Edgar Filing: METROPCS COMMUNICATIONS INC

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 September 30, 2010

¨	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 þ 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 October 29, 2010, there were 354,414,781 shares of the registrant’s common stock, $0.0001 par value, outstanding.

METROPCS COMMUNICATIONS, INC.

Quarterly Report on Form 10-Q

Table of Contents


	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009		1
Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2010 and 2009		2
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009		3
Notes to Condensed Consolidated Interim Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 3. Quantitative and Qualitative Disclosures About Market Risk		45
Item 4. Controls and Procedures		45

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		47
Item 1A. Risk Factors		47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		*
Item 3. Defaults Upon Senior Securities		*
Item 4. (Removed and Reserved)		*
Item 5. Other Information		*
Item 6. Exhibits		48
SIGNATURES		49

*	No reportable information under this item.

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(Unaudited)


	September 30, 2010 (1)			December 31, 2009 (1)
CURRENT ASSETS:
Cash and cash equivalents	$	889,784		$	929,381
Short-term investments		1,012,632			224,932
Inventories, net		126,201			147,401
Accounts receivable (net of allowance for uncollectible accounts of $2,462 and $2,045 at September 30, 2010 and December 31, 2009, respectively)		46,737			51,536
Prepaid expenses		60,043			48,353
Deferred charges		63,677			59,414
Deferred tax assets		5,959			1,948
Other current assets		40,721			28,426

Total current assets		2,245,754			1,491,391
Property and equipment, net		3,423,533			3,252,213
Restricted cash and investments		13,632			15,438
Long-term investments		6,319			6,319
FCC licenses		2,490,629			2,470,181
Other assets		140,746			150,475

Total assets	$	8,320,613		$	7,386,017

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	418,873		$	558,366
Current maturities of long-term debt		20,446			19,326
Deferred revenue		198,128			187,654
Current portion of cash flow hedging derivatives		18,015			24,157
Other current liabilities		33,546			7,966

Total current liabilities		689,008			797,469
Long-term debt, net		4,314,105			3,625,949
Deferred tax liabilities		631,969			512,306
Deferred rents		95,950			80,487
Other long-term liabilities		82,916			81,664

Total liabilities		5,813,948			5,097,875

COMMITMENTS AND CONTINGENCIES (See Note 11)

STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.0001 per share, 100,000,000 shares authorized; no shares of preferred stock issued and outstanding at September 30, 2010 and December 31, 2009		0			0
Common stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 354,362,405 and 352,711,263 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		35			35
Additional paid-in capital		1,673,934			1,634,754
Retained earnings		844,557			664,693
Accumulated other comprehensive loss		(10,275	)		(11,340	)
Less treasury stock, at cost, 209,633 and no treasury shares at September 30, 2010 and December 31, 2009, respectively		(1,586	)		0

Total stockholders’ equity		2,506,665			2,288,142

Total liabilities and stockholders’ equity	$	8,320,613		$	7,386,017

(1) As a result of the adoption of certain provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 (Topic 810, “Consolidation”), the Company is required to separately disclose on its condensed consolidated balance sheets the assets of its consolidated variable interest entity (“VIE”) that can be used only to settle obligations of the VIE and liabilities for which creditors do not have recourse to the Company.

As of September 30, 2010, $866.4 million related to the consolidated VIE were included in the Company’s total assets, which consist of $22.0 million of cash and cash equivalents, $0.1 million of accounts receivable, net, $8.1 million of prepaid expenses, $0.6 million of other current assets, $520.1 million of property and equipment, net, $0.3 million of restricted cash and investments, $293.6 million of FCC licenses and $21.6 million of other assets.

As of December 31, 2009, $807.2 million related to the consolidated VIE were included in the Company’s total assets, which consist of $16.8 million of cash and cash equivalents, $0.1 million of accounts receivable, net, $7.6 million of prepaid expenses, $0.5 million of other current assets, $463.7 million of property and equipment, net, $0.3 million of restricted cash and investments, $293.6 million of FCC licenses and $24.6 million of other assets.

As of September 30, 2010, $45.9 million related to the consolidated VIE were included in the Company’s total liabilities, which consist of $7.0 million of accounts payable and accrued expenses, $0.3 million of current maturities of long-term debt, $14.5 million of long-term debt, net, $14.3 million of deferred rents, and $9.8 million of other long-term liabilities.

As of December 31, 2009, $33.7 million related to the consolidated VIE were included in the Company’s total liabilities, which consist of $9.4 million of accounts payable and accrued expenses, $0.1 million of current maturities of long-term debt, $4.4 million of long-term debt, net, $10.9 million of deferred rents, and $8.9 million of other long-term liabilities.

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

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except share and per share information)

(Unaudited)


	For the three months ended September 30,						For the nine months ended September 30,
	2010			2009			2010			2009
REVENUES:
Service revenues	$	942,251		$	812,340		$	2,717,671		$	2,305,888
Equipment revenues		78,538			83,253			286,156			244,646

Total revenues		1,020,789			895,593			3,003,827			2,550,534

OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense of $99,706, $88,232, $290,532 and $240,803, shown separately below)		313,688			298,288			906,508			812,596
Cost of equipment		256,265			199,092			805,357			651,511
Selling, general and administrative expenses (excluding depreciation and amortization expense of $14,098, $10,745, $40,374 and $31,294, shown separately below)		147,431			138,460			465,940			417,191
Depreciation and amortization		113,804			98,977			330,906			272,097
(Gain) loss on disposal of assets		(18,333	)		2,569			(16,461	)		(8,328	)

Total operating expenses		812,855			737,386			2,492,250			2,145,067


Income from operations		207,934			158,207			511,577			405,467

OTHER EXPENSE (INCOME):
Interest expense		65,726			70,391			198,710			199,358
Interest income		(497	)		(855	)		(1,353	)		(2,120	)
Other expense (income), net		462			397			1,396			1,407
Loss on extinguishment of debt		15,590			0			15,590			0
Impairment loss on investment securities		0			374			0			1,827

Total other expense		81,281			70,307			214,343			200,472

Income before provision for income taxes		126,653			87,900			297,234			204,995

Provision for income taxes		(49,366	)		(14,350	)		(117,370	)		(61,276	)

Net income	$	77,287		$	73,550		$	179,864		$	143,719


Other comprehensive income:
Unrealized gains on available-for-sale securities, net of tax		137			776			261			665
Unrealized losses on cash flow hedging derivatives, net of tax		(3,355	)		(8,570	)		(13,573	)		(12,197	)
Reclassification adjustment for gains on available-for-sale securities included in net income, net of tax		(74	)		(147	)		(207	)		(167	)
Reclassification adjustment for losses on cash flow hedging derivatives included in net income, net of tax		2,780			8,939			14,584			23,777

Total other comprehensive income		(512	)		998			1,065			12,078

Comprehensive income	$	76,775		$	74,548		$	180,929		$	155,797


Net income per common share: (See Note 10)
Basic	$	0.22		$	0.21		$	0.51		$	0.41

Diluted	$	0.22		$	0.21		$	0.50		$	0.40

Weighted average shares:
Basic		353,954,532			352,182,656			353,342,910			351,732,660

