8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (date of earliest event reported): June 9, 2009

METROPCS COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Charter)

DELAWARE	1-33409	20-0836269
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

2250 Lakeside Boulevard Richardson, Texas	75082
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: 214-570-5800

(Former name or former address, if changed since last report): Not Applicable

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01. Other Events.

MetroPCS Communications, Inc. (the "Company") is filing this Current Report on Form 8-K (the “Form 8-K”) to update the financial information in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 2, 2009 (the “Form 10-K”), to reflect revised financial information and disclosures as a result of changes in the Company’s segment reporting as described below, as well as to update the disclosures in Note 6., Derivative Instruments and Hedging Activities, to the Company’s consolidated financial statements to provide retrospective presentation of enhanced derivative disclosures under Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,” (“SFAS No. 161”).

Effective January 1, 2009, the Company implemented a change to the composition of its reportable segments under SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information,” (“SFAS No. 131”). Under this change, the Expansion Markets reportable segment was renamed “Northeast Markets” and several operating segments that had historically been aggregated into the Expansion Markets reportable segment are now aggregated into the Core Markets reportable segment. The Company’s thirteen operating segments, that are determined based on geographic region within the United States, are now aggregated into its two reportable segments as follows:

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

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

Pursuant to guidance provided by the U.S. Securities and Exchange Commission (the “SEC”), the Company has updated the following items that were contained in the Company’s Form 10-K to reflect the change in reportable segments. The following exhibits filed with this Form 8-K and incorporated herein by reference update and supersede only those portions of the Form 10-K for the year ended December 31, 2008 that are affected by the Company’s change in segment reporting:

• Exhibit 99.1: Item 1. Business;

• Exhibit 99.2: Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; and

• Exhibit 99.3: Item 15. (a) Financial Statements, Schedules and Exhibits.

In March 2008, the Financial Accounting Standards Board issued SFAS No. 161, which requires enhanced disclosures about a company’s derivative and hedging activities. SFAS No. 161 was effective for fiscal years beginning on or after November 15, 2008, with earlier adoption allowed. SFAS No. 161 encourages but does not require disclosures for earlier periods presented for comparative purposes at initial adoption.

The information included in and with this Form 8-K is presented only in connection with the changes in the Company’s reportable segments and retrospective presentation of enhanced derivative disclosures under SFAS No. 161. The changes to “Item 1. Business” relate to the Company’s new segment reporting structure and are to report information on its licensed metropolitan areas consistent with this presentation. The changes to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” relate to the Company’s new segment reporting structure and are to report its results of operations and performance measures consistent with this presentation. The changes to “Item 15. (a) Financial Statements, Schedules and Exhibits,” are to amend Notes 2 and 20 consistent with the Company’s new segment reporting structure and to report segment financial information consistent with this presentation and provide retrospective presentation of enhanced derivative disclosures under SFAS No. 161 in Note 6.

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The Company has not updated any other information in the Form 10-K for events or developments that occurred subsequent to the filing of the Form 10-K with the SEC. For developments since the filing of the Form 10-K, please refer to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed on May 11, 2009, and the Company’s Current Reports on Form 8-K filed subsequent to the filing of the Form 10-K. The information in this Form 8-K, including exhibits, should be read in conjunction with the Form 10-K and subsequent SEC filings.

Forward-Looking Statements

Any statements made in this Form 8-K that are not statements of historical fact, including statements about the Company’s beliefs and expectations, are “forward-looking statements” within the meaning of 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 information concerning any possible or assumed future financial condition and results of operations, including statements that may relate to the Company’s plans, objectives, strategies, goals, future events, future revenues or performance, future penetration rates, planned market launches, capital expenditures, financing needs, outcomes of litigation and other information that is not historical information. Forward-looking statements often include words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “would,” “could,” “should,” “may,” “will,” “continue,” “forecast,” and other similar expressions. Forward-looking statements are contained throughout this report, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The Company bases the forward-looking statements or projections made in this report on its current expectations, plans and assumptions that it has made in light of its experience in the industry, as well as its perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances and at such times. As you read and consider this report, you should understand that these forward-looking statements or projections are not guarantees of future performance or results. Although the Company believes that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many of these factors are beyond its control and that many factors could affect its actual financial results, performance or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include:

• the highly competitive nature of its industry;

• the rapid technological changes in its industry;

• an economic slowdown or recession in the United States;

• the state of the capital markets and the United States economy;

• its exposure to counterparty risk in its financial agreements;

• its ability to maintain adequate customer care and manage its churn rate;

• its ability to sustain the growth rates it has experienced to date;

• its ability to manage its rapid growth, train additional personnel and improve its financial and disclosure controls and procedures;

• its ability to secure the necessary spectrum and network infrastructure equipment;

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• its ability to maintain and upgrade its networks and business systems;

• its ability to adequately enforce or protect its intellectual property rights or defend against suits filed by others;

• governmental regulation of its services and the costs of compliance and its failure to comply with such regulations;

• its capital structure, including its indebtedness amounts;

• changes in consumer preferences or demand for its products;

• its inability to attract and retain key members of management; and

• other factors described under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 as updated or supplemented under “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, filed on May 11, 2009.

These forward-looking statements and projections speak only as to the date of the original filing date of the Form 10-K and are subject to and involve risks, uncertainties and assumptions, many of which are beyond the Company’s control or ability to predict, some of which may have occurred since the original filing date of the Form 10-K, and you should not place undue reliance on these forward-looking statements and projections. The results presented for any period may not be reflective of results for any subsequent period. All future written and oral forward-looking statements and projections attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by its cautionary statements. The Company does not intend to, and do not undertake a duty to, update any forward-looking statement or projection in the future to reflect the occurrence of events or circumstances, except as required by law. The Company has not updated its forward-looking statements made as of the original filing date of the Form 10-K to account for subsequent events.

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Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number	Description
23.1	Consent of Deloitte & Touche LLP.
99.1	Item 1. Business.
99.2	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
99.3	Item 15. (a) Financial Statements, Schedules and Exhibits.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	METROPCS COMMUNICATIONS, INC.
Date: June 9, 2009	By:	/s/ J. Braxton Carter
		J. Braxton Carter
		Executive Vice President and Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit Number	Description
23.1	Consent of Deloitte & Touche LLP.
99.1	Item 1. Business.
99.2	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
99.3	Item 15. (a) Financial Statements, Schedules and Exhibits.

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EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-142007 on Form S-8 of our report dated February 27, 2009 (June 8, 2009 as to the retrospective presentation of enhanced derivative disclosures in Note 6 and the reclassification of segment information as described in Note 20) relating to the financial statements of MetroPCS Communications, Inc. (the Company) (which report expresses an unqualified opinion and includes an explanatory paragraph relating to a change in the method of accounting for fair value measurements of financial assets and liabilities as of January 1, 2008 and for uncertainty in income taxes as of January 1, 2007) appearing in this Current Report on Form 8-K of the Company dated June 9, 2009.

/s/ Deloitte & Touche LLP

June 8, 2009

Dallas, Texas

EX-99.1

Exhibit 99.1

Item 1. Business

General

We are a wireless communications provider that offers wireless broadband mobile services under the MetroPCS^® brand in selected major metropolitan areas in the United States over our own licensed networks or networks of entities in which we hold a substantial non-controlling ownership interest. We provide a wide array of wireless communications services to our subscribers on a no long-term contract, paid-in-advance, flat-rate, unlimited usage basis. As of December 31, 2008, we had approximately 5.4 million subscribers in eight states. We are the sixth largest facilities-based provider of wireless services in the United States measured by the number of subscribers served.

MetroPCS Communications, Inc., or MetroPCS, was incorporated in 2004 by MetroPCS, Inc. in the state of Delaware and MetroPCS maintains its corporate headquarters in Richardson, Texas. In July 2004, as a result of a merger between a wholly-owned subsidiary of MetroPCS and MetroPCS, Inc., with MetroPCS, Inc. being the surviving corporation, MetroPCS, Inc. and all of its subsidiaries became wholly-owned subsidiaries of MetroPCS. In April 2007, MetroPCS consummated an initial public offering of its common stock, par value $0.001 per share, and became listed for trading on The New York Stock Exchange under the symbol “PCS.”

Our web site address is www.metropcs.com. Information contained on or accessible from our web site is not incorporated by reference into this annual report on Form 10-K and should not be considered part of this report or any other filing we make with the Securities and Exchange Commission, or the SEC. We file with, or furnish to, the SEC, all our periodic filings and reports, including an annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments thereto, as well as other information. All of our filings with the SEC are available free of charge through the Investor Relations page of our web site as soon as practicable after providing such information to the SEC. Copies of any of our filings may also be requested, without charge, by sending a written request to Investor Relations, MetroPCS Communications, Inc., 2250 Lakeside Blvd., Richardson, Texas 75082.

Business Overview

We currently provide our wide array of wireless broadband mobile services primarily in selected major metropolitan areas in the United States, including the Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco, and Tampa/Sarasota metropolitan areas. As of December 31, 2008, we hold, or have access to, wireless spectrum covering a total population of approximately 150 million people and 9 of the top 12 and 14 of the top 25 most populous metropolitan areas in the United States. We provide our services using code division multiple access, or CDMA, networks, using 1xRTT technology.

In September 2008, we entered into a national roaming agreement and an agreement to exchange wireless spectrum with Leap Wireless International, Inc., or Leap, and at the same time we settled all outstanding litigation between the parties. The nationwide roaming agreement, which has an initial term of 10 years, covers our, Royal Street Communications, LLC, or Royal Street Communications’, and Leap’s existing and future markets. Additionally, we and Leap entered into a spectrum exchange agreement covering licenses in certain markets, with Leap acquiring from us 10 MHz of spectrum in San Diego, Fresno, Seattle and certain other Washington and Oregon markets, and our acquiring from Leap an additional 10 MHz of spectrum in Dallas-Ft. Worth, Shreveport-Bossier City, Lakeland-Winter Haven, Florida and certain other North Texas markets, with consummation subject to customary closing conditions.

Competitive Strengths

We believe our business model has the following competitive strengths that distinguish us from our principal wireless competitors:

• Our Fixed Price Unlimited Service Plans. We offer our services on a no long-term contract, paid-in-advance, flat-rate, unlimited usage basis. We believe we offer a compelling value

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proposition to our customers through our service offerings that provide unlimited usage from within a local calling area for a lower fixed price than any of our primary competitors, which differentiates our offerings from those of the national wireless broadband mobile carriers. Our average per minute costs to our customers for our service plans are significantly lower than the average per minute costs of other traditional wireless broadband mobile carriers. We believe our low average cost per minute positions us very well for the growing trend of wireline displacement.

• Our Densely Populated Markets. The aggregate population density of the metropolitan areas we currently serve and plan to serve is substantially higher than the national average. We believe the high relative population density of the metropolitan areas we serve or plan to serve results in increased efficiencies in network deployment, operations and product distribution.

• Our Cost Leadership Position. We believe we have the lowest costs of any of the providers of wireless broadband mobile services in the United States, which allows us to offer our services on a flat-rate basis at affordable prices while maintaining cash profits per subscriber as a percentage of revenues per subscriber that we believe are among the highest in the wireless broadband mobile services industry.

• Our Spectrum Portfolio. As of December 31, 2008, we hold or have access to wireless spectrum covering a population of approximately 150 million in the United States and covering 9 of the top 12 and 14 of the top 25 most populous metropolitan areas in the United States.

• Our Advanced CDMA Network. We deploy a CDMA network that is designed to provide the capacity necessary to satisfy the usage requirements of our customers. We believe CDMA technology provides us with substantially more voice and data capacity per MHz of spectrum than other commonly deployed wireless broadband mobile technologies.

Business Strategy

We believe the following components of our business strategy provide a foundation for our continued growth:

• Target Underserved Customer Segments in our Markets. We target a mass market which we believe is largely underserved by traditional wireless broadband mobile carriers. Our recent customer surveys indicate that over 85% of our customers use our service as their primary phone service and that over 50% of our customers no longer have traditional landline phone service, which we believe is evidence that our services are gaining acceptance as a substitute for landline service.

• Offer Affordable, Paid-In-Advance, Fixed Price, Unlimited Service Plans With No Long-Term Service Contract Requirement. We plan to continue to focus on increasing the value provided to our subscribers by offering affordable, paid-in-advance, fixed price, unlimited service plans with no long-term service contract and plan to continue to focus on increasing the value provided to our subscribers.

• Remain One of the Lowest Cost Wireless Service Providers in the United States. We plan to continue to focus on controlling our costs allowing us to remain one of the lowest cost providers of wireless broadband services in the United States.

• Expand into Attractive Markets. We plan to continue to focus on acquiring or gaining access to spectrum in metropolitan areas which have high relative population density and customer characteristics similar to our existing metropolitan areas. We may in the future pursue means, other than purchasing spectrum, to acquire or gain access to new metropolitan areas. See “—Competition.”

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• Effectively Compete in our Markets. We continue to make significant capital improvements to our network to be able to offer our subscribers competitive and technologically advanced services, including enhanced data services, location based services and digital technology as it becomes increasingly available.

Products and Services

Our service, branded under the “MetroPCS” name, allows customers to place unlimited local calls from within our service area, and to receive unlimited calls from any area while in our local service areas, under simple and affordable flat monthly rate service plans starting at $30 per month. For an additional $5 to $20 per month, our customers may select alternative service plans that offer additional features on an unlimited basis, such as unlimited long distance calls from within our local service calling area to any telephone number in the continental United States and roaming while in the service area of certain other wireless broadband mobile carriers. For additional usage fees we also provide certain other value-added services, such as international long distance and international text messaging. All our service plans are “paid-in-advance” and do not require a long-term service contract. We provide the following products and services:

• Voice Services. Our voice services allow customers to place voice calls to, and receive calls from, any telephone in the world, including local, domestic long distance, and international calls. Our services also allow customers to receive and make calls while they are located in geographic areas served by certain other wireless broadband mobile carriers through roaming arrangements with such carriers.

• Data Services. Our data services include services provided through the Binary Runtime Environment for Wireless, or BREW, platform, such as ringtones, ring back tones, games and content applications; text messaging services (domestic and international); multimedia messaging services; mobile Internet browsing; mobile instant messaging; location based services; social networking services; and push e-mail.

• Custom Calling Features. We offer custom calling features, including caller ID, call waiting, three-way calling and voicemail.

• Advanced Handsets. We sell a variety of handsets manufactured by nationally recognized handset manufacturers for use on our network, including models that have cameras, can browse the Internet, play music and have other features facilitating digital data.

Service Areas

Our strategy has been to offer our services in major metropolitan markets and surrounding areas. We commenced providing commercial service in the first quarter of 2002. We launched service in our current major metropolitan areas as follows:

• Miami, Atlanta and Sacramento in the first quarter of 2002

• San Francisco in September 2002

• Tampa/Sarasota in October 2005

• Dallas/Ft. Worth in March 2006

• Detroit in April 2006

• Orlando and portions of northern Florida in November 2006

• Los Angeles in September 2007

• Las Vegas in March 2008

• Philadelphia in July 2008

• New York and Boston in February 2009

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We provide service in Los Angeles, California and certain portions of Northern Florida, including Orlando, through a wholesale arrangement with Royal Street Communications, a company in which we hold an 85% non-controlling interest. For a discussion of Royal Street Communications, and its wholly owned subsidiaries, or collectively with Royal Street Communications, Royal Street, please see “— Royal Street.”

The table below provides an overview of our currently licensed metropolitan areas including the Federal Communications Commission, or FCC, licensed geographic area, the amount of broadband wireless spectrum held, and whether we hold the FCC license ourselves or provide or will provide our services in that metropolitan area through our agreements with Royal Street, which holds the license.

Metropolitan Area	Licensed Area	MHz
Core Markets:
Georgia:
Atlanta, GA	BTA024	20
Gainesville, GA	BTA160	30
Athens, GA	BTA022	20
Albany, GA	BEA037	10
Augusta-Aiken, GA-SC	BEA027	10
Macon, GA	BEA038	10
Georgia 1- Whitfield	CMA371	20
Georgia 2 – Dawson	CMA372	20
Georgia 3 – Chattooga	CMA373	20
Georgia 4 – Jasper	CMA374	20
Georgia 13 – Early(12)	CMA383	20
South Florida:
Miami-Fort Lauderdale, FL	BTA293	30
West Palm Beach, FL	BTA469	30
Fort Myers, FL	BTA151 BEA032(11)	30 10
Fort Pierce-Vero Beach, FL	BTA152	30
Naples, FL	BTA313	30
Florida 1 – Collier(11)	CMA360	20
Florida 2 – Glades(11)	CMA361	20
Florida 11 – Monroe(11)	CMA370	20
Northern California:
San Fran.-Oak.-S.J., CA	BTA404(5)	30
Sacramento, CA	BTA389(5)	40
Stockton, CA	BTA434(5)	40
Modesto, CA	BTA303(5)	25
Salinas-Monterey, CA	BTA397(5)	40
Redding, CA	BTA371(5)	40
Merced, CA	BTA291(5)	25
Chico-Oroville, CA	BTA079(5)	40
Eureka, CA	BTA134(5)	25
Yuba City-Marysville, CA	BTA485(5)	40
California 5 – San Luis Obispo(11)	CMA340	20
California 9 – Mendocino(11)	CMA344	20
Central and Northern Florida:
Tampa-St. Petersburg, FL	BTA440	10
Sarasota-Bradenton, FL	BTA408 BEA033	10 10
Daytona Beach, FL	BTA107	20
Ocala, FL	BTA326 CMA245	10 20
Jacksonville, FL(2)	BTA212	20

Metropolitan Area	Licensed Area	MHz
Lakeland-Winter Haven, FL(2)(13)	BTA239	20
Melbourne-Titusville, FL(2)	BTA289	20
Gainesville, FL(1)	BTA159	10
Orlando, FL(1)	BTA336	10
Tallahassee, FL-GA(12)	BEA035	10
Florida 6 – Dixie(12)	CMA365	20
Florida 7 – Hamilton(12)	CMA366	20
Florida 8 – Jefferson(12)	CMA367	20
Florida 9 – Calhoun(12)	CMA368	20
Dallas/Ft. Worth:
Dallas/Ft. Worth, TX	CMA009 EA 127(13)	10 10
Sherman-Denison, TX(3)	BTA418	10
Shreveport-Bossier City, LA-AR(13)	EA 88	20
Waco, TX(11)	CMA194	20
Longview-Marshall, TX(13)	CMA206	10
Tyler, TX(13)	CMA237	10
Lufkin-Nacogdoches, TX(13)	BTA265	10
Abilene, TX(13)	EA128	10
Detroit:
Detroit, MI	BTA112 EA 57	10 10
Grand Rapids-Muskegon-Holland, MI	EA 62	10
Michigan 9 – Cass, MI(14 )	CMA480	20
Southern California:
Los Angeles, CA	BTA262(2)(5)	20
Bakersfield, CA	BTA028(5)	20
Las Vegas:
Las Vegas, NV-AZ-UT	EA 153(5)	20
Other Regional Spectrum(8):
Northeast(8)	REA 1	10
West(8)(13)	REA 6	10
Northeast Markets:
Boston:
Boston-Worcester, MA/NH/RI/VT	EA 3(7)	22
New London-Norwich, CT(10)	BTA319	10
Providence-Pawtucket, RI – Bedford-Fall River, MA(10)	BTA364	10
Worcester-Fitchburg-Leominster, MA(10)	BTA480	10
New York:
New York-No. New Jer.-Long Island, NY-NJ-CT-PA-MA-VT(10)	EA 10(7)	20
New Jersey 1 – Hunterdon(11)	CMA550	20
New Jersey 3 – Sussex(11)	CMA552	20
Philadelphia:
Philadelphia, PA	EA12(6)	10

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(1) License held by a wholly-owned subsidiary of Royal Street Communications.

(2) 10 MHz license held by a wholly-owned subsidiary of Royal Street Communications and 10 MHz license held by MetroPCS.

(3) Comprised of Grayson and Fannin counties only.

(4) Spectrum licensed as part of West REA 6.

(5) Includes 10 MHz of spectrum from West REA 6.

(6) Spectrum licensed as part of Northeast REA 1.

(7) Includes 10 MHz of spectrum from Northeast REA 1.

(8) Portions listed in connection with other metropolitan areas.

(9) Counties of Clay, Wichita, Archer, Baylor, Wilbarger, Ford, and Hardeman, TX leased to Flat Wireless, LLC.

(10) In July 2008, we entered into an agreement to acquire 10 MHz of PCS spectrum in certain markets in Connecticut, Massachusetts and New York and to assign 10 MHz of AWS spectrum in Hartford, Middlesex, Toland, Litchfield, and New Haven, CT, Berkshire, Franklin, Hampden, and Hampshire, MA, and Duchess and Ulster, NY to, Tuscarora Communications, LLC. See Note 7 to the consolidated financial statements included elsewhere in this report.

(11) In December 2008, we entered into an agreement to acquire AWS spectrum in certain markets from AWS Wireless, Inc. See Note 7 to the consolidated financial statements included elsewhere in this report.

(12) In November 2008, we entered into an agreement to acquire AWS spectrum in certain markets from Cavalier Wireless, L.L.C. See Note 7 to the consolidated financial statements included elsewhere in this report.

(13) In September 2008, we entered into an agreement to acquire this spectrum from Cricket Licensee (Reauction), Inc. and Cricket Licensee I, Inc., both subsidiaries of Leap and to assign 10 MHz of AWS spectrum in the Fresno, CA (BEA162), San Diego, CA (BEA161), Seattle-Everett, WA (CMA020), Pendleton, OR-WA (BEA168), and Richland-Kennewick-Pasco, WA (BEA169) to Leap. See Note 7 to the consolidated financial statements included elsewhere in this report.

(14) In February 2009, we consummated an agreement to acquire this spectrum from Cincinnati Bell Wireless, LLC. See Note 7 to the consolidated financial statements included elsewhere in this report.

The map below illustrates the geographic coverage of our licensed spectrum as of December 31, 2008:

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Royal Street

In November 2004, we entered into a cooperative arrangement with C9 Wireless, LLC, or C9, an unaffiliated very small business entrepreneur and, as part of that arrangement, acquired an 85% non-controlling interest in Royal Street Communications, an entity controlled by C9. Royal Street Communications participated in FCC Auction 58, was the high bidder on, and was granted 10 MHz of spectrum in the Los Angeles basic trading area, or BTA, and 10 MHz of spectrum in certain other BTAs in Northern Florida, including Orlando. Auction 58, like other major auctions conducted by the FCC, was designed to allow small businesses, very small businesses and other so-called designated entities, or DEs, to acquire spectrum and construct wireless networks to promote competition with existing carriers. To that end, the FCC designated certain blocks of wireless broadband PCS spectrum, or “closed” licenses, for which only qualified DEs could apply. In addition, DEs were permitted to apply for and bid on “open” licenses in competition with non-DEs, but very small business DEs could receive a bidding credit of up to 25% of the gross bid price. Royal Street Communications qualified as a very small business DE and was granted in December 2005 certain “closed” broadband PCS licenses and certain “open” broadband PCS licenses on which it received a 25% bidding credit. Subsequently, these licenses were assigned with the consent of the FCC to a series of wholly-owned subsidiaries of Royal Street Communications.

We do not own or control the Royal Street licenses. We own a non-controlling 85% limited liability company member interest in Royal Street Communications, and we may elect only two of the five members to Royal Street Communications’ management committee, which has the full power to direct the management of Royal Street Communications. C9 has control over the operations of Royal Street, because it has the right to elect three of the five members of Royal Street Communications’ management committee. C9 also has the right to put, or require us to purchase, all or part of its ownership interest in Royal Street Communications, but due to regulatory restrictions, we have no corresponding right to call, or require C9 to sell to us, C9’s ownership interest in Royal Street Communications. The put right has been structured so that its exercise will not adversely affect Royal Street Communications’ continued eligibility as a very small business DE during periods where such eligibility is required. If C9 exercises its put right, we will be required to pay a fixed return on C9’s invested capital in Royal Street Communications, which fixed return diminishes annually beginning in the sixth year following the grant of Royal Street’s FCC licenses. These put rights expire in June 2012.

Royal Street Communications holds all of its licenses through its wholly-owned subsidiaries and has entered into certain cooperative agreements with us relating to the financing, design, construction and operation of its networks. The Royal Street agreements are based on a “wholesale model” in which Royal Street sells up to 85% of its engineered service capacity to us on a wholesale basis, which we in turn market on a retail basis under the MetroPCS brand to our customers. The remaining 15% of the engineered service capacity of Royal Street’s network is reserved by Royal Street and may be sold to other parties. In addition, the Royal Street agreements provide that MetroPCS, at Royal Street’s request and at all times subject to Royal Street’s direction and control, will assist Royal Street in building out its networks, provide information to Royal Street relating to the budgets and business plans as well as arrange for administrative, clerical, accounting, credit, collection, operational, engineering, maintenance, repair, and technical services.

Additionally, we have provided and will provide financing to Royal Street, at Royal Street’s request, under a loan agreement the proceeds of which are to be used for the acquisition of licenses, build out of its licensed areas, operation of the Royal Street network infrastructure, and to make payments under the loan until Royal Street has positive free cash flow. As of December 31, 2008, the maximum amount that Royal Street could borrow from us under the loan agreement was approximately $1.0 billion of which Royal Street had net outstanding borrowings of $905.0 million from us, approximately $227.7 million of which was incurred in 2008. On February 17, 2009, we executed an amendment to the loan agreement which increased the amount available to Royal Street under the loan agreement by an additional $550.0 million. Royal Street has incurred an additional $14.2 million in net borrowings through February 23, 2009. Interest accrues under the loan agreement at a rate equal to 11% per annum. As of December 31, 2008, Royal Street has commenced repayment of that portion of the loan related to the Orlando, Lakeland-Winter Haven, Melbourne-Titusville and Los Angeles metropolitan areas.

License Term

The broadband personal communications services, or PCS, licenses held by us and by Royal Street have an initial term of ten years. The initial license term is fifteen years for our advanced wireless services, or AWS, licenses which runs from the initial grant date (which varies by license), and ten years from June 12, 2009 for our 700 MHz license. Subject to applicable conditions, all of our and Royal Street’s licenses may be renewed at the end of their

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terms. For example, the initial broadband PCS licenses for San Francisco, Sacramento, Miami and Atlanta were granted in 1997, were renewed in 2007 and are subject to renewal in January 2017; the AWS licenses were granted in November 2007 and are subject to renewal in November 2022; and the 700 MHz license was granted in June 2008 and is subject to renewal in June 2019. Each FCC license is essential to our and Royal Street’s ability to operate and conduct our and Royal Street’s business in the area covered by that license. We also have other licenses, such as microwave licenses, which we use to provide service. We intend to file renewal applications for our licenses when the renewal filing windows open. The next wireless broadband PCS licenses that need to be renewed expire in 2009. For a discussion of general licensing requirements, please see “— Construction Obligations.”

Distribution and Marketing

We offer our products and services to our customers under the “MetroPCS” brand both indirectly through independent retail outlets and directly through Company-operated retail stores. We also sell our services over the Internet using our own branded MetroPCS^® website. Our indirect distribution outlets include a mixture of local, regional and national mass market dealers and retailers and specialty stores. Many of our dealers own and operate more than one location and may operate in more than one of our metropolitan areas. A substantial number of our retailers, dealers and corporate store locations also accept payment for our services and many also perform other services for us. A significant portion of our gross customer additions have been added through our indirect distribution outlets. For the twelve months ended December 31, 2008, approximately 89% of our gross customer additions were through indirect channels.

Our marketing strategy is to create and provide products, services and communications that drive growth while optimizing our marketing return on investment and minimizing the cost to acquire customers. Our marketing campaigns emphasize that MetroPCS offers unlimited services on a flat rate basis without long-term service contracts for an affordable price. MetroPCS builds consumer awareness and promotes the MetroPCS brand by strategic local advertising to develop our brand and support our indirect and direct distribution channels. We advertise primarily through local radio, cable, television, outdoor and local print media. In addition, we believe we have benefited from a significant number of word-of-mouth customer referrals.

Customer Care, Billing and Support Systems

We outsource some or all of our customer care, billing, payment processing and logistics to nationally recognized third-party providers. We also are in the process of transitioning our billing services to another nationally recognized third party vendor. See “Risk Factors — We currently are migrating our billing services to a new vendor.”

Our outsourced call centers are staffed with professional and bilingual customer service personnel, who are available to assist our customers 24 hours a day, 365 days a year. Some of these outsourced call centers are located outside the United States, in Mexico, Panama, and the Philippines, which facilitates the efficient provision of customer support to our large and growing subscriber base, including Spanish speaking customers. We also provide automated voice response service to assist our customers with routine information requests. MetroPCS ranked "Highest in Customer Satisfaction with Wireless Prepaid Service" in the J.D. Power and Associates third annual Prepaid Customer Satisfaction Study in July of 2008.

Network Operations

We and Royal Street operate 1xRTT CDMA networks in all of the metropolitan areas where we have launched service. A network includes a switching center (which may be shared between metropolitan areas) which serves several purposes, including routing calls, managing call handoffs, managing access to the public switched telephone network and providing access to voicemail and other value-added services, cell sites or distributed antenna system, or DAS, nodes, and backhaul facilities, which carry traffic to and from our cell sites and our switching facilities. Currently, almost all cell sites in the network are co-located, meaning our and Royal Street’s equipment is located on leased facilities that are owned by third parties who retain the right to lease the facilities to additional carriers. The switching centers and national operations center provide around-the-clock monitoring of our network.

Our switches connect to the public switched telephone network through fiber rings leased from third-parties, which transmit originating and terminating traffic between our equipment and local exchange and long distance carriers. We also have negotiated interconnection agreements with relevant local exchange carriers in our service areas.

We use third-party providers for long distance services and the majority of our backhaul services.

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Network Technology

Communications between the subscriber wireless device and our network is accomplished by a frequency management technology, or “air interface protocol.” The FCC has not mandated a universal air interface protocol for wireless broadband systems. We and Royal Street have deployed 1xRTT CDMA technology, which is one of the dominant air interface protocols. Our and Royal Street’s decision to use CDMA is based on what we believe are several key advantages that CDMA has over other air interface protocols, including higher network capacity, longer handset battery life, fewer dropped calls, simplified frequency planning, efficient migration path as our CDMA technology can be easily upgraded to fourth generation air interface protocols in a cost effective manner, and increased privacy and security. CDMA is incompatible with certain other air interface protocols. Customers and former customers of other carriers may not be able to use their wireless devices on our or Royal Street’s networks because either their wireless device uses a different air interface protocol or the other CDMA carriers may have restricted the customers from changing the programming of their wireless device to allow it to be used on networks other than the original CDMA carrier’s network.

We also purchase EVRC-B, or 4G vocoder, handsets which will allow for greater capacity in our network and we are considering other network technology such as long term evolution, or LTE, which we believe would provide significant increases in network capacity and data rates. This technology may replace or supplement our and Royal Street’s 1xRTT CDMA network.

Competition

The market for our wireless services is highly competitive. We compete directly in each of our metropolitan areas with other wireless broadband mobile service providers, wireline, Internet, cable, satellite and other communications service providers by providing a wireless alternative to traditional wireline service. We believe that competition for subscribers among wireless broadband mobile providers is based mostly on price, service area, services and features, call quality and customer service.

The current wireless broadband mobile industry is dominated by four national carriers — AT&T, Verizon Wireless, Sprint Nextel and T-Mobile — and their prepaid affiliates or brands. National carriers typically offer post-paid plans that subsidize wireless devices, but require long-term service contracts and credit checks or deposits. The national carriers also have introduced, either directly or through their affiliates, unlimited fixed-rate services plans in areas in which we offer or plan to offer service. These unlimited fixed-rate service plans may cause other competitors to introduce similar unlimited fixed-rate plans. In addition, some regional companies, such as Leap, have unlimited fixed-rate service plans similar to ours and compete, or have announced plans to compete, in certain of our markets.

Over the past few years, the wireless industry also has seen an emergence of several new competitors that provide either pay-as-you-go or prepaid wireless services. Some of these competitors, such as Virgin Mobile USA, and Tracfone, are non-facility based mobile virtual network operators, or MVNOs, that contract with wireless network operators to provide a separately branded wireless service. These MVNOs typically also charge by the minute rather than offering flat-rate unlimited service plans.

The wireline industry is dominated by large incumbent carriers, such as AT&T and Verizon, and also includes competitive local exchange or voice over Internet protocol, or VoIP, service providers. The cable industry also is dominated by large carriers such as Time Warner Cable, Comcast and Cox Communications. These cable companies, along with cable company Advance/Newhouse, formed a joint venture called SpectrumCo LLC, or SpectrumCo, which bid on and acquired 20 MHz of AWS spectrum in a number of major metropolitan areas throughout the United States, including all of the major metropolitan areas which comprise our Core and Northeast Markets. Certain large national cable companies, Sprint, Intel, Clearwire and others also have formed a joint venture to construct a national network to provide wireless data and telecommunications services.

