741 |
|
Accrued payroll and related expenses |
|
|
14,680 |
|
|
|
20,255 |
|
Accrued expenses |
|
|
30,003 |
|
|
|
30,930 |
|
Accrued interest |
|
|
5,394 |
|
|
|
23,208 |
|
|
|
|
Total accrued liabilities |
|
$ |
55,344 |
|
|
$ |
89,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities: |
|
|
|
|
|
|
|
|
Deferred revenue |
|
$ |
18,545 |
|
|
$ |
17,638 |
|
Deferred gain on sale of property and equipment |
|
|
2,745 |
|
|
|
2,205 |
|
Security deposits |
|
|
5,704 |
|
|
|
5,094 |
|
|
|
|
Total other current liabilities |
|
$ |
26,994 |
|
|
$ |
24,937 |
|
|
|
|
8. Long-Term Debt
The following table summarizes the Companys indebtedness as of June 30, 2007 and December 31,
2006, respectively:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2007 |
|
2006 |
|
|
(Dollars in thousands) |
Current portion of long-term debt: |
|
|
|
|
|
|
|
|
Current portion of capital lease obligations |
|
$ |
292 |
|
|
$ |
310 |
|
Current portion of senior secured term loan |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
|
Total current portion of long-term debt |
|
|
2,792 |
|
|
|
2,810 |
|
|
|
|
|
|
|
|
|
|
Long-term debt: |
|
|
|
|
|
|
|
|
Capital lease obligations |
|
$ |
389 |
|
|
$ |
531 |
|
Senior secured term loan |
|
|
241,250 |
|
|
|
242,500 |
|
8 1/2% senior notes |
|
|
714,977 |
|
|
|
714,341 |
|
9 3/8% senior subordinated notes |
|
|
5,397 |
|
|
|
340,735 |
|
8 3/4% senior subordinated notes |
|
|
6,808 |
|
|
|
391,630 |
|
|
|
|
Total long-term debt |
|
|
968,821 |
|
|
|
1,689,737 |
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
971,613 |
|
|
$ |
1,692,547 |
|
|
|
|
9. Athens Sale
In August 2006, the Company entered into a definitive agreement to sell to Cingular Wireless
substantially all of the assets of its wireless communications network and FCC licenses relating to
its Athens, Georgia market. The closing of the sale was substantially completed on January 31,
2007. The carrying values of the network and related assets and FCC licenses sold as part of this
agreement were $2.1 million and $8.9 million, respectively, and total proceeds for the fair value
of the assets sold was approximately $10.9 million. After deducting $0.3 million of transaction
costs, the loss on the Athens sale was approximately $0.4 million. This loss is included within
depreciation and asset disposal expense on the consolidated statement of operations for the six
months ended June 30, 2007.
Pending the successful assignment of six cell sites related to the Athens sale, Cingular
Wireless will pay the Company an additional $0.9 million, and the related assets, which have a
carrying value of approximately $0.4 million, will be transferred to Cingular Wireless. This
final part of the transaction is expected to be completed during the third quarter of 2007 (see
Note 13 Subsequent Events). In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, these pending assets have been classified in assets held for sale
on the consolidated balance sheet as of June 30, 2007.
10
SUNCOM WIRELESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Tower Sale
On November 13, 2006, the Company agreed to sell 69 wireless communications towers located in
its continental United States business segment to SBA Towers II LLC (SBA) for approximately $17.0
million, reflecting a price of approximately $0.3 million per tower. The closing of 63 of the 69
towers occurred during the first six months of 2007, and the remaining six sites are not expected
to be sold to SBA.
In connection with the sale of the towers, the Company has entered into site lease agreements
with SBA, under which it will pay SBA monthly rent for the continued use of space that the Company
occupied on the towers prior to their sale. The leases have an initial term of 10 years, and the
monthly rental amount is subject to certain escalation clauses over the life of the lease. The
Company is required to prepay the first four years rent under each site agreement at each closing,
which aggregated to approximately $5.2 million during the first six months of 2007.
The Company accounted for this sale-leaseback transaction in accordance with SFAS No. 98
Accounting for Leases and SFAS No. 28 Accounting for Sales with Leasebacks. The proceeds for
the sale of the 63 towers were approximately $15.5 million and the carrying value of the towers was
approximately $1.7 million. After deducting $0.4 million of selling costs, the gain on the sale of
the towers was approximately $13.4 million, all of which was deferred and will be recognized over
the remaining operating lease terms of the towers that have been leased back to the Company.
11. Recently Adopted Accounting Pronouncements
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes (FIN 48), on January 1, 2007. As a result of the implementation of FIN 48, the
Company recognized a $2.9 million alternative minimum income tax liability and interest expense for
unrecognized tax benefits, of which $2.5 million was recorded as a deferred tax asset and the
remaining $0.4 million was accounted for as an adjustment to the beginning balance of retained
earnings on the consolidated balance sheet. As of the date of adoption and after the impact of
recognizing the increase in liabilities noted above, the Companys unrecognized tax benefits
totaled $20.2 million, the disallowance of which would not affect the annual effective income tax
rate. The Company does not expect the unrecognized tax benefit to change significantly during the
next twelve months.
The Company is subject to U.S. federal income tax as well as income tax of multiple state and
foreign jurisdictions. The Company is subject to U.S. federal income tax and certain state and
local income tax examination for all years since 1997. The Company is subject to foreign income
tax examination for all years since 2004.
The Companys continuing practice is to recognize interest and/or penalties related to income
tax matters in income tax expense. During the six months ended June 30, 2007, the Company
recognized approximately $1.1 million in potential interest associated with uncertain tax
positions, which increased the Companys unrecognized tax benefit to $21.3 million as of June 30,
2007. Accrued interest and penalties were $3.1 million and $4.2 million as of January 1, 2007 and
June 30, 2007, respectively. To the extent interest is not assessed with respect to uncertain tax
positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax
provision.
In June 2006, the FASB ratified the Emerging Issues Task Force issue 06-3, How Taxes
Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (Gross Versus Net Presentation) (EITF 06-3). EITF 06-3 addresses income statement
presentation and disclosure requirements for taxes assessed by a governmental authority that are
directly imposed on and concurrent with a revenue-producing transaction between a seller and a
customer, including sales and use taxes. EITF 06-3 permits such taxes to be presented on either a
gross basis (included in revenues and costs) or on a net basis (excluded from revenues). The
Company has historically presented, and will continue to present, such taxes on a net basis.
12. Segment Information
The Company has two reportable segments, which it operates and manages as strategic business
units. Reportable segments are defined as components of an enterprise for which separate financial
information is available and is evaluated regularly by the chief operating decision makers in
deciding how to allocate resources and in assessing performance. The Companys reporting segments
are based upon geographic area of operation; one segment consists of the Companys operations in
the continental United States and the other consists of the Companys operations in Puerto Rico and
the U.S. Virgin Islands. The Corporate and other column below includes centralized services that
largely support both segments. The Companys reporting segments follow the same accounting
policies used for the Companys consolidated financial statements.
11
SUNCOM WIRELESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Financial information by reportable business segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months |
|
|
As of and for the three months |
|
|
ended June 30, 2007 |
|
|
ended June 30, 2006 |
|
|
|
|
|
|
Puerto Rico |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico |
|
|
|
|
|
|
Continental |
|
and U.S. |
|
Corporate |
|
|
|
|
|
|
Continental |
|
and U.S. |
|
Corporate |
|
|
|
|
U.S. |
|
Virgin Islands |
|
and other |
|
Consolidated |
|
|
U.S. |
|
Virgin Islands |
|
and other |
|
Consolidated |
|
|
(Dollars in thousands) |
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
$ |
138,195 |
|
|
$ |
57,479 |
|
|
$ |
|
|
|
$ |
195,674 |
|
|
|
$ |
117,778 |
|
|
$ |
46,652 |
|
|
$ |
|
|
|
$ |
164,430 |
|
Roaming |
|
|
21,613 |
|
|
|
3,486 |
|
|
|
|
|
|
|
25,099 |
|
|
|
|
17,692 |
|
|
|
1,827 |
|
|
|
|
|
|
|
19,519 |
|
Equipment |
|
|
15,019 |
|
|
|
6,662 |
|
|
|
|
|
|
|
21,681 |
|
|
|
|
16,787 |
|
|
|
5,952 |
|
|
|
|
|
|
|
22,739 |
|
|
|
|
Total revenue |
|
|
174,827 |
|
|
|
67,627 |
|
|
|
|
|
|
|
242,454 |
|
|
|
|
152,257 |
|
|
|
54,431 |
|
|
|
|
|
|
|
206,688 |
|
Depreciation, asset
disposal and amortization |
|
|
18,841 |
|
|
|
6,549 |
|
|
|
2,788 |
|
|
|
28,178 |
|
|
|
|
82,664 |
|
|
|
8,039 |
|
|
|
4,517 |
|
|
|
95,220 |
|
Income (loss) from
operations |
|
$ |
20,057 |
|
|
$ |
12,923 |
|
|
$ |
(11,384 |
) |
|
$ |
21,596 |
|
|
|
$ |
(60,254 |
) |
|
$ |
2,290 |
|
|
$ |
(13,598 |
) |
|
$ |
(71,562 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,057,457 |
|
|
$ |
368,618 |
|
|
$ |
170,263 |
|
|
$ |
1,596,338 |
|
|
|
$ |
1,107,620 |
|
|
$ |
346,565 |
|
|
$ |
283,193 |
|
|
$ |
1,737,378 |
|
Capital expenditures |
|
|
3,132 |
|
|
|
6,102 |
|
|
|
1,794 |
|
|
|
11,028 |
|
|
|
|
24,166 |
|
|
|
5,499 |
|
|
|
1,206 |
|
|
|
30,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the six months |
|
|
As of and for the six months |
|
|
ended June 30, 2007 |
|
|
ended June 30, 2006 |
|
|
|
|
|
|
Puerto Rico |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico |
|
|
|
|
|
|
Continental |
|
and U.S. |
|
Corporate |
|
|
|
|
|
|
Continental |
|
and U.S. |
|
Corporate |
|
|
|
|
U.S. |
|
Virgin Islands |
|
and other |
|
Consolidated |
|
|
U.S. |
|
Virgin Islands |
|
and other |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
$ |
271,155 |
|
|
$ |
110,954 |
|
|
$ |
|
|
|
$ |
382,109 |
|
|
|
$ |
227,835 |
|
|
$ |
92,062 |
|
|
$ |
|
|
|
$ |
319,897 |
|
Roaming |
|
|
40,386 |
|
|
|
6,715 |
|
|
|
|
|
|
|
47,101 |
|
|
|
|
35,547 |
|
|
|
5,438 |
|
|
|
|
|
|
|
40,985 |
|
Equipment |
|
|
33,229 |
|
|
|
12,935 |
|
|
|
|
|
|
|
46,164 |
|
|
|
|
36,912 |
|
|
|
10,786 |
|
|
|
|
|
|
|
47,698 |
|
|
|
|
Total revenue |
|
|
344,770 |
|
|
|
130,604 |
|
|
|
|
|
|
|
475,374 |
|
|
|
|
300,294 |
|
|
|
108,286 |
|
|
|
|
|
|
|
408,580 |
|
Depreciation, asset
disposal and amortization |
|
|
37,971 |
|
|
|
13,486 |
|
|
|
8,701 |
|
|
|
60,158 |
|
|
|
|
166,538 |
|
|
|
34,566 |
|
|
|
9,119 |
|
|
|
210,223 |
|
Income (loss) from
operations |
|
$ |
35,714 |
|
|
$ |
20,898 |
|
|
$ |
(24,915 |
) |
|
$ |
31,697 |
|
|
|
$ |
(137,079 |
) |
|
$ |
(17,017 |
) |
|
$ |
(27,271 |
) |
|
$ |
(181,367 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,057,457 |
|
|
$ |
368,618 |
|
|
$ |
170,263 |
|
|
$ |
1,596,338 |
|
|
|
$ |
1,107,620 |
|
|
$ |
346,565 |
|
|
$ |
283,193 |
|
|
$ |
1,737,378 |
|
Capital expenditures |
|
|
5,139 |
|
|
|
8,208 |
|
|
|
3,000 |
|
|
|
16,347 |
|
|
|
|
29,819 |
|
|
|
10,050 |
|
|
|
2,304 |
|
|
|
42,173 |
|
A reconciliation from segment income (loss) from operations to consolidated loss before taxes is
set forth below:
12
SUNCOM WIRELESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the six months ended |
|
|
June 30, |
|
June 30, |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
(Dollars in thousands) |
|
Total segment income (loss) from
operations |
|
$ |
21,596 |
|
|
$ |
(71,562 |
) |
|
$ |
31,697 |
|
|
$ |
(181,367 |
) |
Unallocated amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(29,635 |
) |
|
|
(38,167 |
) |
|
|
(67,969 |
) |
|
|
(75,909 |
) |
Loss on debt for equity exchange |
|
|
(182,868 |
) |
|
|
|
|
|
|
(182,868 |
) |
|
|
|
|
Interest and other income |
|
|
2,422 |
|
|
|
3,313 |
|
|
|
4,826 |
|
|
|
7,407 |
|
|
|
|
Consolidated loss before taxes |
|
$ |
(188,485 |
) |
|
$ |
(106,416 |
) |
|
$ |
(214,314 |
) |
|
$ |
(249,869 |
) |
13. Subsequent Event
On July 1, 2007, in connection with the sale of the Companys wireless communications network
and FCC licenses relating to its Athens, Georgia market (see Note 9 Athens Sale), the Company
sold five of the remaining six cell sites to Cingular Wireless for proceeds of approximately $0.8
million. The carrying values of the five cell sites sold as part of this agreement were
approximately $0.3 million, resulting in a gain of approximately $0.5 million, which will be
recorded during the third quarter of 2007. Pending the successful assignment of the final cell
site related to the Athens sale, Cingular Wireless will pay the Company an additional $0.1 million.