Diluted		356,423,216			355,359,436			355,593,779			356,511,560

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

MetroPCS Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	For the nine months ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	179,864		$	143,719
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		330,906			272,097
Provision for uncollectible accounts receivable		38			191
Deferred rent expense		15,648			17,765
Cost of abandoned cell sites		1,450			6,148
Stock-based compensation expense		35,103			35,767
Non-cash interest expense		10,049			8,176
Gain on disposal of assets		(16,461	)		(8,328	)
Loss on extinguishment of debt		15,590			0
Gain on sale of investments		(340	)		(272	)
Impairment loss on investment securities		0			1,827
Accretion of asset retirement obligations		2,772			3,716
Other non-cash expense		1,455			1,168
Deferred income taxes		114,105			85,070
Changes in assets and liabilities:
Inventories, net		21,199			67,831
Accounts receivable, net		4,761			(13,305	)
Prepaid expenses		(11,885	)		(22,123	)
Deferred charges		(4,263	)		11,121
Other assets		15,730			9,565
Accounts payable and accrued expenses		(50,921	)		171,442
Deferred revenue		10,474			12,438
Other liabilities		4,117			(24,599	)

Net cash provided by operating activities		679,391			779,414

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(547,943	)		(636,522	)
Change in prepaid purchases of property and equipment		60,348			(10,211	)
Proceeds from sale of property and equipment		7,643			4,836
Purchase of investments		(1,174,773	)		(374,227	)
Proceeds from maturity of investments		387,500			150,000
Change in restricted cash and investments		1,262			(13,112	)
Acquisitions of FCC licenses		(3,686	)		(16,567	)
Proceeds from exchange of FCC licenses		0			949

Net cash used in investing activities		(1,269,649	)		(894,854	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		(78,765	)		(100,368	)
Proceeds from senior note offerings		992,770			492,250
Debt issuance costs		(24,250	)		(11,925	)
Repayment of debt		(12,000	)		(12,000	)
Retirement of 9¹/4% Senior Notes		(327,529	)		0
Payments on capital lease obligations		(2,923	)		(2,680	)
Purchase of treasury stock		(1,586	)		0
Proceeds from exercise of stock options		4,944			7,793

Net cash provided by financing activities		550,661			373,070


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(39,597	)		257,630
CASH AND CASH EQUIVALENTS, beginning of period		929,381			697,948

CASH AND CASH EQUIVALENTS, end of period	$	889,784		$	955,578

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 condensed 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 ASC 810 as a VIE. The Company examined specific criteria and considered factors such as design of Royal Street, risk and reward sharing, voting rights, and involvement in significant capital and operating decisions in reaching its conclusion to consolidate Royal Street. 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 other current liabilities as of September 30, 2010 due to the controlling member exercising its right to put to MetroPCS Wireless, Inc. (“Wireless”) its entire membership interest in Royal Street Communications. The purchase of the membership interest in Royal Street Communications is conditioned on receipt of Federal Communications Commission (“FCC”) consent, which was granted on October 8, 2010, but has not yet become final and is expected to close on or after December 22, 2010. The redeemable ownership interest in Royal Street is included in other long-term liabilities as of December 31, 2009.

The condensed consolidated balance sheets as of September 30, 2010 and December 31, 2009, the condensed consolidated statements of income and comprehensive income and cash flows for the periods ended September 30, 2010 and 2009, 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. Certain amounts reported in previous periods have been reclassified to conform to the current period presentation. 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.

The Company has thirteen operating segments based on geographic region within the United States: Atlanta, Boston, Dallas/Fort Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota. Effective January 1, 2010, in accordance with the provisions of ASC 280 (Topic 280, “Segment Reporting”), the Company aggregates its thirteen operating segments into one reportable segment.

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. Beginning in January 2010, the Company introduced a new family of service plans, which include all applicable taxes and regulatory fees (“tax inclusive plans”). The Company reports fees for the tax inclusive plans in cost of service on the accompanying condensed consolidated statements of income and comprehensive income. When the Company separately assesses these fees on its customers for those service plans that do not include taxes or regulatory fees, the Company reports these regulatory fees on a gross basis in service revenues and cost of service on the accompanying condensed consolidated statements of income and comprehensive income. For the three months ended September 30, 2010 and 2009, the Company recorded $18.5 million and $47.5 million, respectively, of FUSF, E-911 and other fees on a gross basis. For the nine months ended September 30, 2010 and 2009, the Company recorded $63.1 million and $124.1 million, respectively, of FUSF, E-911 and other fees on a gross basis. Sales, use and excise taxes for all service plans are reported on a net basis in selling, general and administrative expenses on the accompanying condensed consolidated statements of income and comprehensive income.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

2. Share-based Payments:

In accordance with ASC 718 (Topic 718, “Compensation – Stock Compensation”), the Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments, which includes stock options granted and restricted stock awards to employees. The Company records stock-based compensation expense in cost of service and selling, general and administrative expenses. Stock-based compensation expense was $11.8 million and $12.4 million for the three months ended September 30, 2010 and 2009, respectively. Cost of service for the three months ended September 30, 2010 and 2009 includes $0.9 million and $1.1 million, respectively, of stock-based compensation. For the three months ended September 30, 2010 and 2009, selling, general and administrative expenses include $10.9 million and $11.3 million, respectively, of stock-based compensation. Stock-based compensation expense was $35.1 million and $35.8 million for the nine months ended September 30, 2010 and 2009, respectively. Cost of service for the nine months ended September 30, 2010 and 2009 includes $2.7 million and $3.1 million, respectively, of stock-based compensation. For the nine months ended September 30, 2010 and 2009, selling, general and administrative expenses include $32.4 million and $32.7 million, respectively, of stock-based compensation.

Restricted Stock Awards

Restricted stock awards are share awards that entitle the holder to receive shares of the Company’s common stock which become fully tradable upon vesting. During the three and nine months ended September 30, 2010, pursuant to the Amended and Restated MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan, the Company issued 65,000 and 1,916,674 restricted stock awards, respectively, to certain employees and, in 2010 to the directors of MetroPCS. During the three and nine months ended September 30, 2009, pursuant to the Amended and Restated MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan, the Company issued 25,600 and 1,380,710 restricted stock awards, respectively, to certain employees. The restricted stock awards granted to employees 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 during the three months ended September 30, 2010 and 2009 to be approximately $0.6 million and $0.2 million, respectively, based on the closing price of the Company’s common stock on the New York Stock Exchange on the grant dates. The Company determined the grant-date fair value of the restricted stock awards granted during the nine months ended September 30, 2010 and 2009 to be approximately $12.4 million and $19.8 million, respectively, based on the closing price of the Company’s common stock on the New York Stock Exchange on the grant dates. The estimated compensation cost of the restricted stock awards, which is equal to the fair value of the awards on the date of grant, will be recognized on a ratable basis over the four-year vesting period.

Vesting in the restricted stock awards triggers an income tax obligation for the employee that is required to be remitted to the relevant tax authorities. To effect the tax withholding, the Company has agreed to repurchase a sufficient number of common shares from the employee to cover the income tax obligation. The stock repurchase is being accounted for as treasury stock. During the three and nine months ended September 30, 2010, the Company repurchased 82,778 and 209,633 shares of stock, respectively, from certain employees to settle the income tax obligation associated with vesting in restricted stock awards.

3. Short-term Investments:

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.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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


	As of September 30, 2010
	Amortized Cost		Unrealized Gain in Accumulated OCI		Unrealized Loss in Accumulated OCI			Aggregate Fair Value
Equity Securities	$	7	$	0	$	(6	)	$	1
U.S. Treasury Securities		1,012,401		230		0			1,012,631

Total short-term investments	$	1,012,408	$	230	$	(6	)	$	1,012,632


	As of December 31, 2009
	Amortized Cost		Unrealized Gain in Accumulated OCI		Unrealized Loss in Accumulated OCI			Aggregate Fair Value
Equity Securities	$	7	$	0	$	(5	)	$	2
U.S. Treasury Securities		224,790		140		0			224,930

Total short-term investments	$	224,797	$	140	$	(5	)	$	224,932

The cost and aggregate fair values of short-term investments by contractual maturity at September 30, 2010 were as follows (in thousands):


	Amortized Cost		Aggregate Fair Value
Less than one year	$	1,012,401	$	1,012,631

4. Derivative Instruments and Hedging Activities:

In March 2009, Wireless entered into three separate two-year interest rate protection agreements to manage the Company’s interest rate risk exposure under Wireless’ senior secured credit facility, as amended, (the “Senior Secured Credit Facility”), pursuant to which Wireless may borrow up to approximately $1.7 billion. These agreements were 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 5.246%. These agreements expire on February 1, 2012.