In the future, we may face competition from mobile satellite service, or MSS, providers, and from resellers of these services. The FCC has granted some MSS providers, and may grant others, the flexibility to deploy an ancillary terrestrial component to their satellite services. This added flexibility may enhance MSS providers’ ability to offer more competitive mobile services. In addition, several large satellite companies, computer companies, and Internet search and portal companies have indicated an interest in establishing next generation wireless networks, and certain VoIP providers have indicated that in the future they may acquire FCC licenses or use unlicensed

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spectrum to offer wireless services to compete directly with us. The FCC also has adopted an order that allows companies to provide wireless services on an unlicensed basis in certain unused portions of the television spectrum. Further, we also may face competition from providers of WiMax, which is the name given to a family of digital technologies that are capable of supporting high-speed, long-range wireless services suitable for mobility applications, using exclusively licensed or unlicensed spectrum. Additionally, we may compete in the future with companies that offer new technologies and market other services we do not offer or may not be available with our network technology, from our vendors or within our spectrum. Some of our competitors do or may bundle these other services together with their wireless communications service, which customers may find more attractive. Energy companies, utility companies and satellite companies also are expanding their services to offer telecommunications services.

There continues to be substantial merger and acquisition activity in the wireless industry. We have in the past acquired and may in the future acquire spectrum to enter new metropolitan areas. We also may in the future consider acquisitions of or other business combinations with companies in addition to acquisitions of spectrum. For example, we have in the past made a public offer to acquire Leap which we subsequently withdrew. In the future, there could be discussions between us and Leap or others regarding potential transactions between the companies.

Many of our wireless, wireline, cable and other competitors’ resources are substantially greater, and their market shares are larger, than ours. Additionally, many of our wireless competitors offer larger coverage areas and nationwide calling plans that do not give rise to additional roaming charges for their customers. The competitive pressures of the wireless broadband mobile services industry have caused certain competitors to offer service plans with growing bundles of minutes of use at lower per minute prices or price plans with unlimited nights and weekends and could lead them, and have led some of our competitors, to offer unlimited service plans similar to ours. Our competitors’ plans could adversely affect our ability to maintain our pricing, market penetration, growth and customer retention. In addition, large national wireless broadband mobile services carriers have been reluctant to enter into roaming agreements at attractive rates with smaller and regional carriers like us, which limits our ability to serve certain market segments and recent FCC actions to promote automatic roaming do not resolve these difficulties. Moreover, the policies of the United States government have made, and may continue to make, additional spectrum for wireless services available in each of our markets, which may increase the number of our competitors and enhance our competitors’ ability to offer additional plans and services. Further, since many of our competitors are large companies, they have on occasion been able to convince handset manufacturers to provide the newest handsets exclusively to them. Our competitors also can afford to heavily subsidize the price of the subscriber’s handset because they have greater resources than us and may require their customers to enter into long term contracts. The FCC has indicated it may examine, and Congress is considering legislation that may limit, early termination fees for the long term contracts used by national wireless broadband mobile services carriers which could prompt them to reduce the subsidization of handsets and limit their long term contracts.

All of these factors may detract from our ability to attract customers from certain market segments.

As competition develops, we may add additional features or services to our existing service plans, or make other changes to our service plans.

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. Net customer additions are typically strongest in the first and fourth calendar quarters of the year. 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 during the second and third calendar quarters. However, sales activity and churn can be strongly affected by the launch of new and surrounding metropolitan areas and promotional activity, which could reduce or outweigh certain seasonal effects. For a more detailed discussion of seasonality in our business, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Seasonality.”

Inflation

We do not believe that inflation has had a material effect on our operations.

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Employees

As of December 31, 2008, we have approximately 3,200 employees. We believe our relationship with our employees is good. None of our employees are covered by a collective bargaining agreement or represented by an employee union.

Regulation

The wireless telecommunications industry is regulated extensively by the federal government and, to varying degrees, by state and local governments. Congress, state legislatures, municipalities, federal, state and local regulators, and the courts have passed legislation, ordinances, codes, rules, regulations, instituted administrative rulemakings, and issued judicial decisions, affecting the telecommunications industry. Due to the recent changes in the party affiliation of the President of the United States and changes in the composition of Federal and state legislatures, the political environment, and financial conditions, the regulation of the communications industry has been, and is expected to remain in the future, in a state of constant flux. Many of these legislative actions, rulemakings, and judicial decisions have had, and possible future regulations may have, a significant material effect on us, our business, our financial condition, and our operating results.

Federal regulation

Our business is subject to extensive federal regulation under the Communications Act of 1934, as amended, or the Communications Act, the implementing regulations adopted thereunder by the FCC, judicial and regulatory decisions interpreting and implementing the Communications Act, and other federal statutes as discussed below. These statutes, regulations and associated policies govern, among other things, the allocation and licensing of radio spectrum; the ownership, lease, transfer of control and assignment of wireless licenses; the ongoing technical, operational and service requirements under which we must operate; the timing, nature and scope of network construction; the rates, terms and conditions of service; the protection and use of customer information; roaming policies; the provision of certain services, such as E-911; the interconnection of communications networks; the provision of subscriber equipment; the location of network assets; and the use of rights of way.

Broadband spectrum allocations

We utilize paired radio spectrum licensed by the FCC. The principal spectrum bands used to provide terrestrial broadband wireless mobile services in the United States are as follows, all of which can be used to provide services competitive with the spectrum held by us:

Cellular spectrum. Starting in the 1980’s, the FCC awarded two cellular licenses with 25 MHz of spectrum each in the 800 MHz band on a metropolitan statistical area, or MSA, and rural service area, or RSA, basis. There are 306 MSAs and 428 RSAs in the United States. MSAs and RSAs are defined by the Office of Management and Budget and the FCC, respectively.

PCS spectrum. In the 1990’s, the FCC assigned licenses to use 120 MHz of radio spectrum in the 1.9 GHz band for broadband PCS. The FCC divided the 120 MHz of spectrum into two 30 MHz blocks licensed on a Major Trading Area, or MTA, basis, and one 30 MHz block and three 10 MHz blocks licensed on a Basic Trading Area, or BTA, basis. Under the broadband PCS licensing plan, the United States and its possessions and territories are divided into 493 BTAs, all of which are included within 51 MTAs. Both MTAs and BTAs are defined by Rand McNally & Company, as supplemented by the FCC. Many of our competitors utilize a combination of cellular and broadband PCS spectrum to provide their services. In addition, the FCC granted a nationwide 10 MHz paired PCS license to Nextel Communications (now Sprint Nextel) in conjunction with its relocation and rebanding of ESMR spectrum.

SMR spectrum. The FCC first established specialized mobile radio, or SMR, in 1979 to provide for land mobile communications on a commercial basis. The FCC initially licensed spectrum in the 800 and 900 MHz bands for this service, in non-contiguous bands, on a site-by-site basis. Since then, the FCC has established geographic area licenses for such spectrum. In total, the FCC has licensed 19 megahertz of SMR spectrum, plus an additional 7.5 megahertz of spectrum that is available for SMR as well as other services. FCC policy permits flexible use of this spectrum, including the provision of mobile wireless services, and such spectrum is taken into consideration when the FCC is assessing the competitive impact of broadband wireless merger and acquisition transactions.

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AWS-1 spectrum. In 2006, the FCC assigned 90 MHz of spectrum to be used for advanced wireless services, or AWS. The FCC divided the 90 MHz of spectrum into two 10 MHz and one 20 MHz paired blocks assigned on a regional economic area grouping, or REAG, basis; one 10 MHz and one 20 MHz paired blocks each assigned on an economic area, or EA, basis; and a 20 MHz paired block assigned on a Cellular Marketing Area, or CMA, basis. The CMAs generally correspond to MSAs and RSAs. Under the AWS band plan, the United States is divided into 176 EAs, 12 REAGs, and 734 CMAs. The EAs are geographic areas defined by the Regional Economic Analysis Division of the Bureau of Economic Analysis, U.S. Department of Commerce, as supplemented by the FCC. REAGs are collections of EAs.

700 MHz spectrum. In 2008, the FCC assigned 62 MHz of spectrum in the 700 MHz band. The FCC divided the 62 MHz of spectrum into two 12 MHz paired blocks and one 6 MHz unpaired block licensed on a CMA or EA basis; one 22 MHz paired block licensed on a REAG basis, and one 10 MHz paired block, or D Block, assigned on a nationwide basis to be used as part of a private/public safety partnership. The holders of the 22 MHz licenses, most of which are held by Verizon Wireless, must provide a network platform that is generally open to third-party wireless devices and applications, or an Open Network Platform, by allowing consumers to use the handset of their choice and to download and use the applications of their choice, subject to certain network management conditions that are intended to allow the licensee to protect the network from harm. As originally allocated, the D Block licensee was required to fund the construction of a nationwide interoperable broadband network for public safety on a nationwide public safety license and to provide public safety with priority access during emergencies to the D Block owned by the licensee. The D Block remained unpurchased at auction, and the FCC currently is considering revisions to the auction and service rules that will apply to this license.

BRS spectrum. In 2004, the FCC ordered that the 2496-2690 MHz band, or the 2.5 GHz band, be reconfigured over a period of time into upper and lower-band segments for low-power operations, with a mid-band segment for high-power operations. This spectrum is allocated and licensed in the United States and its possessions and territories in 493 BTAs. The Commission concluded in 2008 that 55.5 MHz of the broadband radio service, or BRS, spectrum holdings in the 2.5 GHz band will be included in the Commission’s product market for mobile telephony/broadband services, and taken into consideration when the Commission is assessing the competitive impact of broadband wireless merger and acquisition transactions.

Future allocations. The FCC also has other broadband wireless spectrum allocation proceedings in process. For example, the FCC is considering service rules for an additional 20 MHz of paired AWS spectrum, or AWS-2, in the 1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz and 2175-2180 MHz bands, as well as 20 MHz of unpaired AWS spectrum, or AWS-3, in the 2155-2175 MHz band. Both AWS-2 and AWS-3 have been allocated for advanced fixed and mobile services, including AWS. As noted above, the FCC also is seeking further comment on service rules for the 700 MHz D Block. The FCC and interested parties have proposed that these blocks of spectrum be subject to various conditions, configurations and terms and conditions. We cannot predict with any certainty the likely configuration, conditions or timing of these proposed allocations, or the usability of any of this spectrum for wireless services competitive with our services or by us. Congress, the federal government, and the FCC also may pass legislation or undertake actions or proceedings in the future to allocate additional spectrum for wireless services or to change the rules relating to already licensed spectrum which may allow new or existing licensees to provide services comparable to the services we provide.

Construction obligations

The FCC has established various construction obligations for wireless licenses with different requirements often applying to spectrum licensed at different points in time. For example, broadband PCS licensees holding licenses originally granted as 30 MHz licenses must construct facilities to provide service covering one-third of the population of the licensed area within five years, and two-thirds of the population of the licensed area within ten years, or otherwise provide substantial service to the licensed area within the appropriate five- and ten-year benchmarks, of their initial license grant date. Broadband PCS licensees holding 10 MHz and 15 MHz licenses generally must construct facilities to provide service to 25% of the licensed area within five years of their initial license grant date, or otherwise make a showing of substantial service. The FCC defines substantial service as service which is sound, favorable and substantially above a mediocre service level only minimally warranting renewal. Either we or the previous licensee satisfied the applicable five-year coverage requirement for each of our broadband PCS licenses and the ten-year requirement for those PCS licenses that have already been renewed. All AWS licensees will be required to construct facilities to provide substantial service by the end of the initial 15-year license term. The initial 15-year license term for our AWS licenses does not expire until November 2021.

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The 700 MHz licenses are subject to more stringent performance requirements which are measured from June 13, 2009. Licensees of the CMA and EA license blocks are required to build systems that provide wireless coverage to 35% of the licensed geographic area in four years and 70% of the licensed geographic area by the end of the license term. Licensees of the REAG license blocks are required to cover at least 40% of the population of the licensed area in four years and 75% of the population of the licensed area by the end of the license term. Under the current rules, the licensees of the D Block are required to cover at least 75% of the population in four years, 95% of the population of the nationwide license area within seven years and 99.3% of the population of the nationwide license area within ten years. The build-out requirements for the D Block currently are subject to further comment and may change when the final rules are issued for assigning this license. While the FCC occasionally has granted brief extensions to, and limited waivers of, license construction requirements, any licensee failing to meet these coverage requirements risks forfeiting their license or, in some cases, being subject to fines or monetary forfeitures.

License term

The FCC grants broadband PCS licenses for ten-year terms that are renewable upon application to the FCC. Our broadband PCS license terms began expiring in 2007. We filed renewal applications and have been granted additional ten-year terms for all of our PCS licenses expiring before December 31, 2008. Certain of our broadband PCS licenses will need to be renewed in 2009. AWS licenses are granted for an initial 15-year term that is renewable for successive ten-year terms upon application to the FCC. Our initial AWS license terms end in November 2021. The 700 MHz license we hold has an initial term extending up to June 2019, and is renewable for additional 10 year terms. However, if we fail to meet an initial construction benchmark in June of 2013 for our 700 MHz license, the license term will be shortened to June of 2017, in addition to possibly being subject to fines and forfeitures and/or having our licensed service area reduced. However, if we fail to meet the build out requirements by the end of the license term for our 700 MHz license, we will lose our authority to serve any unserved area and could be subject to fines and forfeitures, including a revocation of our license. At present, our 700 MHz license term in Boston ends in June 2019, but this date could change in the event that Congress or the FCC decides to further extend the digital television transition date.

The FCC may deny license renewal applications for cause after appropriate notice and hearing. The FCC will award a renewal expectancy to broadband commercial mobile radio service, or CMRS, licensees if the licensee meets specific performance standards. To receive a renewal expectancy, we must show that we have provided substantial service during our past license term, and have substantially complied with applicable FCC rules and policies and the Communications Act. If we receive a renewal expectancy, it is very likely that the FCC will renew our existing licenses. If we do not receive a renewal expectancy, the FCC may accept competing applications for the license renewal period, subject to a comparative hearing, and may award the license for the next term to another entity.

Revocation of licenses

The FCC may deny applications for FCC licenses and in extreme cases revoke FCC licenses, if it finds that a licensee lacks the requisite qualifications to be a licensee. For example, the FCC may revoke a license or deny an application of an entity found in a judicial or administrative proceeding to have knowingly or repeatedly engaged in conduct involving felonies, possession or sale of illegal drugs, fraud, antitrust violations or unfair competition, employment discrimination, misrepresentations to the FCC or other government agencies, or serious violations of the Communications Act or FCC regulations.

Transfer and Assignment of FCC licenses

The Communications Act requires prior FCC approval for assignments or transfers of control of any license or construction permit, with limited exceptions. In granting FCC approval for assignments or transfers of control, the FCC may prohibit or impose conditions on such assignments or transfers of control. We have managed to secure the requisite approval of the FCC to a variety of assignment and transfer of control applications without undue delay or the imposition of conditions outside of the ordinary course. We cannot assure you that the FCC will approve or act in a timely fashion on any of our future requests to approve assignment or transfer of control applications. Further, if we are acquired in the future, the FCC may disapprove the transfer of control or assignment, impose conditions, or otherwise require divestitures of some or all of our spectrum, licenses, or other assets.

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Disaggregation, Partitioning and Spectrum Leasing

The FCC allows spectrum and service areas to be subdivided, partitioned, or disaggregated, geographically or by bandwidth, with each resulting license covering a smaller service area and/or including less spectrum. Any such partition or disaggregation is subject to FCC approval, which generally is received, but cannot be guaranteed. The FCC also has adopted policies to facilitate development of a secondary market for unused or underused wireless spectrum by permitting the leasing of spectrum to third parties. These policies provide us, new entrants, and our competitors with alternative means to obtain additional spectrum and allow us to dispose of excess spectrum, subject to FCC approval and applicable FCC conditions.

Spectrum and Market Concentration Limits

The FCC has certain policies intended to prevent undue concentration of the terrestrial wireless broadband mobile services market. For example, the FCC conducts a case-by-case review of all transactions where wireless spectrum is being assigned or a transfer of control is occurring where both parties to the transaction hold CMRS spectrum in the same or in an overlapping area. Previously, the FCC would screen a transaction for competitive concerns if, upon consummation, 95 MHz or more of cellular, broadband PCS, enhanced SMR, and 700 MHz spectrum in a single market was attributable to a party or affiliated group, or if there was a material change in the post-transaction market share concentrations as measured by the Herfindahl-Hirschman Index. In 2008, the FCC revised this screen to include situations where AWS-1 or certain BRS spectrum is available, on a geographic area basis as follows:

• For geographic areas in which AWS-1 and certain BRS spectrum is available, the Commission’s initial spectrum screen is 145 MHz.

• For geographic areas in which AWS-1 is available but certain BRS is not available, the Commission’s initial spectrum screen is 125 MHz.

• For geographic areas in which certain BRS spectrum is available but AWS-1 is not available, the Commission’s initial spectrum screen is 115 MHz.

• For geographic areas in which neither BRS spectrum or AWS-1 is available, the Commission’s initial spectrum screen is 95 MHz.

The FCC also stated that it now will apply this revised screen to spectrum acquired via auction. These benchmarks are subject to pending reconsideration proceedings at the FCC. The FCC also is considering whether to initiate a proceeding to eliminate case-by-case application of a spectrum screen entirely in favor of a bright-line spectrum cap.

We are well below the spectrum aggregation screen in the geographic areas in which we hold or have access to licenses which means we may be able to acquire additional spectrum either by auction or in private transactions and we may be able to be acquired by certain other carriers. However, the FCC’s retention of a case-by-case approach to spectrum acquisition and the continuing revision upward of the spectrum screen may allow our competitors to make additional acquisitions of spectrum and further consolidate the industry.

Foreign Ownership Restrictions

The Communications Act authorizes the FCC to restrict the ownership levels held by foreign nationals or their representatives, a foreign government or its representative or any corporation organized under the laws of a foreign country. Generally, the law prohibits indirect foreign ownership of over 25% of our common stock. Our stock is freely tradable on the NYSE and as such foreign ownership of our common stock could exceed this 25% threshold without our knowledge. The FCC may revoke licenses, or require us to restructure our ownership, if ownership of our common stock by non-United States citizens or entities exceeds the statutory 25% benchmark. However, the FCC may waive the foreign ownership limits for CMRS licensees, such as us, and generally permits additional indirect foreign ownership in excess of the statutory 25% benchmark particularly if that interest is held by an entity or entities that are citizens of, representatives of or organized under the laws of countries that are members of the World Trade Organization, or WTO. For investors from countries that are not members of the WTO, the FCC will determine if the home country extends reciprocal treatment, called “effective competitive opportunities,” to United States entities. If these opportunities do not exist, the FCC may not permit such foreign investment beyond the 25% benchmark. We have established internal procedures to ascertain the nature and extent of our foreign ownership, and

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we believe that the indirect ownership of our equity by foreign entities is below the benchmarks established by the Communications Act. If we were to have foreign ownership in excess of the limits, we have the right to acquire that portion of the foreign investment which places us over the foreign ownership restriction.

Designated Entity Requirements

The FCC has established rules that are designed to promote the granting of spectrum licenses to small and very small businesses, entrepreneurs and other DEs. Some licenses, called closed licenses, have been set aside solely for DEs to acquire at auction. DEs also can qualify for bidding discounts of varying amounts (e.g., 15% or 25%) when acquiring licenses available to all parties, called open licenses, at auction. We are an investor in Royal Street Communications, which is a very small business DE that must meet and continue to abide by the FCC’s DE requirements until at least December 2010.

Among other requirements, the FCC DE rules create a control test that obligates the eligible small or very small business members of a DE licensee to maintain de facto (actual) and de jure (legal) control of the business and license. The FCC rules provide that if a license is transferred to a non-eligible entity, an entity which qualifies for a lesser credit on open licenses, or if the existing licensee ceases to be qualified as a DE, the licensee may lose all closed licenses which are not constructed, and may be required to refund to the FCC some or all of the bidding credit received for all open licenses, based on a five-year straight-line discount repayment schedule commencing from the grant date. For example, in Auction 58, Royal Street Communications received a bidding credit equal to approximately $94 million relating to open licenses it acquired as result of that auction. If Royal Street were found to no longer qualify as a DE during the initial five-year term of its licenses, it would be required to repay a portion of the bidding credit using the five-year straight-line repayment schedule from December 2005. Moreover, any closed licenses which are transferred by Royal Street, or if Royal Street is found to no longer qualify as a DE, prior to the five-year anniversary of their initial grant, or December 2010, also may be subject to an unjust enrichment payment. Revocation also could occur if any license is not constructed on a timely basis or not constructed prior to Royal Street no longer qualifying as a DE. All of Royal Street’s licenses are closed licenses except for its Los Angeles and Gainesville basic trading area licenses. Royal Street already has constructed the systems authorized by its open license for Los Angeles license and its closed licenses in the Orlando, Lakeland-Winter Haven, and Melbourne-Titusville basic trading areas.

In 2006, the FCC adopted new DE requirements that apply to all licenses initially granted after April 25, 2006, or New DE Requirements. First, the FCC found that an entity that enters into an impermissible material relationship, which includes any arrangement whereby a DE leases or resells more than fifty percent of the capacity of its spectrum or network to third parties, will be ineligible for an award of DE benefits and subject to unjust enrichment payments on a license-by-license basis. Second, the FCC found that any entity which has a spectrum leasing or resale arrangement (including wholesale arrangements) with an applicant or licensee for more than 25% of the applicant’s total spectrum capacity on a license-by-license basis will be considered to have an attributable interest in the applicant or licensee. Royal Street’s existing relationships with us are grandfathered and Royal Street is not subject to the New DE Requirements with respect to its existing licenses which were granted before April 25, 2006. However, the New DE Requirements will not permit Royal Street to enter into the same relationship it currently has with us for any future FCC auctions and receive DE benefits, including bidding credits. In addition, Royal Street will not be able to acquire any additional DE licenses in the future, resell services to us on those licenses on the same basis as the existing arrangements, or materially change its existing arrangements with us, without making itself ineligible for DE benefits.

Further, the FCC has adopted rules requiring a DE to seek approval for any change in circumstances that may affect its ongoing eligibility, such as entry into an impermissible material relationship, even if the event would not have triggered a reporting requirement under the FCC’s existing rules. In connection with this rule change, the FCC now requires DEs to file annual reports with the FCC listing and summarizing all agreements and arrangements that relate to eligibility for DE benefits. Royal Street has filed all of its required annual reports with the FCC. The FCC also indicated that it will step up its audit program of DEs.

Several interested parties have filed appeals of the New DE Requirements. These appeals are ongoing. The relief sought by the petitioners in their underlying appeals includes overturning the results of Auctions 66 (AWS-1) and 73 (700 MHz). If the petitioners are ultimately successful in obtaining this relief, any licenses granted to us as a result of Auction 66 and/or 73 may be revoked. Our payments to the FCC for the revoked licenses would be refunded, but without interest. If our licenses are revoked we will have been required to pay interest to our lenders on the money paid to the FCC for the AWS-1 and 700 MHz licenses and we will have incurred clearing, construction, and other

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expenses with respect to the AWS-1 licenses, but would not receive interest or any compensation for our clearing, construction, and other activities on the spectrum. We have constructed our Las Vegas, Philadelphia and New York metropolitan networks on AWS-1 spectrum and we only have AWS-1 spectrum in these markets. If we lost our AWS-1 licenses, we would cease being able to provide service in those metropolitan areas where we have already launched service and would not be able to launch service in those markets where we have not yet launched service. We are unable at this time to predict the likely outcome of the challenges to the New DE Requirements or any further appeal and unable to predict the impact on the licenses granted in Auction 66 and Auction 73. We also are unable to predict whether the litigation will result in any changes to the New DE Requirements or to the DE program generally, and, if there are changes, whether or not any such changes will be beneficial or detrimental to our interests.

In connection with the changes to the DE rules, the FCC also is considering whether additional restrictions should be adopted in its DE program. We do not know what additional changes, if any, will be made to the DE program as a result of this further rulemaking. Based on the FCC’s prior rulings, we do not expect any further changes in the DE rules to be applied retroactively to Royal Street, but we cannot give any assurance that the FCC will not give any new rules retroactive effect.

General Regulatory Obligations

The Communications Act and the FCC’s rules impose a number of requirements on wireless broadband mobile services licensees, which affect our cost of doing business and that could have a material effect on our business, operations, and financial results. Further, a failure to meet or maintain compliance with the Communications Act and the FCC’s rules could subject us to fines, forfeitures, penalties, license revocations, or other sanctions, including the imposition of mandatory reporting requirements, limitation on our ability to participate in future FCC auctions or acquisitions of spectrum, and compliance programs and corporate monitors.

CMRS classification. Our wireless broadband mobile services are classified at the federal level as CMRS. The FCC regulates providers of CMRS services as common carriers, which subjects us to many requirements under the Communications Act and FCC rules and regulations. The FCC, however, has exempted CMRS services from some typical common carrier regulations, such as tariff and interstate certification filings, which allows us to respond more quickly to competition in the marketplace. The FCC also is required by federal law to reduce unreasonable disparities in the regulatory treatment of similar wireless broadband mobile services, such as cellular, broadband PCS, AWS, 700 MHz, and Enhanced Specialized Mobile Radio, or ESMR, services, and federal law preempts state rate and entry regulation of CMRS providers.

The FCC permits wireless broadband mobile services licensees to offer fixed services on a co-primary basis along with mobile services. This facilitates the provision of wireless local loop service by CMRS licensees using wireless links to provide local telephone service. The extent of lawful state regulation of such wireless local loop service is undetermined. While we do not presently offer a fixed service, our network can accommodate such an offering. We continue to evaluate our service offerings, and may offer a fixed service at some point in the future.

Spectrum clearing. Spectrum allocated for AWS currently is utilized by a variety of categories of commercial and governmental users. To foster the orderly clearing of the spectrum, the FCC adopted a transition and cost sharing plan pursuant to which incumbent non-governmental users could be reimbursed for relocating out of the band and the costs of relocation would be shared by AWS-1 licensees benefiting from the relocation. The FCC has established a plan where the AWS-1 licensee and the incumbent non-governmental user are to negotiate voluntarily for three years and then, if no agreement has been reached, the incumbent licensee is subject to mandatory relocation procedures in which the AWS-1 licensee can relocate the incumbent non-governmental licensee at the AWS-1 licensee’s expense. The spectrum allocated for AWS-1 also currently is utilized by certain governmental users, many of whom are required over time to relocate from the AWS-1 spectrum. However, in some cases, not all governmental users are obligated to relocate and in other cases incumbent users are not obligated to relocate for some period of time, with varying time frames for relocation.

Spectrum allocated for 700 MHz currently is occupied by existing analog television broadcast licensees and certain wireless microphone users. Licensees granted 700 MHz licenses are not obligated to pay for the relocation of existing analog television broadcast licensees. By federal law, all existing analog television broadcast licenses are obligated to vacate the 700 MHz spectrum by the digital television transition date, currently scheduled for June 12, 2009. We cannot be certain that Congress will not alter the present digital television transition date to a later date to alleviate certain problems with the analog to digital TV conversion. In addition, the FCC has not yet established final procedures and deadlines, including cost obligations for, wireless microphones users to vacate the band.

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E-911 service. The FCC requires CMRS providers to implement basic 911 and enhanced, or E-911, emergency services. Our obligation to implement these services is incurred in stages on a market-by-market basis as local emergency service providers become equipped to handle E-911 calls. E-911 services allow state and local emergency service providers to better identify and locate wireless callers, including callers using special devices for the hearing impaired. The network equipment and handsets we utilize are capable of meeting the FCC’s E-911 requirements and we have constructed facilities to implement these capabilities in markets where we have had requests from local public safety emergency service providers and are in the process of constructing E-911 facilities in the markets we launched recently. Because we employ a handset-based location technology, the FCC also has rules that require us to ensure that specified percentages of the handsets in service on our systems are location capable and meet certain location accuracy standards. The FCC actively monitors the compliance by CMRS carriers with E-911 requirements. For example, MetroPCS was notified on October 10, 2008, by the FCC that it is investigating the compliance by MetroPCS with its E-911 obligations. In response, MetroPCS has provided the FCC with information which we believe shows our compliance with our E-911 obligations; however, the matter is still pending at this time. The FCC has in the past and may in the future, impose substantial fines and forfeitures on wireless broadband mobile carriers for their failure to comply with the FCC’s E-911 rules and could impose other sanctions, including revocation of licenses or the imposition of mandatory reporting requirements, license conditions, and compliance programs. The FCC also has rules under which wireless broadband mobile carriers may be required to offer priority E-911 services to the public safety agencies under certain circumstances. States in which we do business may limit or eliminate our ability to recover our E-911 costs. However, federal legislation also may limit our liability for uncompleted 911 calls to a similar level to wireline carriers in our markets.

The FCC is considering various alternative proposals for wireless E-911 Phase II location accuracy and reliability and an FCC order currently is circulating at the FCC. We are unable at this time to predict the likely outcome of this proceeding. These E-911 requirements may require us to expend additional capital and resources. The FCC also has left open the possibility of further requirements.

Communications assistance for law enforcement act (CALEA). Federal law requires CMRS carriers to assist law enforcement agencies with lawful wiretaps, and imposes wiretap-related record-keeping and personnel-related obligations. Historically, our customer base may have been, and may continue to be, subject to a greater percentage of law enforcement requests than those of other carriers and, as a result, our compliance expenses may be proportionately greater.

Number administration. Because demand is increasing for a finite pool of telephone numbers, the FCC has adopted number pooling rules that govern how telephone numbers are allocated. Number pooling is mandatory inside the wireline rate centers that are located in counties included in the top 100 MSAs. We have implemented number pooling procedures and support pooled number roaming in all of our metropolitan areas which are in the top 100 MSAs. The FCC also has authorized states to supplement federal numbering requirements in certain respects and some of the states where we provide service have been authorized by the FCC to engage in limited numbering administration. Our ability to access telephone numbers on a timely basis is important for our ability to continue to grow our business.

Number portability. The FCC has ordered all telecommunications carriers, including CMRS carriers, to support telephone number portability which enables subscribers to keep their telephone numbers when they change telecommunications carriers, whether wireless to wireless or, in some instances, wireline to wireless, and vice versa. Under these local number portability rules, a CMRS carrier located in one of the top 100 MSAs must have the technology in place to allow its customers to keep their telephone numbers when they switch to a new carrier. Outside of the top 100 MSAs, CMRS carriers receiving a request to allow end users to keep their telephone numbers must be capable of doing so within six months of the request. All CMRS carriers are required to support nationwide roaming for customers retaining their numbers.

Interconnection. FCC rules provide that all telecommunications carriers are obligated upon reasonable request to interconnect directly or indirectly with the facilities and networks of other telecommunications carriers. All local exchange carriers also must, upon request, enter into mutual or reciprocal compensation arrangements with CMRS carriers for the exchange of intra-MTA traffic, under which each carrier compensates the other for terminated intra-MTA traffic originating on the compensating carrier’s network. Further, at a CMRS carrier’s request, incumbent local exchange carriers must exchange intra-MTA traffic with CMRS carriers at rates based on the FCC’s costing

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rules or rates set by state public utility commissions applying the FCC’s rules. CMRS carriers also have an obligation to engage in voluntary negotiation and may be subject to arbitration with incumbent local exchange carriers similar to those imposed on the incumbent local exchange carriers pursuant to Section 252 of the Communications Act. Once an incumbent local exchange carrier requests negotiation of an interconnection arrangement, both carriers are obligated to begin paying the FCC’s default rates for all intra-MTA traffic exchanged after the request for negotiation.

CMRS carriers generally are obligated to pay reasonable compensation to a local exchange carrier in connection with intra-MTA traffic originated by the CMRS carrier and terminated by the LEC. While these rules provide that local exchange carriers may not charge CMRS carriers for facilities used by CMRS carriers to terminate local exchange carriers’ traffic, local exchange carriers may charge CMRS carriers for facilities used to transport and terminate CMRS traffic and for facilities used for transit purposes to carry CMRS carrier traffic to a third carrier. Since 2005, no local exchange carrier has been permitted to impose on a going-forward basis rates by state tariff for the termination of a CMRS carrier’s intra-MTA traffic. We generally have been successful in negotiating arrangements with carriers with whom we exchange intra-MTA traffic; however, our business could be adversely affected if the rates some carriers charge us for terminating our customers’ intra-MTA traffic ultimately prove to be higher than anticipated. Further, the rules governing interconnection are under review by the FCC in a rulemaking proceeding, and we cannot be certain whether or not there will be material changes in the applicable rules, and if there are changes, when they might take effect and whether they will be beneficial or detrimental to us.