This transaction is expected to be completed during the third quarter of 2007.
13
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
In this section, the terms SunCom, we, us, our and similar terms refer collectively to SunCom
Wireless Holdings, Inc., our wholly-owned subsidiary, SunCom Wireless, Inc., and their consolidated
subsidiaries. Holdings refers to SunCom Wireless Holdings, Inc. and SunCom Wireless refers to
SunCom Wireless, Inc. The following discussion and analysis is based upon our financial statements
as of the dates and for the periods presented in this section. You should read this discussion and
analysis in conjunction with our financial statements and the related notes contained elsewhere in
this report.
Forward-Looking Statements
When used in this Form 10-Q and in future filings by us with the Securities and Exchange
Commission, in our press releases and in oral statements made with the approval of an authorized
executive officer of SunCom, statements concerning possible or assumed future results of operations
of SunCom and those preceded by, followed by or that include the words may, will, should,
expects, plans, anticipates, believes, estimates, predicts, potential or continue
or the negative of such terms and other comparable terminology (including confirmations by an
authorized executive officer of SunCom or any such expressions made by a third party with respect
to SunCom) are intended to identify forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any
such forward-looking statements, each of which speaks only as of the date made. Such statements are
subject to certain risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. For a discussion of certain
risks and uncertainties that could affect our results of operations, liquidity and capital
resources, see the Risk Factors section of our Form 10-K for the year ended December 31, 2006,
Part II, Item 1A of this report and our other Securities and Exchange Commission filings. We have
no obligation to release publicly the result of any revisions, which may be made to any
forward-looking statements to reflect anticipated or unanticipated events or circumstances
occurring after the date of such statements.
Overview
We are a provider of digital wireless communications services in the southeastern United
States, Puerto Rico and the U.S. Virgin Islands. As of June 30, 2007, our wireless communications
network covered a population of approximately 14.6 million potential customers in a contiguous
geographic area encompassing portions of North Carolina, South Carolina, Tennessee and Georgia. In
addition, we operate a wireless communications network covering a population of approximately 4.1
million potential customers in Puerto Rico and the U.S. Virgin Islands.
Our strategy is to provide extensive coverage to customers within our region, to offer our
customers high-quality, innovative voice and data services with coast-to-coast coverage via
compelling rate plans and to benefit from roaming revenues generated by other carriers wireless
customers who roam into our covered area.
We believe our markets are strategically attractive because of their strong demographic
characteristics for wireless communications services. According to the 2005 Paul Kagan Associates
Report, our service area includes 11 of the top 100 markets in the country with population
densities that are higher than the national average. We currently provide wireless voice and data
services utilizing global system for mobile communications and general packet radio service, or
GSM/GPRS, technology, which is capable of providing enhanced voice and data services.
Debt-for-Equity Exchange
In order to improve our capital structure, we entered into an exchange agreement on January
31, 2007 with certain holders of the 93/8% senior subordinated notes due 2011 and 83/4% senior
subordinated notes due 2011 issued by SunCom Wireless. On May 15, 2007, Holdings implemented a
1-for-10 reverse stock split to ensure that there existed sufficient authorized shares of Class A
common stock to complete the debt-for-equity exchange contemplated by the exchange agreement.
Also, on May 15, 2007, pursuant to the exchange agreement, holders of SunCom Wireless subordinated
notes exchanged notes representing 98.3% of the outstanding SunCom Wireless subordinated notes for
approximately 52.0 million shares of Holdings Class A common stock (after giving effect to the
1-for-10 reverse stock split immediately prior to the exchange). Also in connection with the exchange transaction, we agreed to explore strategic alternatives, including a possible sale of the company. We
have engaged Goldman Sachs & Co. as our financial advisor to explore strategic alternatives and
assist us with a process to sell the company. See Note 2 to our consolidated
financial statements for more information.
14
Results of Operations
We have two reportable segments, which we operate and manage as strategic business units. Our
reporting segments are based upon geographic area of operation; one segment consists of our
operations in the continental United States, and the other consists of our operations in Puerto
Rico and the U.S. Virgin Islands. Each reporting segment markets wireless rate plans to consumers
that are specific to its respective geographic area. For purposes of this discussion, corporate
expenses are included in the continental United States segment results.
Three Months Ended June 30, 2007 Compared to the Three Months Ended June 30, 2006
Consolidated operations
The table below summarizes the consolidated key metrics of our operations as of and for the
three months ended June 30, 2007 and 2006. These results are further described in our segment
discussions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months ended June 30, |
|
|
2007 |
|
2006 |
|
Change |
|
Change % |
Gross additions |
|
|
95,846 |
|
|
|
92,131 |
|
|
|
3,715 |
|
|
|
4.0 |
% |
Net additions |
|
|
16,128 |
|
|
|
24,329 |
|
|
|
(8,201 |
) |
|
|
(33.7 |
%) |
Subscribers (end of period) |
|
|
1,136,966 |
|
|
|
1,031,443 |
|
|
|
105,523 |
|
|
|
10.2 |
% |
Monthly subscriber churn |
|
|
2.4 |
% |
|
|
2.2 |
% |
|
|
(0.2 |
%) |
|
|
(9.1 |
%) |
Average revenue per user |
|
$ |
57.21 |
|
|
$ |
52.89 |
|
|
$ |
4.32 |
|
|
|
8.2 |
% |
Cost per gross addition |
|
$ |
459 |
|
|
$ |
409 |
|
|
|
($50 |
) |
|
|
(12.2 |
%) |
Gross additions are new subscriber activations, and net additions are gross additions less
subscriber deactivations. Monthly subscriber churn is calculated by dividing subscriber
deactivations by our average subscriber base for the period. These statistical measures may not be
compiled in the same manner as similarly titled measures of other companies. In addition, average
revenue per user, or ARPU, and cost per gross addition, or CPGA, are performance measures not
calculated in accordance with accounting principles generally accepted in the United States, or
GAAP. For more information about ARPU and CPGA, see Reconciliation of Non-GAAP Financial
Measures below.
Continental U.S. segment operations
The table below summarizes key metrics of our continental U.S. segment operations as of and
for the three months ended June 30, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months ended June 30, |
|
|
2007 |
|
2006 |
|
Change |
|
Change % |
Gross additions |
|
|
61,116 |
|
|
|
59,193 |
|
|
|
1,923 |
|
|
|
3.2 |
% |
Net additions |
|
|
6,274 |
|
|
|
15,379 |
|
|
|
(9,105 |
) |
|
|
(59.2 |
%) |
Subscribers (end of period) |
|
|
799,394 |
|
|
|
750,332 |
|
|
|
49,062 |
|
|
|
6.5 |
% |
Monthly subscriber churn |
|
|
2.3 |
% |
|
|
2.0 |
% |
|
|
(0.3 |
%) |
|
|
(15.0 |
%) |
Average revenue per user |
|
$ |
57.98 |
|
|
$ |
52.86 |
|
|
$ |
5.12 |
|
|
|
9.7 |
% |
Cost per gross addition |
|
$ |
484 |
|
|
$ |
440 |
|
|
|
($44 |
) |
|
|
(10.0 |
%) |
Subscribers. The decrease in total net subscriber additions of 9,105 was driven by a 14,631
decline in our postpaid net subscriber additions that was partially
offset by a 5,526 increase in our prepaid net subscriber additions. Gross subscriber additions in our postpaid
base declined 10,389 quarter-over-quarter as a result of an appreciable increase in both access and
equipment pricing on our month-to-month rate plan offerings, which are sold primarily to
credit-challenged subscribers. Involuntary deactivations due to non-payment in our postpaid base
increased quarter-over-quarter due to a growing subscriber base and higher churn on the
month-to-month plans. Voluntary subscriber deactivations in our postpaid base declined quarter-over-quarter due to an increase in the percentage of postpaid subscribers under contract
from 85% to 87%. Prepaid gross additions increased 12,312 quarter-over-quarter and prepaid
deactivations increased 6,786 quarter-over-quarter, as we did not offer a prepaid product during
the three months ending June 30, 2006. As of June 30, 2007, our postpaid subscriber base of
783,528 included 33,870 subscribers on the month-to-month offerings, and our prepaid subscriber
base included 15,866 subscribers. The 49,062 increase in total subscribers was attributable to net
subscriber additions from July 1, 2006 through June 30, 2007.
15
Monthly Subscriber Churn. Our monthly postpaid subscriber churn was 2.0% for both the three
months ended June 30, 2007 and June 30, 2006. These percentages include churn on the
above-mentioned month-to-month rate plans. Subscriber churn on these plans was
7.1% for the three months ended June 30, 2007 and 4.2% for the three months ended June 30, 2006.
Prepaid subscriber churn was 17.3% for the three months ended June 30, 2007, and there was no
comparable data for the three months ended June 30, 2006 because we did not offer a prepaid product
during that period. As a result, our consolidated subscriber churn increased from 2.0% for the
three months ended June 30, 2006 to 2.3% for the three months ended June 30, 2007. We believe that
churn in the continental U.S. segment may increase slightly in the near term due to an increased
prepaid customer base, which generally has a higher rate of churn.
Average Revenue Per User. Average revenue per user, or ARPU, reflects the average amount
billed to subscribers based on rate plan and calling feature offerings. ARPU is calculated by
dividing service revenue, excluding service revenue credits made to existing subscribers and
revenue not generated by wireless subscribers, by our average subscriber base for the respective
period. The ARPU increase of $5.12 was primarily the result of an increase in average revenue from
usage of features offered for additional fees and an increase in average access revenue per
subscriber. The increase in average feature revenue was primarily the result of subscribers
increasing their usage of our data offerings, such as short message service, or SMS, and
downloadable ring tones. The increase in average access revenue was primarily the result of higher
access points on add-a-line activations. In addition, miscellaneous revenue also increased due to
higher fees charged to delinquent paying subscribers. The above discussion is on a consolidated
subscriber basis; postpaid ARPU and prepaid ARPU were $58.41 and $31.85, respectively, for the
three months ended June 30, 2007. As a result of the anticipated mix of new rate plan offerings,
we expect ARPU to remain relatively flat in the foreseeable future. For more details regarding our
calculation of ARPU, refer to Reconciliation of Non-GAAP Financial Measures below.
Cost Per Gross Addition. Cost per gross addition, or CPGA, is calculated by dividing the sum
of equipment margin for handsets sold to new subscribers (equipment revenue less cost of equipment,
which costs have historically exceeded the related revenues) and selling expenses (exclusive of the
non-cash compensation portion of the selling expenses) related to adding new subscribers by total
gross subscriber additions during the relevant period. The CPGA increase of $44, or 10.0%, was
primarily the result of higher advertising and promotional spending and higher equipment margin per
gross addition. These increases were partially offset by higher gross additions to leverage the
fixed selling costs for the period. For more details regarding our calculation of CPGA, refer to
Reconciliation of Non-GAAP Financial Measures below.