Interest rate protection agreements are entered into to manage interest rate risk associated with Wireless’ variable-rate borrowings under the Senior Secured Credit Facility. The interest rate protection agreements have been designated as cash flow hedges. If a derivative is designated as a cash flow hedge and the hedging relationship qualifies for hedge accounting under the provisions of ASC 815 (Topic 815, “Derivatives and Hedging”), the effective portion of the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss) and reclassified to interest expense in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of a derivative qualifying for hedge accounting is recognized in earnings in the period of the change. For the three and nine months ended September 30, 2010, 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 $18.0 million of net losses that are reported in accumulated other comprehensive loss at September 30, 2010 are expected to be reclassified into earnings within the next 12 months.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Cross-default Provisions

Wireless’ interest rate protection agreements contain cross-default provisions to its Senior Secured Credit Facility. Wireless’ Senior Secured Credit Facility allows interest rate protection agreements to become secured if the counterparty to the agreement is a current lender under the Senior Secured Credit Facility. If Wireless were to default on the Senior Secured Credit Facility, it would trigger these provisions, and the counterparties to the interest rate protection agreements could request immediate payment on interest rate protection agreements in net liability positions, similar to their existing rights as a lender. There are no collateral requirements in the interest rate protection agreements. The aggregate fair value of interest rate protection agreements with cross-default provisions that are in a net liability position on September 30, 2010 is $23.2 million.


Fair Values of Derivative Instruments

(in thousands)	Liability Derivatives
	As of September 30, 2010				As of December 31, 2009
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments under ASC 815
Interest rate protection agreements	Current portion of cash flow hedging derivatives	$	(18,015	)	Current portion of cash flow hedging derivatives	$	(24,157	)
Interest rate protection agreements	Other long-term liabilities		(5,186	)	Other long-term liabilities		(702	)

Total derivatives designated as hedging instruments under ASC 815		$	(23,201	)		$	(24,859	)


The Effect of Derivative Instruments on the Condensed Consolidated Statement of Income and Comprehensive Income For the Three Months Ended September 30,
Derivatives in ASC 815 Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	2010			2009				2010			2009
Interest rate protection agreements	$	(5,591	)	$	(13,954	)	Interest expense	$	(4,663	)	$	(14,581	)


The Effect of Derivative Instruments on the Condensed Consolidated Statement of Income and Comprehensive Income For the Nine Months Ended September 30,

Derivatives in ASC 815 Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	2010			2009				2010			2009
Interest rate protection agreements	$	(22,246	)	$	(19,915	)	Interest expense	$	(23,904	)	$	(38,862	)

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

5. Property and Equipment:

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


	September 30, 2010			December 31, 2009
Construction-in-progress	$	383,328		$	283,365
Network infrastructure (1)		4,074,217			3,756,300
Office equipment and software		197,023			158,732
Leasehold improvements		57,295			55,631
Furniture and fixtures		15,887			14,033
Vehicles		401			401

		4,728,151			4,268,462
Accumulated depreciation and amortization (1)		(1,304,618	)		(1,016,249	)

Property and equipment, net	$	3,423,533		$	3,252,213

(1)

As of September 30, 2010 and December 31, 2009, approximately $203.9 million and $183.4 million, respectively, of network infrastructure assets were held by the Company under capital lease arrangements. Accumulated amortization relating to these assets totaled $20.1 million and $9.8 million as of September 30, 2010 and December 31, 2009, respectively.

6. FCC Licenses:

The Company operates wireless broadband mobile networks under licenses granted by the FCC for a particular geographic area on spectrum allocated by the FCC for terrestrial wireless broadband services. The Company holds personal communications services (“PCS”) licenses granted or acquired on various dates, and in November 2006, the Company acquired a number of advanced wireless services (“AWS”) licenses which can be used to provide services comparable to the wireless broadband mobile services provided by the Company, and other advanced wireless services. In June 2008, the Company acquired a 700 MHz license that also can be used to provide similar services. The PCS licenses previously included, and the AWS licenses currently include, the obligation and resulting costs to relocate existing fixed microwave users of the 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.

FCC Licenses on the accompanying condensed consolidated balance sheets include the Company’s microwave relocation costs. The licenses and 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 years for 700 MHz licenses, the renewal of PCS, AWS and 700 MHz licenses is generally a routine matter without substantial cost and the Company has determined that no legal, regulatory, contractual, competitive, economic, or other factors currently exist that limit the useful life of its PCS, AWS and 700 MHz licenses. As such, under the provisions of ASC 350 (Topic 350, “Intangibles-Goodwill and Other”), the Company does not amortize PCS, AWS and 700 MHz licenses and microwave relocation costs (collectively, its “indefinite-lived intangible assets”) as they are considered to have indefinite lives and together represent the cost of the Company’s spectrum. The carrying value of FCC licenses and microwave relocation costs was approximately $2.5 billion as of September 30, 2010.

In accordance with the requirements of ASC 350, the Company performs its annual indefinite-lived intangible assets impairment test as of each September 30th or more frequently if events or changes in circumstances indicate that the carrying value of the indefinite-lived intangible assets might be impaired. The impairment test consists of a comparison of the estimated fair value with the carrying value. The Company estimates the fair value of its indefinite-lived intangible assets using a direct value methodology in accordance with ASC 805 (Topic 805, “Business Combinations”). The direct value approach determines fair value using a discounted cash flow model. Cash flow projections and assumptions, although subject to a degree of uncertainty, are based on a combination of the Company’s historical performance and trends, its business plans and management’s estimate of future performance, giving consideration to existing and anticipated competitive economic conditions. Other assumptions include the weighted average cost of capital and long-term rate of growth for the business. The Company believes

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

that its estimates are consistent with assumptions that marketplace participants would use to estimate fair value. The Company corroborates its determination of fair value of the indefinite-lived intangible assets, using the discounted cash flow approach described above, with other market-based valuation metrics. An impairment loss would be recorded as a reduction in the carrying value of the related indefinite-lived intangible assets and charged to results of operations.

For the purpose of performing the annual impairment test as of September 30, 2010, the indefinite-lived intangible assets were aggregated and combined into a single unit of accounting. The Company believes that utilizing its indefinite-lived intangible assets as a group represents the highest and best use of the assets, and the value of the indefinite-lived intangible assets would not be significantly impacted by a sale of one or a portion of the indefinite-lived intangible assets, among other factors. As of September 30, 2010, no impairment was recognized as the fair value of the indefinite-lived intangible assets was in excess of the carrying value. Although the Company does not expect its estimates or assumptions to change significantly in the future, the use of different estimates or assumptions within the discounted cash flow model when determining the fair value of the indefinite-lived intangible assets or using a methodology other than a discounted cash flow model could result in different values for the indefinite-lived intangible assets and may affect any related impairment charge. The most significant assumptions within the Company’s discounted cash flow model are the discount rate, the projected growth rate and management’s future business plans. A one percent decline in annual revenue growth rates, a one percent decline in annual net cash flows or a one percent increase in discount rate would not result in an impairment related to the combined single unit of accounting as of September 30, 2010.

