Edgar Filing: METROPCS COMMUNICATIONS INC

Amortized
Cost

Aggregate
Fair
Value

Less than one year

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number

1-33409

METROPCS COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)


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

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

(214) 570-5800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

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

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


Large accelerated filer þ		Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

On July 31, 2009, there were 352,148,874 shares of the registrant’s common stock, $0.0001 par value, outstanding.

METROPCS COMMUNICATIONS, INC.

Quarterly Report on Form 10-Q

Table of Contents


		Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008		1
Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2009 and 2008		2
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008		3
Notes to Condensed Consolidated Interim Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Item 3. Quantitative and Qualitative Disclosures About Market Risk		55
Item 4. Controls and Procedures		56

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		57
Item 1A. Risk Factors		57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		*
Item 3. Defaults Upon Senior Securities		*
Item 4. Submission of Matters to a Vote of Security Holders		59
Item 5. Other Information		*
Item 6. Exhibits		59
SIGNATURES		60

*	No reportable information under this item.

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements.

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(Unaudited)


	June 30, 2009			December 31, 2008
CURRENT ASSETS:
Cash and cash equivalents	$	869,790		$	697,948
Short-term investments		224,853			3
Inventories, net		99,877			155,955
Accounts receivable (net of allowance for uncollectible accounts of $3,005 and $4,106 at June 30, 2009 and December 31, 2008, respectively)		54,159			34,666
Prepaid charges		61,139			56,347
Deferred charges		48,920			49,716
Deferred tax assets		1,833			1,832
Other current assets		33,790			47,417

Total current assets		1,394,361			1,043,884

Property and equipment, net		3,038,984			2,847,751
Long-term investments		4,422			5,986
FCC licenses		2,447,269			2,406,596
Microwave relocation costs		18,487			16,478
Other assets		107,016			101,453

Total assets	$	7,010,539		$	6,422,148


CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	434,977		$	568,432
Current maturities of long-term debt		18,309			17,009
Deferred revenue		171,690			151,779
Other current liabilities		4,832			5,136

Total current liabilities		629,808			742,356

Long-term debt, net		3,589,410			3,057,983
Deferred tax liabilities		441,625			389,509
Deferred rents		68,626			56,425
Redeemable ownership interest		7,062			6,290
Other long-term liabilities		127,972			135,262

Total liabilities		4,864,503			4,387,825

COMMITMENTS AND CONTINGENCIES (See Note 14)

STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.0001 per share, 100,000,000 shares authorized; no shares of preferred stock issued and outstanding at June 30, 2009 and December 31, 2008		—			—
Common Stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 352,089,057 and 350,918,272 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively		35			35
Additional paid-in capital		1,609,436			1,578,972
Retained earnings		558,018			487,849
Accumulated other comprehensive loss		(21,453	)		(32,533	)

Total stockholders’ equity		2,146,036			2,034,323

Total liabilities and stockholders’ equity	$	7,010,539		$	6,422,148

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

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except share and per share information)

(Unaudited)


	For the three months ended June 30,						For the six months ended June 30,
	2009			2008			2009			2008
REVENUES:
Service revenues	$	766,850		$	598,562		$	1,493,548		$	1,160,532
Equipment revenues		92,762			80,245			161,393			180,629

Total revenues		859,612			678,807			1,654,941			1,341,161

OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense of $80,253, $53,061, $152,572 and $101,717, shown separately below)		268,733			206,140			514,308			394,614
Cost of equipment		227,400			160,088			452,419			360,245
Selling, general and administrative expenses (excluding depreciation and amortization expense of $11,122, $7,827, $20,549 and $16,471, shown separately below)		142,321			113,419			278,731			217,793
Depreciation and amortization		91,375			60,888			173,121			118,188
Loss (gain) on disposal of assets		14,010			2,628			(10,898	)		2,649

Total operating expenses		743,839			543,163			1,407,681			1,093,489


Income from operations		115,773			135,644			247,260			247,672

OTHER EXPENSE (INCOME):
Interest expense		70,535			45,664			128,967			93,083
Accretion of put option in majority-owned subsidiary		395			317			772			620
Interest and other income		(475	)		(5,372	)		(1,027	)		(15,254	)
Impairment loss on investment securities		532			9,079			1,453			17,080

Total other expense		70,987			49,688			130,165			95,529

Income before provision for income taxes		44,786			85,956			117,095			152,143

Provision for income taxes		(18,590	)		(35,491	)		(46,926	)		(62,159	)


Net income	$	26,196		$	50,465		$	70,169		$	89,984


Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities, net of tax		27			504			(112	)		504
Unrealized gains (losses) on cash flow hedging derivatives, net of tax		3,338			11,118			(3,627	)		(4,508	)
Reclassification adjustment for losses on cash flow hedging derivatives included in net income, net of tax		8,097			3,124			14,819			4,842


Comprehensive income	$	37,658		$	65,211		$	81,249		$	90,822


Net income per common share:
Basic	$	0.07		$	0.14		$	0.20		$	0.26

Diluted	$	0.07		$	0.14		$	0.20		$	0.25

Weighted average shares:
Basic		351,912,464			349,051,983			351,503,933			348,608,037

Diluted		357,087,331			356,177,866			356,940,117			355,440,059

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

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	For the six months ended June 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	70,169		$	89,984
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		173,121			118,188
Provision for uncollectible accounts receivable		111			121
Deferred rent expense		11,889			12,967
Cost of abandoned cell sites		4,607			2,322
Stock-based compensation expense		23,341			19,472
Non-cash interest expense		5,157			1,205
(Gain) loss on disposal of assets		(10,898	)		2,649
Impairment loss on investment securities		1,453			17,080
Accretion of asset retirement obligations		2,397			1,248
Accretion of put option in majority-owned subsidiary		772			620
Deferred income taxes		44,998			59,794
Changes in assets and liabilities:
Inventories		56,078			65,993
Accounts receivable, net		(19,604	)		(6,757	)
Prepaid charges		(19,400	)		(17,920	)
Deferred charges		796			3,300
Other assets		12,618			(335	)
Accounts payable and accrued expenses		87,107			(46,872	)
Deferred revenue		19,816			6,832
Other liabilities		1,465			1,527

Net cash provided by operating activities		465,993			331,418

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(455,110	)		(388,502	)
Change in prepaid purchases of property and equipment		14,608			24,446
Proceeds from sale of property and equipment		3,571			400
Purchase of investments		(261,856	)		—
Proceeds from sale of investments		37,500			37
Purchases of and deposits for FCC licenses		(11,692	)		(313,267	)
Proceeds from exchange of FCC licenses		949			—
Cash used in business acquisitions		—			(25,162	)
Microwave relocation costs		(679	)		(1,117	)

Net cash used in investing activities		(672,709	)		(703,165	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		(99,429	)		29,479
Proceeds from 9¹/4% Senior Notes		492,250			—
Debt issuance costs		(11,925	)		—
Repayment of debt		(8,000	)		(8,000	)
Payments on capital lease obligations		(1,450	)		—
Proceeds from exercise of stock options		7,112			8,997

Net cash provided by financing activities		378,558			30,476


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		171,842			(341,271	)
CASH AND CASH EQUIVALENTS, beginning of period		697,948			1,470,208

CASH AND CASH EQUIVALENTS, end of period	$	869,790		$	1,128,937

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

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

1. Basis of Presentation:

The accompanying unaudited condensed consolidated interim financial statements include the balances and results of operations of MetroPCS Communications, Inc. (“MetroPCS”) and its consolidated subsidiaries (collectively, the “Company”). MetroPCS indirectly owns, through its wholly-owned subsidiaries, 85% of the limited liability company member interest in Royal Street Communications, LLC (“Royal Street Communications”). The consolidated financial statements include the balances and results of operations of MetroPCS and its wholly-owned subsidiaries as well as the balances and results of operations of Royal Street Communications and its wholly-owned subsidiaries (collectively, “Royal Street”). The Company consolidates its interest in Royal Street in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46-R, “Consolidation of Variable Interest Entities,” (FASB Accounting Standards Codification (“ASC”) 810, “Consolidation”), because Royal Street is a variable interest entity and the Company will absorb all of Royal Street’s expected losses. All intercompany accounts and transactions between MetroPCS and its wholly-owned subsidiaries and Royal Street have been eliminated in the consolidated financial statements. The redeemable ownership interest in Royal Street is included in long-term liabilities. The condensed consolidated balance sheets as of June 30, 2009 and December 31, 2008, the condensed consolidated statements of income and comprehensive income and cash flows for the periods ended June 30, 2009 and 2008, and the related footnotes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

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

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

Federal Universal Service Fund (“FUSF”), E-911 and various other fees are assessed by various governmental authorities in connection with the services that the Company provides to its customers. The Company reports these fees on a gross basis in service revenues and cost of service on the accompanying statements of income and comprehensive income. For the three months ended June 30, 2009 and 2008, the Company recorded $39.3 million and $30.3 million, respectively, of FUSF, E-911 and other fees. For the six months ended June 30, 2009 and 2008, the Company recorded $76.6 million and $56.6 million, respectively, of FUSF, E-911 and other fees. Sales, use and excise taxes are reported on a net basis in selling, general and administrative expenses on the accompanying statements of income and comprehensive income.

