Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
TMUS > SEC Filings for TMUS > Form 10-Q on 25-Apr-2013All Recent SEC Filings

Show all filings for METROPCS COMMUNICATIONS INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for METROPCS COMMUNICATIONS INC


25-Apr-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Any statements made in this quarterly annual report that are not statements of historical fact, including statements about our beliefs, opinions and expectations, are "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and should be evaluated as such. Forward-looking statements include our expectations of customer growth, the causes of churn, the effect of seasonality on our business, the importance of our key non-GAAP financial measures and their use to compare companies in the industry, the effects, cost saving, future benefits or synergies of the Proposed Transaction, uses of CPU and EBITDA as a measure to compare performance, whether existing cash, cash equivalents and short-term investments and anticipated cash flows from operations will be sufficient to fully fund planned operations and planned expansion, the challenges and opportunities facing our business including competitive pricing and increased promotional activity, competitive differentiators, our strategy and business plans, prospects, customer expectations, our projections of capital expenditures for 2013, continued wireline displacements, the effect of future inflation on our operations, the effect of changes in aggregate fair value of financial assets and liabilities and other statements that may relate to our plans, objectives, beliefs, strategies, goals, opinions, beliefs, future events, future revenues or performance, future capital expenditures, financing needs, outcomes of litigation and other information that is not historical information. These forward-looking statements generally can be identified by the fact that they do not disclose or relate strictly to historical or current facts and include, without limitation, words such as "anticipate," "expect," "suggests," "plan," "believe," "intend," "estimates," "predict," "targets," "views," "becomes," "project," "assume," "should," "would," "could," "may," "will," "suggest," "forecast," "potential," and other similar expressions and variations. Forward-looking statements are contained throughout this quarterly report, including in the "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Company Overview," "Seasonality," "Performance Measures," "Liquidity and Capital Resources," "Qualitative and Quantitative Disclosure About Market Risk," "Legal Proceedings," and "Risk Factors" sections of this report.

We base the forward-looking statements or projections made in this report on our current intent, expectations, plans, strategies, objectives, goals, beliefs, opinions, projections and assumptions as of the date of this quarterly report that have been made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future events and developments and other factors we believe are appropriate under the circumstances and at the time such statements are made. As you read and consider this quarterly report, you should understand that these forward-looking statements are not guarantees of future performance or results, are made as of the date of this quarterly report, and no assurances can be given that such statements or results will be obtained. Although we believe that these forward-looking statements are based on reasonable intent, expectations, beliefs, opinions and assumptions at the time they are made, you should be aware that many of these factors are beyond our control and that many factors could affect our actual financial results, performance or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. Factors that may materially affect such forward-looking statements include, but are not limited, to:

• the highly competitive nature of the wireless broadband mobile industry and changes in the competitive landscape;

• ours and our competitors' current and planned promotions and advertising, marketing, sales and other initiatives, including pricing decisions, entry into consolidation and alliance activities, and our ability to respond to and support them;

• the effects of the Proposed Transaction on dealers, retailers, vendors, suppliers, customers, content and application providers, our equity and debt holders and our employees;

• the diversion of management's time and attention while the Proposed Transaction is pending;

• our ability to operate our business in light of the Proposed Transaction and the covenants contained in the Business Combination Agreement;

• the inability to have developed or to obtain handsets, equipment or software that our customers want, demand and expect, or to have handsets, equipment or software serviced, updated, revised or maintained in a timely and cost-effective manner for the prices and the features our customers want, expect or demand;

• our ability to construct, operate and manage our network to deliver the services, content, applications, service quality and speed our customers want, expect and demand, and to provide, maintain and increase the capacity of our network and business systems to satisfy the expectations and demands of our customers and the demands placed by devices on our network;


Table of Contents

• our plans and expectations relating to, without limitation, (i) our growth opportunities and competitive position; (ii) our products and services;
(iii) our customer experience; (iv) our results of operations, including projected synergies from the Proposed Transaction, earnings and cash flows; (v) the impact of the Proposed Transaction on our credit rating; and (vi) integration matters;

• the federal income tax consequences of the Proposed Transaction and the enactment of additional state, federal, and/or foreign tax and/or other laws and regulations;

• expectations, intentions and outcomes relating to, and diversion of management's time and attention to, and our ability to successfully defend against, litigation, including securities, class action, derivative, intellectual property (including patents), and product safety claims, by or against third parties, related to the Proposed Transaction or otherwise;

• the possibility that the Proposed Transaction is delayed or does not close, including due to the failure to satisfy or waive the closing conditions, pursuant to the Business Combination Agreement;

• alternative acquisition proposals that could delay completion of the Proposed Transaction;