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

Other Spectrum Acquisitions

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

On July 27, 2010, the Company entered into a like-kind spectrum exchange agreement for licenses in certain metropolitan areas with another service provider (“Service Provider”). Consummation of this spectrum exchange agreement is subject to customary closing conditions, including final FCC consent. The Company will acquire 10 MHz of AWS spectrum in Orlando in exchange for 10 MHz of PCS spectrum in Ft. Pierce-Vero Beach-Stuart, Florida, 20 MHz of partitioned AWS spectrum in the Salt Lake City and Portland cellular marketing areas and total cash consideration of $3.0 million.

On August 23, 2010, the Company closed on a like-kind spectrum exchange agreement covering licenses in certain markets with the Service Provider. The Service Provider acquired 10 MHz of AWS spectrum in Dallas/Fort Worth, Texas; Shreveport-Bossier City, Louisiana; and an additional 10 MHz of AWS spectrum in certain other Washington markets, as well as an additional 10 MHz of PCS spectrum in Sacramento, California. The Company acquired 10 MHz of AWS spectrum in Dallas/Fort Worth, Texas and Shreveport-Bossier City, Louisiana; and an additional 10 MHz of AWS spectrum in Santa Barbara, California, and Tampa-St. Petersburg-Clearwater, Florida. The exchange of spectrum resulted in a gain on disposal of assets in the amount of $19.2 million.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

7. Accounts Payable and Accrued Expenses:

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


	September 30, 2010		December 31, 2009
Accounts payable	$	92,640	$	164,246
Book overdraft		5,673		84,438
Accrued accounts payable		110,967		131,644
Accrued liabilities		22,784		26,009
Payroll and employee benefits		38,000		30,923
Accrued interest		69,689		42,098
Taxes, other than income		71,173		71,513
Income taxes		7,947		7,495

Accounts payable and accrued expenses	$	418,873	$	558,366

8. Long-term Debt:

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


	September 30, 2010			December 31, 2009
9¹/4% Senior Notes	$	1,636,950		$	1,950,000
7⁷/8% Senior Notes		1,000,000			0
Senior Secured Credit Facility		1,536,000			1,548,000
Capital Lease Obligations		202,115			181,194

Total long-term debt		4,375,065			3,679,194
Add: unamortized discount on debt		(40,514	)		(33,919	)

Total debt		4,334,551			3,645,275
Less: current maturities		(20,446	)		(19,326	)

Total long-term debt	$	4,314,105		$	3,625,949

9¹/4% Senior Notes due 2014

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

The 9¹/4% Senior Notes are unsecured obligations and are guaranteed by MetroPCS, MetroPCS, Inc., and all of Wireless’ direct and indirect wholly-owned subsidiaries, but are not guaranteed by Royal Street and MetroPCS Finance, Inc. (“MetroPCS Finance”). 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. Wireless may also, at its option, prior to November 1, 2010, redeem some or all of the 9¹/4% Senior Notes at the “make whole” price set forth in the indentures governing the 9¹/4% Senior Notes.

On September 21, 2010, Wireless completed a cash tender offer to purchase $313.1 million of outstanding aggregate principal amount of the initial and additional 9¹/4% Senior Notes at a price equal to 104.625% (the “Tender Offer”) for total cash consideration of $327.5 million. The Tender Offer resulted in a loss on extinguishment of debt in the amount of $15.6 million.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

7⁷/8% Senior Notes due 2018

On September 21, 2010, Wireless completed the sale of $1.0 billion of principal amount of 7⁷/8% Senior Notes due 2018 (“7⁷/8% Senior Notes”). The terms of the 7⁷/8% Senior Notes are governed by the indenture and the first supplemental indenture, dated September 21, 2010, among Wireless, the guarantors party thereto and the trustee. The net proceeds of the sale of the 7⁷/8% Senior Notes were $974.9 million after underwriter fees, discounts and other debt issuance costs of $25.1 million.

Senior Secured Credit Facility

Wireless entered into the Senior Secured Credit Facility, as amended, which consists of a $1.6 billion term loan facility and a $100.0 million revolving credit facility. On November 3, 2006, Wireless borrowed $1.6 billion under the Senior Secured Credit Facility. The term loan facility is repayable in quarterly installments in annual aggregate amounts equal to 1% of the initial aggregate principal amount of $1.6 billion. The term loan facility will mature in November 2013 and the revolving credit facility will mature in November 2011.

On July 16, 2010, Wireless entered into an Amendment and Restatement and Resignation and Appointment Agreement (the “Amendment”) which amends and restates the Senior Secured Credit Facility. The Amendment amends the Senior Secured Credit Facility to, among other things, extend the maturity of $1.0 billion of existing term loans under the Senior Secured Credit Facility to November 2016, increase the interest rate to LIBOR plus 3.50% on the extended portion only and reduce the revolving credit facility from $100.0 million to $67.5 million. The remaining $536.0 million will mature in 2013 and the interest rate continues to be LIBOR plus 2.25%. This modification did not result in a loss on extinguishment of debt.

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 and MetroPCS Finance, 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 by Wireless 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.

Under the Senior Secured Credit Facility, Wireless is subject to certain limitations, including limitations on its ability to incur additional debt, make certain restricted payments, sell assets, make certain investments or acquisitions, grant liens and pay dividends. Wireless is also subject to certain financial covenants, including maintaining a maximum senior secured consolidated leverage ratio and, under certain circumstances, maximum consolidated leverage and minimum fixed charge coverage ratios.

The interest rate on the outstanding debt under the Senior Secured Credit Facility is variable. The rate as of September 30, 2010 was 4.593%, which includes the impact of Wireless’ interest rate protection agreements (See Note 4).

Capital Lease Obligations

The Company has entered into various non-cancelable capital lease agreements, with varying expiration terms through 2025. Assets and future obligations related to capital leases are included in the accompanying condensed consolidated balance sheets in property and equipment and long-term debt, respectively. Depreciation of assets held under capital leases is included in depreciation and amortization expense. As of September 30, 2010, the Company had approximately $202.1 million of capital lease obligations, with $4.4 million and $197.7 million recorded in current maturities of long-term debt and long-term debt, respectively.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

9. Fair Value Measurements:

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

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

•

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

•

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

•

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

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

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

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

The following table summarizes assets and liabilities measured at fair value on a recurring basis at September 30, 2010, as required by ASC 820 (in thousands):


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	889,784	$	0	$	0	$	889,784
Short-term investments		1,012,632		0		0		1,012,632
Restricted cash and investments		13,632		0		0		13,632
Long-term investments		0		0		6,319		6,319

Total assets measured at fair value	$	1,916,048	$	0	$	6,319	$	1,922,367


Liabilities
Derivative liabilities	$	0	$	23,201	$	0	$	23,201

Total liabilities measured at fair value	$	0	$	23,201	$	0	$	23,201

The following table summarizes assets and liabilities measured at fair value on a recurring basis at December 31, 2009, as required by ASC 820 (in thousands):


	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	929,381	$	0	$	0	$	929,381
Short-term investments		224,932		0		0		224,932
Restricted cash and investments		15,438		0		0		15,438
Long-term investments		0		0		6,319		6,319

Total assets measured at fair value	$	1,169,751	$	0	$	6,319	$	1,176,070


Liabilities
Derivative liabilities	$	0	$	24,859	$	0	$	24,859

Total liabilities measured at fair value	$	0	$	24,859	$	0	$	24,859

The following table summarizes the changes in fair value of the Company’s derivative liabilities included in Level 2 assets, as required by ASC 820 (in thousands):