Continental U.S. Results from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
(Dollars in thousands) |
|
2007 |
|
2006 |
|
Change $ |
|
Change % |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
$ |
138,195 |
|
|
$ |
117,778 |
|
|
$ |
20,417 |
|
|
|
17.3 |
% |
Roaming |
|
|
21,613 |
|
|
|
17,692 |
|
|
|
3,921 |
|
|
|
22.2 |
% |
Equipment |
|
|
15,019 |
|
|
|
16,787 |
|
|
|
(1,768 |
) |
|
|
(10.5 |
%) |
|
|
|
Total revenue |
|
|
174,827 |
|
|
|
152,257 |
|
|
|
22,570 |
|
|
|
14.8 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service |
|
|
54,587 |
|
|
|
55,879 |
|
|
|
1,292 |
|
|
|
2.3 |
% |
Cost of equipment |
|
|
22,440 |
|
|
|
22,276 |
|
|
|
(164 |
) |
|
|
(0.7 |
%) |
Selling, general and administrative |
|
|
67,498 |
|
|
|
60,115 |
|
|
|
(7,383 |
) |
|
|
(12.3 |
%) |
Termination benefits and other related charges |
|
|
|
|
|
|
658 |
|
|
|
658 |
|
|
|
100.0 |
% |
Depreciation, asset disposal and amortization |
|
|
21,629 |
|
|
|
87,181 |
|
|
|
65,552 |
|
|
|
75.2 |
% |
|
|
|
Total operating expenses |
|
|
166,154 |
|
|
|
226,109 |
|
|
|
59,955 |
|
|
|
26.5 |
% |
Income (loss) from operations |
|
$ |
8,673 |
|
|
$ |
(73,852 |
) |
|
$ |
82,525 |
|
|
|
111.7 |
% |
|
Revenue. Service revenue increased by $20.4 million, or 17.3%, for the three months ended
June 30, 2007 compared to the three months ended June 30, 2006, primarily as a result of an $8.1
million increase in access revenue resulting primarily from a larger subscriber base and a higher
average access point, increased revenue of $8.3 million generated from enhanced features offered
for a fee, such as SMS messaging and downloadable ring tones, and a $1.5 million increase in
miscellaneous revenue attributable to higher late fees charged to delinquent paying subscribers.
We expect subscriber growth to continue and hence, we expect service revenue to increase in the
foreseeable future. The $3.9 million, or 22.2%, increase in roaming revenue was primarily due to
increased roaming minutes of use period over period. See Liquidity and Capital Resources for
a discussion on our expected decline in roaming revenue. Equipment revenue includes the revenue earned
on the sale of handsets and handset accessories to new and existing subscribers. The equipment
revenue decrease of $1.8 million, or 10.5%, was primarily due to decreased revenue on new
activations and handset upgrades for existing customers.
16
Cost of Service. Cost of service for the three months ended June 30, 2007 decreased by $1.3
million, or 2.3%, compared to the same period of 2006. This decrease was largely the result of a
$1.8 million decrease in interconnect costs as a result of decommissioning our TDMA network during
2006, which resulted in network efficiencies and a corresponding reduction in costs, and a $0.5
million decrease in cell site costs due primarily to the sale of our Athens market. These
decreases were partially offset by a $1.5 million increase in incollect roaming costs (costs
associated with our subscribers roaming on other carriers networks) attributable to the growth of
our subscriber base. As a result of the variable components of cost of service, such as
interconnect and toll, our cost of service may increase in conjunction with the growth of our
subscriber base. Cost of service as a percentage of service revenue was 39.5% and 47.4% for the
quarters ended June 30, 2007 and 2006, respectively. This decrease of 7.9% was primarily
attributable to increased service revenue and the declines in interconnect and cell
site costs. Cost of service as a percentage of service revenue may decline in the future, as we
expect to continue to leverage the fixed components of cost of service, such as cell site rent,
against increased revenue.
Cost of Equipment. Cost of equipment increased slightly in the second quarter of 2007
compared to the same period of 2006. The increase was due to higher gross subscriber additions,
partially offset by the absence of equipment costs incurred during the second quarter of 2006 to
migrate subscribers from TDMA to GSM/GPRS technology.
Selling, General and Administrative Expense. Selling, general and administrative expense
increased $7.4 million, or 12.3%, for the three months ended June 30, 2007 compared to the same
period of 2006. The increase was primarily due to a $5.6 million increase in general and
administrative expense (excluding non-cash compensation), which resulted from higher bad debt
expense of $4.0 million. The higher bad debt expense was due to a larger subscriber base and rate
plan offerings to more credit-challenged customers. Also contributing to the higher general and
administrative expense was an increase in handset upgrades provided to existing subscribers in
exchange for a contract extension, which resulted in $1.1 million of incremental commission
expense. Advertising spending increased by $1.5 million for the quarter ended June 30, 2007,
compared to the same period of 2006. Commission expense increased $0.7 million due to higher gross
additions and distribution channel mix. These increases were partially offset by a $0.3 million
decrease in non-cash compensation expense due to the lower market price of stock grants. Our
selling, general and administrative expenses may increase as a function of the growth of our
subscriber base. General and administrative expense as a percentage of service revenue was 30.0%
and 30.6% for the quarters ended June 30, 2007 and 2006, respectively. This decrease was primarily
the result of greater service revenue for the three months ended June 30, 2007. This percentage
may decline in the future, as we expect to leverage our fixed general and administrative costs,
such as headcount and facilities costs, against increased revenue.
Termination Benefit Expense. We did not incur any termination benefit expense for the second
quarter of 2007. We incurred termination benefit expense of $0.7 million for the same period of
2006 related to the reorganization of our continental U.S. operations.
Depreciation, Asset Disposal and Amortization Expense. Depreciation, asset disposal and
amortization expense decreased by $65.6 million, or 75.2%, for the three months ended June 30, 2007
compared to the same period of 2006. This decrease was primarily due to there being no incremental
depreciation expense on our TDMA equipment, which was fully depreciated as of June 30, 2006 and was
decommissioned during the fourth quarter of 2006.
Puerto Rico and U.S. Virgin Islands segment operations
The table below summarizes the key metrics of our Puerto Rico and U.S. Virgin Islands segment
operations as of and for the three months ended June 30, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months ended June 30, |
|
|
2007 |
|
2006 |
|
Change |
|
Change % |
Gross additions |
|
|
34,730 |
|
|
|
32,938 |
|
|
|
1,792 |
|
|
|
5.4 |
% |
Net additions |
|
|
9,854 |
|
|
|
8,950 |
|
|
|
904 |
|
|
|
10.1 |
% |
Subscribers (end of period) |
|
|
337,572 |
|
|
|
281,111 |
|
|
|
56,461 |
|
|
|
20.1 |
% |
Monthly subscriber churn |
|
|
2.5 |
% |
|
|
2.9 |
% |
|
|
0.4 |
% |
|
|
13.8 |
% |
Average revenue per user |
|
$ |
55.38 |
|
|
$ |
52.97 |
|
|
$ |
2.41 |
|
|
|
4.5 |
% |
Cost per gross addition |
|
$ |
416 |
|
|
$ |
351 |
|
|
|
($65 |
) |
|
|
(18.5 |
%) |
Subscribers. The increase in net subscribers additions of 904 was due to a 1,792 increase in
gross subscriber additions, offset partially by higher subscriber deactivations (at a lower churn
rate). The increase in subscriber deactivations period over period was primarily the result of
higher involuntary deactivations due to non-payment. The increase in total subscribers was
attributable to net subscriber additions resulting from July 1, 2006 through June 30, 2007.
Monthly Subscriber Churn. The decrease in monthly subscriber churn stemmed from increased
leverage due to a higher average subscriber base, partially offset by increased involuntary
subscriber deactivations due to non-payment during the three
17
months ended June 30, 2007, as compared to the same period of 2006. As a result of
contractual obligations with customers, we expect that the subscriber churn of our Puerto Rico and
U.S. Virgin Islands segment may remain relatively flat in the near term.
Average Revenue Per User. The ARPU increase was primarily the result of an increase in the
usage of features for additional fees and an increase in average billed airtime revenue per
subscriber, partially offset by a decrease in average billed access revenue per subscriber. The
increase in average feature revenue was primarily the result of subscribers increasing their usage
of our data offerings, such as SMS messaging and downloadable ring tones. The increase in average
airtime revenue was the result of higher billable minutes of use. The decline in average access
revenue was the result of adding new subscribers on lower-priced rate plans. As a result of the
anticipated mix of new rate plan offerings, we expect ARPU to remain relatively flat in the
foreseeable future.
Cost Per Gross Addition. The CPGA increase of $65, or 18.5%, was primarily due to higher
spending on advertising and promotional costs, higher commission expense due to volume incentives
on higher gross additions and higher equipment margin, partially offset by higher gross additions
to leverage our fixed selling costs for the period ended June 30, 2007 as compared to the same
period of last year.
Puerto Rico and U.S. Virgin Islands Results from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
(Dollars in thousands) |
|
2007 |
|
2006 |
|
Change $ |
|
Change % |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
$ |
57,479 |
|
|
$ |
46,652 |
|
|
$ |
10,827 |
|
|
|
23.2 |
% |
Roaming |
|
|
3,486 |
|
|
|
1,827 |
|
|
|
1,659 |
|
|
|
90.8 |
% |
Equipment |
|
|
6,662 |
|
|
|
5,952 |
|
|
|
710 |
|
|
|
11.9 |
% |
|
|
|
Total revenue |
|
|
67,627 |
|
|
|
54,431 |
|
|
|
13,196 |
|
|
|
24.2 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service |
|
|
11,675 |
|
|
|
10,838 |
|
|
|
(837 |
) |
|
|
(7.7 |
%) |
Cost of equipment |
|
|
12,352 |
|
|
|
9,994 |
|
|
|
(2,358 |
) |
|
|
(23.6 |
%) |
Selling, general and administrative |
|
|
24,128 |
|
|
|
23,270 |
|
|
|
(858 |
) |
|
|
(3.7 |
%) |
Depreciation, asset disposal and amortization |
|
|
6,549 |
|
|
|
8,039 |
|
|
|
1,490 |
|
|
|
18.5 |
% |
|
|
|
Total operating expenses |
|
|
54,704 |
|
|
|
52,141 |
|
|
|
(2,563 |
) |
|
|
(4.9 |
%) |
Income from operations |
|
$ |
12,923 |
|
|
$ |
2,290 |
|
|
$ |
10,633 |
|
|
|
464.3 |
% |
|
Revenue. Service revenue increased $10.8 million, or 23.2%, for the three months ended June
30, 2007 compared to the same period of 2006 primarily due to an increased number of subscribers,
which resulted in increased access revenue of $5.3 million. In addition, feature revenue increased
by $3.3 million as a result of additional usage of features offered for an additional fee, such as
SMS messaging and downloadable ring tones. We expect subscriber growth to continue and hence, we
expect service revenue to increase in the foreseeable future. The increase in roaming revenue was
due to a higher rate per minute of use and increased minutes of use on our network. See Liquidity
and Capital Resources for a discussion on our expected decline in roaming revenue. Equipment sales
revenue increased due to increased transactions with existing subscribers.
Cost of Service. Cost of service increased by $0.8 million, or 7.7%, for the three months
ended June 30, 2007 compared to the same period of 2006. The increase was the result of increased
incollect costs of $0.4 million due to higher minutes of use and increased handset insurance costs
of $1.2 million resulting from a larger subscriber base, partially offset by reduced interconnect
expenses of $1.2 million due to the redesign of our network to more efficiently carry our traffic.
As a result of the variable components of cost of service, such as interconnect and toll, our cost
of service may increase in conjunction with the growth of our subscriber base. Cost of service as
a percentage of service revenue was 20.3% and 23.2% for the quarters ended June 30, 2007 and 2006,
respectively. The decrease of 2.9% was primarily attributable to increased service revenue. Cost
of service as a percentage of service revenue may decline in the future, as we expect to continue
to leverage the fixed components of cost of service, such as cell site rent, against increased
revenue.
Cost of Equipment. Cost of equipment increased $2.4 million, or 23.6%, for the first quarter
of 2007 compared to the same period of last year. This increase was primarily due to higher
equipment costs for new activations due to increased gross subscriber additions period over period
and increased transactions with existing subscribers, such as upgrades.
Selling, General and Administrative Expense. Selling, general and administrative expense
increased $0.9 million for the three months ended June 30, 2007 compared to the same period of
2006. The increase was primarily due to increased advertising and promotional costs of $1.0
million and higher commission expense of $0.5 million due to higher gross additions. These
increases were partially offset by decreased bad debt expense of $0.5 million due to improved
collection efforts. As a result of the
18
variable components of selling, general and administrative expense, such as customer care
personnel and billing costs, our selling, general and administrative expense may increase as a
function of the growth of our subscriber base. General and administrative expense as a percentage
of service revenue was 23.7% and 30.5% for the quarter ended June 30, 2007 and 2006, respectively.
The decline of 6.8% was due primarily to increased service revenue. This percentage may continue
to decline in the future as we expect to leverage our fixed general and administrative costs, such
as headcount and facilities costs, against increased revenue.
Depreciation, Asset Disposal and Amortization Expense. Depreciation, asset disposal and
amortization expense decreased by $1.5 million, or 18.5%, for the three months ended June 30, 2007
compared to the same period of 2006. This decrease was primarily due to decreased amortization of
our subscriber list intangibles, which are amortized based on the expected turnover rate of the
associated subscriber base. As the subscriber base decreases due to turnover, the related
amortization decreases proportionately.