Access. In order to offer long distance services to our customers, we resell the long distance services provided by third parties. Those third parties are obligated to pay compensation to the telecommunications carriers who terminate our subscribers’ long distance calls. Historically, CMRS carriers generally have not been entitled to receive direct access payments for the long distance calls they terminate, but must pay access charges to other telecommunications carriers for calls they terminate. In October 2007, the FCC initiated a proceeding to determine whether the FCC’s current rules ensure that the rates for switched access services charged by local exchange carriers are just and reasonable. In the proceeding, the FCC is investigating certain traffic stimulation activities of local exchange carriers which are alleged to generate excessive fees for switched access traffic. The FCC also seeks comment on whether sharing of access revenues is appropriate. The FCC also asked parties to address whether carriers are adopting traffic stimulation strategies with respect to other forms of intercarrier compensation, which would include compensation for intra-MTA traffic delivered by CMRS carriers to local exchange carriers. We and others have asked the FCC to cap the amount of compensation paid to local exchange carriers for traffic that is grossly imbalanced. If the FCC adopts such proposed limitations, it could reduce the amount of compensation we are obligated to pay local exchange carriers, may affect the amount of access sharing revenue we receive. The rules governing access generally are under review by the FCC in a rulemaking proceeding and we cannot be certain whether or not there will be material changes to the applicable rules and, if there are changes, when they may take effect and whether they will be beneficial or detrimental to us.

Universal Service Fund (USF). The FCC has adopted rules requiring interstate communications carriers, including CMRS carriers, to “make an equitable and non-discriminatory contribution” to a Universal Service Fund, or USF, that reimburses communications carriers who are providing subsidized basic communications services to underserved areas and users. The FCC requires carriers providing both intrastate and interstate services to determine their percentage of traffic which is interstate and the FCC has also adopted a safe-harbor percentage of interstate traffic for CMRS carriers. We have made these FCC-required payments using the safe-harbor. The FCC prohibits carriers from recovering administrative costs related to administering the required universal service fund assessments. The FCC’s rules require that carriers’ USF recovery charges to customers not exceed the assessment rate the carrier pays times the proportion of interstate telecommunications revenue on the bill. The FCC has rulemaking proceedings pending in which it is considering a comprehensive reform of the manner in which it assesses carrier USF contributions, how carriers may recover their costs from customers and how USF funds will be distributed among and between states, carriers and services. Some of these proposals may cause the amount of USF contributions required from us and our customer to increase.

Eligible telecommunications carriers. Wireless broadband mobile carriers may be designated as Eligible Telecommunications Carriers, or ETCs, and may receive universal service support for providing service to customers using wireless service in high cost areas. Certain competing wireless broadband mobile carriers operating in states where we operate have obtained or applied for ETC status. Their receipt of universal service support funds may affect our competitive status in a particular market by allowing our competitors to offer service at a lower rate that is subsidized by the universal service fund. The FCC is considering altering, reducing, or capping the amount of universal support received by CMRS ETC providers. In May 2008, the FCC adopted an interim cap on payments to

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ETCs under the USF, pending comprehensive reform that is now under consideration by the agency. We may decide in the future to apply for an ETC designation in certain qualifying high cost areas where we provide wireless services, though our ability to qualify may be affected by ongoing changes and possible future limitations in the program. If we are approved, these payments would be an additional revenue source that we could use to support the services we provide in high cost areas.

Regulatory fees. We are obligated to pay certain annual regulatory fees and assessments to support FCC wireless industry regulation, as well as fees supporting federal universal service programs, number portability, regional database costs, centralized telephone numbering administration, telecommunications relay service for the hearing-impaired and application filing fees. These fees are subject to change periodically by the FCC.

Equal access. CMRS carriers are exempt from the obligation to provide equal access to interstate long distance carriers. However, the FCC has the authority to impose rules requiring unblocked access through carrier identification codes or 800/888 numbers to long distance carriers so CMRS customers are not denied access to their chosen long distance carrier, if the FCC determines the public interest so requires. Our customers have access to alternative long distance carriers using toll-free numbers.

Customer proprietary network information (CPNI). FCC rules impose restrictions on a telecommunications carrier’s use of customer proprietary network information, or CPNI, without prior customer approval, including restrictions on the use of information related to a customer’s location. The FCC has imposed substantial fines on certain wireless carriers for their failure to comply with the FCC’s CPNI rules. The FCC previously conducted a broadscale investigation into whether CMRS carriers are properly protecting the CPNI of their customers against unauthorized disclosure to third parties. In February 2006, the FCC requested that all CMRS carriers provide a certificate from an officer based on personal knowledge that the CMRS carrier was in compliance with all CPNI rules and the filing of such a certificate has now become an annual requirement. We provided the certificate in February 2006 and have provided the required annual certificates since then.

Revised CPNI rules became effective in December 2007 that required us to make certain changes to our business practices or processes. Among other things, CMRS carriers now must take reasonable measures to discover and protect against pretexting and, in enforcement proceedings, the FCC will infer from evidence of unauthorized disclosures of CPNI that reasonable protections were not taken. The FCC also is seeking comment on additional CPNI regulations.

Congress and state legislators also may pass legislation governing the use and protection of CPNI and other personal information. For example, Congress enacted the Telephone Records and Privacy Protection Act of 2006, which imposes criminal penalties upon persons who purchase without a customer’s consent, or use fraud to gain unauthorized access to, telephone records. In addition, certain states have enacted, and other states in the future may enact, legislature relating to customer personal information. The recent and pending legislation (if enacted) may require us to change how we protect our customer’s CPNI and other personal information.

Services to persons with disabilities. Telecommunications carriers are required to make their services accessible to persons with disabilities. These FCC rules generally require service providers to offer equipment and services accessible to and usable by persons with disabilities, if readily achievable, and to comply with FCC-mandated complaint/grievance procedures. These rules are largely untested and are subject to interpretation through the FCC’s complaint process. While these rules principally focus on requirements that must be met by the manufacturers of wireless equipment, we are required to have a certain percentage of our handsets be hearing aid compatible and we have annual reporting requirements. Because of the ongoing consolidation in the digital wireless handset manufacturers industry and in the wireless industry, we may have difficulty securing the necessary handsets in order to meet any additional FCC requirements. In addition, since we are required to offer these hearing aid-compatible wireless phones for each air interface we provide, this requirement may limit our ability to offer services using new air interfaces other than CDMA 1XRTT, may limit the number of handsets we can offer, or may increase the costs of handsets for those new air interfaces. Further, to the extent that the costs of such handsets are more than non-hearing aid-compatible digital wireless handsets, demand for our services may decrease, the number of wireless phones we can offer to our customers may decline, or our selling costs may increase if we choose to subsidize the cost of the hearing aid-compatible handsets.

Backup power requirements. In October 2007, the FCC adopted rules which, if they had taken effect, would have required us to maintain emergency backup power for a minimum of twenty-four hours for certain of our equipment that is normally powered from local commercial power located inside mobile switching offices, and eight hours for

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certain of our equipment that are normally powered from local commercial power and at other locations, including cell sites and DAS nodes. Various aspects of the rules were challenged in court and before the Office of Management and Budget, or OMB. As a result, the rules have not taken effect and are not being enforced, and the FCC has indicated that it plans to seek comment on revised backup power rules applicable to wireless providers. We are unable to predict with any certainty the likely outcome of any proceeding regarding backup power rules. In addition, if we are required to secure additional state or local permits or authorization, it could delay the construction of any new cell sites or distributed antenna systems, or DAS systems, and launch of services in new metropolitan areas.

Siting issues. The location and construction of wireless antennas, DAS systems and nodes, base stations and towers are subject to FCC and Federal Aviation Administration, or FAA, regulations, federal environmental regulation, and other federal, state, and local regulations. With respect to AWS-1 sites, we must notify the FAA when we add AWS-1 frequencies to existing sites that already have been determined not to be a hazard to air navigation by the FAA. Antenna structures used by us and other wireless providers also are subject to FCC rules implementing the National Environmental Policy Act and the National Historic Preservation Act. Under these rules, construction cannot begin on any structure that may significantly affect the human environment, or that may affect historic properties, until the wireless provider has filed an environmental assessment with and obtained approval from the FCC or a local agency. Processing of environmental assessments can delay construction of antenna facilities, particularly if the FCC or local agency determines that additional information is required or if community opposition arises. In addition, several environmental groups have requested various changes to the FCC’s environmental processing rules, challenged specific environmental assessments as failing statutory requirements and sought to have the FCC conduct a comprehensive assessment of antenna tower construction environmental effects. The FCC also has been ordered by the Court of Appeals for the DC Circuit to further consider the impact that communications facilities, including wireless towers and antennas, may have on migratory birds, and the FCC has initiated a proceeding to do so. In the meantime, there are a variety of federal and state court actions in which citizen and environmental groups have sought to deny individual tower approvals based upon potential adverse impacts to migratory birds. Although we almost exclusively use antenna structures that are owned and maintained by third parties, the results of these FCC and court proceedings could have an impact on our efforts to secure access to particular towers, or on our costs of such access.

Tower lighting and painting. The FCC has established rules requiring certain towers and other structures to be painted and lighted to minimize the hazard to air navigation. In addition, we are obligated to notify the FAA if the lighting at a tower which is required to be lighted is no longer lighted. A failure to abide by these requirements could result in the imposition of fines and forfeitures or other liability if an accident occurs. We generally collocate on existing towers and structures and do not have the right to paint or control the lighting at the site but still could be held accountable if the lighting and painting requirements are not met.

Radio frequency limits. The FCC sets limits on radio frequency, or RF, emissions from cell sites and has rules that establish procedures intended to protect persons from RF hazards. We have policies in place to ensure compliance with these applicable limits at cell sites where we have operations, but we cannot guarantee that we are in compliance at each cell site. Any noncompliance could have an impact on our operations at a particular cell site.

Emergency warning. The FCC has adopted technical standards, protocols, procedures, and other requirements under the Warning, Alert, and Response Network Act, or WARN Act, to govern emergency alerting standards for CMRS providers which voluntarily elect to participate. We have elected to participate in the voluntary emergency alert program. This election may cause us to incur costs and expenses and our customers may be required to purchase new handsets. Under the adopted rules, if a CMRS carrier elects to participate, the carrier must notify customers of the availability of emergency alerts but may not charge separately for the alerting capability and the CMRS carrier’s liability related to, or any harm resulting from, the transmission of, or failure to transmit, an emergency alert is limited. If we decide to withdraw from participation at a later date, our customers may decide to terminate their service with us. The FCC also is considering the feasibility of requiring wireless providers to distribute emergency information and the FCC may change its requirements for the rules under the WARN Act, which additional requirements or changes would cause us to incur additional costs and expenses.

Roaming. The FCC long has required CMRS providers to permit customers of other carriers to roam “manually” on their networks, for example, by supplying a credit card number, provided that the roaming customer’s handset is technically capable of accessing the roamed-on network. More recently, the FCC has ruled that automatic roaming also is a common carrier obligation for CMRS carriers. This ruling requires CMRS carriers to provide automatic roaming services to other CMRS carriers upon reasonable request and on a just, reasonable, and non-discriminatory

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basis pursuant to Sections 201 and 202 of the Communications Act. This automatic roaming obligation extends to services such as ours that are real-time, two-way switched voice or data services that are interconnected with the public switched network and utilize an in-network switching facility that enables the provider to reuse frequencies and accomplish seamless hand-offs of subscriber calls. Automatic roaming rights are important to us because we provide service in a limited number of metropolitan areas in the United States and must rely on other carriers in order to offer roaming services outside our existing metropolitan areas. The FCC rules, however, do not require carriers to provide automatic roaming to areas where the roamer’s home carrier holds licenses or otherwise has spectrum usage rights. This in-market limitation may preclude our customers from receiving automatic roaming in large portions of the United States where we recently acquired licenses but have not yet built networks or offer services and do not have existing long-term roaming agreements, such as the geographic areas included in our AWS-1 and 700 MHz licenses. The limitation of automatic roaming rights to areas in which we do not hold or lease spectrum could limit our ability to renew or extend our existing roaming agreements. We and other carriers have filed petitions for reconsideration of this limitation, but we are unable at this time to predict with any certainty the likely outcome of these reconsideration requests.

The FCC also has not extended the automatic roaming obligation to services that are classified as information services (such as high speed Internet services) or to services that are not CMRS but the FCC is seeking comment on whether the roaming obligation should be extended to such non-interconnected services or features. We cannot predict the likely outcome or timing of this proceeding. If the FCC does not adopt an automatic roaming requirement for non-interconnected services or features, such as information services, high speed broadband services, and broadband Internet access services, we could have difficulty attracting and retaining certain groups of customers.

In its recent approval of the Verizon Wireless purchase of Alltel Wireless, the FCC imposed conditions that allow carriers like us who have roaming agreements with both Verizon Wireless and Alltel Wireless to use either agreement to govern all traffic exchanged with the post-merger Verizon Wireless for at least four years after the date of the closing of the transaction. We have opted to elect the Alltel Wireless roaming agreement to govern all of our roaming traffic with the combined Verizon Wireless-Alltel, though Verizon Wireless may take the position that our right to elect the Alltel Wireless agreement only applies to the rate and not to other terms and conditions. We and others have asked the Commission to clarify these requirements, to extend the four-year commitment to seven years and to require post-merger Verizon Wireless to offer automatic roaming for data services and features on a non-discriminatory basis. We are unable at this time to predict with any certainty the likely outcome of these reconsideration requests.

Wireless open access. A provider of VoIP services has asked the FCC to issue a declaratory ruling that would give wireless broadband mobile customers the right to utilize any device of their choice to access a wireless broadband mobile network as long as the device did not cause interference or network degradation and the FCC has placed this request on public notice. The petition also seeks to enable customers to run applications of their choice on wireless broadband mobile networks. This so-called “Wireless Carterfone Rule” is opposed by many wireless broadband mobile companies, including us and CTIA. The proponent also requested that the FCC initiate proceedings to determine whether the current practices of wireless broadband mobile carriers comport with the Communications Act. We cannot be certain as to the likely outcome of this proceeding, but the imposition by the FCC of Open Network Platform requirements on a portion of the 700 MHz spectrum indicates some support at the agency for a Wireless Carterfone Rule, and such support may increase in the future. The adoption of such a rule for existing networks could permit third parties to run applications on our network that consume large amounts of airtime and/or bandwidth. Our fixed price, unlimited service is not well-suited to such applications and a mandate of this nature could substantially impede our business.

Network management. In November 2007, a digital content company asked the FCC to prohibit broadband network operators from blocking, degrading or unreasonably discriminating against lawful Internet applications, context or technologies. In August 2008, the FCC ruled that Comcast Corporation violated the FCC’s policy regarding reasonable broadband network management by discriminating against certain types of network traffic. This ruling currently is on appeal. At this point, we cannot predict the likely outcome of the appeal. We also are unable to predict this ruling’s impact on us, or whether the FCC will initiate similar investigations against other broadband providers, including wireless providers.

White spaces. In November 2008, the FCC adopted rules to allow unlicensed radio transmitters to operate in the unused broadcast digital television spectrum, or White Spaces. The FCC’s rules provide for both fixed and personal/portable devices to operate in the White Spaces on an unlicensed basis, subject to various protections to existing users of the spectrum. It is possible that entities may offer services in the White Spaces that could compete with services offered by us. We are unable to predict the impact of allowing the use of White Spaces for wireless broadband mobile services on our business or the competitive effect of these new rules.

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Regulatory classifications. The FCC has found that wireless broadband Internet access service offered at speeds in excess of 200 kbps in at least one direction is an information service under the Communications Act, and thus essentially unregulated. In addition, the FCC has found that the transmission component of wireless broadband Internet access service meets the definition of telecommunications under the Communications Act and that the offering of a telecommunications transmission component as part of a functionally integrated Internet access service offering is not a regulated telecommunications service under the Communications Act. Further, the FCC has found that mobile wireless broadband Internet access service is not a “commercial mobile service” under Section 332 of the Communications Act. Carriers offering mobile wireless broadband Internet access services are not considered common carriers and have no common carrier obligations with respect to this service. Accordingly, as a result of such classification decisions, we and our competitors have greater flexibility in establishing the terms and conditions, including pricing, of this service.

In January 2008, the FCC solicited comments on whether text messages and short codes are common carrier services to which CMRS carriers must provide non-discriminatory access. We cannot predict the likely outcome of this proceeding, the likely timing of an FCC ruling, or the effect that such a requirement would have on us.

Outage reporting. The FCC requires all telecommunications carriers to report outages to the FCC. These reporting requirements affect the way we track and gather data regarding system outages and repair outages, and potentially subject us to fines and forfeitures if we fail to make timely reports.

Other federal regulation

Copyright protection. The Digital Millennium Copyright Act, or DMCA, prohibits the circumvention of technological measures employed to protect a copyrighted work, or access control. However, under the DMCA, the Copyright Office of the Library of Congress, or the Copyright Office, has the authority to exempt certain activities which otherwise might be prohibited by that section for a period of three years. In November 2006, the Copyright Office granted an exemption to the DMCA to allow circumvention of software locks and other firmware that enable wireless handsets to connect to a wireless telephone network when such circumvention is accomplished for the sole purpose of lawfully connecting the wireless handset to another wireless telephone network. This exemption is effective through October 27, 2009 unless extended by the Copyright Office. We and others have filed comments asking the Copyright Office to extend this, or a substantially similar exemption, for another three-year period. Other interested parties, including the principal wireless industry association, or CTIA, have opposed any extension of this exemption. We are unable to predict with any certainty the likely outcome of the Copyright Office’s determination.

We have implemented a service called MetroFlash that enables new customers under certain circumstances to unlock their existing CDMA handsets, reprogram them to operate on our networks, and to connect them to our network. If a significant number of new customers are attracted to our service as a result of this service and we are unable to continue this service, either because of the failure of the Copyright Office to extend the exemption or because of complaints against us by other third parties, it could adversely affect our ability to continue to attract new customers to our service.

Economic Stimulus. Congress recently enacted the American Recovery and Reinvestment Act of 2009, or the Recovery Act, which provides, among other things, for an aggregate appropriation of $7.2 billion to fund grants to provide access to broadband service to consumers residing in rural, unserved or underserved areas of the United States. The grants are available to, among others, wireless broadband mobile carriers. Grants of up to 80% of the total cost of the project may be used to fund broadband infrastructure projects in certain instances. A significant portion of these funds is expected to be made available in 2009 and 2010. We, our competitors, and new entrants may decide to apply for the Recovery Act funds. The details regarding the terms and conditions of any such grants are unsettled and the usefulness of these funds to us is uncertain. If our competitors or new entrants receive grants, this could allow them to provide service at lower rates, to have lower costs to provide service, or to provide service in areas that we could not serve economically without support from these grants. If we seek and receive these grants, we could use these funds to provide service in areas that we traditionally have not served, to reduce our costs to provide service in certain areas, and to lower our service prices.

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Other. Our operations also are subject to various other regulations, including those regulations promulgated by the Federal Trade Commission, the Federal Aviation Administration, the Environmental Protection Agency, the Occupational Safety and Health Administration and state and local regulatory agencies and legislative bodies.

State, local and other regulation

The Communications Act preempts state or local regulation of market entry or rates charged by any CMRS provider. As a result, we are free to establish rates and offer new products and services with minimum state regulation. However, states and local agencies may regulate “other terms and conditions” of wireless service, and certain states where we operate have adopted rules and regulations to which we are subject, primarily focusing upon consumer protection issues and resolution of customer complaints. In addition, several state authorities have initiated actions or investigations of various wireless carrier practices. The outcome of these proceedings is uncertain and could require us to change our marketing practices, ultimately increasing state regulatory authority over the wireless industry. To the extent that applicable rules differ from state to state, our costs of compliance may go up and our ability to have uniform policies and practices throughout our business may be impaired. State and local governments also may manage public rights of way and can require fair and reasonable compensation from telecommunications carriers, including CMRS providers, for the use of such rights of any, so long as the government publicly discloses such compensation.

Various decisions have been rendered by, and other proceedings are pending before, state public utility commissions and courts pertaining to the extent to which the FCC’s preemptive rights over CMRS rates and entry prevent states from regulating aspects of wireless service, such as billing policies and other consumer issues. Depending upon the ultimate resolution of these proceedings, which we cannot predict at this time, our services may be subject to additional state regulation which could cause us to incur additional costs.

The location and construction of wireless antennas, DAS systems and nodes, base stations and towers are subject to state and local environmental regulations, zoning, permitting, land use and other regulation. Before we can put a DAS node or site into commercial operation, we, or the tower owner in the case of leased sites, must obtain all necessary zoning and building permit approvals. The time needed to obtain necessary zoning approvals, building permits and other state and local permits varies from market to market and state to state and, in some cases, may materially delay our ability to provide service. Variations also exist in local zoning processes. Further, certain cities and municipalities impose severe restrictions and limitations on the placement of wireless facilities which may impede our ability to provide service in some areas. In addition, in order to deploy DAS systems, our DAS provider may need to obtain authorization from a local municipality. In at least one instance, such authorization is subject to challenge. Actions of this nature could have an adverse effect on our ability to construct and launch service in new metropolitan areas or to expand service in existing markets. Further, we may be subject to environmental compliance regulations with respect to the operation of standby power generators, batteries and fuel storage for our telecommunications equipment. A failure or inability to obtain necessary zoning approvals or state permits, or to satisfy environmental rules, may make construction impossible or infeasible on a particular site, might adversely affect our network design, increase our network design costs, require us to use more costly alternative technologies, such as DAS systems, reduce the service provided to our customers, and affect our ability to attract and retain customers. Local zoning and building ordinances also may make it difficult for us to comply with certain federal requirements, such as the backup power requirements under consideration by the FCC.

We cannot assure you that any state or local regulatory requirements currently applicable to our systems will not be changed in the future or that regulatory requirements will not be adopted in those states and localities which currently have none.

Certain states and municipalities in which we provide service or plan to provide service have passed laws prohibiting the use of wireless phones while driving or requiring the use of wireless headsets, other states and municipalities may adopt similar restrictions in the future, and one national organization is advocating a total ban on the use of wireless phones while driving. If state and local governments in areas where we conduct business adopt regulations restricting the use of wireless handsets while driving, we could experience reduced demand for our services.

Certain states in which we provide service are in the process of reviewing proposed legislation that would require persons selling prepaid wireless services, such as ours, to verify a customer’s identity using government identification. We currently do not require our subscribers to provide a government issued identification to initiate service with us. If such legislation is passed, it could have a material adverse affect on our business, financial condition or operating results.

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Future regulation

From time to time, federal, state or local government regulators enact new or revise existing legislation or regulations that could affect us, either beneficially or adversely. Ongoing changes in the political and financial climate may foster increased legislation or regulation. We cannot assure you that federal, state or local governments will not enact legislation or that the FCC or other federal, state or local regulators will not adopt regulations or take other actions that might adversely affect us.

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EX-99.2

Exhibit 99.2

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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. and Royal Street Communications, LLC. 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. Unless otherwise indicated, all share numbers and per share prices give effect to a 3 for 1 stock split effected by means of a stock dividend of two shares of common stock for each share of common stock issued and outstanding at the close of business on March 14, 2007. On April 18, 2007, the registration statement for our initial public offering became effective and our common stock began trading on the New York Stock Exchange under the symbol “PCS” on April 19, 2007. We consummated our initial public offering of our common stock on April 24, 2007.

We are a wireless telecommunications carrier that currently offers wireless services primarily in the greater Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, San Francisco, Sacramento and Tampa/Sarasota metropolitan areas. We launched service in the greater Atlanta, Miami and Sacramento metropolitan areas in the first quarter of 2002; in San Francisco in September 2002; in Tampa/Sarasota in October 2005; in Dallas/Ft. Worth in March 2006; in Detroit in April 2006; in Orlando in November 2006; in Los Angeles in September 2007; in Las Vegas in March 2008; in Jacksonville in April 2008; in Philadelphia in July 2008; and in New York and Boston in February 2009. In 2005, Royal Street Communications, LLC, or Royal Street Communications, and with its wholly-owned subsidiaries, or collectively, Royal Street, was granted licenses by the Federal Communications Commission, or FCC, in Los Angeles and various metropolitan areas throughout northern Florida. We own 85% of the limited liability company member interests in Royal Street Communications, but may only elect two of the five members of Royal Street Communications’ management committee. We have a wholesale arrangement with Royal Street under which we purchase up to 85% of the engineered capacity of Royal Street’s systems allowing us to sell our standard products and services under the MetroPCS brand to the public. Royal Street has constructed, or is in the process of constructing, its network infrastructure in its licensed metropolitan areas. We commenced commercial services in Orlando and certain portions of northern Florida in November 2006 and in Los Angeles in September 2007 through our arrangements with Royal Street. Additionally, upon Royal Street’s request, we have provided and will provide financing to Royal Street under a loan agreement. As of December 31, 2008, the maximum amount that Royal Street could borrow from us under the loan agreement was approximately $1.0 billion of which Royal Street had net outstanding borrowings of $905.0 million through December 31, 2008. On February 17, 2009, we executed an amendment to the loan agreement which increased the amount available to Royal Street under the loan agreement by an additional $550.0 million. Royal Street has incurred an additional $14.2 million in net borrowings through February 23, 2009.

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. Moreover, we expect that our number of customers will continue to increase, which will continue to contribute to increases in our revenues and operating expenses. We currently plan to focus on building out networks to cover approximately 40 million of total population during 2009-2010 including the launch of the Boston and New York metropolitan areas in February 2009.

We sell products and services to customers through our Company-owned retail stores as well as indirectly through relationships with independent retailers. We offer service which 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 local service area, under simple and affordable flat monthly rate service plans starting at $30 per month. For an additional $5 to $20 per month, our customers may select a service plan that offers additional services, such as unlimited voicemail, caller ID, call waiting, enhanced directory assistance, unlimited text messaging, mobile Internet browsing, push e-mail, social networking services, location based services, mobile instant messaging, picture and multimedia messaging and the ability to place unlimited long distance calls from within our local service calling area to any number in the continental United States. We offer flat-rate monthly plans at $30, $35, $40, $45 and $50, as well as Family Plans which offer discounts to our monthly plans for multiple lines. 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

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suspended at the end of the month that was paid for by the customer and terminated if the customer does not pay within thirty days. For additional fees, we also provide international long distance and international text messaging, ringtones, ring back tones, downloads, games and content applications, unlimited directory assistance, location services and other value-added services. As of December 31, 2008, approximately 80% of our customers have selected a $40 or higher rate plan. Our flat-rate plans differentiate our service from the more complex plans and long-term contract requirements of traditional wireless carriers. In addition, the above products and services are offered by us in the Royal Street markets under the MetroPCS brand.

Critical Accounting Policies and Estimates

On January 1, 2008, we adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 157, “Fair Value Measurements,” or SFAS No. 157, for financial assets and liabilities. SFAS No. 157 defines fair value, thereby eliminating inconsistencies in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations. SFAS No. 157 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. SFAS No. 157 requires us 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 following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. You should read this discussion and analysis in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this report. The preparation of financial statements in conformity with GAAP requires us 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 base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Our wireless services are provided on a month-to-month basis and are paid in advance. We recognize revenues from wireless services as they are rendered. Amounts received in advance are recorded as deferred revenue. Suspending service for non-payment is known as hotlining. We do not recognize revenue on hotlined customers.

Revenues and related costs from the sale of accessories are recognized at the point of sale. The cost of handsets sold to indirect retailers are included in deferred charges until they are sold to and activated by customers. Amounts billed to indirect retailers for handsets are recorded as accounts receivable and deferred revenue upon shipment by us and are recognized as equipment revenues when service is activated by customers.

Our customers have the right to return handsets within a specified time or within a certain amount of use, whichever occurs first. We record an estimate for returns as contra-revenue at the time of recognizing revenue. Our assessment of estimated returns is based on historical return rates. If our customers’ actual returns are not consistent with our estimates of their returns, revenues may be different than initially recorded.

We follow the provisions of Emerging Issues Task Force or EITF, No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” or EITF No. 00-21. EITF No. 00-21, addresses the accounting for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. Revenue arrangements with multiple deliverables are divided into separate units of accounting and the consideration received is allocated among the separate units of accounting using the residual method of accounting.

We determined that the sale of wireless services through our direct and indirect sales channels with an accompanying handset constitutes revenue arrangements with multiple deliverables. In accordance with EITF No. 00-21, we divide these arrangements into separate units of accounting and allocate the consideration between the handset and the wireless service using the residual method of accounting. Consideration received for the wireless service is recognized at fair value as service revenue when earned, and any remaining consideration received is recognized as equipment revenue when the handset is delivered and accepted by the customer.

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Allowance for Uncollectible Accounts Receivable

We maintain allowances for uncollectible accounts for estimated losses resulting from the inability of our independent retailers to pay for equipment purchases and for amounts estimated to be uncollectible for intercarrier compensation. We estimate allowances for uncollectible accounts from independent retailers based on the length of time the receivables are past due, the current business environment and our historical experience. If the financial condition of a material portion of our independent retailers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. In circumstances where we are aware of a specific carrier’s inability to meet its financial obligations to us, we record a specific allowance for intercarrier compensation against amounts due; to reduce the net recognized receivable to the amount we reasonably believe will be collected. Total allowance for uncollectible accounts receivable as of December 31, 2008 was approximately 12% of the total amount of gross accounts receivable.

Inventories

We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value or replacement cost based upon assumptions about future demand and market conditions. Total inventory reserves for obsolescent and unmarketable inventory were not significant as of December 31, 2008. If actual market conditions are less favorable than those projected, additional inventory write-downs may be required.

Deferred Income Tax Asset and Other Tax Reserves

We assess our deferred tax asset and record a valuation allowance, when necessary, to reduce our deferred tax asset to the amount that is more likely than not to be realized. We have considered future taxable income, taxable temporary differences and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. Should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to earnings in the period we made that determination.

We establish reserves when, despite our belief that our tax returns are fully supportable, we believe that certain positions may be challenged and ultimately modified. We adjust the reserves in light of changing facts and circumstances. Our effective tax rate includes the impact of income tax related reserve positions and changes to income tax reserves that we consider appropriate. A number of years may elapse before a particular matter for which we have established a reserve is finally resolved. Unfavorable settlement of any particular issue may require the use of cash or a reduction in our net operating loss carryforwards. Favorable resolution would be recognized as a reduction to the effective rate in the year of resolution. Tax reserves as of December 31, 2008 were $37.6 million of which $5.2 million and $32.4 million are presented on the consolidated balance sheet in accounts payable and accrued expenses and other long-term liabilities, respectively.

On January 1, 2007, we adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes,” or FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect our operating results.

Property and Equipment

Depreciation on property and equipment is applied using the straight-line method over the estimated useful lives of the assets once the assets are placed in service, which are seven to ten years for network infrastructure assets, three to ten years for capitalized interest, three to seven years for office equipment, which includes computer equipment, 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, whichever is shorter. The estimated life of property and equipment is based on historical experience with similar assets, as well as taking into account anticipated technological or other

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changes. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation expense in future periods. Likewise, if the anticipated technological or other changes occur more slowly than anticipated, the life of the assets could be extended based on the life assigned to new assets added to property and equipment. This could result in a reduction of depreciation expense in future periods.

We assess the impairment of long-lived assets whenever events or changes in circumstances indicate the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include significant underperformance relative to historical or projected future operating results or significant changes in the manner of use of the assets or in the strategy for our overall business. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. When we determine that the carrying value of a long-lived asset is not recoverable, we measure any impairment based upon a projected discounted cash flow method using a discount rate we determine to be commensurate with the risk involved and would be recorded as a reduction in the carrying value of the related asset and charged to results of operations. If actual results are not consistent with our assumptions and estimates, we may be exposed to an additional impairment charge associated with long-lived assets. The carrying value of property and equipment was approximately $2.8 billion as of December 31, 2008.

Long-Term Investments

We account for our investment securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” At December 31, 2008, all of the Company’s long-term investment securities were reported at fair value. Due to the lack of availability of observable market quotes on our investment portfolio of auction rate securities, the fair value was estimated based on valuation models that rely exclusively on unobservable inputs including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. See Note 10 to the consolidated financial statements included elsewhere in this report.

Declines in fair value that are considered other-than-temporary are charged to earnings and those that are considered temporary are reported as a component of other comprehensive income in stockholders’ equity. The Company has recorded an impairment charge of $30.9 million during the year ended December 31, 2008, reflecting the portion of the auction rate security holdings that the Company has concluded have an other-than-temporary decline in value.

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. The estimated market value of the Company’s auction rate security holdings at December 31, 2008 was approximately $6.0 million.

With the continuing liquidity issues experienced in the global credit and capital markets, the auction rate securities held by the Company at December 31, 2008 continued to experience failed auctions as the amount of securities submitted for sale in the auctions exceeded the amount of purchase orders. In addition, all of the auction rate securities held by the Company have been downgraded or placed on credit watch. The Company may incur additional impairments to its auction rate securities which may be up to the full remaining value of such auction rate securities.