Fair Value Measurements of Derivative Liabilities Using Level 2 Inputs	Derivative Liabilities
	Three Months Ended September 30,
	2010			2009
Beginning balance	$	22,273		$	36,643
Total losses (realized or unrealized):
Included in earnings (1)		4,663			14,581
Included in accumulated other comprehensive loss		(5,591	)		(13,954	)
Transfers in and/or out of Level 2		0			0
Purchases, sales, issuances and settlements		0			0

Ending balance	$	23,201		$	36,016

(1)	Losses included in earnings that are attributable to the reclassification of the effective portion of those derivative liabilities still held at the reporting date as reported in interest expense in the condensed consolidated statements of income and comprehensive income.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)


Fair Value Measurements of Derivative Liabilities Using Level 2 Inputs	Derivative Liabilities
	Nine Months Ended September 30,
	2010			2009
Beginning balance	$	24,859		$	54,963
Total losses (realized or unrealized):
Included in earnings (2)		23,904			38,862
Included in accumulated other comprehensive loss		(22,246	)		(19,915	)
Transfers in and/or out of Level 2		0			0
Purchases, sales, issuances and settlements		0			0

Ending balance	$	23,201		$	36,016

(2)	Losses included in earnings that are attributable to the reclassification of the effective portion of those derivative liabilities still held at the reporting date as reported in interest expense in the condensed consolidated statements of income and comprehensive income.

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


Fair Value Measurements of Assets Using Level 3 Inputs	Long-Term Investments
	Three Months Ended September 30,
	2010		2009
Beginning balance	$	6,319	$	3,837
Total losses (realized or unrealized):
Included in earnings (3)		0		374
Included in accumulated other comprehensive loss		0		(383	)
Transfers in and/or out of Level 3		0		0
Purchases, sales, issuances and settlements		0		0

Ending balance	$	6,319	$	3,846

(3)	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.


Fair Value Measurements of Assets Using Level 3 Inputs	Long-Term Investments
	Nine Months Ended September 30,
	2010		2009
Beginning balance	$	6,319	$	5,986
Total losses (realized or unrealized):
Included in earnings (4)		0		1,827
Included in accumulated other comprehensive loss		0		313
Transfers in and/or out of Level 3		0		0
Purchases, sales, issuances and settlements		0		0

Ending balance	$	6,319	$	3,846

(4)	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.

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.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

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


	September 30, 2010				December 31, 2009
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Secured Credit Facility	$	1,536,000	$	1,505,280	$	1,548,000	$	1,470,600
9¹/4% Senior Notes		1,636,950		1,714,705		1,950,000		1,979,250
7⁷/8% Senior Notes		1,000,000		1,015,000		0		0
Cash flow hedging derivatives		23,201		23,201		24,859		24,859
Short-term investments		1,012,632		1,012,632		224,932		224,932
Long-term investments		6,319		6,319		6,319		6,319

Although the Company has determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgment is required in interpreting market data to develop fair value estimates. The fair value estimates are based on information available at September 30, 2010 and December 31, 2009 and have not been revalued since those dates. As such, the Company’s estimates are not necessarily indicative of the amount that the Company, or holders of the instruments, could realize in a current market exchange and current estimates of fair value could differ significantly.

10. Net Income Per Common Share:

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Basic EPS:
Net income applicable to common stock	$	77,287	$	73,550	$	179,864	$	143,719
Amount allocable to common shareholders		99.2%		99.6%		99.2%		99.6%

Rights to undistributed earnings	$	76,695	$	73,272	$	178,482	$	143,175

Weighted average shares outstanding—basic		353,954,532		352,182,656		353,342,910		351,732,660

Net income per common share—basic	$	0.22	$	0.21	$	0.51	$	0.41

Diluted EPS:
Rights to undistributed earnings	$	76,695	$	73,272	$	178,482	$	143,175

Weighted average shares outstanding—basic		353,954,532		352,182,656		353,342,910		351,732,660
Effect of dilutive securities:
Stock options		2,468,684		3,176,780		2,250,869		4,778,900

Weighted average shares outstanding—diluted		356,423,216		355,359,436		355,593,779		356,511,560

Net income per common share—diluted	$	0.22	$	0.21	$	0.50	$	0.40

In accordance with ASC 260 (Topic 260, “Earnings Per Share”), unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents, whether paid or unpaid, are considered a “participating security” for purposes of computing earnings or loss per common share and the two-class method of computing earnings per share is required for all periods presented. During the three and nine months ended September 30, 2010 and 2009, the Company issued restricted stock awards. Unvested shares of restricted stock are participating securities such that they have rights to receive forfeitable dividends. In accordance with ASC 260, the unvested restricted stock was considered a “participating security” for purposes of computing earnings per common share and was therefore included in the computation of basic and diluted earnings per common share.

Under the restricted stock award agreements, unvested shares of restricted stock have rights to receive non-forfeitable dividends. For the three and nine months ended September 30, 2010 and 2009, the Company has calculated 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. For the three and nine months ended September 30, 2010, approximately 2.7 million of 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 and nine months ended September 30, 2009, approximately 1.3 million of 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.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

For the three months ended September 30, 2010 and 2009, 22.3 million and 23.0 million, respectively, of stock options were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive. For the nine months ended September 30, 2010 and 2009, 25.2 million and 15.7 million, respectively, of stock options were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive.

11. Commitments and Contingencies:

The Company has entered into pricing agreements with various handset manufacturers for the purchase of wireless handsets at specified prices. The terms of these agreements expire on various dates through June 30, 2011. The total aggregate commitment outstanding under these pricing agreements is approximately $62.3 million.

Litigation

The Company is involved in litigation from time to time, including litigation regarding intellectual property claims, that it considers to be in the normal course of business. Legal proceedings are inherently unpredictable, and the matters in which the Company is involved often present complex legal and factual issues. The Company intends to vigorously pursue defenses in all matters in which it is involved and engage in discussions where possible to resolve these matters on terms favorable to the Company. The Company believes that any amounts alleged in the matters discussed below for which it is allegedly liable are not necessarily meaningful indicators of the Company’s potential liability. The Company determines whether it should accrue an estimated loss for a contingency in a particular legal proceeding by assessing whether a loss is deemed probable and can be reasonably estimated. The Company reassesses its views on estimated losses on a quarterly basis to reflect the impact of any developments in the matters in which it is involved. It is possible, however, that the Company’s business, financial condition and results of operations in future periods could be materially adversely affected by increased expense, significant settlement costs and/or unfavorable damage awards relating to such matters. Other than the matter listed below, the Company is not currently party to any pending legal proceedings that it believes could, individually or in the aggregate, have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

The Company, certain current officers and a director (collectively, the “defendants”) have been named as defendants in a securities class action lawsuit filed on December 15, 2009 in the United States District Court for the Northern District of Texas, Civil Action No. 3:09-CV-2392. Plaintiff alleges that the defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Section 20(a) of the Exchange Act. The complaint alleges that the defendants made false and misleading statements about the Company’s business, prospects and operations. The claims are based upon various alleged public statements made during the period from February 26, 2009 through November 4, 2009. The lawsuit seeks, among other relief, a determination that the alleged claims may be asserted on a class-wide basis, unspecified compensatory damages, attorneys’ fees, other expenses, and costs. Defendants’ filed a motion to dismiss on August 9, 2010. Plaintiff filed its opposition to Defendant’s motion to dismiss on September 8, 2010, and Defendants’ reply was filed on October 8, 2010. Due to the complex nature of the legal and factual issues involved in this action, the outcome is not presently determinable nor is a loss considered probable or reasonably estimatable. If this matter were to proceed beyond the pleading stage, the Company could be required to incur substantial costs and expenses to defend this matter and/or be required to pay substantial damages or settlement costs, which could materially adversely affect the Company’s business, financial condition and results of operations.