• our ability to successfully integrate our business with T-Mobile's business and realize the expected spectrum, cost and capital expenditure savings and synergies and other expected benefits from the Proposed Transaction;

• changes in economic, business, competitive, technological and/or regulatory factors, including the passage of legislation or action by governmental or regulatory entities;

• any changes in the regulatory environment in which we operate, including any change or increase in restrictions on our ability to operate our network;

• terminations of, or limitations imposed on MetroPCS' or T-Mobile's business by, contracts entered into by either MetroPCS or T-Mobile, or the effect of provisions with respect to change in control, exclusivity, commitments or minimum purchase amounts contained in such contracts;

• the impact of economic conditions on our business plan, strategy and stock price;

• delays in, or changes in policies related to, income tax refunds or other governmental payments;

• the impact on our network and business from major equipment failures, denial of service attacks, and security breaches related to the network or customer information;

• the ability to obtain financing on terms favorable to us, or at all;

• the impact of public and private regulations;

• possible disruptions, cyber attacks, denial of service, or intrusions of our network, billing, operational support and customer care systems that may limit or disrupt our ability to provide service, customer care, or bill our customers, or which may cause disclosure or improper use of customers' information and associated harm to our customers, systems, reputation and goodwill;

• our continued ability to offer a diverse portfolio of wireless devices;

• our ability to obtain and continue to obtain roaming on terms that are reasonable;

• severe weather conditions, natural disasters, energy shortages, wars or terrorist attacks, and any resulting financial impact not covered by insurance;

• disruptions of our key suppliers' provisioning of products, services, content or applications;

• fluctuations in interest and exchange rates;

• significant increases in benefit plan costs or lower investment returns on plan assets;

• material adverse changes in labor matters, including labor negotiations or additional organizing activity, and any resulting financial and/or operational impact;

• write-offs, including write-offs in connection with the Proposed Transaction, or changes in MetroPCS' and/or T-Mobile's accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings;

• the significant capital commitments of MetroPCS and T-Mobile;

• our ability to remain focused and keep all employees focused on the business during the pendency of the Proposed Transaction;

• the current economic environment in the United States; disruptions to the credit and financial markets in the United States; and the impact of the economy on consumer demand and fluctuations in consumer demand generally for the products and services provided;


Table of Contents

• our ability to manage our growth, achieve planned growth, manage churn rates, maintain our cost structure and achieve additional economies of scale;

• our ability to negotiate and maintain acceptable agreements with our suppliers and vendors, including obtaining roaming on reasonable terms;

• the seasonality of our business and any failure to have strong customer growth in the first and fourth quarters;

• the rates, nature, collectability and applicability of taxes and regulatory fees on the services we provide and increases or changes in taxes and regulatory fees or the services to, or the manner in, which such taxes and fees are applied, calculated, or collected;

• the rapid technological changes in our industry, and our ability to adapt, respond and deploy new technologies, and successfully offer new services using such new technology;

• our ability to fulfill the demands and expectations of our customers, provide the customer care our customers want, expect, or demand, secure the products, services, applications, content and network infrastructure equipment we need, or which our customers or potential customers want, expect or demand;

• the availability of additional spectrum, our ability to secure additional spectrum, or secure it at acceptable prices, when we need it;

• our ability to enforce or protect our intellectual property rights;

• our capital structure, including our indebtedness amount, the limitations imposed by the covenants in the documents governing our indebtedness and the maintenance of our financial and disclosure controls and procedures;

• our ability to attract and retain key members of management and train personnel;

• our ability to retain and grow our indirect distribution channels for our products and services;

• our reliance on third parties to provide distribution, products, software content and services that are integral to or used or sold by our business and the ability of our suppliers to perform, develop and timely provide us with technological developments, products and services we need to remain competitive;

• governmental regulation affecting our services and changes in government regulation, and the costs of compliance and our failure to comply with such regulations; and

• other factors described under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012 as updated or supplemented under "Part II, Item 1A. Risk Factors" in each of our subsequent Quarterly Reports on Form 10-Q as filed with the SEC, including this Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.

The foregoing list of factors is not exclusive. All subsequent written and oral forward-looking statements concerning us and the Proposed Transaction or other matters attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements above. Forward-looking statements herein speak only as of the date of this quarterly report and are based on current assumptions and expectations, and are subject to the factors above, among other things, and involve risks, uncertainties, events, circumstances, uncertainties and assumptions, many of which are beyond our ability to control or predict. You should not place undue reliance on these forward-looking statements. We do not intend to, and do not undertake an obligation to, update these forward-looking statements in the future to reflect future events or circumstances, except as required by applicable securities laws and regulations. The business, financial condition, and results of operations presented for any period, including the three months ended March 31, 2013, may not be indicative of the business, financial condition or results of operations for any subsequent period or the fiscal year.