FCC Licenses and Microwave Relocation Costs

We operate 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 mobile services. In November 2006, we acquired a number of AWS licenses which can be used to provide wireless broadband mobile services comparable to the PCS services provided by us, as well as other advanced wireless services. In June 2008, we 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 to relocate existing fixed microwave users of our licensed spectrum if the use of our spectrum interfered with their systems and/or reimburse other carriers (according to FCC rules) that relocated prior users if the relocation benefits our system. Additionally, we incurred costs related to microwave relocation in constructing our PCS and AWS networks. The PCS, AWS and 700 MHz licenses and microwave

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relocation costs are recorded at cost. Although FCC licenses are issued with a stated term, ten years in the case of PCS licenses, fifteen years in the case of AWS licenses and approximately 10.5 years for 700 MHz licenses, the renewal of PCS, AWS and 700 MHz licenses is generally a routine matter without substantial cost and we have determined that no legal, regulatory, contractual, competitive, economic, or other factors currently exist that limit the useful life of our PCS, AWS and 700 MHz licenses. The carrying value of FCC licenses and microwave relocation costs was approximately $2.4 billion as of December 31, 2008.

Our primary indefinite-lived intangible assets are our FCC licenses. Based on the requirements of SFAS No. 142, “Goodwill and other Intangible Assets,” or SFAS No. 142, we test investments in our FCC licenses for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value of our FCC licenses might be impaired. We perform our annual FCC license impairment test as of each September 30th. The impairment test consists of a comparison of the estimated fair value with the carrying value. We estimate the fair value of our FCC licenses using a discounted cash flow model. Cash flow projections and assumptions, although subject to a degree of uncertainty, are based on a combination of our historical performance and trends, our business plans and management’s estimate of future performance, giving consideration to existing and anticipated competitive economic conditions. Other assumptions include our weighted average cost of capital and long-term rate of growth for our business. We believe that our estimates are consistent with assumptions that marketplace participants would use to estimate fair value. We corroborate our determination of fair value of the FCC licenses, using the discounted cash flow approach described above, with other market-based valuation metrics. Furthermore, we segregate our FCC licenses by regional clusters for the purpose of performing the impairment test because each geographical region is unique. An impairment loss would be recorded as a reduction in the carrying value of the related indefinite-lived intangible asset and charged to results of operations. Historically, we have not experienced significant negative variations between our assumptions and estimates when compared to actual results. However, if actual results are not consistent with our assumptions and estimates, we may be required to record an impairment charge associated with indefinite-lived intangible assets. Although we do not expect our estimates or assumptions to change significantly in the future, the use of different estimates or assumptions within our discounted cash flow model when determining the fair value of our FCC licenses or using a methodology other than a discounted cash flow model could result in different values for our FCC licenses and may affect any related impairment charge. The most significant assumptions within our discounted cash flow model are the discount rate, our projected growth rate and management’s future business plans. A change in management’s future business plans or disposition of one or more FCC licenses could result in the requirement to test certain other FCC licenses. If any legal, regulatory, contractual, competitive, economic or other factors were to limit the useful lives of our indefinite-lived FCC licenses, we would be required to test these intangible assets for impairment in accordance with SFAS No. 142 and amortize the intangible asset over its remaining useful life.

For the license impairment test performed as of September 30, 2008, the fair value of the FCC licenses was in excess of their carrying value. There have been no indicators of impairment and no impairment has been recognized through December 31, 2008.

Share-Based Payments

We account for share-based awards exchanged for employee services in accordance with SFAS No. 123(R), “Share-Based Payment,” or SFAS No. 123(R). Under SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period.

We have granted nonqualified stock options. Most of our stock option awards include a service condition that relates only to vesting. The stock option awards generally vest in one to four years from the grant date. Compensation expense is amortized on a straight-line basis over the requisite service period for the entire award, which is generally the maximum vesting period of the award.

The determination of the fair value of stock options using an option-pricing model is affected by our common stock valuation as well as assumptions regarding a number of complex and subjective variables. Prior to our initial public offering, factors that our Board of Directors considered in determining the fair market value of our common stock, included the recommendation of our finance and planning committee and of management based on certain data, including discounted cash flow analysis, comparable company analysis and comparable transaction analysis, as well as contemporaneous valuation reports. After our initial public offering, the Board of Directors uses the closing price of our common stock on the date of grant as the fair market value for our common stock. The volatility assumption is based on a combination of the historical volatility of our common stock and the volatilities of similar

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companies over a period of time equal to the expected term of the stock options. The volatilities of similar companies are used in conjunction with our historical volatility because of the lack of sufficient relevant history equal to the expected term. The expected term of employee stock options represents the weighted-average period the stock options are expected to remain outstanding. The expected term assumption is estimated based primarily on the stock options’ vesting terms and remaining contractual life and employees’ expected exercise and post-vesting employment termination behavior. The risk-free interest rate assumption is based upon observed interest rates on the grant date appropriate for the term of the employee stock options. The dividend yield assumption is based on the expectation of no future dividend payouts by us.

As share-based compensation expense under SFAS No. 123(R) is based on awards ultimately expected to vest, it is reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We recognized stock-based compensation expense of approximately $41.1 million, $28.0 million and $14.5 million for the years ended December 31, 2008, 2007 and 2006, respectively.

The value of the options is determined by using a Black-Scholes pricing model that includes the following variables: 1) exercise price of the instrument, 2) fair market value of the underlying stock on date of grant, 3) expected life, 4) estimated volatility and 5) the risk-free interest rate. We utilized the following weighted-average assumptions in estimating the fair value of the options grants for the years ended December 31, 2008 and 2007:

	December 31, 2008			December 31, 2007
Expected dividends		0.00	%		0.00	%
Expected volatility		45.20	%		42.69	%
Risk-free interest rate		2.49	%		4.54	%
Expected lives in years		5.00			5.00
Weighted-average fair value of options:
Granted at below fair value	$	—		$	—
Granted at fair value	$	6.95		$	9.89
Weighted-average exercise price of options:
Granted at below fair value	$	—		$	—
Granted at fair value	$	16.36		$	22.41

The Black-Scholes model requires the use of subjective assumptions including expectations of future dividends and stock price volatility. Such assumptions are only used for making the required fair value estimate and should not be considered as indicators of future dividend policy or stock price appreciation. Because changes in the subjective assumptions can materially affect the fair value estimate, and because employee stock options have characteristics significantly different from those of traded options, the use of the Black-Scholes option pricing model may not provide a reliable estimate of the fair value of employee stock options.

Compensation expense is recognized over the requisite service period for the entire award, which is generally the maximum vesting period of the award.

Customer Recognition and Disconnect Policies

When a new customer subscribes to our service, the first month of service is included with the handset purchase. Under GAAP, we are required to allocate the purchase price to the handset and to the wireless service revenue. Generally, the amount allocated to the handset will be less than our cost, and this difference is included in Cost Per Gross Addition, or CPGA. We recognize new customers as gross customer additions upon activation of service. We offer our customers the Metro Promise, which allows a customer to return a newly purchased handset for a full refund prior to the earlier of 30 days or 60 minutes of use. Customers who return their phones under the Metro Promise are reflected as a reduction to gross customer additions. Customers’ monthly service payments are due in advance every month. Our customers must pay their monthly service amount by the payment date or their service will be suspended, or hotlined, and the customer will not be able to make or receive calls on our network. However, a hotlined customer is still able to make E-911 calls in the event of an emergency. There is no service grace period. Any call attempted by a hotlined customer is routed directly to our interactive voice response system and customer service center in order to arrange payment. If the customer pays the amount due within 30 days of the original payment date then the customer’s service is restored. If a hotlined customer does not pay the amount due within 30 days of the payment date the account is disconnected and counted as churn. Once an account is disconnected we charge a $15 reconnect fee upon reactivation to reestablish service and the revenue associated with this fee is deferred and recognized over the estimated life of the customer.

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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, monthly recurring charges for optional features (including nationwide 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, mobile instant messaging, push e-mail and nationwide roaming) and charges for long distance service. Service revenues also include intercarrier compensation and nonrecurring reactivation service charges to customers.

Equipment. We sell wireless broadband mobile handsets and accessories that are used by our customers in connection with our wireless 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.

• Intercarrier Compensation. We pay charges to other telecommunications companies for their transport and termination of calls originated by our customers and destined for customers of other networks. These variable charges are based on our customers’ usage and generally applied at pre-negotiated rates with other carriers, although some carriers have sought to impose such charges unilaterally.

• Variable Long Distance. We pay charges to other telecommunications 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.

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, general and administrative expenses for expense associated with employee stock options, 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 seven to ten years for network infrastructure assets, three to ten years for capitalized interest, three to seven years for office equipment, which includes computer equipment, three to seven years for furniture and fixtures and five years for vehicles. Leasehold improvements are amortized over the term of the respective leases, which includes renewal periods that are reasonably assured, or the estimated useful life of the improvement, whichever is shorter.

Interest Expense and Interest Income. Interest expense includes interest incurred on our borrowings, amortization of debt issuance costs and amortization of discounts and premiums on long-term debt. Interest income is earned primarily on our cash and cash equivalents.

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Income Taxes. For the year ended December 31, 2008, we paid no federal income taxes, whereas for the years ended December 31, 2007 and 2006, we paid approximately $0.3 million and $2.7 million, respectively, in federal income taxes. In addition, we have paid $2.7 million, $1.1 million and an immaterial amount of state income tax during the years ended December 31, 2008, 2007 and 2006, respectively.

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 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 quarters of the year usually combine to result in fewer net customer additions. However, sales activity and churn can be strongly affected by the launch of new and surrounding metropolitan areas and promotional activity, which could reduce or outweigh certain seasonal effects.

	Net Additions			Subscribers
MetroPCS Subscriber Statistics	Core Markets	Northeast Markets	Consolidated	Core Markets	Northeast Markets	Consolidated
	(In 000s)
2006
Q1	245	—	245	2,170	—	2,170
Q2	249	—	249	2,419	—	2,419
Q3	198	—	198	2,617	—	2,617
Q4	324	—	324	2,941	—	2,941
2007
Q1	454	—	454	3,395	—	3,395
Q2	155	—	155	3,550	—	3,550
Q3	114	—	114	3,664	—	3,664
Q4	299	—	299	3,963	—	3,963
2008
Q1	452	—	452	4,415	—	4,415
Q2	183	—	183	4,598	—	4,598
Q3	205	44	249	4,803	44	4,847
Q4	460	60	520	5,263	104	5,367

Operating Segments

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

As of December 31, 2008, we had thirteen operating segments based on geographic region within the United States: Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco, and Tampa/Sarasota. Each of these operating segments provide wireless broadband mobile voice and data services and products to customers in its service areas or is currently constructing a network in order to provide these services. These services include unlimited local and long distance calling, voicemail, caller ID, call waiting, enhanced directory assistance, text messaging, picture and multimedia messaging, domestic and international long distance, international text messaging, ringtones, games and content applications, unlimited directory assistance, ring back tones, nationwide roaming, mobile Internet browsing, mobile instant messaging, push e-mail, location based services, social networking services and other value-added services.

We aggregate our operating segments into two reportable segments: Core Markets and Northeast Markets. Effective January 1, 2009, we implemented a change to the composition of our reportable segments under SFAS No. 131. As a result of this change, we have retrospectively adjusted the segment information for the years ended December 31, 2008, 2007 and 2006 to reflect this change.

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

8

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

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

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

9

Results of Operations

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Set forth below is a summary of certain financial information by reportable operating segment for the periods indicated:

Reportable Operating Segment Data	2008			2007			Change
	(in thousands)
REVENUES:
Service revenues:
Core Markets	$	2,424,859		$	1,919,197		26	%
Northeast Markets		12,391			—		*	*
Total	$	2,437,250		$	1,919,197		27	%
Equipment revenues:
Core Markets	$	310,452		$	316,537		(2	)%
Northeast Markets		3,814			—		100	%
Total	$	314,266		$	316,537		(1	)%
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization disclosed separately below) (1):
Core Markets	$	785,595		$	642,206		22	%
Northeast Markets		71,700			5,304		*	*
Total	$	857,295		$	647,510		32	%
Cost of equipment:
Core Markets	$	690,296		$	597,233		16	%
Northeast Markets		14,352			—		*	*
Total	$	704,648		$	597,233		18	%
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below) (1):
Core Markets	$	389,896		$	323,572		21	%
Northeast Markets		57,686			28,448		103	%
Total	$	447,582		$	352,020		27	%
Adjusted EBITDA (Deficit) (2):
Core Markets	$	901,751		$	694,761		30	%
Northeast Markets	$	(118,618	)	$	(27,766	)	327	%
Depreciation and amortization:
Core Markets	$	230,603		$	170,876		35	%
Northeast Markets		6,502			319		*	*
Other		18,214			7,007		160	%
Total	$	255,319		$	178,202		43	%
Stock-based compensation expense:
Core Markets	$	32,227		$	22,037		46	%
Northeast Markets		8,915			5,987		49	%
Total	$	41,142		$	28,024		47	%
Income (loss) from operations:
Core Markets	$	620,024		$	504,468		23	%
Northeast Markets		(134,039	)		(34,092	)	293	%
Other		(18,218	)		(10,262	)	78	%
Total	$	467,767		$	460,114		2	%

** Not meaningful

(1) Cost of service and selling, general and administrative expenses include stock-based compensation expense. For the year ended December 31, 2008, cost of service includes $2.9 million and selling, general and administrative expenses includes $38.2 million of stock-based compensation expense. For the year ended December 31, 2007, cost of service includes $1.8 million and selling, general and administrative expenses includes $26.2 million of stock-based compensation expense.

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

10

Service Revenues. Service revenues increased $518.1 million, or approximately 27%, to $2.4 billion for the year ended December 31, 2008 from $1.9 billion for the year ended December 31, 2007. The increase is due to increases in Core Markets and Northeast Markets service revenues as follows:

• Core Markets. Core Markets service revenues increased approximately $505.7 million, or 26%, to $2.4 billion for the year ended December 31, 2008 from $1.9 billion for the year ended December 31, 2007. The increase in service revenues is primarily attributable to net customer additions of approximately 1.3 million customers for the year ended December 31, 2008, which accounted for approximately $607.3 million of the Core Markets increase. This increase was partially offset by the higher participation in our Family Plans as well as reduced revenue from certain features included in our service plans that were previously provided a la carte, accounting for an approximately $106.6 million decrease.

• Northeast Markets. Northeast Markets service revenues were approximately $12.4 million for the year ended December 31, 2008. These service revenues are attributable to net customer additions of 104,151 in the Philadelphia metropolitan area for the year ended December 31, 2008.

Equipment Revenues. Equipment revenues decreased $2.3 million, or approximately 1%, to $314.3 million for the year ended December 31, 2008 from $316.6 million for the year ended December 31, 2007. The decrease is due primarily to a decrease in Core Markets equipment revenues, partially offset by an increase in Northeast Markets equipment revenues as follows:

• Core Markets. Core Markets equipment revenues decreased approximately $6.1 million, or approximately 2%, to approximately $310.5 million for the year ended December 31, 2008 from $316.6 million for the year ended December 31, 2007. The decrease in equipment revenues is primarily attributable to a lower average price of handsets activated reducing equipment revenues by $39.9 million, partially offset by an increase in gross additions and an increase in upgrade handset sales to existing customers accounting for an approximate $30.6 million increase in equipment revenues.

• Northeast Markets. Northeast Markets equipment revenues were $3.8 million for the year ended December 31, 2008. These equipment revenues are attributable to gross customer additions from the launch of service in the Philadelphia metropolitan area.

Cost of Service. Cost of service increased $209.8 million, or approximately 32%, to $857.3 million for the year ended December 31, 2008 from $647.5 million for the year ended December 31, 2007. The increase is due primarily to an increase in Core Markets and Northeast Markets cost of service as follows:

• Core Markets. Core Markets cost of service increased approximately $143.4 million, or 22%, to approximately $785.6 million for the year ended December 31, 2008 from $642.2 million for the year ended December 31, 2007. The increase in cost of service is primarily attributable to the approximate 33% growth in our Core Markets customer base and the deployment of additional network infrastructure during the year ended December 31, 2008.

• Northeast Markets. Northeast Markets cost of service increased approximately $66.4 million to $71.7 million for the year ended December 31, 2008 from $5.3 million for the year ended December 31, 2007. The increase in cost of service is primarily attributable to the expenses associated with the construction and launch of service in the Philadelphia metropolitan area and operating costs in the New York and Boston metropolitan areas that were incurred prior to the launch of service in these markets.

Cost of Equipment. Cost of equipment increased $107.4 million, or 18%, to $704.6 million for the year ended December 31, 2008 from $597.2 million for the year ended December 31, 2007. The increase is due primarily to an increase in Core Markets and Northeast Markets cost of equipment as follows:

• Core Markets. Core Markets cost of equipment increased approximately $93.1 million, or approximately 16%, to approximately $690.3 million for the year ended December 31, 2008 from $597.2 million for the year ended December 31, 2007. The increase in Core Markets cost of equipment is primarily attributable to an increase in gross customer additions which accounted for approximately $73.5 million, coupled with an increase in upgrade handset sales to existing customers accounting for approximately $38.8 million. These increases were partially offset by a lower average cost of handsets activated reducing cost of equipment by $27.7 million.

11

• Northeast Markets. Northeast Markets cost of equipment were approximately $14.3 million for the year ended December 31, 2008. This cost is attributable to gross customer additions from the launch of service in the Philadelphia metropolitan area.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $95.6 million, or 27%, to $447.6 million for the year ended December 31, 2008 from $352.0 million for the year ended December 31, 2007. The increase is due to increases in Core Markets and Northeast Markets selling, general and administrative expenses as follows:

• Core Markets. Core Markets selling, general and administrative expenses increased $66.3 million, or approximately 21%, to approximately $389.9 million for the year ended December 31, 2008 from approximately $323.6 million for the year ended December 31, 2007. Selling expenses increased by approximately $42.8 million, or 28%, for the year ended December 31, 2008 compared to the year ended December 31, 2007. The increase in selling expenses is primarily attributable to a $16.6 million increase in marketing and advertising expenses as well as higher employee related costs of approximately $14.5 million incurred to support the growth in the Core Markets. General and administrative expenses increased by approximately $14.1 million, or 9%, for the year ended December 31, 2008 as compared to the year ended December 31, 2007. This was due primarily to the approximate 33% growth in our Core Markets customer base. In addition, stock-based compensation expense increased $9.4 million for the year ended December 31, 2008 as compared to the same period in 2007. See – “Stock-Based Compensation Expense.”

• Northeast Markets. Northeast Markets selling, general and administrative expenses increased $29.3 million, or approximately 103%, to approximately $57.7 million for the year ended December 31, 2008 from approximately $28.4 million for the year ended December 31, 2007. Selling expenses increased by $16.4 million for the year ended December 31, 2008 compared to the year ended December 31, 2007. This increase is primarily due to a $7.0 million increase in marketing and advertising expenses incurred to support the launch of service in the Philadelphia metropolitan area as well as higher employee related costs of approximately $6.4 million to support the launch of service in the Philadelphia metropolitan area and the build-out of the New York and Boston metropolitan areas. General and administrative expenses increased by $10.2 million, or 46%, for the year ended December 31, 2008 compared to the same period in 2007 primarily due to the construction and launch of service in the Philadelphia market and the build-out of the New York and Boston metropolitan areas. In addition, an increase of $2.6 million in stock-based compensation expense contributed to the increase in the Northeast Markets. See – “Stock-Based Compensation Expense.”

Depreciation and Amortization. Depreciation and amortization expense increased $77.1 million, or 43%, to $255.3 million for the year ended December 31, 2008 from $178.2 million for the year ended December 31, 2007. The increase is primarily due to increases in Core Markets and Northeast Markets depreciation and amortization expense as follows:

• Core Markets. Core Markets depreciation and amortization expense increased $59.7 million, or 35%, to $230.6 million for the year ended December 31, 2008 from approximately $170.9 million for the year ended December 31, 2007. The increase related primarily to an increase in network infrastructure assets placed into service during the year ended December 31, 2008 to support the continued growth in the Core Markets.

• Northeast Markets. Northeast Markets depreciation and amortization expense increased approximately $6.2 million to $6.5 million for the year ended December 31, 2008 from $0.3 million for the year ended December 31, 2007. The increase related primarily to an increase in network infrastructure assets placed into service during the year ended December 31, 2008 driven primarily by the launch of service in the Philadelphia metropolitan area.

Stock-Based Compensation Expense. Stock-based compensation expense increased $13.1 million, or approximately 47%, to $41.1 million for the year ended December 31, 2008 from $28.0 million for the year ended December 31, 2007. The increase is due primarily to increases in Core Markets and Northeast Markets stock-based compensation expense as follows:

• Core Markets. Core Markets stock-based compensation expense increased approximately $10.2 million, or 46%, to $32.2 million for the year ended December 31, 2008 from $22.0 million for the year ended December 31, 2007. The increase is primarily related to additional stock options granted to employees in these markets throughout the year ended December 31, 2008.

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• Northeast Markets. Northeast Markets stock-based compensation expense increased $2.9 million, or approximately 49%, to $8.9 million for the year ended December 31, 2008 from approximately $6.0 million for the year ended December 31, 2007. The increase is primarily related to additional stock options granted to employees in these markets throughout the year ended December 31, 2008.

Consolidated Data	2008			2007			Change
	(in thousands)
Loss on disposal of assets	$	18,905		$	655		*	*
Interest expense		179,398			201,746		(11	)%
Interest and other income		(23,170	)		(63,936	)	(64	)%
Impairment loss on investment securities		30,857			97,800		(68	)%
Provision for income taxes		129,986			123,098		6	%
Net income		149,438			100,403		49	%

** Not meaningful.

Loss on Disposal of Assets. Loss on disposal of assets increased $18.3 million to $18.9 million for the year ended December 31, 2008 from $0.6 million for the year ended December 31, 2007. During the year ended December 31, 2008, we recorded a loss on disposal of assets related to certain network equipment and construction costs that were retired. The majority of the loss was related to the transfer of network switching equipment to a new location which resulted in the write-off of the associated construction and installation costs and certain other network equipment that had no future value to the new location.

Interest Expense. Interest expense decreased $22.3 million, or 11%, to $179.4 million for the year ended December 31, 2008 from $201.7 million for the year ended December 31, 2007. The decrease in interest expense was primarily due to the capitalization of $64.2 million of interest during the twelve months ended December 31, 2008, compared to $34.9 million of interest capitalized during the same period in 2007. We capitalize interest costs associated with our FCC licenses and property and equipment during the construction of a new market. The amount of such capitalized interest depends on the carrying values of the FCC licenses and construction in progress involved in those markets and the duration of the construction process. We expect capitalized interest to be significant during the construction of new markets. In addition, our weighted average interest rate decreased to 7.78% for the twelve months ended December 31, 2008 compared to 8.15% for the twelve months ended December 31, 2007 as a result of a decrease in the borrowing rates under the senior secured credit facility. Average debt outstanding for the twelve months ended December 31, 2008 and 2007 was $3.0 and $2.8 billion, respectively. The increase in average debt outstanding was due to the issuance of an additional $400.0 million principal amount of our 9 ¹/4% senior notes in June 2007.

Interest and Other Income. Interest and other income decreased $40.7 million, or approximately 64%, to $23.2 million for the year ended December 31, 2008 from $63.9 million for the year ended December 31, 2007. The decrease in interest and other income was primarily due to the Company investing substantially all of its cash and cash equivalents in money market funds consisting of U.S. treasury securities rather than in short-term investments as the Company has done historically. In addition, interest income decreased due to lower cash balances when compared to 2007 as well as a decrease on the return on our cash balances as a result of a decrease in interest rates.

Impairment Loss on Investment Securities. We can and have historically invested our substantial cash balances in, among other things, securities issued and fully guaranteed by the United States or the states, highly rated commercial paper and auction rate securities, money market funds meeting certain criteria, and demand deposits. These investments are subject to credit, liquidity, market and interest rate risk. During the year ended December 31, 2007, we made an original investment of $133.9 million in principal in certain auction rate securities that were rated AAA/Aaa at the time of purchase, substantially all of which are secured by collateralized debt obligations with a portion of the underlying collateral being mortgage securities or related to mortgage securities. With the continued liquidity issues experienced in global credit and capital markets, the auction rate securities held by us at December 31, 2008 continue to experience failed auctions as the amount of securities submitted for sale in the auctions exceeds the amount of purchase orders. We recognized an additional other-than-temporary impairment loss on investment securities in the amount of $30.9 million during the year ended December 31, 2008.

13

Provision for Income Taxes. Income tax expense was $130.0 million and $123.1 million for the years ended December 31, 2008 and 2007, respectively. The effective tax rate was 46.5% and 54.4% for the years ended December 31, 2008 and 2007, respectively. Our effective rates differ from the statutory federal rate of 35.0% due to state and local taxes, non-deductible expenses and an increase in the valuation allowance related to the impairment loss recognized on investment securities.

Net Income. Net income increased $49.0 million, or approximately 49%, to $149.4 million for the year ended December 31, 2008 compared to $100.4 million for the year ended December 31, 2007. The increase in net income was primarily attributable to an increase in income from operations, a decrease in interest expense and a decrease in the impairment loss on investment securities. These items were partially offset by lower interest and other income for the year ended December 31, 2008.

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Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Set forth below is a summary of certain financial information by reportable operating segment for the periods indicated:

Reportable Operating Segment Data	2007			2006			Change
	(in thousands)
REVENUES:
Service revenues:
Core Markets	$	1,919,197		$	1,290,947		49	%
Northeast Markets		—			—		*	*
Total	$	1,919,197		$	1,290,947		49	%
Equipment revenues:
Core Markets	$	316,537		$	255,916		24	%
Northeast Markets		—			—		*	*
Total	$	316,537		$	255,916		24	%
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization disclosed separately below) (1):
Core Markets	$	642,206		$	445,281		44	%
Northeast Markets		5,304			—		100	%
Total	$	647,510		$	445,281		45	%
Cost of equipment:
Core Markets	$	597,233		$	476,877		25	%
Northeast Markets		—			—		*	*
Total	$	597,233		$	476,877		25	%
Selling, general and administrative expenses (excluding depreciation and amortization disclosed separately below)(1):
Core Markets	$	323,572		$	243,618		33	%
Northeast Markets		28,448			—		100	%
Total	$	352,020		$	243,618		44	%
Adjusted EBITDA (Deficit)(2):
Core Markets	$	694,761		$	395,559		76	%
Northeast Markets	$	(27,766	)	$	—		(100	)%
Depreciation and amortization:
Core Markets	$	170,876		$	131,567		30	%
Northeast Markets		319			—		100	%
Other		7,007			3,461		102	%
Total	$	178,202		$	135,028		32	%
Stock-based compensation expense:
Core Markets	$	22,037		$	14,472		52	%
Northeast Markets		5,987			—		100	%
Total	$	28,024		$	14,472		94	%
Income (loss) from operations:
Core Markets	$	504,468		$	240,722		110	%
Northeast Markets		(34,092	)		—		(100	)%
Other		(10,262	)		(3,469	)	196	%
Total	$	460,114		$	237,253		94	%

** Not meaningful

(1) Cost of service and selling, general and administrative expenses include stock-based compensation expense. For the year ended December 31, 2007, cost of service includes $1.8 million and selling, general and administrative expenses includes $26.2 million of stock-based compensation expense. For the year ended December 31, 2006, cost of service includes $1.3 million and selling, general and administrative expenses includes $13.2 million of stock-based compensation expense.

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

Service Revenues. Service revenues increased $628.3 million, or 49%, to $1.9 billion for the year ended December 31, 2007 from $1.3 billion for the year ended December 31, 2006. The increase is primarily attributable to Core Markets net additions of approximately 1.0 million customers for the year ended December 31, 2007, which accounted for $622.6 million of the increase and the migration of existing customers to higher priced rate plans accounting for $2.5 million of the increase.

15

Equipment Revenues. Equipment revenues increased $60.6 million, or 24%, to $316.5 million for the year ended December 31, 2007 from $255.9 million for the year ended December 31, 2006. The increase is attributable to an increase in gross additions in our Core Markets of approximately 659,000 customers for the year ended December 31, 2007 offset by the sale of lower priced handsets, which accounted for $13.5 million of the increase, as well as an increase in handset sales to existing customers accounting for $41.5 million of the increase.

Cost of Service. Cost of service increased $202.2 million, or 45%, to $647.5 million for the year ended December 31, 2007 from $445.3 million for the year ended December 31, 2006. The increase is due to increases in Core Markets and Northeast Markets cost of service as follows:

• Core Markets. Core Markets cost of service increased $196.9 million, or 44%, to $642.2 million for the year ended December 31, 2007 from approximately $445.3 million for the year ended December 31, 2006. The increase in cost of service is primarily attributable to the approximate 35% growth in our Core Markets customer base and the deployment of additional network infrastructure during the year ended December 31, 2007.

• Northeast Markets. Northeast Markets cost of service was approximately $5.3 million for the year ended December 31, 2007. These expenses are attributable to operating costs in the Philadelphia, New York and Boston metropolitan areas that were incurred prior to the launch of service in these markets.

Cost of Equipment. Cost of equipment increased $120.3 million, or 25%, to $597.2 million for the year ended December 31, 2007 from $476.9 million for the year ended December 31, 2006. The increase is primarily attributable to an increase in gross additions in our Core Markets of approximately 659,000 customers which accounted for $89.5 million, coupled with an increase in upgrade handset sales to existing customers accounting for approximately $53.9 million. These increases were partially offset by a lower average cost of handsets activated reducing cost of equipment by approximately $29.6 million.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $108.4 million, or 44%, to $352.0 million for the year ended December 31, 2007 from $243.6 million for the year ended December 31, 2006. The increase is due to increases in Core Markets and Northeast Markets selling, general and administrative expenses as follows:

• Core Markets. Core Markets selling, general and administrative expenses increased approximately $80.0 million, or approximately 33%, to approximately $323.6 million for the year ended December 31, 2007 from $243.6 million for the year ended December 31, 2006. Selling expenses increased by approximately $48.0 million, or approximately 46%, for the year ended December 31, 2007 compared to the year ended December 31, 2006. The increase in selling expenses is primarily attributable to an approximate $28.9 million in marketing and advertising expenses as well as higher employee related costs of approximately $13.8 million incurred to support the growth in the Core Markets. General and administrative expenses increased by approximately $24.9 million, or approximately 20% for the year ended December 31, 2007 as compared to the year ended December 31, 2006 primarily due to an increase in various administrative expenses incurred in relation to the 35% growth in our Core Markets customer base. In addition, stock-based compensation expense increased $7.1 million for the year ended December 31, 2007 as compared to the same period in 2006. See – “Stock-Based Compensation Expense.”

• Northeast Markets. Northeast Markets selling, general and administrative expenses were $28.4 million for the year ended December 31, 2007. These selling, general and administrative expenses are attributable to the build-out of the Philadelphia, New York and Boston metropolitan areas. In addition, stock-based compensation expenses were approximately $5.9 million. See “– Stock-Based Compensation Expense.”

Depreciation and Amortization. Depreciation and amortization expense increased $43.2 million, or 32%, to $178.2 million for the year ended December 31, 2007 from $135.0 million for the year ended December 31, 2006. The increase is primarily due to increases in Core Markets and Northeast Markets depreciation and amortization expense as follows:

• Core Markets. Core Markets depreciation and amortization expense increased $39.3 million, or approximately 30%, to approximately $170.9 million for the year ended December 31, 2007 from approximately $131.6 million for the year ended December 31, 2006. The increase related primarily to an increase in network infrastructure assets placed into service during the year ended December 31, 2007.

16

• Northeast Markets. Northeast Markets depreciation and amortization expenses were $0.3 million for the year ended December 31, 2007. This expense is related to office equipment and leasehold improvement assets placed into service during the year ended December 31, 2007.

Stock-Based Compensation Expense. Stock-based compensation expense increased $13.4 million, or 94%, to $28.0 million for the year ended December 31, 2007 from $14.4 million for the year ended December 31, 2006. The increase is due primarily to increases in Core Markets and Northeast Markets stock-based compensation expense as follows:

• Core Markets. Core Markets stock-based compensation expense increased approximately $7.6 million, or 52%, to $22.0 million for the year ended December 31, 2007 from approximately $14.4 million for the year ended December 31, 2006. The increase is primarily related to an increase in stock options granted to employees in these markets throughout the year ended December 31, 2007.

• Northeast Markets. Northeast Markets stock-based compensation expense was approximately $6.0 million for the year ended December 31, 2007. This expense is related to stock options granted to employees in these markets throughout the year ended December 31, 2007.

Consolidated Data	2007		2006		Change
	(in thousands)
Loss on disposal of assets	$	655	$	8,806	(93	)%
Interest expense		201,746		115,985	74	%
Loss on extinguishment of debt		—		51,518	100	%
Impairment loss on investment securities		97,800		—	100	%
Provision for income taxes		123,098		36,717	235	%
Net income		100,403		53,806	87	%

Loss on Disposal of Assets. Loss on disposal of assets decreased $8.1 million, or approximately 93%, to $0.7 million for the year ended December 31, 2007 from $8.8 million for the year ended December 31, 2006 primarily as a result of a gain on disposal of assets from the sale of certain network infrastructure assets related to a change in network technology related to our cell sites in certain markets. The gain was offset by a $3.0 million loss on the termination of a lease agreement during the year ended December 31, 2007. During the year ended December 31, 2006, certain network technology related to our cell sites in certain markets was retired and replaced with new technology, resulting in a loss on disposal of assets.