12. Supplemental Cash Flow Information:


	Nine Months Ended September 30,
	2010		2009
	(in thousands)
Cash paid for interest	$	160,741	$	136,675
Cash paid for income taxes		2,359		3,712

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Non-cash investing activities

The Company’s accrued purchases of property and equipment were $71.1 million and $11.1 million as of September 30, 2010 and 2009, respectively. Included within the Company’s accrued purchases are estimates by management for construction services received based on a percentage of completion.

During the nine months ended September 30, 2010, the Company returned obsolete network infrastructure assets to one of its vendors in exchange for $19.9 million in credit towards the purchase of additional network infrastructure assets with the vendor.

Assets acquired under capital lease obligations were $23.6 million and $51.8 million for the nine months ended September 30, 2010 and 2009, respectively.

During the nine months ended September 30, 2010 and 2009, the Company received $22.0 million and $52.3 million, respectively, in fair value of FCC licenses in exchanges with other parties.

13. Related-Party Transactions:

One of the Company’s current directors is a managing director of various investment funds affiliated with one of the Company’s greater than 5% stockholders. These funds own in the aggregate an approximate 17% interest in a company that provides services to the Company’s customers, including handset insurance programs. 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. Transactions associated with these services are included in various line items in the accompanying condensed consolidated balance sheets and condensed consolidated statements of income and comprehensive income. The Company had the following transactions with this related-party (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Fees received by the Company as compensation for providing billing and collection services included in service revenues	$	2.3	$	2.0	$	6.8	$	5.8

Handsets sold to the related-party included in equipment revenues		5.4		4.3		15.4		11.5


	September 30, 2010		December 31, 2009
Accruals for fees collected from customers included in accounts payable and accrued expenses	$	4.7	$	4.2
Receivables from the related-party included in other current assets		1.7		1.2

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. Pursuant to an additional agreement with this related-party, the Company receives compensation for providing access to the Company’s line information database/calling name data storage to the related-party. Transactions associated with these services are included in various line items in the accompanying condensed consolidated statements of income and comprehensive income. The Company had the following transactions with this related-party (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Fees received by the Company as compensation for providing access to the Company’s line information database /calling name data storage included in service revenues	$	1.1	$	0	$	1.7	$	0
Fees paid by the Company for wireless caller ID with name services included in cost of service		2.2		0.3		5.4		0.6

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

One of the Company’s current directors is a managing director of various investment funds affiliated with one of the Company’s greater than 5% stockholders. These funds own in the aggregate an approximate 16% interest in a company that provides advertising services to the Company. The Company paid approximately $1.2 million and $1.3 million to the company for these services during the three months ended September 30, 2010 and 2009, respectively. The Company paid approximately $4.0 million and $3.8 million to the company for these services during the nine months ended September 30, 2010 and 2009, respectively.

One of the Company’s current directors is a managing director of various investment funds affiliated with one of the Company’s greater than 5% stockholders. These funds own in the aggregate an approximate 63% interest in a company that provides DAS leases and maintenance to wireless carriers, including the Company. In addition, another of the Company’s current directors is a general partner of various investment funds which own in the aggregate an approximate 13% interest in the same company. These DAS leases are accounted for as capital or operating leases in the Company’s financial statements. Transactions associated with these leases are included in various line items in the accompanying condensed consolidated balance sheets, condensed consolidated statements of income and comprehensive income, and condensed consolidated statements of cash flows. The Company had the following transactions with this related-party (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Operating lease payments and related expenses included in cost of service	$	2.5	$	3.9	$	7.6	$	9.3
Capital lease maintenance expenses included in cost of service		1.0		0.4		3.3		1.2
DAS equipment depreciation included in depreciation expense		6.0		3.2		17.7		10.2
Capital lease interest included in interest expense		3.6		2.9		10.6		8.6


	September 30, 2010		December 31, 2009
Network service fees included in prepaid charges	$	2.6	$	2.3
DAS equipment included in property and equipment, net		291.4		257.0
Deferred network service fees included in other assets		18.3		22.1
Lease payments and related fees included in accounts payable and accrued expenses		2.4		4.9
Current portion of capital lease obligations included in current maturities of long-term debt		3.7		2.8
Non-current portion of capital lease obligations included in long-term debt, net		166.3		146.0
Deferred DAS service fees included in other long-term liabilities		1.7		1.3

	Nine Months Ended September 30,
	2010		2009
Capital lease payments included in financing activities	$	2.3	$	2.2

14. Guarantor Subsidiaries:

In connection with Wireless’ sale of the 9¹/4% Senior Notes and 7⁷/8% Senior Notes and its entry into the Senior Secured Credit Facility, MetroPCS, MetroPCS Inc., and each of Wireless’ direct and indirect present and future wholly-owned domestic subsidiaries (the “guarantor subsidiaries”), provided guarantees on the 9¹/4% Senior Notes, 7⁷/8% 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 and 7⁷/8% 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 and 7⁷/8% Senior Notes. Royal Street and MetroPCS Finance (the “non-guarantor subsidiaries”) are not guarantors of the 9¹/4% Senior Notes, 7⁷/8% Senior Notes or the Senior Secured Credit Facility.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

The following information presents condensed consolidating balance sheets as of September 30, 2010 and December 31, 2009, condensed consolidating statements of income for the three and nine months ended September 30, 2010 and 2009, and condensed consolidating statements of cash flows for the nine months ended September 30, 2010 and 2009 of the parent company (MetroPCS), the issuer (Wireless), the guarantor subsidiaries and the non-guarantor subsidiaries (Royal Street and MetroPCS Finance). Investments in subsidiaries held by the parent company and the issuer have been presented using the equity method of accounting.

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Balance Sheet

As of September 30, 2010


	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CURRENT ASSETS:
Cash and cash equivalents	$	500,498		$	366,670		$	665	$	21,951		$	0		$	889,784
Short-term investments		374,862			637,770			0		0			0			1,012,632
Inventories, net		0			117,018			9,183		0			0			126,201
Accounts receivable, net		0			46,591			0		146			0			46,737
Prepaid expenses		0			293			51,639		8,111			0			60,043
Deferred charges		0			63,677			0		0			0			63,677
Deferred tax assets		0			5,959			0		0			0			5,959
Current receivable from subsidiaries		0			707,765			0		17,975			(725,740	)		0
Advances to subsidiaries		642,052			586,372			0		3,463			(1,231,887	)		0
Other current assets		87			21,504			18,520		610			0			40,721

Total current assets		1,517,499			2,553,619			80,007		52,256			(1,957,627	)		2,245,754
Property and equipment, net		0			46,686			2,813,915		562,932			0			3,423,533
Restricted cash and investments		0			13,307			0		325			0			13,632
Long-term investments		6,319			0			0		0			0			6,319
Investment in subsidiaries		984,468			2,550,681			0		0			(3,535,149	)		0
FCC licenses		0			3,800			2,193,230		293,599			0			2,490,629
Long-term receivable from subsidiaries		0			712,201			0		0			(712,201	)		0
Other assets		0			64,884			54,232		21,630			0			140,746

Total assets	$	2,508,286		$	5,945,178		$	5,141,384	$	930,742		$	(6,204,977	)	$	8,320,613