Consolidated operations
Interest Expense. Interest expense was $29.6 million, net of capitalized interest of $0.3
million, for the three months ended June 30, 2007. Interest expense was $38.2 million, net of
capitalized interest of $0.3 million, for the three months ended June 30, 2006. The decrease of
$8.6 million, or 22.5%, primarily related to the retirement of $731.6 million principal amount of
the SunCom Wireless subordinated notes effective May 15, 2007 (see Note 2 of our consolidated
financial statements). We had a weighted average interest rate of 8.59% and 8.69% for the three
months ended June 30, 2007 and 2006, respectively, on our average obligation for our senior and
subordinated debt as well as our senior secured term loan.
Interest and Other Income. Interest and other income was $2.4 million for the three months
ended June 30, 2007, a decrease of $0.9 million, compared to $3.3 million for the same period of
2006. This decrease was primarily due to lower average daily cash and short-term investment
balances for the quarter ended June 30, 2007.
Loss on Debt-for-Equity Exchange. We incurred a $182.9 million loss during the quarter ended
June 30, 2007 as a result of our debt-for-equity exchange (see Note 2 of our consolidated financial
statements). There was no loss for the same period ended June 30, 2006.
Income Tax Expense. Income tax expense was $4.5 million for the three months ended June 30,
2007, an increase of $0.5 million, or 12.5%, compared to $4.0 million for the same period of 2006.
We continue to recognize a deferred tax liability associated with our licensing costs. Pursuant to
our adoption of SFAS No. 142, we can no longer reasonably estimate the period of reversal, if any,
for the deferred tax liabilities related to our licensing costs. Therefore, we will continue to
incur deferred tax expense as additional deferred tax liabilities associated with the amortization
of the tax basis of our FCC licenses are incurred.
Net Loss. Net loss was $193.0 million and $110.4 million for the three months ended June 30,
2007 and 2006, respectively. The net loss increase of $82.6 million resulted primarily from the
loss on our debt-for-equity exchange, partially offset by improved operational results.
Six Months Ended June 30, 2007 Compared to the Six Months Ended June 30, 2006
Consolidated operations
The table below summarizes the consolidated key metrics of our operations as of and for the
six months ended June 30, 2007 and 2006. These results are further described in our segment
discussions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the six months ended June 30, |
|
|
2007 |
|
2006 |
|
Change |
|
Change % |
Gross additions |
|
|
203,697 |
|
|
|
208,446 |
|
|
|
(4,749 |
) |
|
|
(2.3 |
%) |
Net additions |
|
|
49,774 |
|
|
|
65,621 |
|
|
|
(15,847 |
) |
|
|
(24.1 |
%) |
Subscribers (end of period) |
|
|
1,136,966 |
|
|
|
1,031,443 |
|
|
|
105,523 |
|
|
|
10.2 |
% |
Monthly subscriber churn |
|
|
2.3 |
% |
|
|
2.4 |
% |
|
|
0.1 |
% |
|
|
4.2 |
% |
Average revenue per user |
|
$ |
56.46 |
|
|
$ |
52.23 |
|
|
$ |
4.23 |
|
|
|
8.1 |
% |
Cost per gross addition |
|
$ |
429 |
|
|
$ |
394 |
|
|
$ |
(35 |
) |
|
|
(8.9 |
%) |
19
Continental U.S. segment operations
The table below summarizes the key metrics of our continental U.S. segment operations as of
and for the six months ended June 30, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the six months ended June 30, |
|
|
2007 |
|
2006 |
|
Change |
|
Change % |
Gross additions |
|
|
129,222 |
|
|
|
138,153 |
|
|
|
(8,931 |
) |
|
|
(6.5 |
%) |
Net additions |
|
|
26,410 |
|
|
|
51,361 |
|
|
|
(24,951 |
) |
|
|
(48.6 |
%) |
Subscribers (end of period) |
|
|
799,394 |
|
|
|
750,332 |
|
|
|
49,062 |
|
|
|
6.5 |
% |
Monthly subscriber churn |
|
|
2.2 |
% |
|
|
2.0 |
% |
|
|
(0.2 |
%) |
|
|
(10.0 |
%) |
Average revenue per user |
|
$ |
57.33 |
|
|
$ |
52.05 |
|
|
$ |
5.28 |
|
|
|
10.1 |
% |
Cost per gross addition |
|
$ |
453 |
|
|
$ |
421 |
|
|
$ |
(32 |
) |
|
|
7.6 |
% |
Subscribers. The decrease in total net subscriber additions of 24,951 was driven by a 37,035
decline in our postpaid net subscriber additions that was partially offset by a 12,084
increase in our prepaid net subscriber additions. Gross subscriber additions in our postpaid
base declined 30,410 period-over-period as a result of an appreciable increase in both access and
equipment pricing on our month-to-month rate plan offerings, which are sold primarily to
credit-challenged subscribers. Involuntary deactivations due to non-payment in our postpaid base
increased period-over-period due to a growing subscriber base and higher churn on the
month-to-month plans. Voluntary subscriber deactivations in our
postpaid base declined period-over-period due to an increase in the percentage of postpaid subscribers under contract
from 85% to 87%. Prepaid gross additions increased 21,479 period-over-period and prepaid
deactivations increased 9,396 period-over-period, as we did not offer a prepaid product during the
six months ending June 30, 2006. As of June 30, 2007, our postpaid subscriber base of 783,528
included 33,870 subscribers on the month-to-month offerings, and our prepaid subscriber base
included 15,866 subscribers. The 49,062 increase in total subscribers was attributable to net
subscriber additions from July 1, 2006 through June 30, 2007.
Monthly Subscriber Churn. Our monthly postpaid subscriber churn was 2.0% for both the six
months ended June 30, 2007 and June 30, 2006. These percentages include churn on the
above-mentioned month-to-month rate plans. Subscriber churn on these plans was
6.1% for the six months ended June 30, 2007 and 4.2% for the six months ended June 30, 2006.
Prepaid subscriber churn was 15.5% for the six months ended June 30, 2007, and there was no
comparable data for the six months ended June 30, 2006 because we did not offer a prepaid product
during that period. As a result, our consolidated subscriber churn increased from 2.0% for the six
months ended June 30, 2006 to 2.2% for the six months ended June 30, 2007.
Average Revenue Per User. The ARPU increase of $5.28 was primarily the result of an increase
in average revenue from usage of features offered for additional fees and an increase in average
access revenue per subscriber. The increase in average feature revenue was primarily the result of
subscribers increasing their usage of our data offerings and the increase in average access revenue
was primarily the result of higher access points on add-a-line activations. In addition,
miscellaneous revenue also increased due to higher fees charged to delinquent paying subscribers.
The above discussion is on a consolidated subscriber basis; postpaid ARPU and prepaid ARPU were
$57.69 and $29.99, respectively, for the six months ended June 30, 2007.
Cost Per Gross Addition. The CPGA increase of $32, or 7.6%, was primarily the result of
higher advertising and promotional spending, higher equipment margin and higher fixed selling costs
per gross subscriber addition due to lower gross additions to leverage the fixed costs for the
period.
Continental U.S. Results from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, |
(Dollars in thousands) |
|
2007 |
|
2006 |
|
Change $ |
|
Change % |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
$ |
271,155 |
|
|
$ |
227,835 |
|
|
$ |
43,320 |
|
|
|
19.0 |
% |
Roaming |
|
|
40,386 |
|
|
|
35,547 |
|
|
|
4,839 |
|
|
|
13.6 |
% |
Equipment |
|
|
33,229 |
|
|
|
36,912 |
|
|
|
(3,683 |
) |
|
|
(10.0 |
%) |
|
|
|
Total revenue |
|
|
344,770 |
|
|
|
300,294 |
|
|
|
44,476 |
|
|
|
14.8 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service |
|
|
106,666 |
|
|
|
112,809 |
|
|
|
6,143 |
|
|
|
5.4 |
% |
Cost of equipment |
|
|
48,840 |
|
|
|
50,803 |
|
|
|
1,963 |
|
|
|
3.9 |
% |
Selling, general and administrative |
|
|
131,793 |
|
|
|
123,819 |
|
|
|
(7,974 |
) |
|
|
(6.4 |
%) |
Termination benefits and other related charges |
|
|
|
|
|
|
1,556 |
|
|
|
1,556 |
|
|
|
100.0 |
% |
Depreciation, asset disposal and amortization |
|
|
46,672 |
|
|
|
175,657 |
|
|
|
128,985 |
|
|
|
73.4 |
% |
|
|
|
Total operating expenses |
|
|
333,971 |
|
|
|
464,644 |
|
|
|
130,673 |
|
|
|
28.1 |
% |
Income (loss) from operations |
|
$ |
10,799 |
|
|
$ |
(164,350 |
) |
|
$ |
175,149 |
|
|
|
106.6 |
% |
|
20
Revenue. Service revenue increased by $43.3 million, or 19.0%, for the six months ended June
30, 2007 compared to the six months ended June 30, 2006, primarily as a result of a $19.2 million
increase in access revenue resulting primarily from a larger subscriber base and a higher average
access point, increased revenue of $15.2 million generated from enhanced features offered for a fee
and a $3.1 million increase in miscellaneous revenue attributable to higher late fees charged to
delinquent paying subscribers. The increase in roaming revenue was primarily due to increased
roaming minutes of use period over period. The equipment revenue decrease was primarily due to
decreased revenue on new activations and handset upgrades for existing customers.
Cost of Service. Cost of service for the six months ended June 30, 2007 decreased by $6.1
million, or 5.4%, compared to the same period of 2006. This decrease was largely the result of a
$3.6 million decrease in interconnect costs as a result of decommissioning our TDMA network during
2006, which resulted in network efficiencies and a corresponding reduction of costs, a $0.9 million
decrease in cell site costs due to the sale of our Athens market and a $1.1 million decrease in
toll costs due to a lower rate per minute of use. Cost of service as a percentage of service
revenue was 39.3% and 49.5% for the six months ended June 30, 2007 and 2006, respectively. This
decrease of 10.2% was primarily attributable to increased service revenue and the declines in
interconnect, toll and cell site cost.
Cost of Equipment. Cost of equipment decreased $2.0 million in the six months ended June 30,
2007 compared to the same period of 2006. The decrease was due to lower gross subscriber additions
and the absence of equipment costs incurred during the first six months of 2006 to migrate
subscribers from TDMA to GSM/GPRS technology.
Selling, General and Administrative Expense. Selling, general and administrative expense
increased $8.0 million, or 6.4%, for the six months ended June 30, 2007 compared to the same period
of 2006. The increase was primarily due to a $10.0 million increase in general and administrative
expense (excluding non-cash compensation), which resulted from higher bad debt expense of $6.0
million. The higher bad debt expense was due to a larger subscriber base and rate plan offerings
to more credit-challenged customers. Also contributing to the higher general and administrative
expense was an increase in the number of handset upgrades provided to existing subscribers in
exchange for a contract extension, which resulted in $2.0 million of incremental commission
expense. In addition, advertising spending increased by $0.5 million for the six months ended June
30, 2007, compared to the same period of 2006. This increase was partially offset by a $1.8
million decrease in non-cash compensation expense due to the lower market price of stock grants and
a $0.5 million decrease in commissions as the result of lower gross subscriber additions. General
and administrative expense as a percentage of service revenue was 29.6% and 31.5% for the six
months ended June 30, 2007 and 2006, respectively. This decrease was primarily the result of
greater service revenue for the six months ended June 30, 2007.
Termination Benefit Expense. We did not incur any termination benefit expense for the six
months ended June 30, 2007. We incurred termination benefit expense of $1.6 million for the same
period of 2006 related to the reorganization of our continental U.S. operations.
Depreciation, Asset Disposal and Amortization Expense. Depreciation, asset disposal and
amortization expense decreased by $129.0 million, or 73.4%, for the six months ended June 30, 2007
compared to the same period of 2006. This decrease was primarily due to there being no incremental
depreciation expense on our TDMA equipment, which was fully depreciated as of June 30, 2006 and was
decommissioned during the fourth quarter of 2006.
Puerto Rico and U.S. Virgin Islands segment operations
The table below summarizes the key metrics of our Puerto Rico and U.S. Virgin Islands segment
operations as of and for the six months ended June 30, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the six months ended June 30, |
|
|
2007 |
|
2006 |
|
Change |
|
Change % |
Gross additions |
|
|
74,475 |
|
|
|
70,293 |
|
|
|
4,182 |
|
|
|
5.9 |
% |
Net additions |
|
|
23,364 |
|
|
|
14,260 |
|
|
|
9,104 |
|
|
|
63.8 |
% |
Subscribers (end of period) |
|
|
337,572 |
|
|
|
281,111 |
|
|
|
56,461 |
|
|
|
20.1 |
% |
Monthly subscriber churn |
|
|
2.6 |
% |
|
|
3.4 |
% |
|
|
0.8 |
% |
|
|
23.5 |
% |
Average revenue per user |
|
$ |
54.36 |
|
|
$ |
52.71 |
|
|
$ |
1.65 |
|
|
|
3.1 |
% |
Cost per gross addition |
|
$ |
388 |
|
|
$ |
341 |
|
|
$ |
(47 |
) |
|
|
(13.8 |
%) |
Subscribers. The increase in net subscriber additions of 9,104 was due to a 4,182 increase
in gross subscriber additions and lower subscriber churn. The lower year-over-year subscriber
churn was the result of decreased voluntary deactivations. The increase in total subscribers was
attributable to net subscriber additions resulting from July 1, 2006 through June 30, 2007.