You should carefully read and consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf, and all future written and oral forward-looking statements attributable to us or the Proposed Transaction or any other matters, are expressly qualified in their entirety by the foregoing cautionary statements. Company Overview
Except as expressly stated, the financial condition and results of operations discussed throughout Management's Discussion and Analysis of Financial Condition and Results of Operations are those of MetroPCS Communications, Inc. and its consolidated subsidiaries, including MetroPCS Wireless, Inc., or Wireless, and unless the context indicates otherwise, references to "MetroPCS," "MetroPCS Communications," "our Company," "the Company," "we," "our," "ours" and "us" refer to MetroPCS Communications, Inc., a Delaware corporation, and its wholly-owned subsidiaries.


Table of Contents

We are a wireless telecommunications carrier that currently offers wireless broadband mobile services primarily in selected major metropolitan areas in the United States, including the Atlanta, Boston, Dallas/Fort Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota metropolitan areas. As of March 31, 2013, we held licenses for wireless spectrum suitable for wireless broadband mobile services covering a total population of 144 million people in and around many of the largest metropolitan areas in the United States. In addition, we have roaming agreements with other wireless broadband mobile carriers that allow us to offer our customers service in many areas when they are outside our service area. These roaming agreements, together with the area we serve with our own networks, allow our customers to receive service in an area covering over 280 million in total population under the Metro USA® brand. We provide our services using code division multiple access (CDMA) networks using 1xRTT technology and evolution data optimized (EVDO) and fourth generation long term evolution (4G LTE).
As a result of the significant growth we have experienced since we launched operations, our results of operations to date are not necessarily indicative of the results that can be expected in future periods. If our number of customers increase over time, they will continue to contribute to increases in our revenues and operating expenses.

We sell products and services to customers through our Company-owned retail stores as well as indirectly through relationships with independent retailers and third party dealers. Our service allows our customers to place unlimited local calls from within our local service area and to receive unlimited calls from any area while in our service area, for a flat-rate monthly service fee. Since January 2010, we have offered service under service plans which include all applicable taxes and regulatory fees and offering nationwide voice, text and web access services on an unlimited, no long-term contract, paid-in-advance, flat-rate basis beginning at $40 per month. For an additional $5 to $30 per month, our customers may select alternative service plans that offer additional features predominately on an unlimited basis. We also offer discounts to customers who purchase services for additional handsets on the same account. In January 2011, we introduced new 4G LTE service plans that allow customers to enjoy voice, text and web access services at fixed monthly rates starting as low as $40 per month. In 2012, we introduced a nationwide 4G LTE data, talk and text service plan for $25 per month, including all applicable taxes and regulatory fees. For additional usage fees, we also provide certain other value-added services. All of these plans require payment in advance for one month of service. If no payment is made in advance for the following month of service, service is suspended at the end of the month that was paid for by the customer and, if the customer does not pay within 30 days, the customer is terminated. We believe our service plans differentiate us from the more complex plans and long-term contract requirements of traditional wireless carriers.

T-Mobile Transaction

On October 3, 2012, we announced we had entered into the Business Combination Agreement, as amended, with Deutsche Telekom, T-Mobile Global, T-Mobile Holding, and T-Mobile. Upon completion of the Proposed Transaction, MetroPCS and T-Mobile will combine their respective businesses, will rename MetroPCS as T-Mobile US, and will operate T-Mobile and MetroPCS as separate customer units. The Business Combination Agreement is structured as a recapitalization, in which MetroPCS will declare a reverse stock split, make a cash payment of $1.5 billion in the aggregate to our stockholders of record immediately following the reverse stock split and acquire all of T-Mobile's capital stock by issuing T-Mobile Holding 74% of MetroPCS' common stock outstanding following the cash payment on a pro forma basis. Upon completion of the Proposed Transaction, MetroPCS stockholders will own 26% of the combined company.
On April 14, 2013, the parties to the Business Combination Agreement entered into an amendment to the Business Combination Agreement to: (i) reduce the principal amount of the debt of the combined company to be issued to Deutsche Telekom at the closing of the Proposed Transaction by $3.8 billion; (ii) reduce the interest rate of the debt of the combined company to be issued to Deutsche Telekom at the closing of the Proposed Transaction by 50 basis points, and (iii) extend the lock-up period on sales to the public following the closing of the Proposed Transaction of shares of common stock of the combined company held by Deutsche Telekom from six months to eighteen months, subject to certain exceptions.
On April 24, 2013, MetroPCS held its special meeting of stockholders to vote on matters relating to the Proposed Transaction. A quorum of MetroPCS stockholders was represented by proxy or in person. The stockholders voted and approved the proposals presented at the special meeting. We anticipate the closing of the Proposed Transaction will occur after the close of business on April 30, 2013.