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	5		$	102,340		$	291,531	$	24,997		$	0		$	418,873
Current maturities of long-term debt		0			16,000			3,088		1,358			0			20,446
Current payable to subsidiaries		0			0			17,975		707,765			(725,740	)		0
Deferred revenue		0			38,760			159,368		0			0			198,128
Current portion of cash flow hedging derivatives		0			18,015			0		0			0			18,015
Advances from subsidiaries		0			0			1,229,233		2,654			(1,231,887	)		0
Other current liabilities		0			26,182			7,332		32			0			33,546

Total current liabilities		5			201,297			1,708,527		736,806			(1,957,627	)		689,008
Long-term debt		0			4,116,436			139,937		57,732			0			4,314,105
Long-term payable to subsidiaries		0			0			0		712,201			(712,201	)		0
Deferred tax liabilities		1,616			630,353			0		0			0			631,969
Deferred rents		0			0			81,682		14,268			0			95,950
Other long-term liabilities		0			12,624			60,495		9,797			0			82,916

Total liabilities		1,621			4,960,710			1,990,641		1,530,804			(2,669,828	)		5,813,948
STOCKHOLDERS’ EQUITY:
Preferred stock		0			0			0		0			0			0
Common stock		35			0			0		0			0			35
Additional paid-in capital		1,673,934			0			0		20,000			(20,000	)		1,673,934
Retained earnings (deficit)		844,557			996,928			3,150,743		(620,062	)		(3,527,609	)		844,557
Accumulated other comprehensive (loss) income		(10,275	)		(12,460	)		0		0			12,460			(10,275	)
Less treasury stock, at cost		(1,586	)		0			0		0			0			(1,586	)

Total stockholders’ equity		2,506,665			984,468			3,150,743		(600,062	)		(3,535,149	)		2,506,665

Total liabilities and stockholders’ equity	$	2,508,286		$	5,945,178		$	5,141,384	$	930,742		$	(6,204,977	)	$	8,320,613

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Balance Sheet

As of December 31, 2009


	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CURRENT ASSETS:
Cash and cash equivalents	$	642,089		$	269,836		$	682	$	16,774		$	0		$	929,381
Short-term investments		224,932			0			0		0			0			224,932
Inventories, net		0			131,599			15,802		0			0			147,401
Accounts receivable, net		0			51,438			0		98			0			51,536
Prepaid expenses		0			201			40,547		7,605			0			48,353
Deferred charges		0			59,414			0		0			0			59,414
Deferred tax assets		0			1,948			0		0			0			1,948
Current receivable from subsidiaries		0			423,275			0		14,574			(437,849	)		0
Advances to subsidiaries		610,505			999,234			0		866			(1,610,605	)		0
Other current assets		199			7,848			19,913		466			0			28,426

Total current assets		1,477,725			1,944,793			76,944		40,383			(2,048,454	)		1,491,391
Property and equipment, net		0			34,128			2,722,813		495,272			0			3,252,213
Restricted cash and investments		0			15,113			0		325			0			15,438
Long-term investments		6,319			0			0		0			0			6,319
Investment in subsidiaries		804,847			2,162,686			0		0			(2,967,533	)		0
FCC licenses		0			3,800			2,172,782		293,599			0			2,470,181
Long-term receivable from subsidiaries		0			829,360			0		0			(829,360	)		0
Other assets		0			92,973			32,885		24,617			0			150,475

Total assets	$	2,288,891		$	5,082,853		$	5,005,424	$	854,196		$	(5,845,347	)	$	7,386,017

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	0		$	223,973		$	310,097	$	24,296		$	0		$	558,366
Current maturities of long-term debt		0			16,000			2,451		875			0			19,326
Current payable to subsidiaries		0			0			14,574		423,275			(437,849	)		0
Deferred revenue		0			38,502			149,152		0			0			187,654
Current portion of cash flow hedging derivatives		0			24,157			0		0			0			24,157
Advances from subsidiaries		0			0			1,610,605		0			(1,610,605	)		0
Other current liabilities		0			84			7,851		31			0			7,966

Total current liabilities		0			302,716			2,094,730		448,477			(2,048,454	)		797,469
Long-term debt		0			3,448,081			142,096		35,772			0			3,625,949
Long-term payable to subsidiaries		0			0			0		829,360			(829,360	)		0
Deferred tax liabilities		749			511,557			0		0			0			512,306
Deferred rents		0			0			69,574		10,913			0			80,487
Other long-term liabilities		0			15,652			57,084		8,928			0			81,664

Total liabilities		749			4,278,006			2,363,484		1,333,450			(2,877,814	)		5,097,875
STOCKHOLDERS’ EQUITY:
Preferred stock		0			0			0		0			0			0
Common stock		35			0			0		0			0			35
Additional paid-in capital		1,634,754			0			0		20,000			(20,000	)		1,634,754
Retained earnings (deficit)		664,693			818,343			2,641,940		(499,254	)		(2,961,029	)		664,693
Accumulated other comprehensive (loss) income		(11,340	)		(13,496	)		0		0			13,496			(11,340	)

Total stockholders’ equity		2,288,142			804,847			2,641,940		(479,254	)		(2,967,533	)		2,288,142

Total liabilities and stockholders’ equity	$	2,288,891		$	5,082,853		$	5,005,424	$	854,196		$	(5,845,347	)	$	7,386,017

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Three Months Ended September 30, 2010


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	0		$	0		$	946,773		$	54,516		$	(59,038	)	$	942,251
Equipment revenues		0			4,437			74,101			0			0			78,538

Total revenues		0			4,437			1,020,874			54,516			(59,038	)		1,020,789
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		0			0			339,145			33,581			(59,038	)		313,688
Cost of equipment		0			4,118			252,147			0			0			256,265
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		0			320			142,031			5,080			0			147,431
Depreciation and amortization		0			53			95,186			18,565			0			113,804
(Gain) loss on disposal of assets		0			0			(18,315	)		(18	)		0			(18,333	)

Total operating expenses		0			4,491			810,194			57,208			(59,038	)		812,855

(Loss) income from operations		0			(54	)		210,680			(2,692	)		0			207,934
OTHER EXPENSE (INCOME):
Interest expense		0			63,136			2,358			40,541			(40,309	)		65,726
Interest income		(456	)		(40,319	)		(31	)		0			40,309			(497	)
Other expense (income), net		0			492			947			(977	)		0			462
Earnings from consolidated subsidiaries		(76,831	)		(165,150	)		0			0			241,981			0
Loss on extinguishment of debt		0			15,590			0			0			0			15,590

Total other (income) expense		(77,287	)		(126,251	)		3,274			39,564			241,981			81,281
Income (loss) before provision for income taxes		77,287			126,197			207,406			(42,256	)		(241,981	)		126,653
Provision for income taxes		0			(49,366	)		0			0			0			(49,366	)

Net income (loss)	$	77,287		$	76,831		$	207,406		$	(42,256	)	$	(241,981	)	$	77,287

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Three Months Ended September 30, 2009


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	0		$	0		$	813,265		$	42,088		$	(43,013	)	$	812,340
Equipment revenues		0			4,335			78,918			0			0			83,253

Total revenues		0			4,335			892,183			42,088			(43,013	)		895,593
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		0			0			314,582			26,719			(43,013	)		298,288
Cost of equipment		0			4,086			195,006			0			0			199,092
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		0			249			132,984			5,227			0			138,460
Depreciation and amortization		0			73			85,634			13,270			0			98,977
Loss (gain) on disposal of assets		0			0			2,731			(162	)		0			2,569