Interest Expense. Interest expense increased $85.7 million, or 74%, to $201.7 million for the twelve months ended December 31, 2007 from $116.0 million for the twelve months ended December 31, 2006. The increase in interest expense was primarily due to an increased average principal balance outstanding as a result of borrowings of $1.6 billion under our senior secured credit facility and the issuance of $1.0 billion of 9 ¹/4% senior notes due 2014, or initial notes, during the fourth quarter of 2006. The Company also issued an additional $400.0 million of 9 ¹/4% senior notes, or additional notes, during the second quarter of 2007. The Company had average debt outstanding for the twelve months ended December 31, 2007 of $2.8 billion. The average debt outstanding for the twelve months ending December 31, 2006 was $1.3 billion. The weighted average interest rate decreased to 8.15% for the twelve months ended December 31, 2007 compared to 10.30% for the twelve months ended December 31, 2006 as a result of a decrease in the borrowing rates under the senior secured credit facility, issuance of the initial notes and the additional notes, collectively referred to as the 9 ¹/4% senior notes, and the impact of the interest rate hedge. The increase in interest expense was partially offset by the capitalization of $34.9 million of interest during the twelve months ended December 31, 2007, compared to $17.5 million of interest capitalized during the same period in 2006. We capitalize interest costs associated with our FCC licenses and property and equipment during the construction of a new market. The amount of such capitalized interest depends on the carrying values of the FCC licenses and construction in progress involved in those markets and the duration of the construction process. We expect capitalized interest to continue to be significant during the construction of the markets associated with the AWS licenses we were granted in November 2006 as a result of Auction 66.

Loss on Extinguishment of Debt. In November 2006, we repaid all amounts outstanding under our first and second lien credit agreements and the exchangeable secured and unsecured bridge credit agreements. As a result, we recorded a loss on extinguishment of debt in the amount of approximately $42.7 million of the first and second lien credit agreements and an approximately $9.4 million loss on the extinguishment of the exchangeable secured and unsecured bridge credit agreements.

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Impairment Loss on Investment Securities. We can and have historically invested our substantial cash balances in, among other things, securities issued and fully guaranteed by the United States or any state, highly rated commercial paper and auction rate securities, money market funds meeting certain criteria, and demand deposits. These investments are subject to credit, liquidity, market and interest rate risk. We made investments of $133.9 million in certain “AAA” rated 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. With the liquidity issues experienced in global credit and capital markets, the auction rate securities held by us at December 31, 2007 have experienced multiple failed auctions as the amount of securities submitted for sale in the auctions has exceeded the amount of purchase orders. As a result, we recognized an other-than-temporary impairment loss on investment securities in the amount of $97.8 million during the year ended December 31, 2007.

Provision for Income Taxes. Income tax expense for the year ended December 31, 2007 increased to $123.1 million, which is approximately 55% of our income before provision for income taxes. The provision for income taxes for the year ended December 31, 2007 includes a tax valuation allowance on the impairment loss on investment securities equal to 15% of our income before provision in income taxes. For the year ended December 31, 2006 the provision for income taxes was $36.7 million, or approximately 41% of income before provision for income taxes.

Net Income. Net income increased $46.6 million, or 87%, to $100.4 million for the year ended December 31, 2007 compared to $53.8 million for the year ended December 31, 2006. The increase is primarily attributable to a 35% growth in customers during the year ended December 31, 2007 as well as cost benefits achieved due to the increasing scale of our business in the Core and Northeast Markets. In addition, the increase in net income is due to a 197% increase in interest income as a result of the significant increase in our cash balances due to proceeds from our initial public offering and additional funding under our 9 ¹/4% senior notes. However, these benefits were partially offset by an increase in interest expense due to an increase in the Company’s average debt outstanding for the year ended December 31, 2007 compared to the same period in 2006 as well as the $97.8 million impairment loss on investment securities.

Performance Measures

In managing our business and assessing our financial performance, we supplement the information provided by financial statement measures with several customer-focused performance metrics that are widely used in the wireless industry. These metrics include average revenue per user per month, or ARPU, which measures service revenue per customer; cost per gross customer addition, or CPGA, which measures the average cost of acquiring a new customer; cost per user per month, or CPU, which measures the non-selling cash cost of operating our business on a per customer basis; and churn, which measures turnover in our customer base. Effective December 31, 2008, we revised our definition of ARPU to include activation revenues. Activation revenues are related to the reactivation of accounts that have previously disconnected and we believe that these revenues are more appropriately presented as a component of ARPU rather than a reduction to CPGA. Prior year measures have been restated to reflect this revision. For a reconciliation of Non-GAAP performance measures and a further discussion of the measures, please read “— Reconciliation of Non-GAAP Financial Measures” below.

The following table shows annual metric information for 2006, 2007 and 2008.

	Year Ended December 31,
	2006			2007			2008
Customers:
End of period		2,940,986			3,962,786			5,366,833
Net additions		1,016,365			1,021,800			1,404,047
Churn:
Average monthly rate		4.6	%		4.7	%		4.7	%
ARPU	$	43.26		$	43.31		$	41.39
CPGA	$	121.12		$	127.97		$	127.21
CPU	$	19.65		$	18.33		$	18.17

Customers. Net customer additions were 1,404,047 for the year ended December 31, 2008, compared to 1,021,800 for the year ended December 31, 2007. Total customers were 5,366,833 as of December 31, 2008, an increase of 35% over the customer total as of December 31, 2007. The increase in total customers is primarily attributable to the continued demand for our service offerings and the launch of our services in new markets. Net customer additions were 1,021,800 for the year ended December 31, 2007, compared to 1,016,365 for the year

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ended December 31, 2006. Total customers were 3,962,786 as of December 31, 2007, an increase of 35% over the customer total as of December 31, 2006. The increase in total customers in 2007 was largely attributable to the continued demand for our service offerings and the launch of our services in new markets.

Churn. As we do not require a long-term service contract, our churn percentage is expected to be higher than traditional wireless carriers that require customers to sign a one- to two-year contract with significant early termination fees. Average monthly churn represents (a) the number of customers who have been disconnected from our system during the measurement period less the number of customers who have reactivated service, divided by (b) the sum of the average monthly number of customers during such period. We classify delinquent customers as churn after they have been delinquent for 30 days. In addition, when an existing customer establishes a new account in connection with the purchase of an upgraded or replacement phone and does not identify themselves as an existing customer, we count the phone leaving service as a churn and the new phone entering service as a gross customer addition. Churn remained flat for the year ended December 31, 2008 at 4.7%. Churn for the year ended December 31, 2007 was 4.7% compared to 4.6% for the year ended December 31, 2006. The 0.1% increase in churn was due to normal historical trends related to the maturity of our markets coupled with continued disconnects from the significant increase in gross additions in the first quarter of 2007 compared to the first quarter of 2006. 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 net customer additions to be strongest in the first and fourth quarters. Softening of sales and increased churn in the second and third quarters of the year usually combine to result in fewer net customer additions during these quarters. See – “Seasonality.”

Average Revenue Per User. ARPU represents (a) service revenues less pass through charges for the measurement period, divided by (b) the sum of the average monthly number of customers during such period. ARPU was $41.39 and $43.31 for the years ended December 31, 2008 and 2007, respectively. The $1.92 decrease in ARPU was primarily attributable to higher participation in our Family Plans as well as reduced revenue from certain features included in our service plans that were previously provided a la carte. ARPU increased $0.05 during 2007 from $43.26 for the year ended December 31, 2006. At December 31, 2008, approximately 80% of our customers were on the $40 or higher rate plan.

Cost Per Gross Addition. CPGA is determined by dividing (a) selling expenses plus the total cost of equipment associated with transactions with new customers less equipment revenues associated with transactions with new customers during the measurement period by (b) gross customer additions during such period. Retail customer service expenses and equipment margin on handsets sold to existing customers when they are identified, including handset upgrade transactions, are excluded, as these costs are incurred specifically for existing customers. CPGA has decreased to $127.21 for the year ended December 31, 2008 from $127.97 for the year ended December 31, 2007, which was primarily driven by a 33% increase in gross additions, partially offset by an increase in selling expenses associated with the continued customer growth in our Core Markets and the launch of service in new markets. CPGA increased to $127.97 for the year ended December 31, 2007 from $121.12 for the year ended December 31, 2006, which was primarily driven by the selling expenses and equipment subsidy associated with the customer growth in our Core Markets as well as selling expenses associated with the launch of service in new markets.

Cost Per User. CPU is cost of service and general and administrative costs (excluding applicable non-cash stock-based compensation expense included in cost of service and general and administrative expense) plus net loss on handset equipment transactions unrelated to initial customer acquisition, divided by the sum of the average monthly number of customers during such period. CPU for the years ended December 31, 2008 and 2007 was $18.17 and $18.33, respectively. CPU for the year ended December 31, 2006 was $19.65. We continue to achieve cost benefits due to the increasing scale of our business. However, these benefits have been partially offset by a combination of the construction and launch expenses associated with our Northeast Markets, which contributed approximately $1.77 and $0.65 of additional CPU for the years ended December 31, 2008 and 2007, respectively.

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The following table shows consolidated quarterly metric information for the years ended December 31, 2007 and 2008.

	Three Months Ended
	March 31, 2007			June 30, 2007			September 30, 2007			December 31, 2007			March 31, 2008			June 30, 2008			September 30, 2008			December 31, 2008
Customers:
End of period		3,395,203			3,549,916			3,664,218			3,962,786			4,414,519			4,598,049			4,847,314			5,366,833
Net additions		454,217			154,713			114,302			298,568			451,733			183,530			249,265			519,519
Churn:
Average monthly rate		4.0	%		4.8	%		5.2	%		4.8	%		4.0	%		4.5	%		4.8	%		5.1	%
ARPU	$	44.01		$	43.44		$	43.05		$	42.83		$	42.51		$	42.05		$	40.73		$	40.52
CPGA	$	111.75		$	128.86		$	130.38		$	141.42		$	125.00		$	140.82		$	128.21		$	119.82
CPU	$	18.56		$	18.01		$	17.81		$	18.93		$	18.86		$	18.23		$	18.18		$	17.55

Core Markets Performance Measures

Set forth below is a summary of certain key performance measures for the periods indicated for our Core Markets:

	Year Ended December 31,
	2006			2007			2008
	(Dollars in thousands)
Core Markets Customers:
End of period		2,940,986			3,962,786			5,262,682
Net additions		1,016,365			1,021,800			1,299,896
Core Markets Adjusted EBITDA	$	395,559		$	694,761		$	901,751
Core Markets Adjusted EBITDA as a Percent of Service Revenues		30.6	%		36.2	%		37.2	%

Our Core Markets have a licensed population of approximately 108 million. As of December 31, 2008, our networks in our Core Markets cover a population of approximately 60 million.

Customers. Net customer additions in our Core Markets were 1,299,896 for the year ended December 31, 2008, compared to 1,021,800 for the year ended December 31, 2007. Total customers were 5,262,682 as of December 31, 2008, an increase of approximately 33% over the customer total as of December 31, 2007. Net customer additions in our Core Markets were 1,021,800 for the year ended December 31, 2007, bringing our total customers to 3,962,786 as of December 31, 2007, an increase of approximately 35% over the total customers as of December 31, 2006. The increase in total customers is primarily attributable to the continued demand for our service offerings.

Adjusted EBITDA. Adjusted EBITDA is presented in accordance with SFAS No. 131 as it is the primary performance metric for which our reportable segments are evaluated and it is utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. For the year ended December 31, 2008, Core Markets Adjusted EBITDA was $901.8 million compared to approximately $694.8 million for the year ended December 31, 2007. For the year ended December 31, 2006, Core Markets Adjusted EBITDA was approximately $395.6 million. We continue to experience increases in Core Markets Adjusted EBITDA as a result of continued customer growth and cost benefits due to the increasing scale of our business in the Core Markets.

Adjusted EBITDA as a Percent of Service Revenues. Adjusted EBITDA as a percent of service revenues is calculated by dividing Adjusted EBITDA by total service revenues. Core Markets Adjusted EBITDA as a percent of service revenues for the year ended December 31, 2008 and 2007 was 37.2% and 36.2%, respectively. Core Markets Adjusted EBITDA as a percent of service revenues for the year ended December 31, 2006 was 30.6%. Consistent with the increase in Core Markets Adjusted EBITDA, we continue to experience corresponding increases in Core Markets Adjusted EBITDA as a percent of service revenues due to the growth in service revenues as well as cost benefits due to the increasing scale of our business in the Core Markets.

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The following table shows a summary of certain quarterly key performance measures for the periods indicated for our Core Markets.

	Three Months Ended
	March 31, 2007			June 30, 2007			September 30, 2007			December 31, 2007			March 31, 2008			June 30, 2008			September 30, 2008			December 31, 2008
	(Dollars in thousands)
Core Markets Customers:
End of period		3,395,203			3,549,916			3,664,218			3,962,786			4,414,519			4,598,049			4,802,692			5,262,682
Net additions		454,217			154,713			114,302			298,568			451,733			183,530			204,643			459,990
Core Markets Adjusted EBITDA	$	149,939		$	186,772		$	192,515		$	165,536		$	192,542		$	232,011		$	236,328		$	240,870
Core Markets Adjusted EBITDA as a Percent of Service Revenues		34.1	%		39.0	%		39.4	%		32.4	%		34.3	%		38.8	%		38.9	%		36.7	%

Northeast Markets Performance Measures

Set forth below is a summary of certain key performance measures for the periods indicated for our Northeast Markets:

	Year Ended December 31,
	2006		2007			2008
	(Dollars in thousands)
Northeast Markets Customers:
End of period		—		—			104,151
Net additions		—		—			104,151
Northeast Markets Adjusted EBITDA (Deficit)	$	—	$	(27,766	)	$	(118,618	)

Our Northeast Markets have a licensed population of approximately 42 million. As of December 31, 2008, our networks in our Northeast Markets cover a population of approximately 4 million.

Customers. Net customer additions in our Northeast Markets were 104,151 for the year ended December 31, 2008 related to the launch of service in the Philadelphia metropolitan area in July 2008.

Adjusted EBITDA (Deficit). Adjusted EBITDA (Deficit) is presented in accordance with SFAS No. 131 as it is the primary performance metric for which our reportable segments are evaluated and it is utilized by management to facilitate evaluation of our ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth. For the year ended December 31, 2008, Northeast Markets Adjusted EBITDA deficit was $118.6 million compared to an Adjusted EBITDA deficit of approximately $27.8 million for the year ended December 31, 2007. The increase in Adjusted EBITDA deficit, when compared to the previous year, was attributable to expenses associated with the construction and launch of service in the Philadelphia metropolitan area and expenses related to the build-out of the New York and Boston metropolitan areas.

The following table shows a summary of certain quarterly key performance measures for the periods indicated for our Northeast Markets.

	Three Months Ended
	March 31, 2007			June 30, 2007			September 30, 2007			December 31, 2007			March 31, 2008			June 30, 2008			September 30, 2008			December 31, 2008
	(Dollars in thousands)
Northeast Markets Customers:
End of period		—			—			—			—			—			—			44,622			104,151
Net additions		—			—			—			—			—			—			44,622			59,529
Northeast Markets Adjusted EBITDA (Deficit)	$	(622	)	$	(6,326	)	$	(8,015	)	$	(12,803	)	$	(14,728	)	$	(21,844	)	$	(35,440	)	$	(46,606	)

Reconciliation of Non-GAAP Financial Measures

We utilize certain financial measures and key performance indicators that are not calculated in accordance with GAAP to assess our financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of income or statement of cash flows; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure so calculated and presented.

ARPU, CPGA, and CPU are non-GAAP financial measures utilized by our management to judge our ability to meet our liquidity requirements and to evaluate our operating performance. We believe these measures are important in understanding the performance of our operations from period to period, and although every company in the

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wireless industry does not define each of these measures in precisely the same way, we believe that these measures (which are common in the wireless industry) facilitate key liquidity and operating performance comparisons with other companies in the wireless industry. The following tables reconcile our non-GAAP financial measures with our financial statements presented in accordance with GAAP.

ARPU — We utilize ARPU to evaluate our per-customer service revenue realization and to assist in forecasting our future service revenues. ARPU is calculated exclusive of pass through charges that we collect from our customers and remit to the appropriate government agencies.

Average number of customers for any measurement period is determined by dividing (a) the sum of the average monthly number of customers for the measurement period by (b) the number of months in such period. Average monthly number of customers for any month represents the sum of the number of customers on the first day of the month and the last day of the month divided by two. The following table shows the calculation of ARPU for the periods indicated.

	Year Ended December 31,
	2006			2007			2008
	(In thousands, except average number of customers and ARPU)
Calculation of Average Revenue Per User (ARPU):
Service revenues	$	1,290,947		$	1,919,197		$	2,437,250
Less:
Pass through charges		(45,640	)		(95,946	)		(136,801	)
Net service revenues	$	1,245,307		$	1,823,251		$	2,300,449
Divided by: Average number of customers		2,398,682			3,508,497			4,631,168
ARPU	$	43.26		$	43.31		$	41.39

	Three Months Ended
	March 31, 2007			June 30, 2007			September 30, 2007			December 31, 2007
	(In thousands, except average number of customers and ARPU)
Calculation of Average Revenue Per User (ARPU):
Service revenues	$	439,516		$	479,341		$	489,131		$	511,209
Less:
Pass through charges		(20,271	)		(25,721	)		(25,215	)		(24,740	)
Net service revenues	$	419,245		$	453,620		$	463,916		$	486,469
Divided by: Average number of customers		3,175,284			3,480,780			3,592,045			3,785,880
ARPU	$	44.01		$	43.44		$	43.05		$	42.83

	Three Months Ended
	March 31, 2008			June 30, 2008			September 30, 2008			December 31, 2008
	(In thousands, except average number of customers and ARPU)
Calculation of Average Revenue Per User (ARPU):
Service revenues	$	561,970		$	598,562		$	610,691		$	666,028
Less:
Pass through charges		(26,554	)		(30,583	)		(31,445	)		(48,220	)
Net service revenues	$	535,416		$	567,979		$	579,246		$	617,808
Divided by: Average number of customers		4,198,794			4,501,980			4,741,043			5,082,856
ARPU	$	42.51		$	42.05		$	40.73		$	40.52

CPGA — We utilize CPGA to assess the efficiency of our distribution strategy, validate the initial capital invested in our customers and determine the number of months to recover our customer acquisition costs. This measure also allows us to compare our average acquisition costs per new customer to those of other wireless broadband mobile providers. Equipment revenues related to new customers are deducted from selling expenses in this calculation as they represent amounts paid by customers at the time their service is activated that reduce our acquisition cost of those customers. Additionally, equipment costs associated with existing customers, net of related revenues, are excluded as this measure is intended to reflect only the acquisition costs related to new customers. The following table reconciles total costs used in the calculation of CPGA to selling expenses, which we consider to be the most directly comparable GAAP financial measure to CPGA.

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	Year Ended December 31,
	2006			2007			2008
	(In thousands, except gross customer additions and CPGA)
Calculation of Cost Per Gross Addition (CPGA):
Selling expenses	$	104,620		$	153,065		$	212,293
Less: Equipment revenues		(255,916	)		(316,537	)		(314,266	)
Add: Equipment revenue not associated with new customers		114,392			142,822			149,029
Add: Cost of equipment		476,877			597,233			704,648
Less: Equipment costs not associated with new customers		(155,930	)		(192,153	)		(244,311	)
Gross addition expenses	$	284,043		$	384,430		$	507,393
Divided by: Gross customer additions		2,345,135			3,004,177			3,988,692
CPGA	$	121.12		$	127.97		$	127.21

	Three Months Ended
	March 31, 2007			June 30, 2007			September 30, 2007			December 31, 2007
	(In thousands, except gross customer additions and CPGA)
Calculation of Cost Per Gross Addition (CPGA):
Selling expenses	$	30,106		$	33,365		$	35,625		$	53,969
Less: Equipment revenues		(97,170	)		(71,835	)		(67,607	)		(79,925	)
Add: Equipment revenue not associated with new customers		42,009			33,892			31,590			35,330
Add: Cost of equipment		173,308			133,439			131,179			159,308
Less: Equipment costs not associated with new customers		(55,169	)		(43,795	)		(43,254	)		(49,936	)
Gross addition expenses	$	93,084		$	85,066		$	87,533		$	118,746
Divided by: Gross customer additions		832,983			660,149			671,379			839,666
CPGA	$	111.75		$	128.86		$	130.38		$	141.42

	Three Months Ended
	March 31, 2008			June 30, 2008			September 30, 2008			December 31, 2008
	(In thousands, except gross customer additions and CPGA)
Calculation of Cost Per Gross Addition (CPGA):
Selling expenses	$	46,647		$	53,180		$	58,916		$	53,551
Less: Equipment revenues		(100,384	)		(80,245	)		(76,030	)		(57,606	)
Add: Equipment revenue not associated with new customers		45,803			37,613			33,295			32,318
Add: Cost of equipment		200,158			160,088			160,538			183,864
Less: Equipment costs not associated with new customers		(72,212	)		(58,993	)		(56,891	)		(56,215	)
Gross addition expenses	$	120,012		$	111,643		$	119,828		$	155,912
Divided by: Gross customer additions		960,083			792,823			934,607			1,301,179
CPGA	$	125.00		$	140.82		$	128.21		$	119.82

CPU — CPU is cost of service and general and administrative costs (excluding applicable non-cash stock-based compensation expense included in cost of service and general and administrative expenses) plus net loss on equipment transactions unrelated to initial customer acquisition exclusive of pass through charges, divided by the sum of the average monthly number of customers during such period. CPU does not include any depreciation and amortization expense. Management uses CPU as a tool to evaluate the non-selling cash expenses associated with ongoing business operations on a per customer basis, to track changes in these non-selling cash costs over time, and to help evaluate how changes in our business operations affect non-selling cash costs per customer. In addition, CPU provides management with a useful measure to compare our non-selling cash costs per customer with those of other wireless providers. We believe investors use CPU primarily as a tool to track changes in our non-selling cash costs over time and to compare our non-selling cash costs to those of other wireless providers, although other wireless carriers may calculate this measure differently. The following table reconciles total costs used in the calculation of CPU to cost of service, which we consider to be the most directly comparable GAAP financial measure to CPU.

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	Year Ended December 31,
	2006			2007			2008
	(In thousands, except average number of customers and CPU)
Calculation of Cost Per User (CPU):
Cost of service	$	445,281		$	647,510		$	857,295
Add: General and administrative expenses		138,998			198,955			235,289
Add: Net loss on equipment transactions unrelated to initial customer acquisition		41,538			49,331			95,282
Less: Stock-based compensation expense included in cost of service and general and administrative expense		(14,472	)		(28,024	)		(41,142	)
Less: Pass through charges		(45,640	)		(95,946	)		(136,801	)
Total costs used in the calculation of CPU	$	565,705		$	771,826		$	1,009,923
Divided by: Average number of customers		2,398,682			3,508,497			4,631,168
CPU	$	19.65		$	18.33		$	18.17

	Three Months Ended
	March 31, 2007			June 30, 2007			September 30, 2007			December 31, 2007
	(In thousands, except average number of customers and CPU)
Calculation of Cost Per User (CPU):
Cost of service	$	145,335		$	162,227		$	163,671		$	176,277
Add: General and administrative expenses		42,831			49,352			48,871			57,900
Add: Net loss on equipment transactions unrelated to initial customer acquisition		13,160			9,903			11,664			14,606
Less: Stock-based compensation expense included in cost of service and general and administrative expense		(4,211	)		(7,653	)		(7,107	)		(9,053	)
Less: Pass through charges		(20,271	)		(25,721	)		(25,215	)		(24,740	)
Total costs used in the calculation of CPU	$	176,844		$	188,108		$	191,884		$	214,990
Divided by: Average number of customers		3,175,284			3,480,780			3,592,045			3,785,880
CPU	$	18.56		$	18.01		$	17.81		$	18.93

	Three Months Ended
	March 31, 2008			June 30, 2008			September 30, 2008			December 31, 2008
	(In thousands, except average number of customers and CPU)
Calculation of Cost Per User (CPU):
Cost of service	$	188,473		$	206,140		$	219,423		$	243,259
Add: General and administrative expenses		57,727			60,239			57,738			59,584
Add: Net loss on equipment transactions unrelated to initial customer acquisition		26,409			21,380			23,596			23,897
Less: Stock-based compensation expense included in cost of service and general and administrative expense		(8,465	)		(11,007	)		(10,782	)		(10,888	)
Less: Pass through charges		(26,554	)		(30,583	)		(31,445	)		(48,220	)
Total costs used in the calculation of CPU	$	237,590		$	246,169		$	258,530		$	267,632
Divided by: Average number of customers		4,198,794			4,501,980			4,741,043			5,082,856
CPU	$	18.86		$	18.23		$	18.18		$	17.55

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash and cash equivalents and cash generated from operations. At December 31, 2008, we had a total of approximately $697.9 million in cash and cash equivalents. Over the last year, the capital and credit markets have become increasingly volatile as a result of adverse economic and financial conditions that have triggered the failure and near failure of a number of large financial services companies and a global recession. We believe that this increased volatility and global recession may make it difficult to obtain additional financing or sell additional equity or debt securities. We believe that, based on our current level of cash and cash equivalents and anticipated cash flows from operations, the current adverse economic and financial conditions in the credit and capital markets will not have a material adverse impact on our liquidity, cash flow, financial flexibility or our ability to fund our operations in the near-term.

We have historically invested our substantial cash balances in, among other things, securities issued and fully guaranteed by the United States or the states, highly rated commercial paper and auction rate securities, money market funds meeting certain criteria, and demand deposits. These investments are subject to credit, liquidity, market and interest rate risk. At December 31, 2008, we had invested substantially all of our cash and cash equivalents in money market funds consisting of U.S. treasury securities.

During the year ended December 31, 2007, we made an original investment of $133.9 million in principal in certain auction rate securities, substantially all of which are secured by collateralized debt obligations with a portion of the underlying collateral being mortgage securities or related to mortgage securities. Consistent with our

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investment policy guidelines, the auction rate securities investments held by us all had AAA/Aaa credit ratings at the time of purchase. With the continued liquidity issues experienced in global credit and capital markets, the auction rate securities held by us at December 31, 2008 continue to experience failed auctions as the amount of securities submitted for sale in the auctions exceeds the amount of purchase orders. In addition, all of the auction rate securities held by us have been downgraded or placed on credit watch.

The estimated market value of our auction rate security holdings at December 31, 2008 was approximately $6.0 million, which reflects a $127.9 million cumulative adjustment to the original principal value of $133.9 million. The estimated market value at December 31, 2007 was approximately $36.1 million, which reflected a $97.8 million adjustment to the aggregate principal value at that date. Although the auction rate securities continue to pay interest according to their stated terms, based on valuation models that rely exclusively on unobservable inputs, we recorded an impairment charge of $30.9 million and $97.8 million during the years ended December 31, 2008 and 2007, respectively, reflecting an additional portion of our auction rate security holdings that we have concluded have an other-than-temporary decline in value. The offsetting increase in fair value of approximately $0.8 million is reported in accumulated other comprehensive loss in the consolidated balance sheets.

Historically, given the liquidity created by auctions, our auction rate securities were presented as current assets under short-term investments on our balance sheet. Given the failed auctions, our auction rate securities are illiquid until there is a successful auction for them or we sell them. Accordingly, the entire amount of such remaining auction rate securities has been reclassified from current to non-current assets and is presented in long-term investments on our balance sheet as of December 31, 2008 and 2007. The $6.0 million estimated market value at December 31, 2008 does not materially impact our liquidity and is not included in our approximately $697.9 million in cash and cash equivalents as of December 31, 2008. We may incur additional impairments to our auction rate securities which may be up to the full remaining value of such auction rate securities. Management believes that any future additional impairment charges will not have a material effect on our liquidity.

On April 24, 2007, MetroPCS Communications consummated an initial public offering of its common stock. MetroPCS Communications sold 37,500,000 shares of common stock at a price per share of $23.00 (less underwriting discounts and commissions), which resulted in net proceeds to MetroPCS Communications of approximately $818.3 million. In addition, selling stockholders sold an aggregate of 20,000,000 shares of common stock, including 7,500,000 shares sold pursuant to the exercise by the underwriters of their over-allotment option. MetroPCS Communications did not receive any proceeds from the sale of shares of common stock by the selling stockholders; however, MetroPCS Communications did receive proceeds of approximately $3.8 million from the exercise of options to acquire common stock which was sold in the initial public offering. Concurrent with the initial public offering by MetroPCS Communications, all outstanding shares of preferred stock of MetroPCS Communications, including accrued but unpaid dividends as of April 23, 2007, were converted into 150,962,644 shares of common stock. On June 6, 2007, MetroPCS Wireless, Inc., or Wireless, consummated the sale of the additional notes in the aggregate principal amount of $400.0 million. The proceeds from the sale of the additional notes were approximately $421.0 million. On January 20, 2009, Wireless consummated the sale of $550.0 million of 9 ¹/4% senior notes due 2014, or new notes. The net proceeds from the sale of the new notes was approximately $480.5 million. The net proceeds will be used for general corporate purposes which could include working capital, capital expenditures, future liquidity needs, additional opportunistic spectrum acquisitions, corporate development opportunities and future technology initiatives.

Our strategy has been to offer our services in major metropolitan areas and their surrounding areas, which we refer to as clusters. We are seeking opportunities to enhance our current market clusters and to provide service in new geographic areas. From time to time, we may purchase spectrum and related assets from third parties or the FCC. As a result of the acquisition of spectrum licenses and the opportunities that these licenses provide for us to expand our operations into major metropolitan markets, we will require significant additional capital in the future to finance the construction and initial operating costs associated with such licenses. We generally do not intend to commence the construction of any individual license area until we have sufficient funds available to provide for the related construction and operating costs associated with such license area. We currently plan to focus on building out networks to cover approximately 40 million of total population during 2009-2010 including the launch of the Boston and New York metropolitan areas in February 2009. Our initial launch dates will be accomplished in phases in the larger metropolitan areas. Our future builds will entail a more extensive use of distributed antenna systems, or DAS, systems than we have deployed in the past. This, along with other factors, could result in an increase in the total capital expenditures per covered population to initially launch operations. We believe that our existing cash, cash equivalents and our anticipated cash flows from operations will be sufficient to fully fund this planned expansion.

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The construction of our network and the marketing and distribution of our wireless communications products and services have required, and will continue to require, substantial capital investment. Capital outlays have included license acquisition costs, capital expenditures for construction of our network infrastructure, costs associated with clearing and relocating non-governmental incumbent licenses, funding of operating cash flow losses incurred as we launch services in new metropolitan areas and other working capital costs, debt service and financing fees and expenses. Our capital expenditures for the years ended December 31, 2008, 2007 and 2006 were approximately $954.6 million, $767.7 million and $550.7 million, respectively. These expenditures were primarily associated with the construction of the network infrastructure in our Northeast Markets, the construction of network infrastructure to build-out certain of our Core Markets, and our efforts to increase the service area and capacity of our existing Core Markets network through the addition of cell sites and switches. We believe the increased service area and capacity in existing markets will improve our service offering, helping us to attract additional customers and increase revenues. In addition, we believe our new Northeast Markets and the metropolitan areas in the Core Markets we built-out during 2006, 2007 and 2008 have attractive demographics which will result in increased revenues.

As of December 31, 2008, we owed an aggregate of approximately $3.0 billion under our senior secured credit facility and 9 ¹/4% senior notes. As of December 31, 2008, we owed approximately $91.3 million under our capital lease obligations.

Our senior secured credit facility calculates consolidated Adjusted EBITDA as: consolidated net income plus depreciation and amortization; gain (loss) on disposal of assets; non-cash expenses; gain (loss) on extinguishment of debt; provision for income taxes; interest expense; and certain expenses of MetroPCS Communications, Inc. minus interest and other income and non-cash items increasing consolidated net income.

We consider consolidated Adjusted EBITDA, as defined above, to be an important indicator to investors because it provides information related to our ability to provide cash flows to meet future debt service, capital expenditures and working capital requirements and fund future growth. We present consolidated Adjusted EBITDA because covenants in our senior secured credit facility contain ratios based on this measure. Other wireless carriers may calculate consolidated Adjusted EBITDA differently. If our consolidated Adjusted EBITDA were to decline below certain levels, covenants in our senior secured credit facility that are based on consolidated Adjusted EBITDA, including our maximum senior secured leverage ratio covenant, may be violated and could cause, among other things, an inability to incur further indebtedness and in certain circumstances a default or mandatory prepayment under our senior secured credit facility. Our maximum senior secured leverage ratio is required to be less than 4.5 to 1.0 based on consolidated Adjusted EBITDA plus the impact of certain new markets. The lenders under our senior secured credit facility use the senior secured leverage ratio to measure our ability to meet our obligations on our senior secured debt by comparing the total amount of such debt to our consolidated Adjusted EBITDA, which our lenders use to estimate our cash flow from operations. The senior secured leverage ratio is calculated as the ratio of senior secured indebtedness to consolidated Adjusted EBITDA, as defined by our senior secured credit facility. For the twelve months ended December 31, 2008, our senior secured leverage ratio was 1.95 to 1.0, which means for every $1.00 of consolidated Adjusted EBITDA we had $1.95 of senior secured indebtedness. In addition, consolidated Adjusted EBITDA is also utilized, among other measures, to determine management’s compensation levels. Consolidated Adjusted EBITDA is not a measure calculated in accordance with GAAP, and should not be considered a substitute for, operating income (loss), net income (loss), or any other measure of financial performance reported in accordance with GAAP. In addition, consolidated Adjusted EBITDA should not be construed as an alternative to, or more meaningful than cash flows from operating activities, as determined in accordance with GAAP.