Table of Contents

Critical Accounting Policies and Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" of our annual report on Form 10-K for the year ended December 31, 2012 filed with the United States Securities and Exchange Commission, or SEC, on March 1, 2013.

Our accounting policies and the methodologies and assumptions we apply under them have not changed from our annual report on Form 10-K for the year ended December 31, 2012.
Revenues
We derive our revenues from the following sources:
Service. We sell wireless broadband mobile services. The various types of service revenues associated with wireless broadband mobile for our customers include monthly recurring charges for airtime, one-time or monthly recurring charges for optional features (including nationwide long distance, unlimited international long distance, unlimited text messaging, international text messaging, voicemail, downloads, ringtones, games and content applications, unlimited directory assistance, enhanced directory assistance, ring back tones, mobile Internet browsing, location based services, mobile instant messaging, navigation, video streaming, video on demand, push e-mail and nationwide roaming) and charges for long distance service. Service revenues also include intercarrier compensation and nonrecurring service charges to customers.

Equipment. We sell wireless broadband mobile handsets and accessories that are used by our customers in connection with our wireless broadband mobile services. This equipment is also sold to our independent retailers to facilitate distribution to our customers.
Costs and Expenses
Our costs and expenses include:
Cost of Service. The major components of our cost of service are:

•            Cell Site Costs. We incur expenses for the rent of cell sites,
             network facilities, engineering operations, field technicians and
             related utility and maintenance charges.


•            Interconnection Costs. We pay other communications companies and
             third-party providers for leased facilities and usage-based charges
             for transporting and terminating network traffic from our cell sites
             and switching centers. We have pre-negotiated rates for transport
             and termination of calls originated by our customers, including
             negotiated interconnection agreements with relevant exchange
             carriers in each of our service areas.


•            Variable Long Distance. We pay charges to other communications
             companies for long distance service provided to our customers. These
             variable charges are based on our customers' usage, applied at
             pre-negotiated rates with the long distance carriers.


•            Roaming Costs. We pay charges to other wireless broadband mobile
             carriers for roaming services so our customers can receive wireless
             broadband mobile service when they travel outside our own network
             service area.


•            Customer Support. We pay charges to nationally recognized
             third-party providers for customer care, billing and payment
             processing services.

Cost of Equipment. Cost of equipment primarily includes the cost of handsets and accessories purchased from third-party vendors to resell to our customers and independent retailers in connection with our services. We do not manufacture any of this equipment.
Selling, General and Administrative Expenses. Our selling expenses include advertising and promotional costs associated with marketing and selling to new customers and fixed charges such as retail store rent and retail associates' salaries. General and administrative expenses include support functions including technical operations, finance, accounting, human resources, information technology and legal services. We record stock-based compensation expense in cost of service and in selling,


Table of Contents

general and administrative expenses for expense associated with employee stock options and restricted stock awards, which is measured at the date of grant, based on the estimated fair value of the award.
Depreciation and Amortization. Depreciation is applied using the straight-line method over the estimated useful lives of the assets once the assets are placed in service, which are five to ten years for network infrastructure assets, three to ten years for capitalized interest, up to fifteen years for capital leases, approximately one to eight years for office equipment, which includes software and computer equipment, approximately three to seven years for furniture and fixtures and five years for vehicles. Leasehold improvements are amortized over the shorter of the remaining term of the lease and any renewal periods reasonably assured or the estimated useful life of the improvement. Interest Expense and Interest Income. Interest expense includes interest incurred on our borrowings and capital lease obligations, amortization of debt issuance costs and amortization of discounts and premiums on long-term debt. Interest income is earned primarily on our cash, cash equivalents and short-term investments.
Income Taxes. For the three months ended March 31, 2013 and 2012 we paid no federal income taxes. For the three months ended March 31, 2013 and 2012 we paid $0.7 million and $0.1 million, respectively, of state income taxes. Seasonality

Our customer activity is influenced by seasonal effects related to traditional retail selling periods and other factors that arise from our target customer base. Based on historical results, we generally expect the net customer additions to be strongest in the first and fourth quarters. Softening of sales and increased customer turnover, or churn, in the second and third calendar quarters of the year usually combine to result in fewer net customer additions or in net customer losses. However, sales activity and churn can be strongly affected by the launch of new metropolitan areas, introduction of new price plans, competition, delays in tax refunds and other government benefits, general economic conditions and by promotional activity, which could reduce, accentuate, increase or outweigh certain seasonal effects. Results of Operations
Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012 Operating Items
Set forth below is a summary of certain financial information for the periods indicated: . . .

  Add TMUS to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for TMUS - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.