Total operating expenses		0			4,408			730,937			45,054			(43,013	)		737,386

(Loss) income from operations		0			(73	)		161,246			(2,966	)		0			158,207
OTHER EXPENSE (INCOME):
Interest expense		0			69,184			1,678			33,942			(34,413	)		70,391
Interest income		(703	)		(34,459	)		(101	)		(5	)		34,413			(855	)
Other expense (income), net		0			397			0			0			0			397
Earnings from consolidated subsidiaries		(73,221	)		(122,766	)		0			0			195,987			0
Impairment loss on investment securities		374			0			0			0			0			374

Total other (income) expense		(73,550	)		(87,644	)		1,577			33,937			195,987			70,307
Income (loss) before provision for income taxes		73,550			87,571			159,669			(36,903	)		(195,987	)		87,900
Provision for income taxes		0			(14,350	)		0			0			0			(14,350	)

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

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Nine Months Ended September 30, 2010


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	0		$	0		$	2,726,002		$	153,377		$	(161,708	)	$	2,717,671
Equipment revenues		0			13,908			272,248			0			0			286,156

Total revenues		0			13,908			2,998,250			153,377			(161,708	)		3,003,827
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		0			0			975,689			92,527			(161,708	)		906,508
Cost of equipment		0			13,153			792,204			0			0			805,357
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		0			756			449,986			15,198			0			465,940
Depreciation and amortization		0			137			278,391			52,378			0			330,906
(Gain) loss on disposal of assets		0			(19	)		(16,071	)		(371	)		0			(16,461	)

Total operating expenses		0			14,027			2,480,199			159,732			(161,708	)		2,492,250

(Loss) income from operations		0			(119	)		518,051			(6,355	)		0			511,577
OTHER EXPENSE (INCOME):
Interest expense		0			191,338			6,655			117,145			(116,428	)		198,710
Interest income		(1,279	)		(116,448	)		(49	)		(5	)		116,428			(1,353	)
Other expense (income), net		0			1,441			2,643			(2,688	)		0			1,396
Earnings from consolidated subsidiaries		(178,585	)		(387,995	)		0			0			566,580			0
Loss on extinguishment of debt		0			15,590			0			0			0			15,590

Total other (income) expense		(179,864	)		(296,074	)		9,249			114,452			566,580			214,343
Income (loss) before provision for income taxes		179,864			295,955			508,802			(120,807	)		(566,580	)		297,234
Provision for income taxes		0			(117,370	)		0			0			0			(117,370	)

Net income (loss)	$	179,864		$	178,585		$	508,802		$	(120,807	)	$	(566,580	)	$	179,864

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Income

Nine Months Ended September 30, 2009


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	0		$	0		$	2,308,579		$	117,756		$	(120,447	)	$	2,305,888
Equipment revenues		0			11,541			233,105			0			0			244,646

Total revenues		0			11,541			2,541,684			117,756			(120,447	)		2,550,534
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		0			0			854,485			78,558			(120,447	)		812,596
Cost of equipment		0			10,808			640,703			0			0			651,511
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		0			734			400,607			15,850			0			417,191
Depreciation and amortization		0			174			234,203			37,720			0			272,097
(Gain) loss on disposal of assets		0			0			(8,432	)		104			0			(8,328	)

Total operating expenses		0			11,716			2,121,566			132,232			(120,447	)		2,145,067

(Loss) income from operations		0			(175	)		420,118			(14,476	)		0			405,467
OTHER EXPENSE (INCOME):
Interest expense		0			201,215			1,894			95,535			(99,286	)		199,358
Interest income		(4,101	)		(97,168	)		(125	)		(12	)		99,286			(2,120	)
Other expense (income), net		0			1,407			0			0			0			1,407
Earnings from consolidated subsidiaries		(141,445	)		(308,350	)		0			0			449,795			0
Impairment loss on investment securities		1,827			0			0			0			0			1,827

Total other (income) expense		(143,719	)		(202,896	)		1,769			95,523			449,795			200,472
Income (loss) before provision for income taxes		143,719			202,721			418,349			(109,999	)		(449,795	)		204,995
Provision for income taxes		0			(61,276	)		0			0			0			(61,276	)

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

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Cash Flows

Nine Months Ended September 30, 2010


	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	179,864		$	178,585		$	508,802		$	(120,807	)	$	(566,580	)	$	179,864
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		0			137			278,391			52,378			0			330,906
Provision for uncollectible accounts receivable		0			38			0			0			0			38
Deferred rent expense		0			0			12,152			3,496			0			15,648
Cost of abandoned cell sites		0			0			1,426			24			0			1,450
Stock-based compensation expense		0			0			35,103			0			0			35,103
Non-cash interest expense		0			10,049			0			0			0			10,049
Gain on disposal of assets		0			(19	)		(16,071	)		(371	)		0			(16,461	)
Loss on extinguishment of debt		0			15,590			0			0			0			15,590
Gain on sale of investments		(340	)		0			0			0			0			(340	)
Accretion of asset retirement obligations		0			0			2,473			299			0			2,772
Other non-cash expense		0			1,455			0			0			0			1,455
Deferred income taxes		0			114,107			0			(2	)		0			114,105
Changes in assets and liabilities		(178,467	)		(324,788	)		(67,914	)		(6,199	)		566,580			(10,788	)

Net cash provided by (used in) operating activities		1,057			(4,846	)		754,362			(71,182	)		0			679,391
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		0			(141,945	)		(334,550	)		(71,448	)		0			(547,943	)
Change in prepaid purchases of property and equipment		0			60,348			0			0			0			60,348
Proceeds from sale of plant and equipment		0			0			1,003			6,640			0			7,643
Purchase of investments		(537,003	)		(637,770	)		0			0			0			(1,174,773	)
Proceeds from maturity of investments		387,500			0			0			0			0			387,500
Change in restricted cash and investments		0			1,262			0			0			0			1,262
Change in advances – affiliates		3,497			428,393			0			0			(431,890	)		0
Issuance of affiliate debt		0			(543,000	)		0			0			543,000			0
Proceeds from affiliate debt		0			385,664			0			0			(385,664	)		0
Acquisitions of FCC licenses		0			0			(3,686	)		0			0			(3,686	)

Net cash used in investing activities		(146,006	)		(447,048	)		(337,233	)		(64,808	)		(274,554	)		(1,269,649	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		0			(80,263	)		0			1,498			0			(78,765	)
Proceeds from long-term loan		0			0			0			543,000			(543,000	)		0
Proceeds from senior note offerings		0			992,770			0			0			0			992,770
Change in advances – affiliates		0			0			(414,488	)		(17,402	)		431,890			0
Debt issuance costs		0			(24,250	)		0			0			0			(24,250	)
Repayment of debt		0			(12,000	)		0			(385,664	)		385,664			(12,000	)
Retirement of 9¹/4% Senior Notes		0			(327,529	)		0			0			0			(327,529	)
Payments on capital lease obligations		0			0			(2,658	)		(265	)		0			(2,923	)
Purchase of treasury stock		(1,586	)		0			0			0			0			(1,586	)
Proceeds from exercise of stock options		4,944			0			0			0			0			4,944

Net cash provided by (used in) financing activities		3,358			548,728			(417,146	)		141,167			274,554			550,661

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(141,591	)		96,834			(17	)		5,177			0			(39,597	)
CASH AND CASH EQUIVALENTS, beginning of period		642,089			269,836			682			16,774			0			929,381

CASH AND CASH EQUIVALENTS, end of period	$	500,498		$	366,670		$	665		$	21,951		$	0		$	889,784

MetroPCS Communications, Inc. and Subsidiaries

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

Consolidated Statement of Cash Flows

Nine Months Ended September 30, 2009

Parent

Issuer

Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Eliminations

Consolidated

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES: