We believe that the success of our business is a function of our performance relative to a number of key drivers. The drivers can be summarized in our ability to attract and retain customers by profitably providing superior service at competitive rates. We continually monitor our performance against these key drivers by evaluating several metrics. In addition to adjusted operating income (adjusted operating income represents the profitability measure of our segments
- see Note 9 to the unaudited Condensed Consolidated Financial Statements for reconciliation to the appropriate measure under accounting principles generally accepted in the United States of America, or "GAAP" measure), the following key metrics, among other factors, are monitored by management in assessing the performance of our business:
• Gross postpaid and prepaid wireless additions

• Net additions - wireless subscribers

• ARPU

• Roaming revenue

• Penetration - wireless

• Postpaid churn - wireless

• Average monthly minutes of use per wireless voice subscriber

• Data revenue per average wireless subscriber

• Fiber route miles - Puerto Rico broadband

• Switched access lines - Puerto Rico broadband

• Dedicated access line equivalents - Puerto Rico broadband

• On-net buildings - Puerto Rico broadband

• Capital expenditures

Gross postpaid and prepaid wireless additions represent the number of new subscribers we are able to add during the period. Growing our subscriber base by adding new subscribers is a fundamental element of our long-term growth strategy. We must maintain a competitive offering of products and services to sustain our subscriber growth. We focus on postpaid customers in our U.S. and Puerto Rico operations.
Net additions - wireless subscribers represents the number of subscribers we were able to add to our service during the period after deducting the number of disconnected or terminated subscribers. By monitoring our growth against our forecast, we believe we are better able to anticipate our future operating performance.
ARPU represents the average monthly subscriber revenue generated by a typical subscriber (determined as subscriber revenues divided by average number of retail subscribers). We monitor trends in ARPU to ensure that our rate plans and promotional offerings are attractive to customers and profitable. The majority of our revenues are derived from subscriber revenues. Subscriber revenues include, among other things: monthly access charges; charges for airtime used in excess of plan minutes; Universal Service Fund ("USF") support payment revenues; long distance revenues derived from calls placed by our customers; roaming revenue; handset insurance; messaging and other data; and other charges such as activation, voice mail, call waiting, call forwarding and regulatory charges.
Roaming revenue represents the amount of revenue we receive from other wireless carriers for providing service to their subscribers who "roam" into our markets and use our systems to carry their voice and data traffic. The rates paid to us are established by an agreement between the roamer's wireless provider and us. The amount of roaming revenue we generate is often dependent upon usage patterns of our roaming partners' subscribers and the rate plan mix and technology mix of our roaming partners. We closely monitor trends in roaming revenues because usage patterns by our roaming partners' subscribers can be difficult to predict.
Penetration - wireless represents a percentage, which is calculated by dividing the number of our subscribers by the total population of potential subscribers available in the markets that we serve.

Postpaid churn represents the number of postpaid subscribers that disconnect or are terminated from our service. Churn is calculated by dividing the aggregate number of wireless retail subscribers who cancel service during each month in a period by the total number of wireless retail subscribers as of the beginning of the month. Churn is stated as the average monthly churn rate for the applicable period. We monitor and seek to control churn so that we can grow our business without incurring significant sales and marketing costs needed to replace disconnected subscribers. We must continue to ensure that we offer excellent network quality and customer service so that our churn rates remain low.
Average monthly minutes of use per wireless voice customer represents the average number of minutes ("MOUs") used by our voice customers during a period. We monitor growth in MOUs to ensure that the access and overage charges we are collecting are consistent with that growth. In addition, growth in subscriber usage may indicate a need to invest in additional network capacity.
Data revenue per average wireless subscriber represents the portion of ARPU generated by our retail subscribers using data services such as text, picture, and multi-media messaging, wireless Internet browsing, wireless e-mail, Instant Internet, data cards and downloading content and applications.
Fiber route miles are the number of miles of fiber cable that we have laid. Fiber is installed to connect our equipment to our customer premises equipment. As a facilities-based carrier, the number of fiber route miles is an indicator of the strength of our network, our coverage and our potential market opportunity.
Switched access lines represent the number of lines connected to our switching center and serving customers for incoming and outgoing calls. Growing our switched access lines is a fundamental element of our strategy. We monitor the trends in our switched access line growth against our forecast to be able to anticipate future operating performance. In addition, this measurement allows us to compute our current market penetration in the markets we serve.
Dedicated access line equivalents represents the amount of Voice Grade Equivalent ("VGE") lines used to connect two end points. We monitor the trends in our dedicated service using VGE against our forecast to anticipate future operating performance, network capacity requirements and overall growth of our business.
On-net buildings are locations where we have established a point of presence to serve one or more customers. Tracking the number of on-net buildings allows us to size our addressable market and determine the appropriate level of capital expenditures. As a facilities-based broadband operator, it is a critical performance measurement of our growth and a clear indication of our increased footprint.
Capital expenditures represent the amount spent on upgrades, additions and improvements to our telecommunications network and back office infrastructure. We monitor our capital expenditures as part of our overall financing plan and to ensure that we receive an appropriate rate of return on our capital investments. This statistic is also used to ensure that capital investments are in line with network usage trends and consistent with our objective of offering a high quality network to our customers.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our unaudited Condensed Consolidated Financial Statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and revenues and expenses during the periods reported. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.
There are certain critical estimates that we believe require significant judgment in the preparation of our unaudited Condensed Consolidated Financial Statements. We consider an accounting estimate to be critical if:
• it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate, and

• changes in the estimate or different estimates that we could have selected may have had a material effect on our consolidated financial condition or consolidated results of operations.

Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses, which result from our customers not making required payments. We base our allowance on the likelihood of recoverability of our subscriber accounts receivable based on past experience and by reviewing current collection trends. A worsening of economic or industry trends beyond our estimates could result in an increase in our allowance for doubtful accounts by recording additional expense.
Property, Plant and Equipment - Depreciation The telecommunications industry is capital intensive. Depreciation of property, plant and equipment constitutes a substantial operating cost for us. The cost of our property, plant and equipment, principally telecommunications equipment, is charged to depreciation expense over estimated useful lives. We depreciate our telecommunications equipment using the straight-line method over its estimated useful lives. We periodically review changes in our technology and industry conditions, asset retirement activity and salvage values, as conditions warrant, to determine adjustments to the estimated remaining useful lives and depreciation rates. Actual economic lives may differ from our estimated useful lives as a result of changes in technology, market conditions and other factors. Such changes could result in a change in our depreciable lives and therefore our depreciation expense in future periods.
Valuation of Long-Lived Assets
Long-lived assets such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In our estimation of fair value, we consider current market values of properties similar to our own, competition, prevailing economic conditions, government policy, including taxation, and the historical and current growth patterns of both our business and the industry. We also consider the recoverability of the cost of our long-lived assets based on a comparison of estimated undiscounted operating cash flows for the related businesses with the carrying value of the long-lived assets. Considerable management judgment is required to estimate the fair value of an impairment, if any, of our assets. These estimates are very subjective in nature; we believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. Estimates related to recoverability of assets are critical accounting policies as management must make assumptions about future revenue and related expenses over the life of an asset, and the effect of recognizing impairment could be material to our consolidated financial position as well as our consolidated results of operations. Actual revenue and costs could vary significantly from such estimates.
Goodwill and Wireless Licenses - Valuation of Goodwill and Indefinite-Lived Intangible Assets
A significant portion of our intangible assets are licenses that provide the Company's wireless operations with the exclusive right to utilize radio frequency spectrum designated on the license to provide wireless communication services. The wireless licenses are treated as indefinite-lived intangible assets under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142") and are not amortized, but rather are tested for impairment.
We test our wireless licenses for impairment annually, and more frequently if indications of impairment exist. We use a direct value approach in performing our annual impairment test on our wireless licenses, in accordance with a September 29, 2004 Staff Announcement from the staff of the Securities and Exchange Commission ("SEC"), "Use of the Residual Method to Value Acquired Assets Other Than Goodwill." The direct value approach determines fair value using estimates of future cash flows associated specifically with the licenses. If the fair value of the wireless licenses is less than the carrying amount of the licenses, an impairment is recognized.
In addition, we test goodwill for impairment pursuant to SFAS 142. We currently test goodwill for impairment using a residual value approach on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit (calculated using a discounted cash flow method) with its carrying amount, including goodwill. We determined that our reporting units for SFAS 142 are our operating segments determined under SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares implied fair value (i.e., fair value of reporting unit less the fair value of the unit's assets and liabilities, including identifiable intangible assets) of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying value of goodwill exceeds its implied fair value, the excess is required to be recorded as an impairment.