21
Monthly Subscriber Churn. The decrease in monthly subscriber churn stemmed from increased
leverage due to a higher average subscriber base and decreased voluntary subscriber deactivations
resulting from the reduced impact of migrating our remaining Puerto Rico TDMA subscribers to our
GSM/GPRS technology during the first quarter of 2006.
Average Revenue Per User. The ARPU increase was primarily the result of an increase in the
usage of features for additional fees, partially offset by a decrease in average billed access
revenue per subscriber. The increase in average feature revenue was primarily the result of
subscribers increasing their usage of our data offerings, such as SMS and downloadable ring tones.
The decline in average access revenue was the result of adding new subscribers on lower-priced rate
plans.
Cost Per Gross Addition. The CPGA increase of $47, or 13.8%, was primarily due to higher
spending on advertising and promotional costs and higher equipment margin for the six months ended
June 30, 2007 as compared to the same period of last year.
Puerto Rico and U.S. Virgin Islands Results from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, |
(Dollars in thousands) |
|
2007 |
|
2006 |
|
Change $ |
|
Change % |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
|
$ |
110,954 |
|
|
$ |
92,062 |
|
|
$ |
18,892 |
|
|
|
20.5 |
% |
Roaming |
|
|
6,715 |
|
|
|
5,438 |
|
|
|
1,277 |
|
|
|
23.5 |
% |
Equipment |
|
|
12,935 |
|
|
|
10,786 |
|
|
|
2,149 |
|
|
|
19.9 |
% |
|
|
|
Total revenue |
|
|
130,604 |
|
|
|
108,286 |
|
|
|
22,318 |
|
|
|
20.6 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service |
|
|
22,528 |
|
|
|
21,856 |
|
|
|
(672 |
) |
|
|
(3.1 |
%) |
Cost of equipment |
|
|
24,819 |
|
|
|
20,688 |
|
|
|
(4,131 |
) |
|
|
(20.0 |
%) |
Selling, general and administrative |
|
|
48,873 |
|
|
|
48,193 |
|
|
|
(680 |
) |
|
|
(1.4 |
%) |
Depreciation, asset disposal and amortization |
|
|
13,486 |
|
|
|
34,566 |
|
|
|
21,080 |
|
|
|
61.0 |
% |
|
|
|
Total operating expenses |
|
|
109,706 |
|
|
|
125,303 |
|
|
|
15,597 |
|
|
|
12.4 |
% |
Income (loss) from operations |
|
$ |
20,898 |
|
|
$ |
(17,017 |
) |
|
$ |
37,915 |
|
|
|
222.8 |
% |
|
Revenue. Service revenue increased $18.9 million, or 20.5%, for the six months ended June 30,
2007 compared to the same period of 2006 primarily due to an increased number of subscribers, which
resulted in increased access revenue of $10.1 million. In addition, feature revenue increased by
$5.5 million as a result of additional usage of features offered for an additional fee. The
increase in roaming revenue was due to increased minutes of use on our network. Equipment sales
revenue increased due to increased transactions with existing subscribers.
Cost of Service. Cost of service increased by $0.7 million, or 3.1%, for the six months ended
June 30, 2007 compared to the same period of 2006. The increase was the result of increased
incollect costs of $1.0 million due to higher minutes of use and increased handset insurance costs
of $1.9 million resulting from a larger subscriber base, partially offset by reduced interconnect
expenses of $2.5 million due to redesigning our network to more efficiently carry our traffic.
Cost of service as a percentage of service revenue was 20.3% and 23.7% for the six months ended
June 30, 2007 and 2006, respectively. The decrease of 3.4% was primarily attributable to increased
service revenue.
Cost
of Equipment. Cost of equipment increased $4.1 million, or 20.0%, for the six months
ended June 30, 2007 compared to the same period of last year. This increase was primarily due to
higher equipment costs for new activations due to increased gross subscriber additions period over
period and increased transactions with existing subscribers, such as upgrades.
Selling, General and Administrative Expense. Selling, general and administrative expense
increased $0.7 million for the six months ended June 30, 2007 compared to the same period of 2006.
The increase was primarily due to increased advertising and promotional costs of $2.3 million and
higher commission expense of $0.5 million due to higher gross additions. These increases were
partially offset by a $2.3 million decrease in general and administrative expense as a result of
reduced bad debt expense of $2.0 million due to improved collection efforts. General and
administrative expense as a percentage of service revenue was 24.8% and 32.5% for the six months
ended June 30, 2007 and 2006, respectively. The decline of 7.7% was due primarily to increased
service revenue and decreased general and administrative expense as discussed above.
Depreciation, Asset Disposal and Amortization Expense. Depreciation, asset disposal and
amortization expense decreased by $21.1 million, or 61.0%, for the six months ended June 30, 2007
compared to the same period of 2006. This decrease was primarily due to there being no depreciation
expense on our TDMA equipment, which was decommissioned during the first quarter of 2006, and fully
depreciated as of March 31, 2006.
22
Consolidated operations
Interest Expense. Interest expense was $68.0 million, net of capitalized interest of $0.6
million, for the six months ended June 30, 2007. Interest expense was $75.9 million, net of
capitalized interest of $0.7 million, for the six months ended June 30, 2006. The decrease of $7.9
million, or 10.4%, relates primarily to the retirement of our subordinated notes in the principal
amount of $731.6 million during the second quarter of 2007 (see Note 2 of our consolidated
financial statements for more information).
We had a weighted average interest rate of 8.67% for the six months ended June 30, 2007 on our
average obligation for our senior and subordinated debt as well as our senior secured term loan,
compared with an 8.66% weighted average interest rate for the six months ended June 30, 2006.
Loss on Debt-for-Equity Exchange. We incurred a $182.9 million loss for the six months ended
June 30, 2007 as a result of our debt-for-equity exchange (see Note 2 of our consolidated financial
statements for more information). There was no loss for the six months ended June 30, 2006.
Interest and Other Income. Interest and other income was $4.8 million for the six months
ended June 30, 2007, a decrease of $2.6 million, compared to $7.4 million for the six months ended
June 30, 2006. This decrease was primarily due to lower average daily cash and short-term
investment balances for the six months ended June 30, 2007.
Income Tax Expense. Income tax expense was $7.6 million for the six months ended June 30,
2007, a decrease of $0.1 million, compared to $7.7 million for the six months ended June 30, 2006.
Net Loss. Net loss was $221.9 million and $257.6 million for the six months ended June 30,
2007 and 2006, respectively. The net loss decrease of $35.7 million primarily resulted from
improved operational results, offset partially by the loss on our debt-for-equity exchange.
Liquidity and Capital Resources
As of June 30, 2007, we had $55.6 million in cash and cash equivalents compared to $37.7
million as of December 31, 2006. In addition, we had $127.3 million of short-term investments as
of June 30, 2007, compared to $157.6 million as of December 31, 2006. We also held $1.7 million of
restricted cash and short-term investments as of June 30, 2007 and December 31, 2006, which is
pledged as collateral for our surety bonds on our cell site lease agreements. Net working capital
was $188.5 million as of June 30, 2007 and $167.7 million as of December 31, 2006. Cash used in
operating activities was $4.1 million for the six months ended June 30, 2007, a decrease of $38.3
million, compared to $42.4 million for the six months ended June 30, 2006. The decrease in cash
used in operating activities was primarily due to increased revenue of $66.8 million and decreased
cost of service expenses of $5.5 million, partially offset by an increase in cash used in working
capital of $31.5 million and increased selling, general and administrative expense (excluding
non-cash compensation) of $10.5 million. Cash provided by investing activities was $41.0 million
for the six months ended June 30, 2007, a decrease of $22.5 million, or 35.4%, compared to $63.5
million for the six months ended June 30, 2006. The decrease in cash provided by investing
activities was primarily related to a $73.9 million decrease in the net sales of auction rate
securities. This decline was partially offset by a net increase in proceeds from asset sales of
$25.9 million, which related primarily to our tower sales and Athens sale, and a $25.8 million
reduction in capital expenditures. Cash used in financing activities was $19.0 million for the six
months ended June 30, 2007, an increase of $8.1 million, compared to $10.9 million for the six
months ended June 30, 2006. The increase in cash used by financing activities relates primarily to
a $5.2 million increase in deferred transaction costs related to our debt-for-equity transaction
and a $3.2 million increase in the change in our bank overdraft.
In July 2007, we learned that our largest
roaming partner had redirected a portion of the roaming traffic generated by its customers roaming
in areas covered by our network to the networks of other wireless providers. In subsequent discussions with this roaming partner, they estimated that this change would result
in an approximately 25% decline of roaming minutes that we process for its customers compared to
the second quarter of 2007. The number of minutes that we processed for its customers throughout
July 2007 substantiated the estimated decline. We estimate that this change will result in
approximately $5 million less roaming revenue, on a quarterly basis, as compared to the second
quarter of 2007. We expect future quarterly roaming revenue will be comparable to the adjusted
second quarter of 2007 for as long as these roaming minutes are redirected to other wireless
providers. If our roaming partners were to direct additional traffic away from our network,
this could result in a further reduction of our roaming revenue. There can be no assurance that
our largest roaming partner or our other roaming partners will direct roaming traffic from their
customers to our network. We also would expect our cost of services would decline in light of
lower incremental variable costs, which approximate 10% to 15% of the respective revenue, associated
with roaming traffic.
23
Liquidity
The construction of our network and the marketing and distribution of wireless communications
products and services have required, and will continue to require, substantial capital. Capital
outlays have included license acquisition costs, capital expenditures for network construction,
funding of operating cash flow losses and other working capital costs, debt service and financing
fees and expenses. We will have additional capital requirements, which could be substantial, for
future upgrades and advances in new technology. We believe that cash on hand and short-term
investments will be sufficient to meet our projected capital and operational requirements for at
least the next twelve months.
On May 15, 2007, certain SunCom Wireless subordinated note holders exchanged $731.6 million
aggregate principal amount of subordinated notes for approximately 52.0 million shares of Holdings
Class A common stock. See Note 2 to our consolidated financial statements for more information.
After the exchange, our long-term debt, net of cash and short-term investments, decreased from $1.5 billion to $0.8 billion. However, we
are still highly-leveraged and SunCom Wireless inability to pay such debt service could result in
a default on such indebtedness which, unless cured or waived, would have a material adverse effect
on our liquidity and financial position.
Reconciliation of Non-GAAP Financial Measures
We utilize certain financial measures that are not calculated in accordance with GAAP, to
assess our financial performance. A non-GAAP financial measure is defined as a numerical measure
of a companys financial performance that (i) excludes amounts, or is subject to adjustments that
have the effect of excluding amounts, that are included in the comparable measure calculated and
presented in accordance with GAAP in the statement of income or statement of cash flows; or (ii)
includes amounts, or is subject to adjustments that have the effect of including amounts, that are
excluded from the comparable measure so calculated and presented. The discussion of each non-GAAP
financial measure we use in this report appear above under Results of Operations. A brief
description of the calculation of each measure is included where the particular measure is first
discussed. Our method of computation may or may not be comparable to other similarly titled
measures of other companies. The following tables reconcile our non-GAAP financial measures with
our financial statements presented in accordance with GAAP.
Average revenue per user
We believe ARPU, which calculates the average service revenue billed to an individual
subscriber, is a useful measure to evaluate our past billable service revenue and assist in
forecasting our future billable service revenue. ARPU is exclusive of service revenue credits made
to retain existing subscribers and revenue not generated by wireless subscribers. Service revenue
credits are discretionary reductions of the amount billed to a subscriber. We have no contractual
obligation to issue these credits; therefore, ARPU reflects the amount subscribers have
contractually agreed to pay us based on their specific usage pattern. Revenue not generated by
wireless subscribers, which primarily consists of Universal Service Fund program revenue, is
excluded from our calculation of ARPU, as this revenue does not reflect amounts billed to
subscribers. ARPU is calculated by dividing service revenue, exclusive of service revenue credits
made to existing subscribers and revenue not generated by wireless subscribers, by our average
subscriber base for the respective period. For quarterly periods, average subscribers is calculated
by adding subscribers at the beginning of the quarter to subscribers at the end of the quarter and
dividing by two; for year-to-date periods, average subscribers is calculated by adding the average
subscriber amount calculated for the quarterly periods during the period and dividing by the number
of quarters in the period.
Consolidated ARPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
Average revenue per user (ARPU) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(Dollars in thousands, except ARPU) |
|
Service revenue |
|
$ |
195,674 |
|
|
$ |
164,430 |
|
|
$ |
382,109 |
|
|
$ |
319,897 |
|
Subscriber retention credits |
|
|
480 |
|
|
|
189 |
|
|
|
838 |
|
|
|
445 |
|
Revenue not generated by
wireless subscribers |
|
|
(2,394 |
) |
|
|
(2,887 |
) |
|
|
(4,703 |
) |
|
|
(6,062 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted service revenue |
|
$ |
193,760 |
|
|
$ |
161,732 |
|
|
$ |
378,244 |
|
|
$ |
314,280 |
|
Average subscribers |
|
|
1,128,902 |
|
|
|
1,019,279 |
|
|
|
1,116,459 |
|
|
|
1,002,873 |
|
|
ARPU |
|
$ |
57.21 |
|
|
$ |
52.89 |
|
|
$ |
56.46 |
|
|
$ |
52.23 |
|
24
Segment ARPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico and |
|
|
|
|
|
|
|
|
|
Puerto Rico and |
Average revenue per user |
|
Continental U.S. |
|
U.S. Virgin Islands |
|
Continental U.S. |
|
U.S. Virgin Islands |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
(Dollars in thousands, except ARPU) |
Service revenue |
|
$ |
138,195 |
|
|
$ |
117,778 |
|
|
$ |
57,479 |
|
|
$ |
46,652 |
|
|
$ |
271,155 |
|
|
$ |
227,835 |
|
|
$ |
110,954 |
|
|
$ |
92,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber retention
credits |
|
|
429 |
|
|
|
125 |
|
|
|
51 |
|
|
|
64 |
|
|
|
758 |
|
|
|
328 |
|
|
|
80 |
|
|
|
117 |
|
Revenue not generated by
wireless subscribers |
|
|
(133 |
) |
|
|
(131 |
) |
|
|
(2,261 |
) |
|
|
(2,756 |
) |
|
|
(264 |
) |
|
|
(247 |
) |
|
|
(4,439 |
) |
|
|
(5,815 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted service revenue |
|
|
138,491 |
|
|
|
117,772 |
|
|
|
55,269 |
|
|
|
43,960 |
|
|
|
271,649 |
|
|
|
227,916 |
|
|
|
106,595 |
|
|
|
86,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average subscribers |
|
|
796,257 |
|
|
|
742,643 |
|
|
|
332,645 |
|
|
|
276,636 |
|
|
|
789,655 |
|
|
|
729,802 |
|
|
|
326,804 |
|
|
|
273,071 |
|
|
ARPU |
|
$ |
57.98 |
|
|
$ |
52.86 |
|
|
$ |
55.38 |
|
|
$ |
52.97 |
|
|
$ |
57.33 |
|
|
$ |
52.05 |
|
|
$ |
54.36 |
|
|
$ |
52.71 |
|
Cost per gross addition
We believe CPGA is a useful measure that quantifies the costs to acquire a new subscriber.
This measure also provides a gauge to compare our average acquisition costs per new subscriber to
that of other wireless communication providers. CPGA is calculated by dividing the sum of equipment
margin for handsets sold to new subscribers (equipment revenue less cost of equipment, which costs
have historically exceeded the related revenue) and selling expenses, exclusive of non-cash
compensation, related to adding new subscribers by total gross subscriber additions during the
relevant period. Retail customer service expenses are excluded from CPGA, as these costs are
incurred specifically for existing subscribers.
Consolidated CPGA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
Cost per gross addition (CPGA) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(Dollars in thousands, except CPGA) |
|
Selling expenses |
|
$ |
36,534 |
|
|
$ |
33,108 |
|
|
$ |
72,829 |
|
|
$ |
70,304 |
|
Less: non-cash compensation included in selling expenses |
|
|
(66 |
) |
|
|
(105 |
) |
|
|
(142 |
) |
|
|
(369 |
) |
Plus: termination benefits allocated to selling expense |
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
104 |
|
Total cost of equipment transactions with new subscribers |
|
|
17,402 |
|
|
|
15,156 |
|
|
|
35,631 |
|
|
|
34,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CPGA operating expenses |
|
$ |
53,870 |
|
|
$ |
48,207 |
|
|
$ |
108,318 |
|
|
$ |
104,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service |
|
$ |
66,262 |
|
|
$ |
66,717 |
|
|
$ |
129,194 |
|
|
$ |
134,665 |
|
Non-cash compensation included in selling expenses |
|
|
66 |
|
|
|
105 |
|
|
|
142 |
|
|
|
369 |
|
Total cost of equipment transactions with existing
subscribers |
|
|
17,390 |
|
|
|
17,114 |
|
|
|
38,028 |
|
|
|
36,594 |
|
General and administrative expense |
|
|
55,092 |
|
|
|
50,277 |
|
|
|
107,837 |
|
|
|
101,708 |
|
Termination benefits other than selling expense portion |
|
|
|
|
|
|
610 |
|
|
|
|
|
|
|
1,452 |
|
Depreciation and asset disposal |
|
|
20,935 |
|
|
|
84,531 |
|
|
|
45,081 |
|
|
|
188,030 |
|
Amortization |
|
|
7,243 |
|
|
|
10,689 |
|
|
|
15,077 |
|
|
|
22,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
Cost per gross addition (CPGA) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(Dollars in thousands, except CPGA) |
|
Total operating expenses |
|
$ |
220,858 |
|
|
$ |
278,250 |
|
|
$ |
443,677 |
|
|
$ |
589,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CPGA operating expenses (from above) |
|
$ |
53,870 |
|
|
$ |
48,207 |
|
|
$ |
108,318 |
|
|
$ |
104,936 |
|
Equipment revenue transactions with new subscribers |
|
|
(9,839 |
) |
|
|
(10,568 |
) |
|
|
(20,931 |
) |
|
|
(22,879 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CPGA costs, net |
|
$ |
44,031 |
|
|
$ |
37,639 |
|
|
$ |
87,387 |
|
|
$ |
82,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
95,846 |
|
|
|
92,131 |
|
|
|
203,697 |
|
|
|
208,446 |
|
CPGA |
|
$ |
459 |
|
|
$ |
409 |
|
|
$ |
429 |
|
|
$ |
394 |
|
Segment CPGA for the Three Months Ended June 30, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico and U.S. |
Cost per gross addition (CPGA) |
|
Continental U.S. |
|
Virgin Islands |
|
|
Three Months Ended June 30, |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
(Dollars in thousands, except CPGA) |
Selling expenses |
|
$ |
26,031 |
|
|
$ |
24,045 |
|
|
$ |
10,503 |
|
|
$ |
9,063 |
|
Less: non-cash compensation included in selling expenses |
|
|
(22 |
) |
|
|
(86 |
) |
|
|
(44 |
) |
|
|
(19 |
) |
Plus: termination benefits allocated to selling expense |
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
|
|
Total cost of equipment transactions with new subscribers |
|
|
9,726 |
|
|
|
8,907 |
|
|
|
7,676 |
|
|
|
6,249 |
|
|
|
|
|
|
CPGA operating expenses |
|
|
35,735 |
|
|
|
32,914 |
|
|
|
18,135 |
|
|
|
15,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service |
|
|
54,587 |
|
|
|
55,879 |
|
|
|
11,675 |
|
|
|
10,838 |
|
Non-cash compensation included in selling expenses |
|
|
22 |
|
|
|
86 |
|
|
|
44 |
|
|
|
19 |
|
Total cost of equipment transactions with existing
subscribers |
|
|
12,714 |
|
|
|
13,369 |
|
|
|
4,676 |
|
|
|
3,745 |
|
General and administrative expense |
|
|
41,467 |
|
|
|
36,070 |
|
|
|
13,625 |
|
|
|
14,207 |
|
Termination benefits other than selling expense portion |
|
|
|
|
|
|
610 |
|
|
|
|
|
|
|
|
|
Depreciation and asset disposal |
|
|
18,423 |
|
|
|
82,376 |
|
|
|
2,512 |
|
|
|
2,155 |
|
Amortization |
|
|
3,206 |
|
|
|
4,805 |
|
|
|
4,037 |
|
|
|
5,884 |
|
|
|
|
|
|
Total operating expenses |
|
|
166,154 |
|
|
|
226,109 |
|
|
|
54,704 |
|
|
|
52,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CPGA operating expenses (from above) |
|
|
35,735 |
|
|
|
32,914 |
|
|
|
18,135 |
|
|
|
15,293 |
|
Equipment revenue transactions with new subscribers |
|
|
(6,138 |
) |
|
|
(6,845 |
) |
|
|
(3,701 |
) |
|
|
(3,723 |
) |
|
|
|
|
|
CPGA costs, net |
|
$ |
29,597 |
|
|
$ |
26,069 |
|
|
$ |
14,434 |
|
|
$ |
11,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
61,116 |
|
|
|
59,193 |
|
|
|
34,730 |
|
|
|
32,938 |
|
CPGA |
|
$ |
484 |
|
|
$ |
440 |
|
|
$ |
416 |
|
|
$ |
351 |
|
Segment CPGA for the Six Months Ended June 30, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico and U.S. |
Cost per gross addition (CPGA) |
|
Continental U.S. |
|
Virgin Islands |
|
|
Six Months Ended June 30, |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
(Dollars in thousands, except CPGA) |
Selling expenses |
|
$ |
51,490 |
|
|
$ |
51,988 |
|
|
$ |
21,339 |
|
|
$ |
18,316 |
|
Less: non-cash compensation included in selling expenses |
|
|
(55 |
) |
|
|
(333 |
) |
|
|
(87 |
) |
|
|
(36 |
) |
Plus: termination benefits allocated to selling expense |
|
|
|
|
|
|
104 |
|
|
|
|
|
|
|
|
|
Total cost of equipment transactions with new subscribers |
|
|
20,468 |
|
|
|
22,043 |
|
|
|
15,163 |
|
|
|
12,854 |
|
|
|
|
|
|
CPGA operating expenses |
|
|
71,903 |
|
|
|
73,802 |
|
|
|
36,415 |
|
|
|
31,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service |
|
|
106,666 |
|
|
|
112,809 |
|
|
|
22,528 |
|
|
|
21,856 |
|
Non-cash compensation included in selling expenses |
|
|
55 |
|
|
|
333 |
|
|
|
87 |
|
|
|
36 |
|
Total cost of equipment transactions with existing
subscribers |
|
|
28,372 |
|
|
|
28,760 |
|
|
|
9,656 |
|
|
|
7,834 |
|
General and administrative expense |
|
|
80,303 |
|
|
|
71,831 |
|
|
|
27,534 |
|
|
|
29,877 |
|
Termination benefits other than selling expense portion |
|
|
|
|
|
|
1,452 |
|
|
|
|
|
|
|
|
|
Depreciation and asset disposal |
|
|
40,068 |
|
|
|
165,814 |
|
|
|
5,013 |
|
|
|
22,216 |
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico and U.S. |
Cost per gross addition (CPGA) |
|
Continental U.S. |
|
Virgin Islands |
|
|
Six Months Ended June 30, |
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
(Dollars in thousands, except CPGA) |
Amortization |
|
|
6,604 |
|
|
|
9,843 |
|
|
|
8,473 |
|
|
|
12,350 |
|
|
|
|
|
|
Total operating expenses |
|
|
333,971 |
|
|
|
464,644 |
|
|
|
109,706 |
|
|
|
125,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CPGA operating expenses (from above) |
|
|
71,903 |
|
|
|
73,802 |
|
|
|
36,415 |
|
|
|
31,134 |
|
Equipment revenue transactions with new subscribers |
|
|
(13,424 |
) |
|
|
(15,700 |
) |
|
|
(7,507 |
) |
|
|
(7,179 |
) |
|
|
|
|
|
CPGA costs, net |
|
$ |
58,479 |
|
|
$ |
58,102 |
|
|
$ |
28,908 |
|
|
$ |
23,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
129,222 |
|
|
|
138,153 |
|
|
|
74,475 |
|
|
|
70,293 |
|
CPGA |
|
$ |
453 |
|
|
$ |
421 |
|
|
$ |
388 |
|
|
$ |
341 |
|
Inflation
We do not believe that inflation has had a material impact on our operations.
27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are highly leveraged and, as a result, our cash flows and earnings are exposed to
fluctuations in interest rates. SunCom Wireless debt obligations are U.S. dollar denominated.
Our market risk, therefore, is the potential loss arising from adverse changes in interest rates.