2. Share-based Payments:

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” (“SFAS No. 123(R)”), (ASC 718, “Share-Based Payment,” (“ASC 718”)), the Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments, which includes stock options granted and restricted stock awards to employees. The Company records stock-based compensation expense in cost of service and selling, general and administrative expenses. Stock-based compensation expense was approximately $12.7 million and $11.0 million for the three months ended June 30, 2009 and 2008, respectively. Cost of service for the three months ended June 30, 2009 and 2008 includes approximately $1.3 million and $0.7 million, respectively, of stock-based compensation. For the three months ended June 30, 2009 and 2008, selling, general and administrative expenses include $11.4 million and $10.3 million, respectively, of stock-based compensation. Stock-based compensation expense was $23.3 million and $19.5 million for the six months ended June 30, 2009 and 2008, respectively. Cost of service for the six months ended June 30, 2009 and 2008 includes $2.0 million and $1.2 million, respectively, of stock-based compensation. For the six months ended June 30, 2009 and 2008, selling, general and administrative expenses include $21.3 million and $18.3 million, respectively, of stock-based compensation.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Restricted Stock Awards

Restricted stock awards are share awards that entitle the holder to receive shares of the Company’s common stock which become fully tradable upon vesting. During the three and six months ended June 30, 2009, pursuant to the Amended and Restated MetroPCS 2004 Equity Incentive Compensation Plan, the Company issued 44,600 and 1,355,110, respectively, restricted stock awards to certain employees. The restricted stock awards granted generally vest on a four-year vesting schedule with 25% vesting on the first anniversary date of the award and the remainder pro-rata on a monthly or quarterly basis thereafter. The Company determined the grant-date fair value of the restricted stock awards granted to be $19.6 million based on the closing price of the Company’s common stock on the New York Stock Exchange on the grant dates. The estimated compensation cost of the restricted stock awards, which is equal to the fair value of the awards on the date of grant, will be recognized on a straight-line basis over the four-year vesting period.

3. Short-term Investments:

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

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

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


	As of June 30, 2009
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Aggregate Fair Value
Equity Securities	$	7	$	—	$	(4	)	$	3
U.S. Treasury Securities		224,386		464		—			224,850

Total short-term investments	$	224,393	$	464	$	(4	)	$	224,853


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

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

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

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

4. Derivative Instruments and Hedging Activities:

On November 21, 2006, MetroPCS Wireless, Inc. (“Wireless”) entered into a three-year interest rate protection agreement to manage the Company’s interest rate risk exposure and fulfill a requirement of Wireless’ senior secured credit facility, as amended, (the “Senior Secured Credit Facility”), pursuant to which Wireless may borrow up to $1.7 billion. The agreement covers a notional amount of $1.0 billion and effectively converts this portion of Wireless’ variable rate debt to fixed-rate debt at an annual rate of 7.169%. The interest rate protection agreement expires on February 1, 2010. This financial instrument is reported in other long-term liabilities at fair market value of $24.4 million as of June 30, 2009.

On April 30, 2008, Wireless entered into an additional two-year interest rate protection agreement to manage the Company’s interest rate risk exposure. The agreement was effective on June 30, 2008 and covers an aggregate notional amount of $500.0 million and effectively converts this portion of Wireless’ variable rate debt to fixed rate debt at an annual rate of 5.464%. The monthly interest settlement periods began on June 30, 2008. This agreement expires on June 30, 2010. This financial instrument is reported in other long-term liabilities at fair market value of approximately $12.5 million as of June 30, 2009.

In March 2009, Wireless entered into three separate two-year interest rate protection agreements to manage the Company’s interest rate risk exposure. These agreements are effective on February 1, 2010 and cover a notional amount of $1.0 billion and effectively convert this portion of Wireless’ variable rate debt to fixed rate debt at a weighted average annual rate of 4.381%. The monthly interest settlement periods will begin on February 1, 2010. These agreements expire on February 1, 2012. These financial instruments are reported in long-term investments and other long-term liabilities at fair market value of approximately $0.6 million and approximately $0.3 million, respectively, as of June 30, 2009.

The primary risk managed by using derivative instruments is interest rate risk. Interest rate protection agreements are entered into to manage interest rate risk associated with the Company’s variable-rate borrowings. The interest rate protection agreements have been designated as cash flow hedges. If a derivative is designated as a cash flow hedge and the hedging relationship qualifies for hedge accounting under the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS No. 133”), (ASC 815, “Derivatives and Hedging,” (“ASC 815”)), the effective portion of the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss) and reclassified to interest expense in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of a derivative qualifying for hedge accounting is recognized in earnings in the period of the change. For the three months ended June 30, 2009, the change in fair value did not result in ineffectiveness.

At the inception of the cash flow hedges and quarterly thereafter, the Company performs an assessment to determine whether changes in the fair values or cash flows of the derivatives are deemed highly effective in offsetting changes in the fair values or cash flows of the hedged transaction. If at any time subsequent to the inception of the cash flow hedges, the assessment indicates that the derivative is no longer highly effective as a hedge, the Company will discontinue hedge accounting and recognize all subsequent derivative gains and losses in results of operations. The Company estimates that approximately $41.6 million of net losses that are reported in accumulated other comprehensive loss at June 30, 2009 are expected to be reclassified into earnings within the next 12 months.

Cross-default Provisions

The Company’s interest rate protection agreements contain cross-default provisions to the Company’s Senior Secured Credit Facility. The Company’s Senior Secured Credit Facility allows interest rate protection agreements to become secured if the counterparty to the agreement is a current lender under the facility. If the Company were to default on the Senior Secured Credit Facility, it would trigger these provisions, and the counterparties to the interest rate protection agreements could request immediate payment on interest rate protection agreements in net liability positions, similar to their existing rights as a lender. There are no collateral requirements in the interest rate protection agreements. The aggregate fair value of interest rate protection agreements with cross-default provisions that are in a net liability position on June 30, 2009 is $37.2 million.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Fair Values of Derivative Instruments


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

Derivatives designated as hedging instruments under SFAS No. 133 (ASC 815)
Interest rate protection agreements	Long-term investments	$	585		Long-term investments	$	—
Interest rate protection agreements	Other long-term liabilities		(37,228	)	Other long-term liabilities		(54,963	)

Total derivatives designated as hedging instruments under SFAS No. 133 (ASC 815)		$	(36,643	)		$	(54,963	)

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

For the Three Months Ended June 30,


Derivatives in SFAS No. 133 (ASC 815) Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)				Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	2009		2008			2009		2008

Interest rate protection agreements	$	5,463	$	17,845	Interest expense	$	(13,253)	$	(4,857)

Total	$	5,463	$	17,845		$	(13,253)	$	(4,857)

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

For the Six Months Ended June 30,


Derivatives in SFAS No. 133 (ASC 815) Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	2009			2008				2009			2008

Interest rate protection agreements	$	(5,960	)	$	(7,597	)	Interest expense	$	(24,281	)	$	(7,663	)

Total	$	(5,960	)	$	(7,597	)		$	(24,281	)	$	(7,663	)

5. Property and Equipment:

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


	June 30, 2009			December 31, 2008
Construction-in-progress	$	304,902		$	898,454
Network infrastructure		3,387,270			2,522,206
Office equipment and software		123,128			63,848
Leasehold improvements		54,272			47,784
Furniture and fixtures		12,267			10,273
Vehicles		444			311

		3,882,283			3,542,876
Accumulated depreciation and amortization		(843,299	)		(695,125	)


Property and equipment, net	$	3,038,984		$	2,847,751

6. Long-term Investments:

During the year ended December 31, 2007, the Company made an original investment of $133.9 million in principal in ten auction rate securities with maturity dates through 2046, substantially all of which are secured by collateralized debt obligations with a portion of the underlying collateral being mortgage securities or related to mortgage securities. Consistent with the Company’s investment policy guidelines, the auction rate securities investments held by the Company all had AAA/Aaa credit ratings at the time of purchase. With the continuing

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

liquidity issues experienced in the global credit and capital markets, the auction rate securities held by the Company at June 30, 2009 continued to experience failed auctions as the amount of securities submitted for sale in the auctions exceeded the amount of purchase orders. Since July 2007, there have been no successful auctions for the auction rate securities held by the Company. In addition, all of the auction rate securities held by the Company have been downgraded or placed on credit watch with credit ratings ranging from ‘BBB/Ba1’ to ‘CC/C’ as of June 30, 2009. The Company has not sold any of its auction rate securities through June 30, 2009.

Due to the lack of availability of observable market quotes on the Company’s investment portfolio of auction rate securities, the fair value was estimated based on valuation models that rely exclusively on unobservable inputs, including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The valuation of the Company’s auction rate securities is subject to uncertainties that are difficult to predict. Factors that may impact the Company’s valuation include changes to credit ratings of the securities as well as the underlying assets supporting these securities, rates of default of the underlying assets, underlying collateral values, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity. The estimated market value of the Company’s auction rate security holdings at June 30, 2009 was approximately $3.8 million, which reflects a $130.1 million cumulative adjustment to the original principal value of $133.9 million. The estimated market value at December 31, 2008 was approximately $6.0 million, which reflected a $127.9 million adjustment to the aggregate principal value at that date. Each auction rate security continues to pay interest according to its stated term ranging from one month LIBOR plus .55% to one month LIBOR plus 2.5%. Due to the continued severity in the capital markets, deterioration of the credit quality of the underlying assets and the length of time until the auction rate securities mature, the Company believes that full recovery is not probable and has recorded an impairment charge of $0.5 million and $1.5 million during the three and six months ended June 30, 2009, respectively, reflecting an additional portion of the auction rate security holdings that the Company has concluded have an other-than-temporary decline in value.

Given the failed auctions, the Company’s auction rate securities are illiquid until there is a successful auction for them or the Company sells them. Accordingly, the entire amount of such remaining auction rate securities has been classified as a non-current asset and is presented in long-term investments on the accompanying condensed consolidated balance sheets as of June 30, 2009 and December 31, 2008. The Company may continue to incur additional impairments to its auction rate securities which may be up to the full remaining value of such auction rate securities.

7. FCC Licenses and Microwave Relocation Costs:

The Company operates wireless broadband mobile networks under licenses granted by the Federal Communications Commission (“FCC”) for a particular geographic area on spectrum allocated by the FCC for terrestrial wireless broadband services. In addition, in November 2006, the Company acquired a number of advanced wireless services (“AWS”) licenses which can be used to provide services comparable to the wireless broadband mobile services provided by the Company, and other advanced wireless services. In June 2008, the Company acquired a 700 MHz license that also can be used to provide similar services. The personal communications services (“PCS”) licenses previously included, and the AWS licenses currently include, the obligation and resulting costs to relocate existing fixed microwave users of the Company’s licensed spectrum if the Company’s use of its spectrum interferes with their systems and/or reimburse other carriers (according to FCC rules) that relocated prior users if the relocation benefits the Company’s system. Accordingly, the Company incurred costs related to microwave relocation in constructing its PCS and AWS networks.

The microwave relocation costs are recorded at cost. Although PCS, AWS and 700 MHz licenses are issued with a stated term, ten years in the case of the PCS licenses, fifteen years in the case of the AWS licenses and approximately ten and one-half years for 700 MHz licenses, the renewal of PCS, AWS and 700 MHz licenses is generally a routine matter without substantial cost and the Company has determined that no legal, regulatory, contractual, competitive, economic, or other factors currently exist that limit the useful life of its PCS, AWS and 700 MHz licenses. As such, under the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” (ASC 350, “Intangibles-Goodwill and Other”), the Company does not amortize PCS, AWS and 700 MHz licenses and microwave relocation costs (collectively, its “indefinite-lived intangible assets”) as they are considered to have

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

indefinite lives and together represent the cost of the Company’s spectrum. The Company is required to test indefinite-lived intangible assets for impairment on an annual basis based upon a fair value approach. Indefinite-lived intangible assets must be tested between annual tests if events or changes in circumstances indicate that the asset might be impaired. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business, or other factors.

Furthermore, if any of the indefinite-lived intangible assets are subsequently determined to have a finite useful life, such assets would be tested for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS No. 144”), (ASC 360, “Property, Plant, and Equipment,” (“ASC 360”)), and the intangible assets would then be amortized prospectively over the estimated remaining useful life. The Company completed its impairment test as of September 30, 2008 and the fair value of each of the indefinite-lived intangible assets was in excess of its carrying value. There also have been no subsequent indicators of impairment including those indicated in SFAS No. 144 (ASC 360), and accordingly, no subsequent interim impairment tests were performed.

The carrying value of FCC licenses and microwave relocation costs was $2.5 billion as of June 30, 2009.

Other Spectrum Acquisitions

During the three and six months ended June 30, 2009, the Company closed on various agreements for the acquisition and exchange of spectrum in the net aggregate amount of approximately $3.3 million and $10.3 million, respectively, in cash.

8. Accounts Payable and Accrued Expenses:

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


	June 30, 2009		December 31, 2008
Accounts payable	$	145,914	$	148,309
Book overdraft		5,323		104,752
Accrued accounts payable		120,364		178,085
Accrued liabilities		25,318		15,803
Payroll and employee benefits		26,192		34,047
Accrued interest		42,351		33,521
Taxes, other than income		63,135		46,705
Income taxes		6,380		7,210


Accounts payable and accrued expenses	$	434,977	$	568,432

9. Long-term Debt:

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


	June 30, 2009			December 31, 2008
9¹/4% Senior Notes	$	1,950,000		$	1,400,000
Senior Secured Credit Facility		1,556,000			1,564,000
Capital Lease Obligations		138,064			91,343


Total long-term debt		3,644,064			3,055,343
Add: unamortized (discount) premium on debt		(36,345	)		19,649


Total debt		3,607,719			3,074,992
Less: current maturities		(18,309	)		(17,009	)


Total long-term debt	$	3,589,410		$	3,057,983

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

9¹/4% Senior Notes

On November 3, 2006, Wireless completed the sale of $1.0 billion of principal amount of 9¹/4% Senior Notes due 2014, (the “Initial Notes”). On June 6, 2007, Wireless completed the sale of an additional $400.0 million of 9¹/4% Senior Notes due 2014 (the “Additional Notes”) under the existing indenture at a price equal to 105.875% of the principal amount of such Additional Notes. On January 20, 2009, Wireless completed the sale of an additional $550.0 million of 9¹/4% Senior Notes due 2014 (the “New 9¹/4% Senior Notes” and, together with the Initial Notes and Additional Notes, the “9¹/4% Senior Notes”) at a price equal to 89.50% of the principal amount of such New 9¹/4% Senior Notes resulting in net proceeds of approximately $480.3 million. The net proceeds from the sale of the New 9¹ /4% Senior Notes will be used for general corporate purposes which could include working capital, capital expenditures, future liquidity needs, additional opportunistic spectrum acquisitions, corporate development opportunities and future technology initiatives.