In analyzing goodwill and wireless licenses for potential impairment, we use projections of future cash flows from each reporting unit to determine whether its estimated value exceeds its carrying value. These projections of cash flows are based on our views of growth rates, time horizons of cash flow forecasts, assumed terminal value, estimates of our future cost structures and anticipated future economic conditions and the appropriate discount rates relative to risk and estimates of residual values. These projections are very subjective in nature. We believe that our estimates are consistent with assumptions that marketplace participants would use in their estimates of fair value. The use of different estimates or assumptions within our discounted cash flow model (e.g., growth rates, future economic conditions or discount rates and estimates of terminal values) when determining the fair value of the reporting unit and wireless licenses are subjective and could result in different values and may affect any related goodwill or wireless licenses impairment charge.
Stock-Based Compensation
In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS 123(R)"), which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. We recognize compensation expense for such awards based on the estimated grant date fair value method using the Black-Scholes valuation model. Compensation expense is recognized on a straight-line basis over their respective vesting periods, net of estimated forfeitures.
In the process of implementing SFAS 123(R) we analyzed certain key variables, such as expected volatility and expected life to determine an accurate estimate of these variables. There were no grants issued during the three months ended August 31, 2009. The expected life of the option is calculated using the simplified method set out in SEC Staff Accounting Bulletin No. 107 (as amended by Staff Accounting Bulletin No. 110) using the vesting term of 3 or 4 years and the contractual term of 7 or 10 years, depending on the option tranche. The simplified method defines the expected life as the average of the contractual term of the options and the weighted average vesting period for all option tranches. SFAS 123(R) requires that we calculate stock-based compensation expense based on awards that are ultimately expected to vest. Accordingly, stock-based compensation expense for the three months ended August 31, 2009 has been reduced for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures.
Income Taxes
The computation of income taxes is subject to estimation due to the significant judgment required with respect to the tax positions we have taken that have been or could be challenged by taxing authorities.
Our income tax provision is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate.
Tax law requires items to be included in the tax return at different times than when these items are reflected in the unaudited Condensed Consolidated Financial Statements. As a result, our annual tax rate reflected in our unaudited Condensed Consolidated Financial Statements is different than that reported in our tax return (our cash tax rate). Some of these differences are permanent, such as expenses that are not deductible in our tax return, while other differences reverse over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities. The tax rates used to determine deferred tax assets or liabilities are the enacted tax rates in effect for the year in which the differences are expected to reverse. Based on the evaluation of all available information, we recognize future tax benefits, such as net operating loss carryforwards, to the extent that realizing these benefits is considered more likely than not.
We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing our forecasted taxable income using both historical and projected future operating results, the reversal of existing temporary differences, taxable income in prior carry-back years (if permitted) and the availability of tax planning strategies. A valuation allowance is required to be established unless management determines that it is more likely than not that we will ultimately realize the tax benefit associated with a deferred tax asset.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. In the first quarter of fiscal 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of SFAS No. 109 ("FIN 48") (see Note 5 to the unaudited Condensed Consolidated Financial Statements). As a result of the implementation of FIN 48, we recognize liabilities for uncertain tax positions based on the two-step process prescribed in the interpretation. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be

realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.
We adjust our income tax provision in the period it is determined that actual results will differ from our estimates. The income tax provision reflects tax law and rate changes in the period such changes are enacted.

RESULTS OF OPERATIONS
   U.S. Wireless Operations

                                      Three Months Ended
                                          August 31,
                                      2009          2008        $ Change      % Change
                                                      (In thousands)
     Revenue:
     Service revenue                $ 116,564     $ 120,249     $  (3,685 )          (3 )%
     Roaming revenue                   21,449        15,789         5,660            36
     Equipment sales                    7,921        11,769        (3,848 )         (33 )

     Total revenue                    145,934       147,807        (1,873 )          (1 )

     Costs and expenses:
     Cost of services                  29,108        28,765           343             1
     Cost of equipment sold            15,849        21,946        (6,097 )         (28 )
     Sales and marketing               12,236        14,154        (1,918 )         (14 )
     General and administrative        23,752        24,354          (602 )          (2 )

     Total costs and expenses          80,945        89,219        (8,274 )          (9 )

     Adjusted operating income(1)   $  64,989     $  58,588     $   6,401            11 %

(1) Adjusted operating income represents the profitability measure of the segment - see Note 9 to the unaudited Condensed Consolidated Financial Statements for a reconciliation of consolidated adjusted operating income to the appropriate GAAP measure.

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