As of June 30, 2007, our debt can be categorized as follows (in thousands):
|
|
|
|
|
Fixed interest rates: |
|
|
|
|
Senior notes |
|
$ |
714,977 |
|
Senior subordinated notes |
|
$ |
12,205 |
|
|
|
|
|
|
Subject to interest rate fluctuations: |
|
|
|
|
Senior secured term loan |
|
$ |
243,750 |
|
Our interest rate risk management program focuses on minimizing exposure to interest rate
movements, setting an optimal mixture of floating and fixed rate debt and minimizing liquidity
risk.
Our cash and cash equivalents consist of short-term assets having initial maturities of three
months or less, and our investments consist of auction rate securities with maturities of one year
or less. While these investments are subject to a degree of interest rate risk, this risk is not
considered to be material relative to our overall investment income position.
If interest rates rise over the remaining term of the senior secured term loan at the June 30,
2007 outstanding principal balance, we would realize increased annual interest expense of
approximately $1.2 million for each 50 basis point increase in rates. If interest rates decline
over the remaining term of the senior secured term loan, we would realize decreased annual interest
expense of approximately $1.2 million for each 50 basis point decrease in rates.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Controls and Procedures.
We have carried out an evaluation under the supervision and with the participation of our
management, including our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures. As a result
of this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as
of June 30, 2007, SunComs disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective to ensure that
information required to be disclosed by SunCom in the reports filed or submitted by it under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commissions rules and forms and include
controls and procedures designed to ensure that information required to be disclosed by SunCom in
such reports is accumulated and communicated to our management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
Changes in Internal Controls.
There were no changes in SunComs internal controls over financial reporting that occurred
during the six months ended June 30, 2007 that have materially affected, or are reasonably likely
to materially affect, SunComs internal control over financial reporting.
28
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
We recently reviewed and updated our risk factor disclosure in connection with preparing our
registration statement on Form S-3 (File No. 333-143497). The following risk factors supersede
and, to the extent inconsistent with, replace the risks factors disclosed in our Form 10-K for the
year ended December 31, 2006.
Our business faces many risks. The risks described below may not be the only risks we face.
Additional risks that we do not yet know of, or that we currently think are immaterial, may also
impair our business operations or financial results. If any of the events or circumstances
described in the following risks actually occurs, our business, financial condition or results of
operations could suffer and the trading price of our Class A common stock or SunCom Wireless notes
could decline.
Our stock price may be adversely affected if our previously announced exploration of strategic
alternatives does not result in a transaction or results in a transaction different from what the
market may be expecting. In addition, our exploration of strategic alternatives may have an
adverse impact on our business operations and, therefore, on our operating results or financial
outlook.
As previously disclosed, in connection with the exchange transaction consummated on May 15,
2007, we agreed to explore strategic alternatives, including a possible sale of the company. We
have engaged Goldman Sachs & Co. as our financial advisor to explore strategic alternatives and
assist us with a process to sell the company. There are various risks and uncertainties that this
process may cause, such as:
|
§ |
|
distracting management from the day-to-day operations of the business, which may
adversely affect our operations; |
|
|
§ |
|
consuming time and resources from our normal business operations, which may result in
missing or not executing on near or long-term business opportunities; and |
|
|
§ |
|
perceived uncertainties as to our future direction, which may result in increased
difficulties and expense in recruiting and retaining employees, particularly senior
management, and may impact our relationships with customers and vendors. |
In addition, if our exploration of strategic alternatives and sale process do not result in a
transaction or, alternatively, results in a transaction different than what the market expects, it
is likely that the share price of our Class A common stock will be adversely affected. There can
be no assurance that any transaction or return to stockholders will result from our exploration of
strategic alternatives.
Certain of our stockholders invest in other wireless communications services companies, and
conflicts of interest may arise from these investments and from other directorships held by
Holdings directors that may not be resolved in our favor.
Our principal stockholders, or their affiliates, may have investments in wireless
communications services companies other than us. These institutional investors may in the future
invest in other entities that compete with us. In addition, certain of Holdings directors serve as
directors of other communications services companies. As a result, these directors may be subject
to conflicts of interest during their tenure as directors of Holdings. Because of these potential
conflicts, these directors may be required to disclose periodically financial or business
opportunities to us and to the other companies to which they owe fiduciary duties.
Roaming revenue represents a significant portion of our total revenues. The level of roaming
revenue is not guaranteed and is subject to fluctuations based on factors that are beyond our
control, including decisions made by our roaming partners. Decreased roaming minutes of use from
our roaming partners customers will negatively impact our results of operations and cash flows.
For the first six months of 2007 and in 2006, 2005 and 2004, approximately 9.9%, 10.1%, 12.5%
and 17.8%, respectively, of our total revenues were derived from roaming charges incurred by other
wireless providers for use of our network by their customers who had traveled within our coverage
area. A significant portion of that revenue was derived from T-Mobiles and AT&T Mobilitys
customers.
In July 2007, we learned that our largest roaming partner had redirected a portion of the roaming traffic generated by its customers roaming in areas covered by our network to the networks of other wireless providers. In subsequent discussions with this roaming partner, they estimated that this change would result in an approximately 25% decline of roaming minutes that we process
for its customers compared to the second quarter of 2007. The number of minutes that we processed
for its customers throughout July 2007 substantiated the estimated decline. We estimate that this
change will result in approximately $5 million less roaming revenue, on a quarterly basis, as
compared to the second quarter of 2007. We expect future quarterly roaming revenue will be
comparable to the adjusted second quarter of 2007 for as long as these roaming minutes are
redirected to other wireless providers. If our roaming partners were to direct additional traffic
away from our network, this could result in a further reduction of our roaming revenue. There can
be no assurance that our largest roaming partner or our other roaming partners will direct roaming
traffic from their customers to our network. We also would expect our cost of services would
decline in light of lower incremental variable costs, which approximate 10% to 15% of the
respective revenue, associated with roaming traffic.
29
We have substantial indebtedness, and servicing our indebtedness could reduce funds available to
grow our business.
We are highly leveraged. We have total consolidated long-term obligations of approximately
$1.0 billion, represented by a senior secured term loan, a series of senior notes and the remaining
outstanding subordinated notes. Our high level of indebtedness could interfere with our ability to
grow. For example, it could:
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§ |
|
increase our vulnerability to general adverse economic and industry conditions; |
|
|
§ |
|
limit our ability to obtain additional financing; |
|
|
§ |
|
require the dedication of a substantial portion of our cash flow from operations to the
payment of principal of, and interest on, our indebtedness; |
|
|
§ |
|
limit our flexibility in planning for, or reacting to, changes in our business and the industry; and |
|
|
§ |
|
place us at a competitive disadvantage relative to less leveraged competitors. |
Our ability to generate sufficient cash flow from operations to pay the principal of, and
interest on, our indebtedness is uncertain. In particular, if we do not meet our anticipated
revenue growth and operating expense targets, our future debt service obligations could exceed cash
available to us. Our inability to pay debt service could result in a default on our indebtedness
which, unless cured or waived, would have a material adverse effect on our liquidity and financial
position. Further, we may not be able to refinance any of our indebtedness on commercially
reasonable terms or at all.
The share price of our Class A common stock may be volatile and could decline substantially.
The trading price of our Class A common stock has been volatile and is likely to continue to
be volatile. Our stock price could be subject to wide fluctuations in response to a variety of
issues, including broad market factors that may have a material adverse impact on our stock price,
regardless of actual performance. These factors include the following:
|
|
|
periodic variations in the actual or anticipated financial results of our business or that of our competitors; |
|
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|
|
downward revisions in securities analysts estimates of our future operating results or of the future
operating results of our competitors; |
|
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|
|
material announcements by us or our competitors; |
|
|
|
|
public sales of a substantial number of shares of our common stock; and |
|
|
|
|
adverse changes in general market conditions or economic trends or in conditions or trends in the markets in
which we operate. |
There may be an adverse effect on the market price of shares of our Class A common stock as a
result of shares being available for sale in the future.
As of June 30, 2007,
we had an aggregate of 59,228,826 shares of Class A common stock outstanding. Of our total
outstanding shares, 52,599,116 of such shares, or approximately 88.8%, are beneficially owned by
the selling stockholders named in our prospectus, dated June 19, 2007, which forms a part of our
registration statement on Form S-3 (File No. 333-143497). Accordingly, these shares of Class A
common stock comprise a substantial portion of our equity capitalization.
30
If the selling stockholders sell a substantial amount of our shares of Class A common stock,
the market price of our Class A common stock may decline, in some instances substantially. These
sales and concentration of equity ownership also may make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem appropriate.
We have the ability to issue additional equity securities, which would lead to further dilution of
our issued and outstanding Class A common stock.
The issuance of additional equity securities or securities convertible into equity securities
would result in dilution of then-existing stockholders equity interests in us. Holdings board of
directors has the authority to issue, without vote or action of stockholders, up to 70,000,000
shares of preferred stock in one or more series, and has the ability to fix the rights,
preferences, privileges and restrictions of any such series. Any such series of preferred stock
could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences or other rights superior to the rights of holders of our common
stock. If we issue convertible preferred stock, a subsequent conversion may dilute the current
common stockholders interest. Our board of directors has no present intention of issuing any such
preferred stock, but reserves the right to do so in the future. In addition, we may issue up to
approximately 94,697 shares of Class A common stock that are authorized but not issued under our
equity incentive plans.
We do not intend to pay cash dividends. As a result, stockholders will benefit from an investment
in our common stock only if it appreciates in value.
We have never paid a cash dividend on our Class A common stock, and we do not plan to pay any
cash dividends on our Class A common stock in the foreseeable future. We currently intend to retain
any future earnings to finance our operations. As a result, the success of an investment in our
Class A common stock will depend upon any future appreciation in its value. We cannot guarantee
that our Class A common stock will appreciate in value or even maintain the price at which
stockholders have purchased their shares.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
SunCom Wireless Holdings, Inc. held a special meeting of stockholders on April 20, 2007. At
this meeting, stockholders were asked to approve three proposals, and all three proposals were
approved by a majority of all shares outstanding as of the record date, although approval of only a
majority of the stockholders present and entitled to vote was necessary to approve the third
proposal. There were 71,252,459 shares outstanding as of the record date for the special meeting.
The following is a brief description of each proposal and a summary of the vote tabulation for each
proposal.
Proposal I Approval of the exchange of newly-issued shares of Holdings Class A
common stock for previously-outstanding subordinated notes of SunCom Wireless Inc. pursuant to an
Exchange Agreement, dated as of January 31, 2007, by and among Holdings, SunCom Wireless, Inc.,
SunCom Investment Company LLC and certain holders of the subordinated notes.
|
|
|
|
|
|
|
For |
|
Against |
|
Abstentions |
|
Broker Non-Votes |
43,194,922
|
|
3,439,499
|
|
315,083
|
|
0 |
Proposal II Adoption of an Agreement and Plan of Merger, dated as of January 31,
2007, between Holdings and a wholly-owned subsidiary of Holdings formed solely for the purpose of
effecting the merger. The primary purpose of the merger was to implement a 1-for-10 reverse stock
split immediately prior to the exchange transaction to ensure sufficient authorized shares of Class
A common stock for the exchange.
|
|
|
|
|
|
|
For |
|
Against |
|
Abstentions |
|
Broker Non-Votes |
42,568,009
|
|
3,450,680
|
|
930,816
|
|
0 |
31
Proposal III Authorization to adjourn the special meeting to a later date to solicit
additional proxies if there were insufficient votes to approve the exchange and adopt the Agreement
and Plan of Merger as contemplated by proposals I and II above.
|
|
|
|
|
|
|
For |
|
Against |
|
Abstentions |
|
Broker Non-Votes |
41,954,973
|
|
4,063,356
|
|
931,176
|
|
0 |
As previously reported, the merger and exchange transaction closed on May 15, 2007. Pursuant
to the terms of the exchange agreement, as amended, the Holdings board of directors was expanded
to 10 members. Michael E. Kalogris and Scott I. Anderson remain on the Holdings board of directors,
and on May 15, 2007, six new directors were appointed in accordance with the terms of the Exchange
Agreement, as amended. For more information about the closing and the six new directors appointed
at closing, see Holdings current report on Form 8-K filed on May 21, 2007.
Two of the new directors, Karim Samii and Joseph Thornton, have waived their right to receive
any director fees in connection with their participation on the Holdings board of directors, but
they have retained their right to be reimbursed for expenses incurred in connection with such
participation.
As previously disclosed, on May 30, 2007, the Holdings board of directors appointed two
additional directors to fill the two remaining vacancies. Following are updated biographies for
these two directors:
Jerry V. Elliott, age 48, served as the chief executive officer, president and a director of
Global Signal Inc., a publicly traded real estate investment trust that rents tower space to
wireless carriers, from April 2006 until it was acquired by Crown Castle International in
January 2007. From December 2005 to April 2006, Mr. Elliott served as president of Citizens
Communications Company, a provider of communication services to rural areas and small to
medium-sized towns. He served as chief financial officer of Citizens Communications from
February 2002 to November 2005 and as a director from September 2004 until April 2006. Prior to
holding these positions, Mr. Elliott was a managing director for media and communications in
Morgan Stanleys investment banking group, a partner at the law firm of Shearman & Sterling LLP
and an accountant at Arthur Andersen LLP. Mr. Elliott has been a director of Idearc Inc. since
December 2006. Mr. Elliott received a B.B.A. in Accounting and Finance and a J.D. from Baylor
University and an L.L.M. in Taxation from New York University School of Law.
Gustavo A. Prilick, age 53, has been a partner at the South America Fund, a private equity
fund, since July 2003. From November 1996 to May 2003, Mr. Prilick served as the chief
operating officer of Millicom International Cellular S.A., an international cellular telephony
services provider. Prior to holding these positions, Mr. Prilick served as chief executive
officer of CTI Móvil, a GTE-led wireless communications venture in Argentina, and in management
positions with Oracle Corporation, Altos Computer Systems, Hewlett-Packard and Apple Computer.
Mr. Prilick received his MBA at Stanford University and a degree in electronic engineering at
the University of Buenos Aires.
Also on May 30, 2007, the Holdings board of directors named: Scott Anderson, Jerry Elliott
and James Volk as the audit committee; G. Edward Evans, Patrick Daugherty and Karim Samii as the
compensation committee; and Gustavo Prilick, Niles Chura and Joseph Thornton as the
nominating/corporate governance committee. The members of the audit committee meet the financial
literacy requirement and additional independence standards applicable to audit committee members
under NYSE and SEC rules.
The board of directors has affirmatively determined that each of Messrs. Anderson, Chura,
Daugherty, Elliott, Evans, Prilick, Samii, Thornton and Volk have no relationship with Holdings
that would interfere in the exercise of such directors independence from Holdings and its
management and meets all other criteria of independence under the listing standards of the NYSE.
In accordance with the director independence standards of the NYSE, the board of directors examined
relevant facts and circumstances of transactions and relationships between Holdings or its
management and directors or their affiliates and among directors and their affiliates, including:
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§ |
|
that Mr. Anderson is a director of, and Messrs. Elliott and Evans are former employees
of, certain companies that transact current business with Holdings; |
|
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§ |
|
that, as a result of the exchange transaction, former holders of SunCom Wireless
subordinated notes are now significant stockholders in Holdings and appointed eight of the
10 directors on the board of directors; |
|
|
§ |
|
that Messrs. Chura, Daugherty, Samii and Thornton are employees of investment advisers
to funds that are now significant stockholders of Holdings, that such funds were paid
substantial interest payments in respect of their holdings |
32
|
|
|
of SunCom Wireless subordinated notes and that such interest payments to the funds would not
continue because the funds had exchanged their subordinated notes in the exchange
transaction; and |
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|
§ |
|
that most directors own shares of Holdings Class A common stock. |
The board of directors did not consider any of the foregoing to be material relationships that
would impair a directors independence. Further, the board of directors generally believes that
stock ownership tends to further align a directors interests with those of Holdings other
stockholders.
On July 10, 2007, Holdings submitted an Interim Affirmation to the NYSE certifying that the
Holdings board of directors had affirmatively determined that a majority of the board of directors
consists of independent directors under the NYSE corporate governance listing standards and that
each of the audit committee, compensation committee and nominating/corporate governance committee
is comprised of independent directors. Additionally, as exhibits to Holdings annual report on Form
10-K for the year ended December 31, 2006, Holdings filed the certifications of its chief executive
officer and chief financial officer required under the Sarbanes-Oxley Act of 2002 regarding the
quality of Holdings' public disclosure.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
|
|
|
Exhibit |
|
|
Number |
|
Description |
2.1
|
|
Exchange Agreement, dated as of January 31, 2007, among SunCom Wireless Holdings,
Inc., SunCom Wireless Investment Co., LLC, SunCom Wireless, Inc. and the holders of the
93/8% Senior Subordinated Notes due 2011 and 83/4% Senior Subordinated Notes due 2011 of
SunCom Wireless, Inc. party thereto (incorporated by reference to Exhibit 2.1 to the Form
8-K of SunCom Wireless Holdings, Inc. filed January 31, 2007). |
|
|
|
2.2
|
|
Amendment to Exchange Agreement (incorporated by reference to Exhibit 2.1 to the
Form 8-K of SunCom Wireless Holdings, Inc. filed May 21, 2007). |
|
|
|
2.3
|
|
Agreement and Plan of Merger, dated as of January 31, 2007, by and between SunCom
Wireless Holdings, Inc. and SunCom Wireless Merger Corp. (incorporated by reference to
Exhibit 2.2 to the Form 8-K of SunCom Wireless Holdings, Inc. filed January 31, 2007). |
|
|
|
3.1
|
|
Second Restated Certificate of Incorporation of Triton PCS Holdings, Inc.
(incorporated by reference to Exhibit 3.1 to the 8-A/A of SunCom Wireless Holdings Inc.
filed May 23, 2007). |
|
|
|
3.2
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|
Second Amended and Restated Bylaws of Triton PCS Holdings, Inc. (incorporated by
reference to Exhibit 3.6 to the Form 10-Q of Triton PCS Holdings, Inc. for the quarter
ended September 30, 1999). |
|
|
|
4.1
|
|
Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit
4.1 to the Form 8-A/A SunCom Wireless Holdings, Inc. filed May 23, 2007). |
|
|
|
4.2
|
|
Indenture, dated as of January 19, 2001, among Triton PCS, Inc., the Guarantors
party thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit
4.5 to Amendment No. 2 to the Form S-3 Registration Statement of Triton PCS Holdings,
Inc., File No. 333-49974). |
|
|
|
4.3
|
|
Supplemental Indenture, dated as of November 18, 2004, by and among Triton PCS,
Inc., Affiliate License Co., L.L.C. and The Bank of New York, to the Indenture, dated as
of January 19, 2001, among Triton PCS, Inc., the Guarantors party thereto and The Bank of
New York, as trustee (incorporated by reference to Exhibit 4.3 to the Form 10-K of Triton
PCS Holdings, Inc. for the year ended December 31, 2004). |
|
|
|
4.4
|
|
Supplemental Indenture, dated as of January 27, 2005, by and among Triton PCS,
Inc., AWS Network Newco, LLC, SunCom Wireless International, LLC, SunCom Wireless Puerto
Rico Operating Company, LLC, Triton Network Newco, LLC and The Bank of New York to the
Indenture, dated as of January 19, 2001, among Triton PCS, Inc., the Guarantors party
thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.4 to
the Form 10-K of Triton PCS Holdings, Inc. for the year ended December 31, 2004). |
33
|
|
|
Exhibit |
|
|
Number |
|
Description |
4.5
|
|
Supplemental Indenture, dated as of May 15, 2007, by and among SunCom Wireless,
Inc., SunComWireless Management Company, Inc., Triton PCS Finance Company, Inc., Triton
PCS Holdings Company LLC, SunCom Wireless Property Company LLC, SunCom Wireless Operating
Company LLC, Triton PCS License Company LLC, Triton PCS Investment Company LLC, Affiliate
License Co., LLC, AWS License NewCo, LLC, SunCom Wireless International LLC, SunCom
Wireless Puerto Rico Operating Company LLC, Triton Network Newco LLC and The Bank of New
York, as trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K of SunCom
Wireless Holdings, Inc. filed May 21, 2007). |
|
|
|
4.6
|
|
Indenture, dated as of November 14, 2001, among Triton PCS, Inc., the Guarantors
thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to
the Form 8-K/A of Triton PCS Holdings, Inc. filed November 15, 2001). |
|
|
|
4.7
|
|
Supplemental Indenture, dated as of November 18, 2004, by and among Triton PCS,
Inc., Affiliate License Co., L.L.C. and The Bank of New York to the Indenture, dated as
of November 14, 2001, among Triton PCS, Inc., the Guarantors thereto and The Bank of New
York, as trustee (incorporated by reference to Exhibit 4.6 to the Form 10-K of Triton PCS
Holdings, Inc. for the year ended December 31, 2004). |
|
|
|
4.8
|
|
Supplemental Indenture, dated as of January 27, 2005, by and among Triton PCS,
Inc., AWS Network Newco, LLC, SunCom Wireless International, LLC, SunCom Wireless Puerto
Rico Operating Company, LLC, Triton Network Newco, LLC and The Bank of New York to the
Indenture, dated as of November 14, 2001, among Triton PCS, Inc., the Guarantors thereto
and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.7 to the
Form 10-K of Triton PCS Holdings, Inc. for the year ended December 31, 2004). |
|
|
|
4.9
|
|
Supplemental Indenture dated as of May 15, 2007, by and among SunCom Wireless,
Inc., SunCom Wireless Management Company, Inc., Triton PCS Finance Company, Inc., Triton
PCS Holdings Company LLC, SunCom Wireless Property Company LLC, Triton PCS Equipment
Company LLC, SunCom Wireless Operating Company LLC, Triton PCS License Company LLC,
Triton PCS Investment Company LLC, Affiliate License Co., LLC, AWS License NewCo, LLC,
SunCom Wireless International LLC, SunCom Wireless Puerto Rico Operating Company LLC,
Triton Network NewCo LLC and The Bank of New York, as trustee (incorporated by reference
to Exhibit 4.2 to the Form 8-K filed May 21, 2007). |
|
|
|
4.10
|
|
Indenture, dated as of June 13, 2003, among Triton PCS, Inc., the Guarantors
thereto and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to
the Form 8-K/A of Triton PCS Holdings, Inc. filed June 16, 2003). |
|
|
|
4.11
|
|
Supplemental Indenture, dated as of November 18, 2004, by and among Triton PCS,
Inc., Affiliate License Co., L.L.C. and The Bank of New York, to the Indenture, dated as
of June 13, 2003, among Triton PCS, Inc., the Guarantors thereto and The Bank of New
York, as trustee (incorporated by reference to Exhibit 4.9 to the Form 10-K of Triton PCS
Holdings, Inc. for the year ended December 31, 2004). |
|
|
|
4.12
|
|
Supplemental Indenture, dated as of January 27, 2005, by and among Triton PCS,
Inc., AWS Network Newco, LLC, SunCom Wireless International, LLC, SunCom Wireless Puerto
Rico Operating Company, LLC, Triton Network Newco, LLC and The Bank of New York, to the
Indenture, dated as of June 13, 2003, among Triton PCS, Inc., the Guarantors thereto and
The Bank of New York, as trustee (incorporated by reference to Exhibit 4.10 to the Form
10-K of Triton PCS Holdings, Inc. for the year ended December 31, 2004). |
|
|
|
10.1
|
|
Registration Rights Agreement, dated as of May 15, 2007 (incorporated by reference
to Exhibit 10.1 to the Form 8-K of SunCom Wireless Holdings, Inc. filed May 21, 2007). |
|
|
|
10.2
|
|
Amendment to Employment Agreement, dated as of April 27, 2007, by and among SunCom
Wireless Management Company, Inc. and Raul Burgos (incorporated by reference to Exhibit
10.1 to the Form 8-K of SunCom Wireless Holdings, Inc. filed May 2, 2007).* |
|
|
|
10.3
|
|
Letter Agreement, dated May 10, 2007, between SunCom Wireless Holdings, Inc. and
Mathias DeVito (incorporated by reference to Exhibit 10.2 to the Form 8-K of SunCom
Wireless Holdings, Inc. filed May 21, 2007).* |
|
|
|
10.4
|
|
Letter Agreement, dated May 10, 2007, between SunCom Wireless Holdings, Inc. and
Arnold Sheiffer (incorporated by reference to Exhibit 10.3 to the Form 8-K of SunCom
Wireless Holdings, Inc. filed May 21, 2007).* |
34
|
|
|
Exhibit |
|
|
Number |
|
Description |
10.5
|
|
Letter Agreement Waiver, dated May 14, 2007, by and among SunCom Wireless Holdings
Inc., Karim Samii and Joseph Thorton.* |
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended. |
|
|
|
31.3
|
|
Certification of Vice President of Accounting and Controller pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended. |
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended. |
|
|
|
* |
|
Management contract or compensatory plan. |
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this amended report to be signed on its behalf by the undersigned thereunto duly
authorized.
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|
|
SUNCOM WIRELESS HOLDINGS, INC.
|
|
Date: July 31, 2007 |
By: |
/s/ Michael E. Kalogris
|
|
|
|
Michael E. Kalogris |
|
|
|
Chief Executive Officer
(principal executive officer) |
|
|
|
|
|
|
|
|
|
|
Date: July 31, 2007 |
By: |
/s/ Eric Haskell
|
|
|
|
Eric Haskell |
|
|
|
Chief Financial Officer
(principal financial officer) |
|