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

On January 20, 2009, Wireless entered into a registration rights agreement in connection with the consummation of the sale of the New 9¹/4% Senior Notes. Under the terms of the registration rights agreement, Wireless agreed to file a registration statement covering the New 9¹/4% Senior Notes on or before the 270th day after the New 9¹/4% Senior Notes’ issue date. Wireless also agreed to use commercially reasonable efforts to have such Registration Statement declared effective on or prior to the 300th day after the issue date of the New 9¹/4% Senior Notes. Alternatively, if Wireless is unable to consummate the Exchange Offer (as defined in the Registration Rights Agreement) or if holders of the New 9¹/4% Senior Notes cannot participate in the Exchange Offer for certain specified reasons, then Wireless and the Guarantors will use commercially reasonable efforts to file a shelf registration statement within the times specified in the Registration Rights Agreement to facilitate resale of the New 9¹/4% Senior Notes. All registration expenses will be paid by Wireless and the Guarantors. If (i) Wireless fails to file a registration statement by the applicable deadline, (ii) any such registration statement has not been declared effective by the SEC by the applicable deadline, (iii) the Exchange Offer has not been consummated by the applicable deadline or (iv) any registration statement required by the registration rights agreement is filed and declared effective but thereafter ceases to be effective or fails to be usable for its intended purpose without being cured under the terms of the registration rights agreement, then Wireless and the guarantors of the New 9¹/ 4% Senior Notes must pay each holder liquidated damages in an amount equal to $0.05 per week per $1,000 in principal amount of New 9¹/4% Senior Notes for each week or portion thereof that the default continues for the first 90-day period immediately following the occurrence of the default. The amount of liquidated damages increases by an additional $0.05 per week per $1,000 in principal amount of the New 9¹/4% Senior Notes with respect to each subsequent 90-day period until all defaults have been cured, up to a maximum amount of liquidated damages of $0.20 per week per $1,000 in principal amount of New 9¹/4% Senior Notes. On June 22, 2009, Wireless filed such required registration statement on Form S-4 (“the Exchange Offer Registration Statement”). On July 10, 2009, the SEC declared the Exchange Offer Registration Statement effective. The Exchange Offer is currently scheduled to expire at 5:00 p.m. New York City time on August 13, 2009, unless extended.

Senior Secured Credit Facility

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

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

The interest rate on the outstanding debt under the Senior Secured Credit Facility is variable. The rate as of June 30, 2009 was 6.455% (see Note 4).

Capital Lease Obligations

The Company has entered into various non-cancelable distributed antenna systems (“DAS”) capital lease agreements, with varying expiration terms through 2024, covering dedicated optical fiber. Assets and future obligations related to capital leases are included in the accompanying condensed consolidated balance sheets in property and equipment and long-term debt, respectively. Depreciation of assets held under capital leases is included in depreciation and amortization expense. As of June 30, 2009, the Company had approximately $138.1 million of capital lease obligations, with $2.3 million and $135.8 million recorded in current maturities of long-term debt and long-term debt, respectively.

10. Fair Value Measurements:

The Company has adopted the provisions of SFAS No. 157, “Fair Value Measurements,” (“SFAS No. 157”), (ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”)), for financial assets and liabilities. SFAS No. 157 (ASC 820) became effective for financial assets and liabilities on January 1, 2008. The Company adopted the provisions of SFAS No. 157 (ASC 820) for non-financial assets and liabilities upon its effectiveness on January 1, 2009. SFAS No. 157 (ASC 820) defines fair value, thereby eliminating inconsistencies in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations.

SFAS No. 157 (ASC 820) establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:

•

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

•

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

•

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

SFAS No. 157 (ASC 820) requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The Company’s financial assets and liabilities measured at fair value on a recurring basis include cash and cash equivalents, short and long-term investments securities and derivative financial instruments.

Included in the Company’s cash and cash equivalents are cash on hand, cash in bank accounts, investments in money market funds consisting of U.S. treasury securities with an original maturity of 90 days or less. Included in

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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

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

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

The following table summarizes assets and liabilities measured at fair value on a recurring basis at June 30, 2009, as required by SFAS No. 157 (ASC 820) (in thousands):


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	869,790	$	—	$	—	$	869,790
Short-term investments		224,853		—		—		224,853
Long-term investments		—		—		3,837		3,837
Derivative assets		—		585		—		585

Total assets at fair value	$	1,094,643	$	585	$	3,837	$	1,099,065


Liabilities
Derivative liabilities	$	—	$	37,228	$	—	$	37,228

Total liabilities at fair value	$	—	$	37,228	$	—	$	37,228

The following table summarizes the changes in fair value of the Company’s Level 3 assets, as required by SFAS No. 157 (ASC 820) (in thousands):


Fair Value Measurements of Assets Using Level 3 Inputs	Long-Term Investments
	Three Months Ended June 30, 2009		Six Months Ended June 30, 2009
Beginning balance	$	4,612	$	5,986
Total losses (gains) (realized or unrealized):
Included in earnings		532		1,453
Included in accumulated other comprehensive loss		243		696
Transfers in and/or out of Level 3		—		—
Purchases, sales, issuances and settlements		—		—

Ending balance at June 30, 2009	$	3,837	$	3,837

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)


	Three Months Ended June 30, 2009	Six Months Ended June 30, 2009
Losses included in earnings that are attributable to the change in unrealized losses relating to those assets still held at the reporting date as reported in impairment loss on investment securities in the condensed consolidated statements of income and comprehensive income	$532	$1,453

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Long-Term Debt

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

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


	June 30, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Secured Credit Facility	$	1,556,000	$	1,485,980	$	1,564,000	$	1,251,200
9¹/4% Senior Notes		1,950,000		1,930,500		1,400,000		1,239,000
Cash flow hedging derivatives		36,643		36,643		54,963		54,963
Short-term investments		224,850		224,850		3		3
Long-term investments		3,837		3,837		5,986		5,986

11. Income Taxes:

Since December 31, 2008, there have been no changes in the amount of the Company’s unrecognized tax benefits. The Company accrued gross interest expense and penalties of $0.6 million and $1.2 million on unrecognized tax benefits during the three and six months ended June 30, 2009. A state examination is currently ongoing and the Company believes it is reasonably possible that the amount of unrecognized tax benefits in that state could significantly decrease within the next 12 months period. The gross unrecognized tax benefits for this position could decrease due to settlement with this state in an amount up to $2.7 million. In another state jurisdiction, the Company believes it is reasonably possible that the amount of unrecognized tax benefits in that state could significantly decrease within the next 12 months due to the expiration of the statute of limitations. The gross unrecognized tax benefits for this tax position could decrease due to the expiring statute in an amount up to $12.4 million. The Company does not anticipate that a proposed adjustment in either of the state jurisdictions would result in a material change to the Company’s financial position.

The Internal Revenue Service (“IRS”) is currently examining the 2005 and 2006 tax years of Royal Street Communications. Management anticipates the audit will be substantially complete during the year ending 2009 with no changes to the Company’s tax position.

In addition, there are several state income and franchise tax examinations that are currently in progress for the Company and/or certain of its subsidiaries for various tax years. Management does not believe these examinations will have a significant effect on the Company’s tax position.

During 2008, the Company invested in renewable energy products. The Company will account for its renewable energy investment tax credits in accordance with Accounting Principles Board Opinion No. 4, “Accounting for the Investment Credit,” (“APB 4”), (ASC 740, “Income Taxes,” (“ASC 740”)). APB 4 (ASC 740) provides an accepted accounting method for investment tax credits, known as the tax reduction method or the flow-through method, and treats the investment tax credit as a reduction of income tax expense in the year generated.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

12. Common Stock Options Issued to Directors:

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

13. Net Income Per Common Share:

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Basic EPS:
Net income applicable to common stock	$	26,196	$	50,465	$	70,169	$	89,984
Amount allocable to common shareholders		99.6%		100.0%		99.6%		100.0%

Rights to undistributed earnings	$	26,098	$	50,465	$	69,906	$	89,984

Weighted average shares outstanding—basic		351,912,464		349,051,983		351,503,933		348,608,037

Net income per common share—basic	$	0.07	$	0.14	$	0.20	$	0.26

Diluted EPS:
Rights to undistributed earnings	$	26,098	$	50,465	$	69,906	$	89,984

Weighted average shares outstanding—basic		351,912,464		349,051,983		351,503,933		348,608,037
Effect of dilutive securities:
Stock options		5,174,867		7,125,883		5,436,184		6,832,022

Weighted average shares outstanding—diluted		357,087,331		356,177,866		356,940,117		355,440,059

Net income per common share—diluted	$	0.07	$	0.14	$	0.20	$	0.25

On January 1, 2009, the Company adopted FASB Staff Position (FSP) Emerging Issues Task Force (EITF) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” (“EITF No. 03-6-1”), (ASC 260, “Earnings Per Share,” (“ASC 260”)), which clarifies EITF No. 03-6, “Participating Securities and the Two-Class Method Under FAS No. 128,” (ASC 260). EITF No. 03-6-1 (ASC 260) provides that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents, whether paid or unpaid, are considered a “participating security” for purposes of computing earnings or loss per common share and the two-class method of computing earnings per share is required for all periods presented.

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

For the three months ended June 30, 2009 and 2008, 16.3 million and 12.8 million, respectively, of stock options were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive. For the six months ended June 30, 2009 and 2008, 15.4 million and 10.8 million, respectively, of stock options were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive.

14. Commitments and Contingencies:

During the three months ended June 30, 2009, the Company entered into pricing agreements with various handset manufacturers for the purchase of wireless handsets at specified prices. The terms of these agreements expire on various dates through October 3, 2009. The total aggregate commitment outstanding under these pricing agreements is approximately $13.8 million as of June 30, 2009.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

AWS Licenses Acquired in Auction 66

Spectrum allocated for AWS currently is utilized by a variety of categories of commercial and governmental users. To foster the orderly clearing of the spectrum, the FCC adopted a transition and cost sharing plan pursuant to which incumbent non-governmental users could be reimbursed for relocating out of the band and the costs of relocation would be shared by AWS licensees benefiting from the relocation. The FCC has established a plan where the AWS licensee and the incumbent non-governmental user are to negotiate voluntarily for three years and then, if no agreement has been reached, the incumbent licensee is subject to mandatory relocation where the AWS licensee can force the incumbent non-governmental licensee to relocate at the AWS licensee’s expense. The spectrum allocated for AWS currently is utilized also by governmental users. The FCC rules provide that a portion of the money raised in Auction 66 will be used to reimburse the relocation costs of governmental users from the AWS band. However, not all governmental users are obligated to relocate and some such users may delay relocation for some time. For the three months ended June 30, 2009 and 2008, the Company incurred approximately $1.1 million and $0.5 million in microwave relocation costs, respectively. For the six months ended June 30, 2009 and 2008, the Company incurred approximately $2.0 million and $0.9 million in microwave relocation costs, respectively.

FCC Katrina Order

In October 2007, the FCC adopted rules which, had they become effective, would have required the Company to maintain emergency backup power for certain minimum periods of time for various components of the Company’s systems. In July 2009, the United States Court of Appeals vacated these FCC backup power rules. However, the FCC has indicated that it plans to issue a Notice of Proposed Rulemaking (“NPRM”), to adopt revised backup power rules. At this time, the Company is unable to predict with any certainty when any such NPRM may be forthcoming from the FCC, whether the NPRM will result in the promulgation of new backup power or other requirements and, if so, whether any new rules may require the Company to purchase additional equipment, spend additional capital, seek and receive additional state and local permits, authorizations and approvals, and incur additional operating expenses to comply with the new rules and such costs could be material.

Litigation

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

15. Supplemental Cash Flow Information:

Non-cash investing activities

The Company’s accrued purchases of property and equipment were approximately $18.2 million and $45.0 million for the six months ended June 30, 2009 and 2008, respectively. Included within the Company’s accrued purchases are estimates by management for construction services received based on a percentage of completion.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Assets acquired under capital lease obligations were $47.5 million and $26.8 million for the six months ended June 30, 2009 and 2008, respectively.

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

16. Related-Party Transactions:

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Fees received by the Company as compensation for providing billing and collection services	$	1.9	$	1.8	$	3.8	$	3.6
Handsets sold to the related party		3.8		4.4		7.2		7.4


	June 30, 2009		December 31, 2008
Accruals for fees collected from customers	$	3.6	$	3.7
Receivables from the related party included in accounts receivable		1.6		0.8

One of the Company’s current directors is the chairman of an equity firm that holds various investment funds affiliated with one of the Company’s greater than 5% stockholders. The equity firm is affiliated with a current director of a company that provides wireless caller ID with name services to the Company. The Company paid approximately $0.2 million and $0.3 million to the company for these services during the three and six months ended June 30, 2009, respectively.

One of the Company’s current directors is a general partner of various investment funds affiliated with one of the Company’s greater than 5% stockholders. These funds own in the aggregate an approximate 15.6% interest in a company that provides advertising services to the Company. The Company paid approximately $1.1 million and $1.2 million to the company for these services during the three months ended June 30, 2009 and 2008, respectively. The Company paid approximately $2.5 million and $2.2 million to the company for these services during the six months ended June 30, 2009 and 2008, respectively.

17. Segment Information:

Operating segments are defined by SFAS No. 131, “Disclosure About Segments of an Enterprise and Related Information,” (“SFAS No. 131”), (ASC 280, “Segment Reporting,” (“ASC 280”)), as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chairman of the Board, President and Chief Executive Officer.

As of June 30, 2009, the Company had thirteen operating segments based on geographic region within the United States: Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota. Each of these operating segments provide wireless broadband mobile voice and data services and products to customers in its service areas. These services include unlimited local and long distance calling, voicemail, caller ID, call waiting, enhanced directory assistance, text messaging, picture and multimedia messaging, domestic and international long distance,

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

international text messaging, ringtones, games and content applications, unlimited directory assistance, ring back tones, nationwide roaming, mobile Internet browsing, mobile instant messaging, push e-mail, location based services, social networking services and other value-added services.

The Company aggregates its operating segments into two reportable segments: Core Markets and Northeast Markets. Effective January 1, 2009, the Company implemented a change to the composition of its reportable segments under SFAS No. 131 (ASC 280). The historical quarterly information for the three and six months ended June 30, 2008 presented below has been retrospectively adjusted to reflect this change.

•

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

•

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

General corporate overhead, which includes expenses such as corporate employee labor costs, rent and utilities, legal, accounting and auditing expenses, is allocated equally across all operating segments. Corporate marketing and advertising expenses are allocated equally to the operating segments, beginning in the period during which the Company launches service in that operating segment. Expenses associated with the Company’s national data center and national operations center are allocated based on the average number of customers in each operating segment. There are no transactions between reportable segments.

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


Three Months Ended June 30, 2009	Core Markets		Northeast Markets			Other			Total
	(in thousands)
Service revenues	$	718,190	$	48,660		$	—		$	766,850
Equipment revenues		79,015		13,747			—			92,762
Total revenues		797,205		62,407			—			859,612
Cost of service (1)		221,075		47,658			—			268,733
Cost of equipment		182,475		44,925			—			227,400
Selling, general and administrative expenses (1)		109,479		32,842			—			142,321
Segment Adjusted EBITDA (Deficit) (2)		293,999		(60,168	)		—
Depreciation and amortization		62,194		21,382			7,799			91,375
Loss on disposal of assets		8,460		9			5,541			14,010
Stock-based compensation expense		9,822		2,851			—			12,673
Income (loss) from operations		213,522		(84,409	)		(13,340	)		115,773
Interest expense		—		—			70,535			70,535
Accretion of put option in majority-owned subsidiary		—		—			395			395
Interest and other income		—		—			(475	)		(475	)
Impairment loss on investment securities		—		—			532			532
Income (loss) before provision for income taxes		213,522		(84,409	)		(84,327	)		44,786

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)


Three Months Ended June 30, 2008	Core Markets		Northeast Markets			Other			Total
	(in thousands)
Service revenues	$	598,562	$	—		$	—		$	598,562
Equipment revenues		80,245		—			—			80,245
Total revenues		678,807		—			—			678,807
Cost of service (1)		194,499		11,641			—			206,140
Cost of equipment		160,032		56			—			160,088
Selling, general and administrative expenses (1)		100,974		12,445			—			113,419
Segment Adjusted EBITDA (Deficit) (2)		232,011		(21,844	)		—
Depreciation and amortization		56,398		459			4,031			60,888
Loss on disposal of assets		2,627		—			1			2,628
Stock-based compensation expense		8,709		2,298			—			11,007
Income (loss) from operations		164,277		(24,601	)		(4,032	)		135,644
Interest expense		—		—			45,664			45,664
Accretion of put option in majority-owned subsidiary		—		—			317			317
Interest and other income		—		—			(5,372	)		(5,372	)
Impairment loss on investment securities		—		—			9,079			9,079
Income (loss) before provision for income taxes		164,277		(24,601	)		(53,720	)		85,956

Six Months Ended June 30, 2009	Core Markets		Northeast Markets			Other			Total
	(in thousands)
Service revenues	$	1,421,397	$	72,151		$	—		$	1,493,548
Equipment revenues		142,582		18,811			—			161,393
Total revenues		1,563,979		90,962			—			1,654,941
Cost of service (1)		428,552		85,756			—			514,308
Cost of equipment		376,561		75,858			—			452,419
Selling, general and administrative expenses (1)		214,558		64,173			—			278,731
Segment Adjusted EBITDA (Deficit) (2)		562,417		(129,593	)		—
Depreciation and amortization		127,297		32,171			13,653			173,121
Loss (gain) on disposal of assets		6,880		5			(17,783	)		(10,898	)
Stock-based compensation expense		18,110		5,231			—			23,341
Income (loss) from operations		410,131		(167,001	)		4,130			247,260
Interest expense		—		—			128,967			128,967
Accretion of put option in majority-owned subsidiary		—		—			772			772
Interest and other income		—		—			(1,027	)		(1,027	)
Impairment loss on investment securities		—		—			1,453			1,453
Income (loss) before provision for income taxes		410,131		(167,001	)		(126,035	)		117,095

Six Months Ended June 30, 2008	Core Markets		Northeast Markets			Other			Total
	(in thousands)
Service revenues	$	1,160,532	$	—		$	—		$	1,160,532
Equipment revenues		180,629		—			—			180,629
Total revenues		1,341,161		—			—			1,341,161
Cost of service (1)		376,712		17,902			—			394,614
Cost of equipment		360,189		56			—			360,245
Selling, general and administrative expenses (1)		195,092		22,701			—			217,793
Segment Adjusted EBITDA (Deficit) (2)		424,553		(36,572	)		—
Depreciation and amortization		108,015		729			9,444			118,188
Loss on disposal of assets		2,645		—			4			2,649
Stock-based compensation expense		15,385		4,087			—			19,472
Income (loss) from operations		298,507		(41,387	)		(9,448	)		247,672
Interest expense		—		—			93,083			93,083
Accretion of put option in majority-owned subsidiary		—		—			620			620
Interest and other income		—		—			(15,254	)		(15,254	)
Impairment loss on investment securities		—		—			17,080			17,080
Income (loss) before provision for income taxes		298,507		(41,387	)		(104,977	)		152,143

(1)

Cost of service for the three months ended June 30, 2009 and 2008 includes approximately $1.3 million and $0.7 million, respectively, of stock-based compensation disclosed separately. Cost of service for the six months ended June 30, 2009 and 2008 includes $2.0 million and $1.2 million, respectively, of stock-based compensation disclosed separately. Selling, general and administrative expenses for the three months ended June 30, 2009 and 2008 includes $11.4 million and $10.3 million, respectively, of stock-based compensation disclosed separately. Selling, general and administrative expenses for the six months ended June 30, 2009 and 2008 includes $21.3 million and $18.3 million, respectively, of stock-based compensation disclosed separately.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

(2)

Core and Northeast Markets Adjusted EBITDA (Deficit) is presented in accordance with SFAS No. 131 (ASC 280) as it is the primary financial measure utilized by management to facilitate evaluation of the Company’s ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
	(in thousands)
Segment Adjusted EBITDA (Deficit):
Core Markets Adjusted EBITDA	$	293,999		$	232,011		$	562,417		$	424,553
Northeast Markets Adjusted EBITDA Deficit		(60,168	)		(21,844	)		(129,593	)		(36,572	)

Total		233,831			210,167			432,824			387,981
Depreciation and amortization		(91,375	)		(60,888	)		(173,121	)		(118,188	)
(Loss) gain on disposal of assets		(14,010	)		(2,628	)		10,898			(2,649	)
Stock-based compensation expense		(12,673	)		(11,007	)		(23,341	)		(19,472	)
Interest expense		(70,535	)		(45,664	)		(128,967	)		(93,083	)
Accretion of put option in majority-owned subsidiary		(395	)		(317	)		(772	)		(620	)
Interest and other income		475			5,372			1,027			15,254
Impairment loss on investment securities		(532	)		(9,079	)		(1,453	)		(17,080	)

Consolidated income before provision for income taxes	$	44,786		$	85,956		$	117,095		$	152,143

18. Guarantor Subsidiaries:

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

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

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Balance Sheet

As of June 30, 2009


	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CURRENT ASSETS:
Cash and cash equivalents	$	638,904		$	209,014		$	672	$	21,200		$	—		$	869,790
Short-term investments		224,853			—			—		—			—			224,853
Inventories, net		—			88,341			11,536		—			—			99,877
Accounts receivable, net		—			54,054			—		105			—			54,159
Prepaid charges		—			3,539			50,352		7,248			—			61,139
Deferred charges		—			48,920			—		—			—			48,920
Deferred tax assets		—			1,833			—		—			—			1,833
Current receivable from subsidiaries		—			319,904			—		13,641			(333,545	)		—
Other current assets		163			234			32,404		989			—			33,790

Total current assets		863,920			725,839			94,964		43,183			(333,545	)		1,394,361
Property and equipment, net		—			25,341			2,581,446		432,197			—			3,038,984
Long-term investments		3,836			586			—		—			—			4,422
Investment in subsidiaries		690,028			1,945,911			—		—			(2,635,939	)		—
FCC licenses		—			3,800			2,149,870		293,599			—			2,447,269
Microwave relocation costs		—			—			18,487		—			—			18,487
Long-term receivable from subsidiaries		—			828,442			—		—			(828,442	)		—
Other assets		—			45,908			37,363		23,745			—			107,016

Total assets	$	1,557,784		$	3,575,827		$	4,882,130	$	792,724		$	(3,797,926	)	$	7,010,539

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	—		$	123,764		$	283,550	$	27,663		$	—		$	434,977
Current maturities of long-term debt		—			16,000			2,287		22			—			18,309

Current payable to subsidiaries		—			—			13,641		319,904			(333,545	)		—
Deferred revenue		—			31,414			140,276		—			—			171,690

Advances to subsidiaries		(588,362	)		(1,257,722	)		1,846,084		—			—			—
Other current liabilities		—			115			4,683		34			—			4,832

Total current liabilities		(588,362	)		(1,086,429	)		2,290,521		347,623			(333,545	)		629,808
Long-term debt		—			3,453,656			134,278		1,476			—			3,589,410
Long-term payable to subsidiaries		—			—			—		828,442			(828,442	)		—
Deferred tax liabilities		110			441,515			—		—			—			441,625
Deferred rents		—			—			59,850		8,776			—			68,626
Redeemable ownership interest		—			7,062			—		—			—			7,062
Other long-term liabilities		—			69,995			50,273		7,704			—			127,972

Total liabilities		(588,252	)		2,885,799			2,534,922		1,194,021			(1,161,987	)		4,864,503
COMMITMENTS AND CONTINGENCIES (See Note 14)
STOCKHOLDERS’ EQUITY:
Preferred stock		—			—			—		—			—			—
Common stock		35			—			—		—			—			35
Additional paid-in capital		1,609,436			—			—		20,000			(20,000	)		1,609,436
Retained earnings (deficit)		558,018			712,179			2,347,208		(421,297	)		(2,638,090	)		558,018
Accumulated other comprehensive (loss) income		(21,453	)		(22,151	)		—		—			22,151			(21,453	)

Total stockholders’ equity		2,146,036			690,028			2,347,208		(401,297	)		(2,635,939	)		2,146,036

Total liabilities and stockholders’ equity	$	1,557,784		$	3,575,827		$	4,882,130	$	792,724		$	(3,797,926	)	$	7,010,539

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Balance Sheet

As of December 31, 2008


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

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

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

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

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

Total liabilities		(568,507	)		2,577,483			2,596,353		1,083,637			(1,301,141	)		4,387,825
COMMITMENTS AND CONTINGENCIES (See Note 14)
STOCKHOLDERS’ EQUITY:
Preferred stock		—			—			—		—			—			—
Common stock		35			—			—		—			—			35
Additional paid-in capital		1,578,972			—			—		20,000			(20,000	)		1,578,972
Retained earnings (deficit)		487,849			643,955			2,088,527		(348,200	)		(2,384,282	)		487,849
Accumulated other comprehensive (loss) income		(32,533	)		(33,374	)		—		—			33,374			(32,533	)

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

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

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Three Months Ended June 30, 2009


	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	767,724	$	40,032		$	(40,906	)	$	766,850
Equipment revenues		—			3,777			88,985		—			—			92,762

Total revenues		—			3,777			856,709		40,032			(40,906	)		859,612
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			283,525		26,114			(40,906	)		268,733
Cost of equipment		—			3,395			224,005		—			—			227,400
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			382			136,682		5,257			—			142,321
Depreciation and amortization		—			(7	)		79,645		11,737			—			91,375
Loss on disposal of assets		—			—			13,815		195			—			14,010

Total operating expenses		—			3,770			737,672		43,303			(40,906	)		743,839

Income (loss) from operations		—			7			119,037		(3,271	)		—			115,773
OTHER EXPENSE (INCOME):
Interest expense		—			69,175			1,829		32,570			(33,039	)		70,535
Earnings from consolidated subsidiaries		(26,282	)		(81,362	)		—		—			107,644			—
Accretion of put option in majority-owned subsidiary		—			395			—		—			—			395
Interest and other income		(446	)		(33,073	)		10		(5	)		33,039			(475	)
Impairment loss on investment securities		532			—			—		—			—			532

Total other (income) expense		(26,196	)		(44,865	)		1,839		32,565			107,644			70,987
Income (loss) before provision for income taxes		26,196			44,872			117,198		(35,836	)		(107,644	)		44,786
Provision for income taxes		—			(18,590	)		—		—			—			(18,590	)

Net income (loss)	$	26,196		$	26,282		$	117,198	$	(35,836	)	$	(107,644	)	$	26,196

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Three Months Ended June 30, 2008


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	599,556		$	26,887		$	(27,881	)	$	598,562
Equipment revenues		—			4,396			75,849			—			—			80,245

Total revenues		—			4,396			675,405			26,887			(27,881	)		678,807
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			212,129			21,892			(27,881	)		206,140
Cost of equipment		—			4,153			155,935			—			—			160,088
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			243			107,978			5,198			—			113,419
Depreciation and amortization		—			53			51,340			9,495			—			60,888
Loss on disposal of assets		—			—			2,597			31			—			2,628

Total operating expenses		—			4,449			529,979			36,616			(27,881	)		543,163

Income (loss) from operations		—			(53	)		145,426			(9,729	)		—			135,644
OTHER EXPENSE (INCOME):
Interest expense		—			52,630			(6,126	)		25,724			(26,564	)		45,664
Earnings from consolidated subsidiaries		(55,401	)		(116,367	)		—			—			171,768			—
Accretion of put option in majority-owned subsidiary		—			317			—			—			—			317
Interest and other income		(4,143	)		(27,525	)		(37	)		(231	)		26,564			(5,372	)
Impairment loss on investment securities		9,079			—			—			—			—			9,079

Total other (income) expense		(50,465	)		(90,945	)		(6,163	)		25,493			171,768			49,688
Income (loss) before provision for income taxes		50,465			90,892			151,589			(35,222	)		(171,768	)		85,956
Provision for income taxes		—			(35,491	)		—			—			—			(35,491	)

Net income (loss)	$	50,465		$	55,401		$	151,589		$	(35,222	)	$	(171,768	)	$	50,465

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Six Months Ended June 30, 2009


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	1,495,316		$	75,667		$	(77,435	)	$	1,493,548
Equipment revenues		—			7,206			154,187			—			—			161,393

Total revenues		—			7,206			1,649,503			75,667			(77,435	)		1,654,941
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			539,904			51,839			(77,435	)		514,308
Cost of equipment		—			6,721			445,698			—			—			452,419
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			485			267,622			10,624			—			278,731
Depreciation and amortization		—			102			148,569			24,450			—			173,121
(Gain) loss on disposal of assets		—			—			(11,164	)		266			—			(10,898	)

Total operating expenses		—			7,308			1,390,629			87,179			(77,435	)		1,407,681

(Loss) income from operations		—			(102	)		258,874			(11,512	)		—			247,260
OTHER EXPENSE (INCOME):
Interest expense		—			132,031			216			61,593			(64,873	)		128,967
Earnings from consolidated subsidiaries		(68,224	)		(185,584	)		—			—			253,808			—
Accretion of put option in majority-owned subsidiary		—			772			—			—			—			772
Interest and other income		(3,398	)		(62,471	)		(24	)		(7	)		64,873			(1,027	)
Impairment loss on investment securities		1,453			—			—			—			—			1,453

Total other (income) expense		(70,169	)		(115,252	)		192			61,586			253,808			130,165
Income (loss) before provision for income taxes		70,169			115,150			258,682			(73,098	)		(253,808	)		117,095
Provision for income taxes		—			(46,926	)		—			—			—			(46,926	)

Net income (loss)	$	70,169		$	68,224		$	258,682		$	(73,098	)	$	(253,808	)	$	70,169

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Six Months Ended June 30, 2008


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	1,162,751		$	39,737		$	(41,956	)	$	1,160,532
Equipment revenues		—			7,403			173,226			—			—			180,629

Total revenues		—			7,403			1,335,977			39,737			(41,956	)		1,341,161
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			394,984			41,586			(41,956	)		394,614
Cost of equipment		—			7,014			353,231			—			—			360,245
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			388			207,245			10,160			—			217,793
Depreciation and amortization		—			107			100,915			17,166			—			118,188
Loss on disposal of assets		—			—			2,615			34			—			2,649

Total operating expenses		—			7,509			1,058,990			68,946			(41,956	)		1,093,489

Income (loss) from operations		—			(106	)		276,987			(29,209	)		—			247,672
OTHER EXPENSE (INCOME):
Interest expense		—			113,642			(17,541	)		46,366			(49,384	)		93,083
Earnings from consolidated subsidiaries		(96,146	)		(219,551	)		—			—			315,697			—
Accretion of put option in majority-owned subsidiary		—			620			—			—			—			620
Interest and other income		(10,918	)		(53,122	)		(64	)		(534	)		49,384			(15,254	)
Impairment loss on investment securities		17,080			—			—			—			—			17,080

Total other (income) expense		(89,984	)		(158,411	)		(17,605	)		45,832			315,697			95,529
Income (loss) before provision for income taxes		89,984			158,305			294,592			(75,041	)		(315,697	)		152,143
Provision for income taxes		—			(62,159	)		—			—			—			(62,159	)

Net income (loss)	$	89,984		$	96,146		$	294,592		$	(75,041	)	$	(315,697	)	$	89,984

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Cash Flows

Six Months Ended June 30, 2009


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	70,169		$	68,224		$	258,682		$	(73,098	)	$	(253,808	)	$	70,169
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			102			148,569			24,450			—			173,121
Provision for uncollectible accounts receivable		—			111			—			—			—			111
Deferred rent expense		—			—			9,932			1,957			—			11,889
Cost of abandoned cell sites		—			—			2,704			1,903			—			4,607
Stock-based compensation expense		—			—			23,341			—			—			23,341
Non-cash interest expense		—			5,164			(7	)		—			—			5,157
(Gain) loss on disposal of assets		—			—			(11,164	)		266			—			(10,898	)
Accretion of asset retirement obligations		—			—			2,059			338			—			2,397
Accretion of put option in majority-owned subsidiary		—			772			—			—			—			772
Impairment loss in investment securities		1,453			—			—			—			—			1,453
Deferred income taxes		—			44,998			—			—			—			44,998
Changes in assets and liabilities		185,703			(149,674	)		(11,163	)		(4,421	)		118,431			138,876

Net cash provided by (used in) operating activities		257,325			(30,303	)		422,953			(48,605	)		(135,377	)		465,993
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		—			(4,710	)		(414,579	)		(35,821	)		—			(455,110	)
Change in prepaid purchases of property and equipment		—			14,608			—			—			—			14,608
Proceeds from sale of plant and equipment		—			—			746			2,825			—			3,571
Purchase of investments		(261,856	)		(220,000	)		—			—			220,000			(261,856	)
Proceeds from sale of investments		37,500			—			—			—			—			37,500
Purchases of and deposits for FCC licenses		—			(3,800	)		(7,892	)		—			—			(11,692	)
Proceeds from exchange of FCC licenses		—			—			949			—			—			949
Microwave relocation costs		—			—			(679	)		—			—			(679	)

Net cash (used in) provided by investing activities		(224,356	)		(213,902	)		(421,455	)		(32,996	)		220,000			(672,709	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		—			(97,227	)		—			(2,202	)		—			(99,429	)
Proceeds from long-term loan		—			—			—			220,000			(220,000	)		—
Proceeds from 9¹/4% Senior Notes Due 2014		—			492,250			—			—			—			492,250
Debt issuance costs		—			(11,925	)		—			—			—			(11,925	)
Repayment of debt		—			(8,000	)		—			(127,853	)		127,853			(8,000	)
Payments on capital lease obligations		—			—			(1,450	)		(7,524	)		7,524			(1,450	)
Proceeds from exercise of stock options		7,112			—			—			—			—			7,112

Net cash provided by (used in) financing activities		7,112			375,098			(1,450	)		82,421			(84,623	)		378,558

INCREASE IN CASH AND CASH EQUIVALENTS		40,081			130,893			48			820			—			171,842
CASH AND CASH EQUIVALENTS, beginning of period		598,823			78,121			624			20,380			—			697,948

CASH AND CASH EQUIVALENTS, end of period	$	638,904		$	209,014		$	672		$	21,200		$	—		$	869,790

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Cash Flows

Six Months Ended June 30, 2008


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	89,984		$	96,146		$	294,592		$	(75,041	)	$	(315,697	)	$	89,984
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			107			100,915			17,166			—			118,188
Provision for uncollectible accounts receivable		—			121			—			—			—			121
Deferred rent expense		—			—			11,134			1,833			—			12,967
Cost of abandoned cell sites		—			—			1,068			1,254			—			2,322
Stock-based compensation expense		—			—			19,472			—			—			19,472
Non-cash interest expense		—			1,258			(50	)		24,880			(24,883	)		1,205
Loss on disposal of assets		—			—			2,615			34			—			2,649
Accretion of asset retirement obligations		—			—			974			274			—			1,248
Accretion of put option in majority-owned subsidiary		—			620			—			—			—			620
Impairment loss in investment securities		17,080			—			—			—			—			17,080
Deferred income taxes		—			59,794			—			—			—			59,794
Changes in assets and liabilities		(86,055	)		(189,370	)		(117,935	)		(16,102	)		415,230			5,768

Net cash provided by (used in) operating activities		21,009			(31,324	)		312,785			(45,702	)		74,650			331,418
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		—			5,947			(338,720	)		(53,048	)		(2,681	)		(388,502	)
Change in prepaid purchases of property and equipment		—			(2,555	)		27,001			—			—			24,446
Proceeds from sale of plant and equipment		—			—			186			214			—			400
Proceeds from sale of investment		37			—			—			—			—			37
Purchases of and deposits for FCC licenses		—			(313,267	)		—			—			—			(313,267	)
Cash used in acquisitions		—			(25,162	)		—			—			—			(25,162	)
Microwave relocation costs		—			—			(1,117	)		—			—			(1,117	)

Net cash used in investing activities		37			(335,037	)		(312,650	)		(52,834	)		(2,681	)		(703,165	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		—			23,280			—			6,199			—			29,479
Proceeds from long-term note to parent		—			—			—			170,000			(170,000	)		—
Payments on capital lease obligations		—			—			—			(5,632	)		5,632			—
Repayment of debt		—			(8,000	)		—			(92,399	)		92,399			(8,000	)
Proceeds from exercise of stock options		8,997			—			—			—			—			8,997

Net cash provided by (used in) financing activities		8,997			15,280			—			78,168			(71,969	)		30,476

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		30,043			(351,081	)		135			(20,368	)		—			(341,271	)
CASH AND CASH EQUIVALENTS, beginning of period		801,472			633,277			444			35,015			—			1,470,208

CASH AND CASH EQUIVALENTS, end of period	$	831,515		$	282,196		$	579		$	14,647		$	—		$	1,128,937

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

19. Recent Accounting Pronouncements:

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (“SFAS No. 141(R)”), (ASC 805, “Business Combinations,” (“ASC 805”)), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS No. 141(R) (ASC 805) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) (ASC 805) was effective for financial statements issued for fiscal years beginning after December 15, 2008 and early adoption was prohibited. The implementation of this standard did not have a material impact on the Company’s financial condition, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements,” (“SFAS No. 160”), (ASC 810), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest, and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. SFAS No. 160 (ASC 810) also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. SFAS No. 160 (ASC 810) was effective for financial statements issued for fiscal years beginning after December 15, 2008 and early adoption was prohibited. The implementation of this standard did not have a material impact on the Company’s financial condition, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,” (“SFAS No. 161”), (ASC 815). SFAS No. 161 (ASC 815) requires enhanced disclosures about a company’s derivative and hedging activities. These enhanced disclosures will discuss (a) how and why a company uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 (ASC 815) and its related interpretations and (c) how derivative instruments and related hedged items affect a company’s financial position, results of operations and cash flows. SFAS No. 161 (ASC 815) was effective for fiscal years beginning on or after November 15, 2008, with earlier adoption allowed. The implementation of this standard did result in enhanced disclosures, but did not affect the Company’s financial condition, results of operations or cash flows.

In April 2008, the FASB issued FSP SFAS No. 142-3, “Determination of the Useful Life of Intangible Assets,” (“FSP SFAS No. 142-3”), (ASC 350). FSP SFAS No. 142-3 (ASC 350) amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142 (ASC 350). FSP SFAS No. 142-3 (ASC 350) was effective for fiscal years beginning after December 15, 2008. The implementation of this standard did not affect the Company’s financial condition, results of operations or cash flows.

In June 2008, the FASB issued FSP EITF No. 03-6-1, (ASC 260). Under FSP EITF 03-6-1 (ASC 260), unvested share-based payment awards that contain rights to receive non-forfeitable dividends (whether paid or unpaid) are considered participating securities, and the two-class method of computing earnings per share is required for all periods presented. FSP EITF 03-6-1 (ASC 260) was effective for fiscal years beginning after December 15, 2008, and interim periods within those years. The implementation of this standard did not have a material impact on the Company’s financial condition, results of operations or cash flows.

In April 2009, the FASB issued FSP SFAS No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” (“FSP SFAS No. 157-4”), (ASC 820). FSP SFAS No. 157-4 (ASC 820) provides additional guidance for estimating fair value in accordance with SFAS No. 157 (ASC 820) when the volume and level of activity for the asset or liability have significantly decreased. This FSP emphasizes that even if there has been a significant decrease in the volume or level of activity and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. FSP SFAS No. 157-4 (ASC 820) was effective for interim and annual reporting periods ending after June 15, 2009 and shall be applied prospectively. The implementation of this standard did not have a material impact on the Company’s financial condition, results of operations or cash flows.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

In April 2009, the FASB issued FSP SFAS No. 115-2 and SFAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” (“FSP SFAS No. 115-2 and SFAS No. 124-2”), (ASC 320, “Investments,” (“ASC 320”)). FSP SFAS No. 115-2 and SFAS No. 124-2 (ASC 320) amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP SFAS No. 115-2 and SFAS No.&