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The following table shows the calculation of our consolidated Adjusted EBITDA, as defined in our senior secured credit facility, for the years ended December 31, 2006, 2007 and 2008.

	Year Ended December 31,
	2006			2007			2008
	(In Thousands)
Calculation of Consolidated Adjusted EBITDA:
Net income	$	53,806		$	100,403		$	149,438
Adjustments:
Depreciation and amortization		135,028			178,202			255,319
Loss on disposal of assets		8,806			655			18,905
Stock-based compensation expense(1)		14,472			28,024			41,142
Interest expense		115,985			201,746			179,398
Accretion of put option in majority-owned subsidiary(1)		770			1,003			1,258
Interest and other income		(21,543	)		(63,936	)		(23,170	)
Loss on extinguishment of debt		51,518			—			—
Impairment loss on investment securities		—			97,800			30,857
Provision for income taxes		36,717			123,098			129,986
Consolidated Adjusted EBITDA	$	395,559		$	666,995		$	783,133

(1) Represents a non-cash expense, as defined by our senior secured credit facility.

In addition, for further information, the following table reconciles consolidated Adjusted EBITDA, as defined in our senior secured credit facility, to cash flows from operating activities for the years ended December 31, 2006, 2007 and 2008.

	Year Ended December 31,
	2006			2007			2008
	(In Thousands)
Reconciliation of Net Cash Provided by Operating Activities to Consolidated Adjusted EBITDA:
Net cash provided by operating activities	$	364,761		$	589,306		$	447,490
Adjustments:
Interest expense		115,985			201,746			179,398
Non-cash interest expense		(6,964	)		(3,259	)		(2,550	)
Interest and other income		(21,543	)		(63,936	)		(23,170	)
Provision for uncollectible accounts receivable		(31	)		(129	)		(8	)
Deferred rent expense		(7,464	)		(13,745	)		(20,646	)
Cost of abandoned cell sites		(3,783	)		(6,704	)		(8,592	)
Accretion of asset retirement obligation		(769	)		(1,439	)		(3,542	)
Gain on sale of investments		2,385			10,506			—
Provision for income taxes		36,717			123,098			129,986
Deferred income taxes		(32,341	)		(118,524	)		(124,347	)
Changes in working capital		(51,394	)		(49,925	)		209,114
Consolidated Adjusted EBITDA	$	395,559		$	666,995		$	783,133

Operating Activities

Cash provided by operating activities decreased $141.8 million to $447.5 million during the year ended December 31, 2008 from $589.3 million for the year ended December 31, 2007. The decrease was primarily attributable to a decrease in working capital during the year ended December 31, 2008 compared to the same period in 2007, partially offset by an approximately 49% increase in net income as a result of the growth experienced over the last twelve months.

Cash provided by operating activities increased $224.5 million to $589.3 million during the year ended December 31, 2007 from $364.8 million for the year ended December 31, 2006. The increase was primarily attributable to an 87% increase in net income as well as a 266% increase in deferred income taxes during the year ended December 31, 2007 compared to the same period in 2006.

Cash provided by operating activities increased $81.6 million to $364.8 million during the year ended December 31, 2006 from $283.2 million for the year ended December 31, 2005. The increase was primarily attributable to the timing of payments on accounts payable and accrued expenses for the year ended December 31, 2006 as well as an increase in deferred revenues due to an approximately 53% increase in customers during the year ended December 31, 2006 compared to the same period in 2005.

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Investing Activities

Cash used in investing activities was $1.3 billion during the year ended December 31, 2008 compared to $517.1 million during the year ended December 31, 2007. The increase was due primarily to $328.5 million in purchases of FCC licenses, $25.2 million in cash used for business acquisitions, a $186.9 million increase in purchases of property and equipment which was primarily related to construction in the Northeast Markets, and $267.2 million in net proceeds from the sale of investments during the year ended December 31, 2007 that did not recur during the year ended December 31, 2008.

Cash used in investing activities was $517.1 million during the year ended December 31, 2007 compared to $1.9 billion during the year ended December 31, 2006. The decrease was mainly due to $1.4 billion in purchases of FCC licenses during the year ended December 31, 2006 that did not recur in 2007 as well as a $264.7 million increase in net proceeds from the sale of investments, partially offset by a $217.0 million increase in purchases of property and equipment.

Cash used in investing activities was $1.9 billion during the year ended December 31, 2006 compared to $905.2 million during the year ended December 31, 2005. The increase was due primarily to an $887.7 million increase in purchases of FCC licenses and a $284.3 million increase in purchases of property and equipment, partially offset by a $355.5 million decrease in net purchases of investments.

Financing Activities

Cash provided by financing activities was $74.5 million for the year ended December 31, 2008 compared to $1.2 billion for year ended December 31, 2007. The decrease was due primarily to $818.3 million in net proceeds from the Company’s initial public offering that was completed in April 2007 and $420.4 million in net proceeds from the issuance of the additional notes in June 2007 that occurred during the year ended December 31, 2007 compared to the year ended December 31, 2008.

Cash provided by financing activities was $1.2 billion for the year ended December 31, 2007 compared to $1.6 billion for the year ended December 31, 2006. The decrease was due primarily to a decrease in proceeds from various financing activities during the year ended December 31, 2007 compared to the year ended December 31, 2006. Financing activities during the year ended December 31, 2007 included $818.3 million in net proceeds from the company’s initial public offering that was completed in April 2007 and $421.0 million in net proceeds from the sale of additional notes in June 2007.

Cash provided by financing activities was $1.6 billion for the year ended December 31, 2006 compared to $712.2 million for the year ended December 31, 2005. The increase was due primarily to net proceeds from the senior secured credit facility and the issuance of the 9 ¹/4% senior notes in the aggregate principal amount of $1.0 billion.

First and Second Lien Credit Agreements

On November 3, 2006, we paid the lenders under the first and second lien credit agreements $931.5 million plus accrued interest of $8.6 million to extinguish the aggregate outstanding principal balance under the first and second lien credit agreements. As a result, we recorded a loss on extinguishment of debt in the amount of approximately $42.7 million.

On November 21, 2006, we terminated the interest rate cap agreement that was required by our first and second lien credit agreements. We received approximately $4.3 million upon termination of the agreement. The proceeds from the termination of the agreement approximated its carrying value.

Bridge Credit Facilities

In July 2006, MetroPCS II, Inc., or MetroPCS II, an indirect wholly-owned subsidiary of MetroPCS Communications, Inc. (which has since merged into Wireless), entered into an Exchangeable Senior Secured Credit Agreement and Guaranty Agreement, dated as of July 13, 2006, or the secured bridge credit facility. The aggregate credit commitments available under the secured bridge credit facility were $1.25 billion and were fully funded.

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On November 3, 2006, MetroPCS II repaid the aggregate outstanding principal balance under the secured bridge credit facility of $1.25 billion and accrued interest of $5.9 million. As a result, MetroPCS II recorded a loss on extinguishment of debt of approximately $7.0 million.

In October 2006, MetroPCS IV, Inc., an indirect wholly-owned subsidiary of MetroPCS Communications, Inc. (which has since merged into Wireless), entered into an additional Exchangeable Senior Unsecured Bridge Credit Facility, or the unsecured bridge credit facility. The aggregate credit commitments available under the unsecured bridge credit facility were $250.0 million and were fully funded.

On November 3, 2006, MetroPCS IV, Inc. repaid the aggregate outstanding principal balance under the unsecured bridge credit facility of $250.0 million and accrued interest of $1.2 million. As a result, MetroPCS IV, Inc. recorded a loss on extinguishment of debt of approximately $2.4 million.

Senior Secured Credit Facility

Wireless, an indirect wholly-owned subsidiary of MetroPCS Communications, Inc., entered into the Senior Secured Credit Facility on November 3, 2006, or senior secured credit facility. The senior secured credit facility consists of a $1.6 billion term loan facility and a $100 million revolving 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. The revolving credit facility will mature in November 2011.

The facilities under the senior secured credit agreement are guaranteed by MetroPCS Communications, Inc., MetroPCS, Inc. and each of Wireless’ direct and indirect present and future wholly-owned domestic subsidiaries. The facilities are not guaranteed by Royal Street, but Wireless has pledged the promissory note given by Royal Street in connection with amounts borrowed by Royal Street from Wireless and we pledged the limited liability company member interests we hold in Royal Street. 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 the present and future assets of Wireless and each of its direct and indirect present and future wholly-owned subsidiaries (except as prohibited by law and certain permitted exceptions).

Under the senior secured credit agreement, Wireless will be 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. There is no prohibition on our ability to make investments in or loan money to Royal Street.

Amounts outstanding under our senior secured credit facility bear interest at a LIBOR rate plus a margin as set forth in the facility and the terms of the senior secured credit facility require us to enter into interest rate hedging agreements that fix the interest rate in an amount equal to at least 50% of our outstanding indebtedness, including the notes.

On November 21, 2006, Wireless entered into a three-year interest rate protection agreement to manage its interest rate risk exposure and fulfill a requirement of its senior secured credit facility. The agreement covers a notional amount of $1.0 billion and effectively converts this portion of Wireless’ variable rate debt to fixed-rate debt at an annual rate of 7.169%. The quarterly interest settlement periods began on February 1, 2007. The interest rate protection agreement expires on February 1, 2010.

On February 20, 2007, Wireless entered into an amendment to the senior secured credit facility. Under the amendment, the margin used to determine the senior secured credit facility interest rate was reduced to 2.25% from 2.50%.

On April 30, 2008, Wireless entered into an additional two-year interest rate protection agreement to manage its interest rate risk exposure. The agreement was effective on June 30, 2008 and covers a notional amount of $500.0 million and effectively converts this portion of Wireless’ variable rate debt to fixed rate debt at an annual rate of 5.464%. The monthly interest settlement periods began on June 30, 2008. The interest rate protection agreement expires on June 30, 2010.

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9 ¹/4% Senior Notes Due 2014

On November 3, 2006, Wireless consummated the sale of $1.0 billion principal amount of its initial senior notes. On June 6, 2007, Wireless consummated the sale of an additional $400.0 million principal amount of additional notes. The initial senior notes and the additional notes are referred to together as the 9 ¹/4% senior notes. The 9 ¹/4% senior notes are unsecured obligations and are guaranteed by MetroPCS Communications, Inc., MetroPCS, Inc., and all of Wireless direct and indirect wholly-owned domestic restricted subsidiaries, but are not guaranteed by Royal Street. Interest is payable on the initial senior notes on May 1 and November 1 of each year, beginning with May 1, 2007, with respect to the initial senior notes, and beginning on November 1, 2007 with respect to the additional notes. Wireless may, at its option, redeem some or all of the 9 ¹/4% senior notes at any time on or after November 1, 2010 for the redemption prices set forth in the indenture governing the 9 ¹/4% senior notes. In addition, Wireless may also redeem up to 35% of the aggregate principal amount of the 9 ¹/4% senior notes with the net cash proceeds of certain sales of equity securities, including the sale of common stock.

On January 14, 2009, Wireless completed the sale of the new notes at a price equal to 89.50% of the principal amount of such new notes. On January 20, 2009, Wireless consummated the sale of the new notes resulting in net proceeds of $480.5 million. The net proceeds from the sale of the new notes will be used for general corporate purposes which could include working capital, capital expenditures, future liquidity needs, additional opportunistic spectrum acquisitions, corporate development opportunities and future technology initiatives. The new notes are unsecured obligations and are guaranteed by MetroPCS, MetroPCS, Inc., and all of Wireless’ direct and indirect wholly-owned subsidiaries, but are not guaranteed by Royal Street. Interest is payable on the new notes on May 1 and November 1 of each year, beginning on May 1, 2009.

Capital Lease Obligations

We have entered into various non-cancelable DAS capital lease agreements, with expirations through 2024, covering dedicated optical fiber. Assets and future obligations related to capital leases are included in the accompanying consolidated balance sheet in property and equipment and long-term debt, respectively. Depreciation of assets held under capital lease obligations is included in depreciation and amortization expense.

Capital Expenditures and Other Asset Acquisitions and Dispositions

Capital Expenditures. We and Royal Street currently expect to incur capital expenditures in the range of $0.7 billion to $0.9 billion on a consolidated basis for the year ending December 31, 2009. We plan to focus on building out networks to cover approximately 40 million of total population during 2009-2010, including the launch of the Boston and New York metropolitan areas in February 2009.

During the year ended December 31, 2008, we and Royal Street incurred $954.6 million in capital expenditures. These capital expenditures were primarily for the expansion and improvement of our existing network infrastructure and costs associated with the construction of new markets.

During the year ended December 31, 2007, we and Royal Street incurred $767.7 million in capital expenditures. These capital expenditures were primarily for the expansion and improvement of our existing network infrastructure and costs associated with the construction of new markets.

During the year ended December 31, 2006, we had $550.7 million in capital expenditures. These capital expenditures were primarily for the expansion and improvement of our existing network infrastructure and costs associated with the construction of new markets.

Other Acquisitions and Dispositions. On November 29, 2006, we were granted AWS licenses as a result of FCC Auction 66, for a total aggregate purchase price of approximately $1.4 billion.

On December 21, 2007, we executed an agreement with PTA Communications, Inc., or PTA, to purchase 10 MHz of PCS spectrum from PTA for the basic trading area of Jacksonville, Florida. We also entered into agreements with NTCH, Inc. (dba Cleartalk PCS) and PTA-FLA, Inc. for the purchase of certain of their assets used in providing PCS wireless telecommunications services in the Jacksonville market. On January 17, 2008, we closed on the acquisition of the assets and paid a total of $18.6 million in cash for these assets, exclusive of transaction costs. On May 13, 2008, we closed on the purchase of the 10 MHz of spectrum from PTA for the basic trading area of Jacksonville, Florida for consideration of $6.5 million in cash.

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We participated as a bidder in Auction 73 and on June 26, 2008, we were granted one 12 MHz 700 MHz license for an aggregate purchase price of approximately $313.3 million. The 700 MHz License supplements the 10 MHz of advanced wireless spectrum previously granted to us in the Boston-Worcester, Massachusetts/New Hampshire/Rhode Island/Vermont Economic Area as a result of Auction 66.

On various dates in 2008, we consummated agreements for spectrum acquisitions from third-parties in the aggregate amount of approximately $15.3 million.

On September 26, 2008, we entered into a spectrum exchange agreement covering licenses in certain markets with Leap Wireless International, Inc. (“Leap Wireless”) with Leap Wireless acquiring an additional 10 MHz of spectrum in San Diego and Fresno, California; Seattle, Washington and certain other Washington and Oregon markets, and we will acquire an additional 10 MHz of spectrum in Shreveport-Bossier City, Louisiana; Lakeland-Winter Haven, Florida; and Dallas-Ft. Worth, Texas and certain other North Texas markets, with consummation subject to customary closing conditions.

On various dates in 2008, we entered into agreements for the acquisition of spectrum from third parties in the aggregate amount of approximately $8.3 million. Consummation of these acquisitions is conditioned upon customary closing conditions, including approval by the FCC.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations and Commercial Commitments

The following table provides aggregate information about our contractual obligations as of December 31, 2008. See Note 12 to our annual consolidated financial statements included elsewhere in this report.

	Payments Due by Period
	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
	(In thousands)
Contractual Obligations:
Long-term debt, including current portion	$	2,964,000	$	16,000	$	32,000	$	1,516,000	$	1,400,000
Interest expense on long-term debt(1)		1,232,843		230,269		457,444		437,213		107,917
Alcatel Lucent purchase commitment		21,600		21,600		—		—		—
Contractual tax obligations (2)		2,773		2,773		—		—		—
Capital lease obligations		186,499		10,213		21,357		22,658		132,271
Operating leases		1,753,010		204,296		419,156		398,231		731,327
Total cash contractual obligations	$	6,160,725	$	485,151	$	929,957	$	2,374,102	$	2,371,515

(1) Interest expense on long-term debt includes future interest payments on outstanding obligations under our senior secured credit facility and 9 ¹/4% senior notes. The senior secured credit facility bears interest at a floating rate tied to a fixed spread to the London Inter Bank Offered Rate. The interest expense presented in this table is based on the rates at December 31, 2008 which was 6.443% for the senior secured credit facility.

(2) Represents the liability reported in accordance with the Company’s adoption of the provisions of FIN 48. Due to the high degree of uncertainty regarding the timing of potential future cash outflows associated with these liabilities, other than the items included in the table above, the Company was unable to make a reasonably reliable estimate of the amount and period in which these remaining liabilities might be paid. Accordingly, unrecognized tax benefits of $16.6 million as of December 31, 2008, have been excluded from the contractual obligations table above. For further information related to unrecognized tax benefits, see Note 18, “Income Taxes,” to the consolidated financial statements included in this Report.

Inflation

We believe that inflation has not materially affected our operations.

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Effect of New Accounting Standards

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

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

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

In April 2008, the FASB issued FSP SFAS No. 142-3, “Determination of the Useful Life of Intangible Assets,” (“FSP SFAS No. 142-3”). FSP SFAS No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” FSP SFAS No. 142-3 is effective for fiscal years beginning after December 15, 2008. The implementation of this standard did not have a material impact on our financial condition or results of operations.

In October 2008, the FASB issued FSP SFAS No. 157-3 “Determining Fair Value of a Financial Asset in a Market That Is Not Active,” (“FSP SFAS No. 157-3”). FSP SFAS No. 157-3 clarified the application of SFAS No. 157 in an inactive market. It demonstrates how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP SFAS No. 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have a material impact on our financial condition or results of operations.

In November 2008, the FASB issued EITF No. 08-6, “Equity Method Investment Accounting Considerations,” (“EITF No. 08-6”). EITF No. 08-6 clarifies the accounting treatment for certain transactions and impairment considerations involving equity method investments. EITF No. 08-6 is effective for fiscal years and interim periods beginning on or after December 15, 2008, consistent with the effective dates of SFAS No. 141(R) and SFAS No. 160. The implementation of this standard did not have a material impact on our financial condition or results of operations.

32

EX-99.3

Exhibit 99.3

Item 15. Exhibits, Financial Statement Schedules

(a) Financial Statements, Schedules and Exhibits

(1) Financial Statements - The following financial statements of MetroPCS Communications, Inc. are filed as a part of this Form 10-K on the pages indicated:

	Page
Audited Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2008 and 2007	F-2
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2008, 2007 and 2006	F-3
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2008, 2007 and 2006	F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	F-6
Notes to Consolidated Financial Statements	F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

MetroPCS Communications, Inc.

Richardson, Texas

We have audited the accompanying consolidated balance sheets of MetroPCS Communications, Inc. and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of MetroPCS Communications, Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 10 to the consolidated financial statements, the Company changed their method of accounting for fair value measurements of financial assets and liabilities as of January 1, 2008 and as discussed in Note 2 for uncertainty in income taxes as of January 1, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

February 27, 2009

(June 8, 2009 as to the retrospective presentation of enhanced derivative disclosures in Note 6 and the reclassification of segment information as described in Note 20)

Dallas, Texas

F-1

MetroPCS Communications, Inc. and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2008 and 2007

(in thousands, except share and per share information)

	2008			2007
CURRENT ASSETS:
Cash and cash equivalents	$	697,948		$	1,470,208
Inventories, net		155,955			109,139
Accounts receivable (net of allowance for uncollectible accounts of $4,106 and $2,908 at December 31, 2008 and 2007, respectively)		34,666			31,809
Prepaid charges		56,347			60,469
Deferred charges		49,716			34,635
Deferred tax assets		1,832			4,920
Other current assets		47,420			21,704
Total current assets		1,043,884			1,732,884
Property and equipment, net		2,847,751			1,891,411
Restricted cash and investments		4,575			320
Long-term investments		5,986			36,050
FCC licenses		2,406,596			2,072,895
Microwave relocation costs		16,478			10,105
Other assets		96,878			62,465
Total assets	$	6,422,148		$	5,806,130
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	568,432		$	439,449
Current maturities of long-term debt		17,009			16,000
Deferred revenue		151,779			120,481
Other current liabilities		5,136			4,560
Total current liabilities		742,356			580,490
Long-term debt, net		3,057,983			2,986,177
Deferred tax liabilities		389,509			290,128
Deferred rents		56,425			35,779
Redeemable minority interest		6,290			5,032
Other long-term liabilities		135,262			59,778
Total liabilities		4,387,825			3,957,384
COMMITMENTS AND CONTINGENCIES (See Note 12)
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.0001 per share, 100,000,000 shares authorized; no shares of preferred stock issued and outstanding at December 31, 2008 and 2007		—			—
Common Stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 350,918,272 and 348,108,027 shares issued and outstanding at December 31, 2008 and 2007, respectively		35			35
Additional paid-in capital		1,578,972			1,524,769
Retained earnings		487,849			338,411
Accumulated other comprehensive loss		(32,533	)		(14,469	)
Total stockholders’ equity		2,034,323			1,848,746
Total liabilities and stockholders’ equity	$	6,422,148		$	5,806,130

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

F-2

MetroPCS Communications, Inc. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

For the Years Ended December 31, 2008, 2007 and 2006

(in thousands, except share and per share information)

	2008			2007			2006
REVENUES:
Service revenues	$	2,437,250		$	1,919,197		$	1,290,947
Equipment revenues		314,266			316,537			255,916
Total revenues		2,751,516			2,235,734			1,546,863
OPERATING EXPENSES:
Cost of service (exclusive of depreciation and amortization expense of $225,911, $157,387 and $122,606, shown separately below)		857,295			647,510			445,281
Cost of equipment		704,648			597,233			476,877
Selling, general and administrative expenses (exclusive of depreciation and amortization expense of $29,408, $20,815 and $12,422, shown separately below)		447,582			352,020			243,618
Depreciation and amortization		255,319			178,202			135,028
Loss on disposal of assets		18,905			655			8,806
Total operating expenses		2,283,749			1,775,620			1,309,610
Income from operations		467,767			460,114			237,253
OTHER EXPENSE (INCOME):
Interest expense		179,398			201,746			115,985
Accretion of put option in majority-owned subsidiary		1,258			1,003			770
Interest and other income		(23,170	)		(63,936	)		(21,543	)
Impairment loss on investment securities		30,857			97,800			—
Loss on extinguishment of debt		—			—			51,518
Total other expense		188,343			236,613			146,730
Income before provision for income taxes		279,424			223,501			90,523
Provision for income taxes		(129,986	)		(123,098	)		(36,717	)
Net income		149,438			100,403			53,806
Accrued dividends on Series D Preferred Stock		—			(6,499	)		(21,006	)
Accrued dividends on Series E Preferred Stock		—			(929	)		(3,000	)
Accretion on Series D Preferred Stock		—			(148	)		(473	)
Accretion on Series E Preferred Stock		—			(106	)		(339	)
Net income applicable to common stock	$	149,438		$	92,721		$	28,988
Net income	$	149,438		$	100,403		$	53,806
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities, net of tax		830			6,640			(1,211	)
Unrealized (losses) gains on cash flow hedging derivatives, net of tax		(30,438	)		(13,614	)		1,959
Reclassification adjustment for losses (gains) included in net income, net of tax		11,544			(8,719	)		(1,307	)
Comprehensive income	$	131,374		$	84,710		$	53,247
Net income per common share: (See Note 19)
Net income per common share — basic	$	0.43		$	0.29		$	0.11
Net income per common share — diluted	$	0.42		$	0.28		$	0.10
Weighted average shares:
Basic		349,395,285			287,692,280			155,820,381
Diluted		355,380,111			296,337,724			159,696,608

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

F-3

MetroPCS Communications, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Years Ended December 31, 2008, 2007 and 2006

(in thousands, except share information)

	Number of Shares	Amount		Additional Paid-In Capital			Deferred Compensation			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
BALANCE, December 31, 2005	155,327,094	$	15	$	149,584		$	(178	)	$	216,702		$	1,783		$	367,906
Common Stock issued	49,725		—		314			—			—			—			314
Exercise of Common Stock options	1,148,328		1		2,743			—			—			—			2,744
Exercise of Common Stock warrants	526,950		—		—			—			—			—			—
Reversal of deferred compensation upon adoption of SFAS No. 123(R)	—		—		(178	)		178			—			—			—
Stock-based compensation	—		—		14,472			—			—			—			14,472
Accrued dividends on Series D Preferred Stock	—		—		—			—			(21,006	)		—			(21,006	)
Accrued dividends on Series E Preferred Stock	—		—		—			—			(3,000	)		—			(3,000	)
Accretion on Series D Preferred Stock	—		—		—			—			(473	)		—			(473	)
Accretion on Series E Preferred Stock	—		—		—			—			(339	)		—			(339	)
Reduction due to the tax impact of Common Stock option forfeitures	—		—		(620	)		—			—			—			(620	)
Net income	—		—		—			—			53,806			—			53,806
Unrealized losses on available-for-sale securities, net of tax	—		—		—			—			—			(1,211	)		(1,211	)
Unrealized gains on cash flow hedging derivatives, net of tax	—		—		—			—			—			1,959			1,959
Reclassification adjustment for gains included in net income, net of tax	—		—		—			—			—			(1,307	)		(1,307	)
BALANCE, December 31, 2006	157,052,097	$	16	$	166,315		$	—		$	245,690		$	1,224		$	413,245
Common Stock issued	31,230		—		354			—			—			—			354
Exercise of Common Stock options	2,562,056		—		9,706			—			—			—			9,706
Issuance of Common Stock through initial public offering, net of issuance costs	37,500,000		4		818,262			—			—			—			818,266
Conversion of Series D Preferred Stock	144,857,320		14		449,999			—			—			—			450,013
Conversion of Series E Preferred Stock	6,105,324		1		52,170			—			—			—			52,171
Stock-based compensation	—		—		28,024			—			—			—			28,024
Accrued dividends on Series D Preferred Stock	—		—		—			—			(6,499	)		—			(6,499	)
Accrued dividends on Series E Preferred Stock	—		—		—			—			(929	)		—			(929	)
Accretion on Series D Preferred Stock	—		—		—			—			(148	)		—			(148	)
Accretion on Series E Preferred Stock	—		—		—			—			(106	)		—			(106	)
Reduction due to the tax impact of Common Stock option forfeitures	—		—		(61	)		—			—			—			(61	)
Net income	—		—		—			—			100,403			—			100,403
Unrealized gains on available-for-sale securities, net of tax	—		—		—			—			—			6,640			6,640
Unrealized losses on cash flow hedging derivatives, net of tax	—		—		—			—			—			(13,614	)		(13,614	)
Reclassification adjustment for gains included in net income, net of tax	—		—		—			—			—			(8,719	)		(8,719	)
BALANCE, December 31, 2007	348,108,027	$	35	$	1,524,769		$	—		$	338,411		$	(14,469	)	$	1,848,746

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

F-4

MetroPCS Communications, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity — (Continued)

For the Years Ended December 31, 2008, 2007 and 2006

(in thousands, except share information)

	Number of Shares	Amount		Additional Paid-In Capital		Deferred Compensation		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Exercise of Common Stock options	2,810,245		—		12,582		—		—		—			12,582
Stock-based compensation expense	—		—		41,454		—		—		—			41,454
Tax impact of Common Stock option exercises and forfeitures	—		—		167		—		—		—			167
Net income	—		—		—		—		149,438		—			149,438
Unrealized gains on available-for-sale securities, net of tax	—		—		—		—		—		830			830
Unrealized losses on cash flow hedging derivatives, net of tax	—		—		—		—		—		(30,438	)		(30,438	)
Reclassification adjustment for losses included in net income, net of tax	—		—		—		—		—		11,544			11,544
BALANCE, December 31, 2008	350,918,272	$	35	$	1,578,972	$	—	$	487,849	$	(32,533	)	$	2,034,323

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

F-5

MetroPCS Communications, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2008, 2007 and 2006

(in thousands)

	2008			2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	149,438		$	100,403		$	53,806
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		255,319			178,202			135,028
Provision for uncollectible accounts receivable		8			129			31
Deferred rent expense		20,646			13,745			7,464
Cost of abandoned cell sites		8,592			6,704			3,783
Stock-based compensation expense		41,142			28,024			14,472
Non-cash interest expense		2,550			3,259			6,964
Loss on disposal of assets		18,905			655			8,806
Loss on extinguishment of debt		—			—			51,518
Gain on sale of investments		—			(10,506	)		(2,385	)
Impairment loss on investment securities		30,857			97,800			—
Accretion of asset retirement obligation		3,542			1,439			769
Accretion of put option in majority-owned subsidiary		1,258			1,003			770
Deferred income taxes		124,347			118,524			32,341
Changes in assets and liabilities, net of impact of acquisitions:
Inventories		(46,816	)		(16,275	)		(53,320	)
Accounts receivable		(2,865	)		(3,797	)		(12,143	)
Prepaid charges		(15,102	)		(6,887	)		(6,538	)
Deferred charges		(15,081	)		(8,126	)		(13,239	)
Other assets		(43,556	)		(11,345	)		(9,231	)
Accounts payable and accrued expenses		(119,166	)		63,884			108,492
Deferred revenue		31,294			30,013			33,957
Other liabilities		2,178			2,458			3,416
Net cash provided by operating activities		447,490			589,306			364,761
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(954,612	)		(767,709	)		(550,749	)
Change in prepaid purchases of property and equipment		15,645			(19,992	)		(5,262	)
Proceeds from sale of property and equipment		856			3,759			3,021
Purchase of investments		—			(3,358,427	)		(1,269,919	)
Proceeds from sale of investments		37			3,625,648			1,272,424
Change in restricted cash and investments		—			294			2,406
Purchases of and deposits for FCC licenses		(328,519	)		—			(1,391,586	)
Cash used in business acquisitions		(25,162	)		—			—
Microwave relocation costs		(2,520	)		(661	)		—
Net cash used in investing activities		(1,294,275	)		(517,088	)		(1,939,665	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		79,353			4,111			11,368
Proceeds from bridge credit agreements		—			—			1,500,000
Proceeds from Senior Secured Credit Facility		—			—			1,600,000
Proceeds from 9 1/4% Senior Notes Due 2014		—			423,500			1,000,000
Proceeds from initial public offering		—			862,500			—
Cost of raising capital		—			(44,234	)		—
Debt issuance costs		—			(3,091	)		(58,789	)
Repayment of debt		(16,000	)		(16,000	)		(2,437,985	)
Payments on capital lease obligations		(1,410	)		—			—
Proceeds from minority interest in majority-owned subsidiary		—			—			2,000
Proceeds from termination of cash flow hedging derivative		—			—			4,355
Proceeds from exercise of stock options and warrants		12,582			9,706			2,744
Net cash provided by financing activities		74,525			1,236,492			1,623,693
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(772,260	)		1,308,710			48,789
CASH AND CASH EQUIVALENTS, beginning of year		1,470,208			161,498			112,709
CASH AND CASH EQUIVALENTS, end of year	$	697,948		$	1,470,208		$	161,498

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

F-6

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

1. Organization and Business Operations:

MetroPCS Communications, Inc. (“MetroPCS”), a Delaware corporation, together with its consolidated subsidiaries (the “Company”), is a wireless telecommunications carrier that offers wireless broadband mobile services. As of December 31, 2008, the Company offered services primarily in the metropolitan areas of Atlanta, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, Orlando/Jacksonville, Philadelphia, San Francisco, Sacramento and Tampa/Sarasota. In February 2009, the Company launched service in the Boston and New York metropolitan areas. The Company sells products and services to customers through Company-owned retail stores as well as through relationships with independent retailers.

On November 24, 2004, MetroPCS, through its wholly-owned subsidiaries, and C9 Wireless, LLC, an independent third-party, formed a limited liability company called Royal Street Communications, LLC (“Royal Street Communications”), to bid on spectrum auctioned by the FCC in Auction 58. The Company owns 85% of the limited liability company member interest of Royal Street Communications, but may only elect two of the five members of Royal Street Communications’ management committee (See Note 4). The consolidated financial statements include the balances and results of operations of MetroPCS and its wholly-owned subsidiaries as well as the balances and results of operations of Royal Street Communications and its wholly-owned subsidiaries (collectively, “Royal Street”). The Company consolidates its interest in Royal Street in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46-R, “Consolidation of Variable Interest Entities,” (“FIN 46(R)”). Royal Street qualifies as a variable interest entity under FIN 46(R) because the Company is the primary beneficiary of Royal Street and will absorb all of Royal Street’s expected losses. The redeemable minority interest in Royal Street is included in long-term liabilities. All intercompany accounts and transactions between the Company and Royal Street have been eliminated in the consolidated financial statements.

On March 14, 2007, the Company’s Board of Directors approved a 3 for 1 stock split of the Company’s common stock effected by means of a stock dividend of two shares of common stock for each share of common stock issued and outstanding on that date. All share, per share and conversion amounts relating to common stock and stock options included in the accompanying consolidated financial statements have been retroactively adjusted to reflect the stock split.

On April 24, 2007, MetroPCS consummated its initial public offering (the “Offering”) of 57,500,000 shares of common stock priced at $23.00 per share (less underwriting discounts and commissions). MetroPCS offered 37,500,000 shares of common stock and certain of MetroPCS’ existing stockholders offered 20,000,000 shares of common stock in the Offering, which included 7,500,000 shares sold by MetroPCS’ existing stockholders pursuant to the underwriters’ exercise of their over-allotment option. Concurrent with the Offering, all outstanding shares of preferred stock, including accrued but unpaid dividends, were converted into 150,962,644 shares of common stock. The shares began trading on April 19, 2007 on the New York Stock Exchange under the symbol “PCS.”

2. Summary of Significant Accounting Policies:

Consolidation

The accompanying consolidated financial statements include the balances and results of operations of MetroPCS and its wholly- and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Operating Segments

SFAS No. 131 “Disclosure About Segments of an Enterprise and Related Information,” (“SFAS No. 131”), establishes standards for the way that public business enterprises report information about operating segments in annual financial statements. At December 31, 2008, the Company had thirteen operating segments based on geographic regions within the United States: Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, San Francisco, Sacramento and Tampa/Sarasota. The Company aggregates its operating segments into two reportable segments: Core Markets and Northeast Markets (See Note 20).

F-7

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Use of Estimates in Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The most significant of such estimates used by the Company include:

• allowance for uncollectible accounts receivable;

• valuation of inventories;

• valuation of investment securities;

• estimated useful life of assets;

• accrued property, plant and equipment for the percentage of construction services received;

• impairment of long-lived assets and indefinite-lived assets;

• likelihood of realizing benefits associated with temporary differences giving rise to deferred tax assets;

• reserves for uncertain tax positions;

• estimated customer life in terms of amortization of certain deferred revenue;

• valuation of common stock prior to the Offering; and

• stock-based compensation expense.

Derivative Instruments and Hedging Activities

The Company accounts for its hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS No. 133”). The standard requires the Company to recognize all derivatives on the consolidated balance sheet at fair value. Changes in the fair value of derivatives are to be recorded each period in earnings or on the accompanying consolidated balance sheets in accumulated other comprehensive income (loss) depending on the type of hedged transaction and whether the derivative is designated and effective as part of a hedged transaction. Gains or losses on derivative instruments reported in accumulated other comprehensive income (loss) must be reclassified to earnings in the period in which earnings are affected by the underlying hedged transaction and the ineffective portion of all hedges must be recognized in earnings in the current period. The Company’s use of derivative financial instruments is discussed in Note 6.

Cash and Cash Equivalents

The Company includes as cash and cash equivalents (i) cash on hand, (ii) cash in bank accounts, (iii) investments in money market funds, and (iv) treasury securities with an original maturity of 90 days or less.

Inventories

Substantially all of the Company’s inventories are stated at the lower of average cost or market. Inventories consist mainly of handsets that are available for sale to customers and independent retailers.

F-8

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Allowance for Uncollectible Accounts Receivable

The Company maintains allowances for uncollectible accounts for estimated losses resulting from the inability of independent retailers to pay for equipment purchases and for amounts estimated to be uncollectible from other carriers. The following table summarizes the changes in the Company’s allowance for uncollectible accounts (in thousands):

	2008			2007			2006
Balance at beginning of period	$	2,908		$	1,950		$	2,383
Additions:
Charged to expense		8			129			31
Direct reduction to revenue and other accounts		1,337			1,037			929
Deductions		(147	)		(208	)		(1,393	)
Balance at end of period	$	4,106		$	2,908		$	1,950

Prepaid Charges

Prepaid charges consisted of the following (in thousands):

	2008		2007
Prepaid vendor purchases	$	17,829	$	37,054
Prepaid rent		23,689		13,996
Prepaid maintenance and support contracts		4,482		3,961
Prepaid insurance		2,165		2,162
Prepaid advertising		2,331		264
Other		5,851		3,032
Prepaid charges	$	56,347	$	60,469

Property and Equipment

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

	2008			2007
Construction-in-progress	$	898,454		$	393,282
Network infrastructure		2,522,206			1,901,119
Office equipment		63,848			44,059
Leasehold improvements		47,784			33,410
Furniture and fixtures		10,273			7,833
Vehicles		311			207
		3,542,876			2,379,910
Accumulated depreciation and amortization		(695,125	)		(488,499	)
Property and equipment, net	$	2,847,751		$	1,891,411

Property and equipment are stated at cost. Additions and improvements are capitalized, while expenditures that do not enhance or extend the asset’s useful life are charged to operating expenses as incurred. When the Company sells, disposes of or retires property and equipment, the related gains or losses are included in operating results. 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 seven to ten years for network infrastructure assets, three to ten years for capitalized interest, up to fifteen years for capital lease assets, three to seven years for office equipment, which includes computer equipment, 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. Maintenance and repair costs are charged to expense as incurred. The Company follows the provisions of SFAS No. 34, “Capitalization of Interest Cost,” with respect to its FCC licenses and the related construction of its network infrastructure assets. Capitalization commences with pre-construction period administrative and technical activities, which includes obtaining leases, zoning approvals and building permits, and ceases at the point in which the asset is ready for its intended use, which generally coincides with the market launch date. For the years ended December 31, 2008, 2007 and 2006, the Company capitalized interest in the amount of $64.2 million, $34.9 million and $17.5 million, respectively.

F-9

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Impairment of Long-Lived Assets

The Company assesses potential impairments to its long-lived assets, including property and equipment, when there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss may be required to be recognized when the undiscounted cash flows expected to be generated by a long-lived asset (or group of such assets) is less than its carrying value. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and charged to results of operations.

Restricted Cash and Investments

Restricted cash and investments consist of cash deposited in escrow accounts, money market instruments and short-term investments. In general, these investments are pledged as collateral against letters of credit used as security for payment obligations and are presented as current or non-current assets based on the terms of the underlying letters of credit.

Long-Term Investments

The Company accounts for its investment securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” At December 31, 2008, all of the Company’s long-term investment securities were reported at fair value. Due to the lack of availability of observable market quotes on the Company’s investment portfolio of auction rate securities, the fair value was estimated based on valuation models that rely exclusively on unobservable inputs including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity.

Declines in fair value that are considered other-than-temporary are charged to earnings.

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 (See Note 5).

Revenues and Cost of Service

The Company’s wireless services are provided on a month-to-month basis and are paid in advance. Revenues from wireless services are recognized as services are rendered. Amounts received in advance are recorded as deferred revenue. Long-term deferred revenue is included in other long-term liabilities. Cost of service generally includes the direct costs of operating the Company’s networks.

The Company follows the provisions of Emerging Issues Task Force (“EITF”) No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” (“EITF No. 00-21”). Under the provisions of EITF No. 00-21, arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets constitutes a multiple element arrangement that should be divided into separate units of accounting with the consideration received allocated among the separate units of accounting using the residual method of accounting.

The Company has determined that the sale of wireless services through its direct and indirect sales channels with an accompanying handset constitutes a revenue arrangement with multiple deliverables. In accordance with EITF No. 00-21, the Company divides these arrangements into separate units of accounting, and allocates the consideration between the handset and the wireless service using the residual method of accounting. Consideration received for the wireless service is recognized at fair value as service revenue when earned, and any remaining consideration received is recognized as equipment revenue when the handset is delivered and accepted by the customer.

F-10

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Equipment revenues arise from the sale of handsets and accessories. Revenues and related costs from the sale of handsets in the Company’s retail locations are recognized at the point of sale. Handsets shipped to independent retailers are recorded as deferred revenue and deferred charges upon shipment by the Company and are recognized as equipment revenues and related costs when service is activated by its customers. Revenues and related costs from the sale of accessories are recognized at the point of sale. The costs of handsets and accessories sold are recorded in cost of equipment.

Sales incentives offered without charge to customers related to the sale of handsets are recognized as a reduction of revenue when the related equipment revenue is recognized. Customers have the right to return handsets within 30 days or 60 minutes of usage, whichever occurs first.

Federal Universal Service Fund (“FUSF”), E-911 and various other fees are assessed by various governmental authorities in connection with the services that the Company provides to its customers. The Company reports these fees on a gross basis in service revenues and cost of service on the accompanying statements of income and comprehensive income. For the years ended December 31, 2008, 2007 and 2006, the Company recorded approximately $135.6 million, $94.0 million and $44.3 million, respectively, of FUSF, E-911, and other fees. Sales, use and excise taxes are reported on a net basis in selling, general and administrative expenses on the accompanying statements of income and comprehensive income.

Software Costs

In accordance with Statement of Position (“SOP”) 98-1, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use,” (“SOP 98-1”), certain costs related to the purchase of internal use software are capitalized and amortized over the estimated useful life of the software. For the years ended December 31, 2008, 2007 and 2006, approximately $14.6 million, $9.2 million and $8.8 million, respectively, of purchased software costs under SOP 98-1 were placed in service. The Company amortizes software costs over a three-year life and for the years ended December 31, 2008, 2007 and 2006, the Company recognized amortization expense of approximately $10.7 million, $5.5 million and $2.8 million, respectively. Capitalized software costs are classified as office equipment.

FCC Licenses and Microwave Relocation Costs

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 wireless broadband services. In addition, in November 2006, the Company acquired a number of advanced wireless services (“AWS”) licenses which can be used to provide services comparable to the services provided by the Company, and other advanced wireless services. In June 2008, the Company acquired a 700 MHz license that also can be used to provide similar services. The personal communications services (“PCS”) licenses previously included, and the AWS licenses currently include, the obligation and resulting costs to relocate existing fixed microwave users of the Company’s licensed spectrum if the Company’s spectrum interfered with their systems and/or reimburse other carriers (according to FCC rules) that relocated prior users if the relocation benefits the Company’s system. Accordingly, the Company incurred costs related to microwave relocation in constructing its PCS and AWS networks. The PCS, AWS, and 700 MHz 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 10 years from the date of the digital television transition for 700 MHz licenses, the renewal of PCS, AWS and 700 MHz licenses is generally a routine matter without substantial cost and the Company has determined that no legal, regulatory, contractual, competitive, economic, or other factors currently exist that limit the useful life of its PCS, AWS and 700 MHz licenses. As such, under the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company does not amortize PCS, AWS and 700 MHz licenses and microwave relocation costs as they are considered to have indefinite lives and together represent the cost of the Company’s spectrum. The Company is required to test indefinite-lived intangible assets, consisting of PCS, AWS, and 700 MHz licenses and microwave relocation costs, for impairment on an annual basis based upon a fair value approach. Indefinite-lived intangible assets must be tested between annual tests if events or changes in circumstances indicate that the asset might be impaired. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in an entity’s market value, legal factors, operating performance indicators,

F-11

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

competition, sale or disposition of a significant portion of the business, or other factors. The Company completed its impairment tests during the third quarter of 2008. There have been no indicators of impairment and no impairment has been recognized through December 31, 2008.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred. Advertising costs totaled $99.0 million, $73.2 million and $46.4 million during the years ended December 31, 2008, 2007 and 2006, respectively.

Income Taxes

The Company records income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes,” (“SFAS No. 109”). SFAS No. 109 uses an asset and liability approach to account for income taxes, wherein deferred taxes are provided for book and tax basis differences for assets and liabilities. In the event differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities result in deferred tax assets, a valuation allowance is provided for a portion or all of the deferred tax assets when there is sufficient uncertainty regarding the Company’s ability to recognize the benefits of the assets in future years.

On January 1, 2007, the Company adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes,” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition issues. The adoption of FIN 48 did not have a significant impact on the Company’s financial statements. There was no cumulative effect adjustment related to adopting FIN 48.

Other Comprehensive Income (Loss)

Unrealized gains on available-for-sale securities and cash flow hedging derivatives are reported in accumulated other comprehensive loss as a separate component of stockholders’ equity until realized. Realized gains and losses on available-for-sale securities are included in interest and other income. Gains or losses on cash flow hedging derivatives reported in accumulated other comprehensive loss are reclassified to earnings in the period in which earnings are affected by the underlying hedged transaction.

Stock-Based Compensation

The Company accounts for share-based awards exchanged for employee services in accordance with SFAS No. 123(R), “Share-Based Payment,” (“SFAS No. 123(R)”) under the modified prospective method of adoption. Under SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period.

Asset Retirement Obligations

The Company accounts for asset retirement obligations as determined by SFAS No. 143, “Accounting for Asset Retirement Obligations,” (“SFAS No. 143”) and FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143,” (“FIN No. 47”). SFAS No. 143 and FIN No. 47 address financial accounting and reporting for legal obligations associated with the retirement of tangible long-lived assets and the related asset retirement costs. SFAS No. 143 requires that companies recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the estimated useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement.

F-12

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The Company is subject to asset retirement obligations associated with its cell site operating leases, which are subject to the provisions of SFAS No. 143 and FIN No. 47. Cell site lease agreements may contain clauses requiring restoration of the leased site at the end of the lease term to its original condition, creating an asset retirement obligation. This liability is classified under other long-term liabilities. Landlords may choose not to exercise these rights as cell sites are considered useful improvements. In addition to cell site operating leases, the Company has leases related to switch site, retail, and administrative locations subject to the provisions of SFAS No. 143 and FIN No. 47.

The following table summarizes the Company’s asset retirement obligation transactions (in thousands):

	2008			2007
Beginning asset retirement obligations	$	14,298		$	6,685
Liabilities incurred		28,816			6,929
Reductions		(138	)		(755	)
Accretion expense		3,542			1,439
Ending asset retirement obligations	$	46,518		$	14,298

Earnings Per Share

Basic earnings per share (“EPS”) are based upon the weighted average number of common shares outstanding for the period. Diluted EPS is computed in the same manner as EPS after assuming issuance of common stock for all potentially dilutive equivalent shares, whether exercisable or not.

The Series D Preferred Stock and Series E Preferred Stock (collectively, the “preferred stock”) that was outstanding during the years ended December 31, 2007 and 2006 are participating securities, such that in the event a dividend is declared or paid on the common stock, the Company must simultaneously declare and pay a dividend on the preferred stock as if they had been converted into common stock. In accordance with EITF Issue 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128,” (“EITF 03-6”), the preferred stock was considered a “participating security” for purposes of computing earnings or loss per common share and, therefore, the preferred stock was included in the computation of basic and diluted earnings per common share using the two-class method, except during periods of net losses. When determining basic earnings per common share under EITF 03-6, undistributed earnings for a period were allocated to a participating security based on the contractual participation rights of the security to share in those earnings as if all of the earnings for the period had been distributed (See Note 19).

Recent Accounting Pronouncements

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

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

F-13

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

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

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

In October 2008, the FASB issued FSP SFAS No. 157-3 “Determining Fair Value of a Financial Asset in a Market That Is Not Active,” (“FSP SFAS No. 157-3”). FSP SFAS No. 157-3 clarified the application of SFAS No. 157 in an inactive market. It demonstrates how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP SFAS No. 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have a material impact on the Company’s financial condition or results of operations.

In November 2008, the FASB issued EITF No. 08-6, “Equity Method Investment Accounting Considerations,” (“EITF No. 08-6”). EITF 08-6 clarifies the accounting treatment for certain transactions and impairment considerations involving equity method investments. EITF No. 08-6 is effective for fiscal years and interim periods beginning on or after December 15, 2008, consistent with the effective dates of SFAS No. 141(R) and SFAS No. 160. The implementation of this standard did not have a material impact on the Company’s financial condition or results of operations.

3. Acquisitions:

On December 21, 2007, the Company executed an agreement with PTA Communications, Inc. (“PTA”) to purchase 10 MHz of PCS spectrum from PTA for the basic trading area of Jacksonville, Florida. The Company also entered into agreements with NTCH, Inc. (dba Cleartalk PCS) and PTA-FLA, Inc. for the purchase of certain of their assets used in providing PCS wireless telecommunications services in the Jacksonville market. On January 17, 2008, the Company closed on the acquisition of the assets and paid a total of $18.6 million in cash for these assets, exclusive of transaction costs. On May 13, 2008, the Company closed on the purchase of the 10 MHz of spectrum from PTA for the basic trading area of Jacksonville, Florida for consideration of $6.5 million in cash.

4. Majority-Owned Subsidiary:

On November 24, 2004, MetroPCS, through its wholly-owned subsidiaries, together with C9 Wireless, LLC, an independent, unaffiliated third-party, formed a limited liability company, Royal Street Communications, that qualified to bid for closed licenses and to receive bidding credits as a very small business DE on open licenses in FCC Auction 58. MetroPCS indirectly owns 85% of the limited liability company member interest of Royal Street Communications, but may elect only two of five members of the Royal Street Communications’ management committee, which has the full power to direct the management of Royal Street. Royal Street Communications has formed limited liability company subsidiaries which hold all licenses won in Auction 58. At Royal Street’s request and subject to Royal Street’s control and direction, MetroPCS assisted or is assisting in the construction of Royal Street’s networks and has agreed to purchase, via a resale arrangement, as much as 85% of the engineered service capacity of Royal Street’s networks. The Company’s 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. The Company consolidates its interest in Royal Street in accordance with FIN 46(R).

F-14

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Royal Street qualifies as a variable interest entity under FIN 46(R) because the Company is the primary beneficiary of Royal Street and will absorb all of Royal Street’s expected losses. Royal Street does not guarantee MetroPCS Wireless, Inc.’s (“Wireless”) obligations under its senior secured credit facility, pursuant to which Wireless may borrow up to $1.7 billion, as amended, (the “Senior Secured Credit Facility”) and its $1.4 billion of 9 ¹/4% Senior Notes due 2014 (the “9 ¹/4% Senior Notes”). See the “non-guarantor subsidiaries” information in Note 21 for the financial position and results of operations of Royal Street. C9 Wireless, LLC, a beneficial interest holder in Royal Street, has no recourse to the general credit of MetroPCS. All intercompany accounts and transactions between the Company and Royal Street have been eliminated in the consolidated financial statements.

C9 Wireless, LLC has a right to sell, or put, its limited liability company interests in Royal Street Communications to the Company at specific future dates based on a contractually determined amount (the “Put Right”). The Put Right represents an unconditional obligation of MetroPCS and its wholly-owned subsidiaries to purchase from C9 Wireless, LLC its limited liability company interests in Royal Street Communications. In accordance with SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” this obligation is recorded as a liability and is measured at each reporting date at the amount of cash that would be required to settle the obligation under the contract terms if settlement occurred at the reporting date.

5. Investments:

The Company has historically invested its substantial cash balances in, among other things, securities issued and fully guaranteed by the United States or any state, highly rated commercial paper and auction rate securities, money market funds meeting certain criteria, and demand deposits. These investments are subject to credit, liquidity, market and interest rate risk. At December 31, 2008, the Company had invested substantially all of its cash and cash equivalents in money market funds consisting of treasury securities.

During the year ended December 31, 2007, the Company made an original investment of $133.9 million in principal in certain auction rate securities, substantially all of which are secured by collateralized debt obligations with a portion of the underlying collateral being mortgage securities or related to mortgage securities. Consistent with the Company’s investment policy guidelines, the auction rate securities investments held by the Company all had AAA/Aaa credit ratings at the time of purchase. With the continuing liquidity issues experienced in the global credit and capital markets, the auction rate securities held by the Company at December 31, 2008 continued to experience failed auctions as the amount of securities submitted for sale in the auctions exceeded the amount of purchase orders. In addition, all of the auction rate securities held by the Company have been downgraded or placed on credit watch.

The estimated market value of the Company’s auction rate security holdings at December 31, 2008 was approximately $6.0 million, which reflects a $127.9 million cumulative adjustment to the original principal value of $133.9 million. The estimated market value at December 31, 2007 was approximately $36.1 million, which reflected a $97.8 million adjustment to the aggregate principal value at that date. Although the auction rate securities continue to pay interest according to their stated terms, based on valuation models that rely exclusively on unobservable inputs, the Company recorded an impairment charge of $30.9 million during the year ended December 31, 2008, reflecting an additional portion of the auction rate security holdings that the Company has concluded have an other-than-temporary decline in value. The offsetting increase in fair value of approximately $0.8 million is reported in accumulated other comprehensive loss in the consolidated balance sheets.

Historically, given the liquidity created by auctions, the Company’s auction rate securities were presented as current assets under short-term investments on the Company’s balance sheet. Given the failed auctions, the Company’s auction rate securities are illiquid until there is a successful auction for them or the Company sells them. Accordingly, the entire amount of such remaining auction rate securities has been reclassified from current to non-current assets and is presented in long-term investments on the accompanying balance sheets as of December 31, 2008 and 2007. The Company may incur additional impairments to its auction rate securities.

F-15

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

6. Derivative Instruments and Hedging Activities:

On November 21, 2006, Wireless entered into a three-year interest rate protection agreement to manage the Company’s interest rate risk exposure and fulfill a requirement of Wireless’ Senior Secured Credit Facility. The agreement covers a notional amount of $1.0 billion and effectively converts this portion of Wireless’ variable rate debt to fixed-rate debt at an annual rate of 7.169%. The quarterly interest settlement periods began on February 1, 2007. The interest rate protection agreement expires on February 1, 2010. This financial instrument is reported in other long-term liabilities at fair market value of approximately $38.8 million as of December 31, 2008. The net change in fair value of $15.3 million is reported in accumulated other comprehensive loss in the consolidated balance sheets, net of income taxes in the amount of approximately $5.9 million. As of December 31, 2007, this financial instrument was reported in other long-term liabilities at fair market value of approximately $23.5 million. The net change in fair value of $13.6 million was reported in accumulated other comprehensive loss in the consolidated balance sheets, net of income taxes in the amount of approximately $9.9 million.

On April 30, 2008, Wireless entered into an additional two-year interest rate protection agreement to manage the Company’s interest rate risk exposure. The agreement was effective on June 30, 2008 and covers a notional amount of $500.0 million and effectively converts this portion of Wireless’ variable rate debt to fixed rate debt at an annual rate of 5.464%. The monthly interest settlement periods began on June 30, 2008. This agreement expires on June 30, 2010. This financial instrument is reported in other long-term liabilities at fair market value of approximately $16.2 million as of December 31, 2008. The net change in fair value of $16.2 million is reported in accumulated other comprehensive loss in the accompanying consolidated balance sheet, net of income taxes in the amount of approximately $6.5 million.

The primary risk managed by using derivative instruments is interest rate risk. Interest rate protection agreements are entered into to manage interest rate risk associated with the Company’s variable-rate borrowings. The interest rate protection agreements have been designated as cash flow hedges. If a derivative is designated as a cash flow hedge and the hedging relationship qualifies for hedge accounting under the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS No. 133”), 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 year ended December 31, 2008, 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 $44.5 million of net losses that are reported in accumulated other comprehensive loss at December 31, 2008 is expected to be reclassified into earnings within the next 12 months.

Cross-default Provisions

The Company’s interest rate protection agreements contain cross-default provisions to the Company’s Senior Secured Credit Facility. The Company’s Senior Secured Credit Facility allows interest rate protection agreements to become secured if the counterparty to the agreement is a current lender under the facility. If the Company were to default on the Senior Secured Credit Facility, it would trigger these provisions, and the counterparties to the interest rate protection agreements could request immediate payment on interest rate protection agreements in net liability positions, similar to their existing rights as a lender. There are no collateral requirements in the interest rate protection agreements. The aggregate fair value of interest rate protection agreements with cross-default provisions that are in a net liability position on December 31, 2008 is $55.0 million.

F-16

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Fair Values of Derivative Instruments

(in thousands)	Liability Derivatives
	As of December 31, 2008			As of December 31, 2007
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments under SFAS No. 133
Interest rate protection agreements	Other long-term liabilities	$	54,963	Other long-term liabilities	$	23,502
Total derivatives designated as hedging instruments under SFAS No. 133		$	54,963		$	23,502

The Effect of Derivative Instruments on the Consolidated Statement of Income

and Comprehensive Income For the Twelve Months Ended December 31,

Derivatives in SFAS No. 133 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)
	2008			2007			2006			2008			2007		2006
Interest rate protection agreements	$	(50,867	)	$	(22,055	)	$	3,295	Interest expense	$	(19,406	)	$	3,312	$	4,583
Total	$	(50,867	)	$	(22,055	)	$	3,295		$	(19,406	)	$	3,312	$	4,583

7. Intangible Assets:

The changes in the carrying value of intangible assets during the years ended December 31, 2008 and 2007 are as follows (in thousands):

	FCC Licenses		Microwave Relocation Costs
Balance at December 31, 2006	$	2,072,885	$	9,187
Additions		10		918
Balance at December 31, 2007	$	2,072,895	$	10,105
Additions		333,701		6,373
Balance at December 31, 2008	$	2,406,596	$	16,478

FCC licenses represent the 14 C-Block PCS licenses acquired by the Company in the FCC auction in May 1996, the AWS licenses acquired in FCC Auction 66, the 700 MHz license acquired in FCC Auction 73 and FCC licenses acquired from other carriers. FCC licenses also represent licenses acquired in 2005 by Royal Street Communications in Auction 58.

The grant of the licenses by the FCC subjects the Company to certain FCC ongoing ownership restrictions. Should the Company cease to continue to qualify under such ownership restrictions, the PCS, AWS and 700 MHz licenses may be subject to revocation or require the payment of fines or forfeitures. Although PCS, AWS, and 700 MHz licenses are issued with a stated term, 10 years in the case of the PCS licenses, 15 years in the case of the AWS licenses, and approximately 10 years from the date of the digital television transition for 700 MHz licenses, the renewal of PCS, AWS, and 700 MHz licenses is generally a routine matter without substantial cost.

On November 29, 2006, the Company was granted AWS licenses as a result of FCC Auction 66, for a total aggregate purchase price of approximately $1.4 billion. These licenses cover six of the 25 largest metropolitan areas in the United States. The east coast expansion opportunities include, but are not limited to, the entire east coast corridor from Philadelphia to Boston, including New York, as well as the entire states of New York, New Jersey, Connecticut and Massachusetts. In the western United States, the new expansion opportunities include the San Diego, Portland, Seattle and Las Vegas metropolitan areas. The balance supplements or expands the geographic boundaries of the Company’s existing operations in Dallas/Ft. Worth, Detroit, Los Angeles, San Francisco and Sacramento.

F-17

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

On February 21, 2007, the FCC granted the Company’s applications for the renewal of its 14 C-Block PCS licenses acquired in the FCC auction in May 1996, as well as the applications for the renewal of certain other licenses subsequently acquired from other carriers.

On December 21, 2007, the Company executed an agreement with PTA Communications, Inc. (“PTA”) to purchase 10 MHz of PCS spectrum from PTA for the basic trading area of Jacksonville, Florida. On May 13, 2008, the Company closed on the purchase of the 10 MHz of spectrum from PTA for the basic trading area of Jacksonville, Florida for consideration of $6.5 million in cash.

The Company participated as a bidder in FCC Auction 73, and on June 26, 2008, the Company was granted one 12 MHz 700 MHz license for a total aggregate purchase price of approximately $313.3 million. This 700 MHz license supplements the 10 MHz of AWS spectrum previously granted to the Company in the Boston-Worcester, Massachusetts/New Hampshire/Rhode Island/Vermont Economic Area as a result of FCC Auction 66.

On various dates in 2008, the Company consummated agreements for spectrum acquisitions from third-parties in the aggregate amount of approximately $15.3 million.

On September 26, 2008, the Company entered into a spectrum exchange agreement covering licenses in certain markets with Leap Wireless International, Inc. (“Leap Wireless”) with Leap Wireless acquiring an additional 10 MHz of spectrum in San Diego and Fresno, California; Seattle, Washington and certain other Washington and Oregon markets, and the Company acquiring an additional 10 MHz of spectrum in Shreveport-Bossier City, Louisiana; Lakeland-Winter Haven, Florida; and Dallas-Ft. Worth, Texas and certain other North Texas markets, with consummation subject to customary closing conditions.

During the year ended December 31, 2008, the Company entered into various agreements for the acquisition and exchange of spectrum in the aggregate amount of approximately $8.3 million. Consummation of these acquisitions is conditioned upon customary closing conditions, including approval by the FCC.

8. Accounts Payable and Accrued Expenses:

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

	2008		2007
Accounts payable	$	148,309	$	131,177
Book overdraft		104,752		25,399
Accrued accounts payable		178,085		155,733
Accrued liabilities		15,803		16,285
Payroll and employee benefits		34,047		29,380
Accrued interest		33,521		33,892
Taxes, other than income		46,705		41,044
Income taxes		7,210		6,539
Accounts payable and accrued expenses	$	568,432	$	439,449

F-18

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

9. Long-Term Debt:

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

	2008			2007
9 1/4% Senior Notes	$	1,400,000		$	1,400,000
Senior Secured Credit Facility		1,564,000			1,580,000
Capital lease obligations		91,343			—
Total		3,055,343			2,980,000
Add: unamortized premium on debt		19,649			22,177
Total debt		3,074,992			3,002,177
Less: current maturities		(17,009	)		(16,000	)
Total long-term debt	$	3,057,983		$	2,986,177

Maturities of the principal amount of long-term debt, excluding capital lease obligations, at face value are as follows (in thousands):

For the Year Ending December 31,
2009	$	16,000
2010		16,000
2011		16,000
2012		16,000
2013		1,500,000
Thereafter		1,400,000
Total	$	2,964,000

$1.4 Billion 9 ¹/4% Senior Notes

On November 3, 2006, Wireless completed the sale of $1.0 billion of principal amount of 9 ¹/4% Senior Notes due 2014, (the “Initial Notes”). The net proceeds of the sale of the Initial Notes were approximately $978.0 million after underwriter fees and other debt issuance costs of $22.0 million. The net proceeds from the sale of the Initial Notes, together with the borrowings under the Senior Secured Credit Facility, were used to repay amounts owed under various credit agreements, credit facilities, and to pay related premiums, fees and expenses, as well as for general corporate purposes.

On June 6, 2007, Wireless completed the sale of an additional $400.0 million of 9¹/4% Senior Notes due 2014 (the “Additional Notes” and together with the Initial Notes, the “9 ¹/4% Senior Notes”) under the existing indenture at a price equal to 105.875% of the principal amount of such Additional Notes.

The 9 ¹/4% Senior Notes are unsecured obligations and are guaranteed by MetroPCS, MetroPCS, Inc., and all of Wireless’ direct and indirect wholly-owned subsidiaries, but are not guaranteed by Royal Street. Interest is payable on the 9 ¹/4% Senior Notes on May 1 and November 1 of each year, beginning on May 1, 2007 for the Initial Notes and November 1, 2007 for the Additional Notes. Wireless may, at its option, redeem some or all of the 9 ¹/4% Senior Notes at any time on or after November 1, 2010 for the redemption prices set forth in the indenture governing the 9 ¹/4 % Senior Notes. In addition, Wireless may also redeem up to 35% of the aggregate principal amount of the 9 ¹/4% Senior Notes with the net cash proceeds of certain sales of equity securities.

Senior Secured Credit Facility

On November 3, 2006, Wireless entered into the Senior Secured Credit Facility, pursuant to which Wireless may borrow up to $1.7 billion. The Senior Secured Credit Facility 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 will be 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. The net proceeds from the borrowings under the Senior Secured Credit Facility, together with the sale of the Initial Notes, were used to repay amounts owed under various credit agreements, credit facilities, and to pay related premiums, fees and expenses, as well as for general corporate purposes.

F-19

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

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

The interest rate on the outstanding debt under the Senior Secured Credit Facility is variable. The rate as of December 31, 2008 was 6.443%. On November 21, 2006, Wireless entered into a three-year interest rate protection agreement to manage the Company’s interest rate risk exposure and fulfill a requirement of the Senior Secured Credit Facility. The agreement covers a notional amount of $1.0 billion and effectively converts this portion of Wireless’ variable rate debt to fixed-rate debt at an annual rate of 7.169% (See Note 6). On February 20, 2007, Wireless entered into an amendment to the Senior Secured Credit Facility. Under the amendment, the margin on the base rate used to determine the Senior Secured Credit Facility interest rate was reduced to 2.25% from 2.50%. On April 30, 2008, Wireless entered into an additional two-year interest rate protection agreement to manage the Company’s interest rate risk exposure. This agreement was effective on June 30, 2008, covers a notional amount of $500.0 million and effectively converts this portion of Wireless’ variable rate debt to fixed rate debt at an annual rate of 5.464%.

Capital Lease Obligations

The Company entered into various non-cancelable distributed antenna systems (“DAS”) capital lease agreements, with varying expiration terms through 2024, covering dedicated optical fiber. Assets and future obligations related to capital leases are included in the accompanying consolidated balance sheet in property and equipment and long-term debt, respectively. Depreciation of assets held under capital leases is included in depreciation and amortization expense. See Note 12.

10. Fair Value Measurements:

In the first quarter of 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value Measurements,” (“SFAS No. 157”) for financial assets and liabilities. SFAS No. 157 became effective for financial assets and liabilities on January 1, 2008. SFAS No. 157 defines fair value, thereby eliminating inconsistencies in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations.

SFAS No. 157 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.

F-20

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

SFAS No. 157 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 long-term investments securities and derivative financial instruments.

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

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

The following table summarizes assets and liabilities measured at fair value on a recurring basis at December 31, 2008, as required by SFAS No. 157 (in thousands):

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	675,294	$	—	$	—	$	675,294
Long-term investments		—		—		5,986		5,986
Total assets at fair value	$	675,294	$	—	$	5,986	$	681,280
Liabilities
Derivative liabilities	$	—	$	54,963	$	—	$	54,963
Total liabilities at fair value	$	—	$	54,963	$	—	$	54,963

F-21

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

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

Fair Value Measurements of Assets Using Level 3 Inputs

	Year Ended December 31, 2008
Beginning balance	$	36,050
Total losses (gains) (realized or unrealized):
Included in earnings		30,857
Included in other comprehensive loss		(830	)
Transfers in and/or out of Level 3		—
Purchases, sales, issuances and settlements		37
Ending balance at December 31, 2008	$	5,986

	Year Ended December 31, 2008
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 consolidated statements of income and comprehensive income	$	30,857

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

Long-Term Debt

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

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

	2008				2007
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Secured Credit Facility	$	1,564,000	$	1,251,200	$	1,580,000	$	1,607,734
9 1/4% Senior Notes		1,400,000		1,239,000		1,400,000		1,314,250
Cash flow hedging derivatives		54,963		54,963		23,502		23,502
Long-term investments		5,986		5,986		36,050		36,050

11. Concentrations:

The Company purchases a substantial portion of its wireless infrastructure equipment and handset equipment from only a few major suppliers. Further, the Company generally relies on one key vendor in each of the following areas: network infrastructure equipment, billing services, customer care, handset logistics and long distance services. Loss of any of these suppliers could adversely affect operations temporarily until a comparable substitute could be found. Verisign, the Company’s existing billing system provider, publicly announced that it plans to leave the telecommunications services business, including the billing services business. On September 15, 2008, the Company entered into a managed services agreement with Amdocs Software Systems Limited and Amdocs, Inc. (“Amdocs”). The Company is currently transitioning its billing systems to Amdocs.

Local and long distance telephone and other companies provide certain communication services to the Company. Disruption of these services could adversely affect operations in the short term until an alternative telecommunication provider was found.

Concentrations of credit risk with respect to trade accounts receivable are limited due to the diversity of the Company’s indirect retailer base.

F-22

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

12. Commitments and Contingencies:

Operating and Capital Leases

The Company has entered into non-cancelable operating lease agreements to lease facilities, certain equipment and sites for towers and antennas required for the operation of its wireless networks. Total rent expense for the years ended December 31, 2008, 2007 and 2006 was $199.1 million, $125.1 million and $85.5 million, respectively.

The Company entered into various non-cancelable DAS capital lease agreements, with varying expiration terms through 2024, covering dedicated optical fiber.

Future annual minimum rental payments required for all non-cancelable operating and capital leases at December 31, 2008 are as follows (in thousands):

	Operating Leases		Capital Leases
For the Year Ending December 31,
2009	$	204,296	$	10,213
2010		209,999		10,521
2011		209,157		10,836
2012		198,270		11,162
2013		199,961		11,496
Thereafter		731,327		132,271
Total minimum future lease payments	$	1,753,010		186,499
Amount representing interest				(95,156	)
Present value of minimum lease payments				91,343
Current portion				(1,009	)
Long-term capital lease obligations			$	90,334

The Company has an agreement with Alcatel Lucent, to provide it with PCS and AWS CDMA system products and services, including without limitation, wireless base stations, switches, power, cable and transmission equipment and services with an initial term through the earlier to occur of (1) December 31, 2011, or (2) the date on which the Company has purchased or licensed products, services and licensed materials under the agreement equal to a sum which it currently expects to spend for products, services, or licensed material from Alcatel Lucent from June 6, 2005 through December 31, 2011. The agreement provides for both exclusive and non-exclusive pricing for PCS and AWS CDMA products and the agreement may be renewed at the Company’s option on an annual basis for three additional years after its initial term expires. If the Company fails to continue purchasing its PCS and AWS CDMA products exclusively from Alcatel Lucent, it may have to pay certain liquidated damages based on the difference in prices between exclusive and non-exclusive prices, which would be material to the Company. As of December 31, 2008, the Company had issued purchase orders in the amount of approximately $21.6 million for products, materials and services that the Company expects to be delivered during the three months ended March 31, 2009.

AWS Licenses Acquired in Auction 66

Spectrum allocated for AWS currently is utilized by a variety of categories of commercial and governmental users. To foster the orderly clearing of the spectrum, the FCC adopted a transition and cost sharing plan pursuant to which incumbent non-governmental users could be reimbursed for relocating out of the band and the costs of relocation would be shared by AWS licensees benefiting from the relocation. The FCC has established a plan where the AWS licensee and the incumbent non-governmental user are to negotiate voluntarily for three years and then, if no agreement has been reached, the incumbent licensee is subject to mandatory relocation where the AWS licensee can force the incumbent non-governmental licensee to relocate at the AWS licensee’s expense. The spectrum allocated for AWS currently is utilized also by governmental users. The FCC rules provide that a portion of the money raised in Auction 66 will be used to reimburse the relocation costs of governmental users from the AWS band. However, not all governmental users are obligated to relocate and some such users may delay relocation for some time. For the years ended December 31, 2008 and 2007, the Company incurred approximately $6.4 million and $0.9 million in microwave relocation costs, respectively.

F-23

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

FCC Katrina Order

In October 2007, the FCC adopted rules which, if they had taken effect, would have required the Company to maintain emergency backup power for a minimum of twenty-four hours for certain of the Company’s equipment that is normally powered from local commercial power located inside mobile switching offices, and eight hours for certain of the Company’s equipment that is normally powered from local commercial power and at other locations, including cell sites and DAS nodes. Various aspects of the rules were challenged in court and before the Office of Management and Budget, or OMB. As a result, the rules have not taken effect and are not being enforced, and the FCC has indicated that it plans to seek comment on revised backup power rules applicable to wireless providers. The Company is unable to predict with any certainty the likely outcome of any proceeding regarding backup power rules. Any new rules may require the Company to purchase additional equipment, spend additional capital, seek and receive additional state and local permits, authorizations and approvals, and incur additional operating expenses to comply with the new rules and such costs could be material. In addition, if the Company is required to secure additional state or local permits or authorizations, it could delay the construction of any new cell sites or DAS systems and launch of services in new metropolitan areas.

Litigation

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

13. Series D Cumulative Convertible Redeemable Participating Preferred Stock:

In July 2000, MetroPCS, Inc. executed a Securities Purchase Agreement, which was subsequently amended (as amended, the “SPA”). Under the SPA, MetroPCS, Inc. issued shares of Series D Preferred Stock. In July 2004, each share of MetroPCS, Inc. Series D Preferred Stock was converted into a share of Series D Preferred Stock of MetroPCS. Dividends accrued at an annual rate of 6% of the liquidation value of $100 per share on the Series D Preferred Stock. Dividends of $6.5 million and $21.0 million were accrued for the years ended December 31, 2007, and 2006, respectively, and were included in the Series D Preferred Stock balance.

Each share of Series D Preferred Stock was to automatically convert into common stock upon (i) completion of a Qualified Public Offering (as defined in the SPA), (ii) MetroPCS’ common stock trading (or in the case of a merger or consolidation of MetroPCS with another company, other than a sale or change of control of MetroPCS, the shares received in such merger or consolidation having traded immediately prior to such merger and consolidation) on a national securities exchange for a period of 30 consecutive trading days above a price that implies a market valuation of the Series D Preferred Stock in excess of twice the initial purchase price of the Series D Preferred Stock, or (iii) the date specified by the holders of two-thirds of the outstanding Series D Preferred Stock. The Series D Preferred Stock and the accrued but unpaid dividends thereon were convertible into common stock at $3.13 per share of common stock, which per share amount is subject to adjustment in accordance with the terms of MetroPCS’ Second Amended and Restated Articles of Incorporation. On April 24, 2007, MetroPCS consummated the Offering and all outstanding shares of Series D Preferred Stock, including accrued but unpaid dividends, were converted into 144,857,320 shares of common stock.

14. Series E Cumulative Convertible Redeemable Participating Preferred Stock:

MetroPCS entered into a stock purchase agreement, dated as of August 30, 2005, under which MetroPCS issued 500,000 shares of Series E Preferred Stock for $50.0 million in cash. Total proceeds to MetroPCS were $46.7 million, net of transaction costs of approximately $3.3 million. The Series E Preferred Stock and the Series D Preferred Stock ranked equally with respect to dividends, conversion rights and liquidation preferences. Dividends on the Series E Preferred Stock accrued at an annual rate of 6% of the liquidation value of $100 per share. Dividends of $0.9 million and $3.0 million were accrued for the years ended December 31, 2007 and 2006, respectively, and were included in the Series E Preferred Stock balance.

F-24

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Each share of Series E Preferred Stock was to be converted into common stock of MetroPCS upon (i) the completion of a Qualifying Public Offering, (as defined in the Second Amended and Restated Stockholders Agreement), (ii) the common stock trading (or, in the case of a merger or consolidation of MetroPCS with another company, other than as a sale or change of control of MetroPCS, the shares received in such merger or consolidation having traded immediately prior to such merger or consolidation) on a national securities exchange for a period of 30 consecutive trading days above a price implying a market valuation of the Series D Preferred Stock over twice the Series D Preferred Stock initial purchase price, or (iii) the date specified by the holders of two-thirds of the Series E Preferred Stock. The Series E Preferred Stock was convertible into common stock at $9.00 per share, which per share amount was subject to adjustment in accordance with the terms of the Second Amended and Restated Articles of Incorporation of MetroPCS. On April 24, 2007, MetroPCS consummated the Offering and all outstanding shares of Series E Preferred Stock, including accrued but unpaid dividends, were converted into 6,105,324 shares of common stock.

15. Capitalization:

Common Stock Issued to Directors

Non-employee members of MetroPCS’ Board of Directors receive compensation for serving on the Board of Directors, as provided in MetroPCS’ Non-Employee Director Remuneration Plan (the “Remuneration Plan”). In 2008, the Compensation Committee of the Board of Directors amended and restated the Remuneration Plan (the “2008 Remuneration Plan”) to be more competitive with the market and to be more reflective of the Company’s status as a public company. The Remuneration Plan provided, among other things, that each non-employee director’s annual retainer and meeting fees be paid, at the election of each non-employee director, in cash, common stock, or a combination of cash and common stock. The 2008 Remuneration Plan provides that each non-employee director’s annual retainer and meeting fees will be paid in cash and each director will receive options to purchase common stock. In accordance with the 2008 Remuneration Plan, no shares of common stock were issued to non-employee members of the Board of Directors during the year ended December 31, 2008. During the years ended December 31, 2007 and 2006, non-employee members of the Board of Directors were issued 31,230 and 49,725 shares of common stock, respectively, as payment of their annual retainer.

Stockholder Rights Plan

On March 27, 2007, in connection with the Offering, the Company adopted a Stockholder Rights Plan. Under the Stockholder Rights Plan, each share of the Company’s common stock includes one right to purchase one one-thousandth of a share of series A junior participating preferred stock. The rights will separate from the common stock and become exercisable (1) ten calendar days after public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 15% of the Company’s outstanding common stock or (2) ten business days following the start of a tender offer or exchange offer that would result in a person’s acquiring beneficial ownership of 15% or more of the Company’s outstanding common stock. A beneficial owner holding 15% or more of MetroPCS’ common stock is referred to as an “acquiring person” under the Stockholder Rights Plan.

Initial Public Offering

On April 24, 2007, upon consummation of the Offering, the Company’s Third Amended and Restated Certificate of Incorporation (the “Restated Certificate”), as filed with the Delaware Secretary of State, became effective. The Restated Certificate provides for two classes of capital stock to be designated, respectively, Common Stock and Preferred Stock. The total number of shares which the Company is authorized to issue is 1,100,000,000 shares. 1,000,000,000 shares are Common Stock, par value $0.0001 per share, and 100,000,000 shares are Preferred Stock, par value $0.0001 per share. The Restated Certificate does not distinguish classes of common stock or preferred stock.

F-25

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

16. Share-Based Payments:

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R) using the modified prospective transition method. Under that transition method, compensation expense recognized beginning on that date includes: (a) compensation expense for all share-based payments granted prior to, but not yet vested as of, January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation expense for all share-based payments granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Although there was no material impact on the Company’s financial position, results of operations or cash flows from the adoption of SFAS No. 123(R), the Company reclassified all deferred equity compensation on the consolidated balance sheet to additional paid-in capital upon its adoption.

MetroPCS has two stock option plans (the “Option Plans”) under which it grants options to purchase common stock of MetroPCS: the Second Amended and Restated 1995 Stock Option Plan, as amended (“1995 Plan”), and the Amended and Restated 2004 Equity Incentive Compensation Plan (“2004 Plan”). The 1995 Plan was terminated in November 2005 and no further awards can be made under the 1995 Plan, but all options previously granted will remain valid in accordance with their original terms. In February 2007, the 2004 Plan was amended to increase the number of shares of common stock reserved for issuance under the plan from 18,600,000 to a total of 40,500,000 shares. As of December 31, 2008, the maximum number of shares reserved for the 2004 Plan was 40,500,000 shares. Vesting periods and terms for stock option grants are determined by the plan administrator, which is MetroPCS’ Board of Directors for the 1995 Plan and the Compensation Committee of the Board of Directors of MetroPCS for the 2004 Plan. No option granted under the 1995 Plan has a term in excess of fifteen years and no option granted under the 2004 Plan shall have a term in excess of ten years. Options granted during the years ended December 31, 2008, 2007 and 2006 have a vesting period of one to four years.

Options granted under the 1995 Plan are exercisable upon grant. Shares received upon exercising options prior to vesting are restricted from sale based on a vesting schedule. In the event an option holder’s service with the Company is terminated, MetroPCS may repurchase unvested shares issued under the 1995 Plan at the option exercise price. Options granted under the 2004 Plan are only exercisable upon vesting. Upon exercise of options under the Option Plans, new shares of common stock are issued to the option holder.

The value of the options is determined by using a Black-Scholes pricing model that includes the following variables: 1) exercise price of the instrument, 2) fair market value of the underlying stock on date of grant, 3) expected life, 4) estimated volatility and 5) the risk-free interest rate. The Company utilized the following weighted-average assumptions in estimating the fair value of the option grants in the years ended December 31, 2008, 2007 and 2006:

	2008			2007			2006
Expected dividends		0.00	%		0.00	%		0.00	%
Expected volatility		45.20	%		42.69	%		35.04	%
Risk-free interest rate		2.49	%		4.54	%		4.64	%
Expected lives in years		5.00			5.00			5.00
Weighted-average fair value of options:
Granted at below fair value	$	—		$	—		$	10.16
Granted at fair value	$	6.95		$	9.89		$	3.75
Weighted-average exercise price of options:
Granted at below fair value	$	—		$	—		$	1.49
Granted at fair value	$	16.36		$	22.41		$	9.95

The Black-Scholes model requires the use of subjective assumptions including expectations of future dividends and stock price volatility. Such assumptions are only used for making the required fair value estimate and should not be considered as indicators of future dividend policy or stock price appreciation. Because changes in the subjective assumptions can materially affect the fair value estimate, and because employee stock options have characteristics significantly different from those of traded options, the use of the Black-Scholes option pricing model may not provide a reliable estimate of the fair value of employee stock options.

F-26

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

A summary of the status of the Company’s Option Plans as of December 31, 2008, 2007 and 2006, and changes during the periods then ended, is presented in the table below:

	2008				2007				2006
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding, beginning of year	27,643,794		$	11.70	23,499,462		$	6.91	14,502,210		$	4.18
Granted	6,566,165		$	16.36	8,476,998		$	22.41	11,369,793		$	9.65
Exercised	(2,810,245	)	$	4.48	(2,562,056	)	$	3.79	(1,148,328	)	$	2.39
Forfeited	(722,126	)	$	18.09	(1,770,610	)	$	10.81	(1,224,213	)	$	4.22
Outstanding, end of year	30,677,588		$	13.21	27,643,794		$	11.70	23,499,462		$	6.91
Options vested or expected to vest at year-end	29,633,907		$	13.07	25,395,877		$	11.36	20,127,759		$	6.55
Options exercisable at year-end	15,920,318		$	10.04	12,524,250		$	5.86	10,750,692		$	3.78
Options vested at year-end	15,836,608		$	10.05	11,904,985		$	5.82	8,940,615		$	3.59

Options outstanding under the Option Plans as of December 31, 2008 have a total aggregate intrinsic value of approximately $122.6 million and a weighted average remaining contractual life of 7.54 years. Options outstanding under the Option Plans as of December 31, 2007 and 2006 have a weighted average remaining contractual life of 7.85 and 8.01 years, respectively. Options vested or expected to vest under the Option Plans as of December 31, 2008 have a total aggregate intrinsic value of approximately $121.6 million and a weighted average remaining contractual life of 7.50 years. Options exercisable under the Option Plans as of December 31, 2008 have a total aggregate intrinsic value of approximately $102.4 million and a weighted average remaining contractual life of 6.58 years.

The following table summarizes information about stock options outstanding at December 31, 2008:

	Options Outstanding				Options Vested
Exercise Price	Number of Shares	Weighted Average Contractual Life	Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price
$0.08 - $5.49	3,969,690	3.84	$	2.52	3,969,690	$	2.52
$6.31 - $7.15	5,792,376	6.77	$	7.14	4,799,713	$	7.14
$7.54 - $8.67	637,525	7.51	$	8.08	330,866	$	8.08
$11.33 - $11.33	6,909,625	7.97	$	11.33	3,858,177	$	11.33
$12.77 - $15.29	858,450	9.39	$	14.70	118,419	$	15.08
$16.20 - $16.20	5,254,185	9.18	$	16.20	42,575	$	16.20
$16.40 - $21.10	901,500	9.34	$	18.33	45,300	$	17.09
$23.00 - $36.58	6,354,237	8.24	$	24.60	2,671,868	$	24.43

In 2004, Congress passed the American Job Creation Act of 2004 which changed certain rules with respect to deferred compensation, including options to purchase MetroPCS’ common stock which were granted below the fair market value of the common stock as of the grant date. MetroPCS had previously granted certain options to purchase its common stock under the 1995 Plan at exercise prices which MetroPCS believes were below the fair market value of its common stock at the time of grant. In December 2005, MetroPCS offered to amend the stock option grants of all affected employees by increasing the exercise price of such affected stock option grants to the fair value of MetroPCS’ common stock as of the date of grant and granting additional stock options, which vested 50% on January 1, 2006 and 50% on January 1, 2007, at the fair market value of MetroPCS’ common stock as of the grant date provided that the employee remained employed by the Company on those dates. The total number of affected stock options was 2,617,140 and MetroPCS granted 407,274 additional stock options.

During the year ended December 31, 2008, 2,810,245 options granted under the Option Plans were exercised for 2,810,245 shares of common stock. The intrinsic value of these options was approximately $38.6 million and total proceeds were approximately $12.6 million for the year ended December 31, 2008. During the year ended December 31, 2007, 2,562,056 options granted under the Option Plans were exercised for 2,562,056 shares of

F-27

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

common stock. The intrinsic value of these options was approximately $47.7 million and total proceeds were approximately $9.7 million for the year ended December 31, 2007. During the year ended December 31, 2006, 1,148,328 options granted under the Option Plans were exercised for 1,148,328 shares of common stock. The intrinsic value of these options was approximately $9.0 million and total proceeds were approximately $2.7 million for the year ended December 31, 2006.

The following table summarizes information about unvested stock option grants:

Stock Option Grants	Shares		Weighted Average Grant-Date Fair Value
Unvested balance, January 1, 2008	15,738,809		$	6.99
Grants	6,566,165		$	6.95
Vested shares	(6,824,591	)	$	6.59
Forfeitures	(639,403	)	$	8.12
Unvested balance, December 31, 2008	14,840,980		$	7.11

The Company determines fair value of stock option grants as the closing share price of the Company’s common stock at grant-date. The weighted average grant-date fair value of the stock option grants for the year ended December 31, 2008, 2007 and 2006 is $6.95, $9.89 and $3.98, respectively. The total fair value of stock options that vested during the year ended December 31, 2008 was $45.0 million.

The Company has recognized $41.1 million, $28.0 million and $14.5 million of non-cash stock-based compensation expense in the years ended December 31, 2008, 2007 and 2006, respectively, and an income tax benefit of $17.2 million, $11.0 million and $5.8 million, respectively.

As of December 31, 2008, there was approximately $98.1 million of unrecognized stock-based compensation cost related to unvested share-based compensation arrangements, which is expected to be recognized over a weighted average period of approximately 2.49 years. Such costs are scheduled to be recognized as follows: $41.4 million in 2009, $34.8 million in 2010, $18.3 million in 2011 and $3.6 million in 2012.

Compensation expense is recognized over the requisite service period for the entire award, which is generally the maximum vesting period of the award. The fair value of the common stock was determined contemporaneously with the option grants.

In December 2006, the Company amended stock option agreements of a former member of MetroPCS’ Board of Directors to extend the contractual life of 405,054 vested options to purchase common stock until December 31, 2006. This amendment resulted in the recognition of additional non-cash stock-based compensation expense of approximately $4.1 million in the fourth quarter of 2006.

In December 2006, in recognition of efforts related to the Offering and to align executive ownership with the Company, the Company made a special stock option grant to its named executive officers and certain other eligible employees. The Company granted stock options to purchase an aggregate of 6,885,000 shares of the Company’s common stock to its named executive officers and certain other officers and employees. The purpose of the grant was also to provide retention of employees following the Company’s initial public offering as well as to motivate employees to return value to the Company’s shareholders through future appreciation of the Company’s common stock price. The exercise price for the option grants was $11.33, which was the fair market value of the Company’s common stock on the date of the grant as determined by the Company’s board of directors. In determining the fair market value of the common stock, consideration was given to the recommendations of the Company’s finance and planning committee and of management based on certain data, including discounted cash flow analysis, comparable company analysis, and comparable transaction analysis, as well as contemporaneous valuation. The stock options granted to the named executive officers other than the Company’s CEO and senior vice president and chief technology officer 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 basis thereafter. The stock options granted to the Company’s CEO vest on a three-year vesting schedule with one-third vesting on the first anniversary date of the award and the

F-28

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

remainder pro-rata on a monthly basis thereafter. The stock options granted to the Company’s senior vice president and chief technology officer vest over a two-year vesting schedule with one-half vesting on the first anniversary of the award and the remainder pro-rata on a monthly basis thereafter.

In November 2006, the Company made an election to account for its APIC pool utilizing the short cut method provided under FSP FAS No. 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payments.”

17. Employee Benefit Plan:

The Company sponsors a savings plan under Section 401(k) of the Internal Revenue Code for the majority of its employees. The plan allows employees to contribute a portion of their pretax income in accordance with specified guidelines. The Company did not match employee contributions as of December 31, 2008 but could make discretionary or profit-sharing contributions. The Company has made no contributions to the savings plan through December 31, 2008. On January 1, 2009, the Company adopted a limited matching contribution policy and will match certain employee contributions to the savings plan beginning in the first quarter of 2009.

18. Income Taxes:

The provision for taxes on income consisted of the following (in thousands):

	2008		2007		2006
Current:
Federal	$	156	$	257	$	674
State		5,483		4,317		3,702
		5,639		4,574		4,376
Deferred:
Federal		99,899		113,611		29,959
State		24,448		4,913		2,382
		124,347		118,524		32,341
Provision for income taxes	$	129,986	$	123,098	$	36,717

A reconciliation of income taxes computed at the United States federal statutory income tax rate (35%) to the provision for income taxes reflected in the consolidated statements of income and comprehensive income for the years ended December 31, 2008, 2007 and 2006 is as follows (in thousands):

	2008		2007		2006
U.S. federal income tax provision at statutory rate	$	97,798	$	78,225	$	31,683
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal income tax impact		18,458		6,423		2,386
Change in valuation allowance		11,940		35,717		(194	)
Provision for tax uncertainties		1,627		1,976		2,557
Permanent items		163		371		218
Other		—		386		67
Provision for income taxes	$	129,986	$	123,098	$	36,717

F-29

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Deferred taxes are provided for those items reported in different periods for income tax and financial reporting purposes. The Company’s net deferred tax liability consisted of the following deferred tax assets and liabilities (in thousands):

	2008			2007
Deferred tax assets:
Net operating loss carry forward	$	141,965		$	70,888
Deferred revenue		15,917			12,384
Allowance for uncollectible accounts		1,645			1,223
Deferred rent		19,342			13,808
Deferred compensation		28,609			14,841
Asset retirement obligation		2,161			1,003
Credit carry forwards		2,583			2,619
Other comprehensive loss		21,464			8,897
Transaction taxes		3,884			2,087
Unrealized loss on investments		47,657			35,717
Other		19,933			7,782
Gross deferred tax assets		305,160			171,249
Valuation allowance		(47,657	)		(35,717	)
Total deferred tax assets, net		257,503			135,532
Deferred tax liabilities:
Depreciation		(352,106	)		(240,564	)
Deferred cost of handset sales		(19,349	)		(13,226	)
FCC licenses		(199,422	)		(136,832	)
Partnership interest		(70,284	)		(22,658	)
Other		(4,019	)		(7,460	)
Deferred tax liabilities		(645,180	)		(420,740	)
Net deferred tax liability	$	(387,677	)	$	(285,208	)

Deferred tax assets and liabilities at December 31, 2008 and 2007 are as follows (in thousands):

	2008			2007
Current deferred tax asset	$	1,832		$	4,920
Non-current deferred tax liability		(389,509	)		(290,128	)
Net deferred tax liability	$	(387,677	)	$	(285,208	)

At December 31, 2008 the Company has approximately $382.8 million and $163.1 million of financial reporting net operating loss carry forwards for federal and state income tax purposes, respectively. The Company’s net operating loss carry forwards for federal and state tax purposes were approximately $82.3 million and $58.3 million, respectively, greater than its net operating loss carry forwards for financial reporting purposes due to the Company’s inability to realize excess tax benefits under SFAS 123(R) until such benefits reduce income taxes payable. The federal net operating loss will begin to expire in 2023. The state net operating losses will begin to expire in 2013. At December 31, 2008 the Company has approximately $1.2 million and $0.2 million of alternative minimum tax credit carry forwards for federal and state income tax purposes, respectively. These alternative minimum tax credits carry forward indefinitely.

Financial statement deferred tax assets must be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company believes that realization of the deferred tax assets is more likely than not based on the future reversal of existing temporary differences which give rise to the deferred tax liabilities, with the exception of the deferred tax asset related to the unrealized tax loss. During 2008 and 2007, an impairment of investments was recorded for financial statement purposes resulting in an unrealized loss. Recognition of this unrealized loss for tax purposes would result in a capital loss. The Company has not generated capital gains within the carry back period and does not anticipate generating sufficient capital gains within the carry forward period to realize this deferred tax asset. Therefore, the Company has recorded a valuation allowance of $47.7 million and $35.7 million as of December 31, 2008 and 2007, respectively.

F-30

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Audits and Uncertain Tax Benefits

The Company files income tax returns in the U.S. federal and certain state jurisdictions and is subject to examinations by the Internal Revenue Service (the “IRS”) and other taxing authorities. These audits can result in adjustments of taxes due or adjustments of the net operating losses which are available to offset future taxable income. The Company’s estimate of the potential outcome of any uncertain tax issue prior to audit is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. An unfavorable result under audit may reduce the amount of federal and state net operating losses the Company has available for carry forward to offset future taxable income, or may increase the amount of tax due for the period under audit, resulting in an increase to the effective rate in the year of resolution.

In 2008, MetroPCS concluded a state audit which did not result in a material impact to the financial statements.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits are as follows (in thousands):

Balance, January 1, 2008	$	19,328
Increases for tax provisions taken during a prior period		—
Increases for tax provisions taken during the current period		—
Decreases relating to settlements		—
Decreases resulting from the expiration of the statute of limitations		—
Balance, December 31, 2008	$	19,328

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $12.6 million and $12.6 million as of December 31, 2008 and 2007, respectively. Additionally, the total interest and penalties which would affect the effective tax rate is $13.6 million and $12.0 million as of December 31, 2008 and 2007, respectively. The Company continues to recognize both interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company recognized gross interest and penalties of $2.5 million during 2008, $2.8 million during 2007 and $3.4 million during 2006. Accrued gross interest and penalties were $18.3 million and $15.8 million as of December 31, 2008 and 2007, respectively. A state examination is currently ongoing and the Company believes it is reasonably possible that the amount of unrecognized tax benefits could significantly decrease within the next 12 month period. The Company does not anticipate that a proposed adjustment would result in a material change to the Company’s financial position. The gross unrecognized tax benefits could change due to settlement with this state in an amount up to $2.7 million. In another state jurisdiction, it is reasonably possible that the amount of unrecognized tax benefits could significantly decrease within the next 12 months due to the expiration of a statute. The gross unrecognized tax benefit for this tax position could decrease in an amount up to $13.2 million.

The IRS is currently examining the 2005 and 2006 tax years of Royal Street Communications. Management does not believe the examination will have a significant effect on the Company’s tax position.

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

F-31

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

19. 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):

	2008			2007			2006
Basic EPS — Two Class Method:
Net income	$	149,438		$	100,403		$	53,806
Accrued dividends and accretion:
Series D Preferred Stock		—			(6,647	)		(21,479	)
Series E Preferred Stock		—			(1,035	)		(3,339	)
Net income applicable to common stock	$	149,438		$	92,721		$	28,988
Amount allocable to common shareholders		100.0	%		88.8	%		57.1	%
Rights to undistributed earnings	$	149,438		$	82,330		$	16,539
Weighted average shares outstanding — basic		349,395,285			287,692,280			155,820,381
Net income per common share — basic	$	0.43		$	0.29		$	0.11
Diluted EPS:
Rights to undistributed earnings	$	149,438		$	82,330		$	16,539
Weighted average shares outstanding — basic		349,395,285			287,692,280			155,820,381
Effect of dilutive securities:
Warrants		—			—			147,257
Stock options		5,984,826			8,645,444			3,728,970
Weighted average shares outstanding — diluted		355,380,111			296,337,724			159,696,608
Net income per common share — diluted	$	0.42		$	0.28		$	0.10

Net income per common share for the years ended December 31, 2007 and 2006 is computed in accordance with EITF 03-6. Under EITF 03-6, the preferred stock is considered a “participating security” for purposes of computing earnings or loss per common share and, therefore, the preferred stock is included in the computation of basic and diluted net income per common share using the two-class method, except during periods of net losses. Preferred stock was included in the computation of income per common share through April 24, 2007, the date of conversion to common stock as a result of the Offering. When determining basic earnings per common share under EITF 03-6, undistributed earnings for a period are allocated to a participating security based on the contractual participation rights of the security to share in those earnings as if all of the earnings for the period had been distributed.

For the years ended December 31, 2008, 2007 and 2006, 11.9 million, 4.4 million and 7.4 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 years ended December 31, 2007 and 2006, 44.2 million and 136.1 million, respectively, of convertible shares of Series D Preferred Stock were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive.

For the years ended December 31, 2007 and 2006, 1.9 million and 5.7 million, respectively, of convertible shares of Series E Preferred Stock were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive.

20. Segment Information:

Operating segments are defined by SFAS No. 131 as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the President, Chief Executive Officer and Chairman of the Board.

F-32

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

As of December 31, 2008, the Company had thirteen operating segments based on geographic region within the United States: Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota. Each of these operating segments provides wireless voice and data services and products to customers in its service areas or is currently constructing a network in order to provide these services. These services include unlimited local and long distance calling, voicemail, caller ID, call waiting, enhanced directory assistance, text messaging, picture and multimedia messaging, domestic and international long distance, international text messaging, ringtones, games and content applications, unlimited directory assistance, ring back tones, nationwide roaming, mobile Internet browsing, mobile instant messaging, push e-mail, location based services, social networking services and other value-added services.

The Company aggregates its operating segments into two reportable segments: Core Markets and Northeast Markets. Effective January 1, 2009, the Company implemented a change to the composition of its reportable segments under SFAS No. 131. As a result of this change, the Company has retrospectively adjusted the segment information for the years ended December 31, 2008, 2007 and 2006 to reflect this change.

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

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

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

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

Year Ended December 31, 2008	Core Markets		Northeast Markets			Other			Total
Service revenues	$	2,424,859	$	12,391		$	—		$	2,437,250
Equipment revenues		310,452		3,814			—			314,266
Total revenues		2,735,311		16,205			—			2,751,516
Cost of service(1)		785,595		71,700			—			857,295
Cost of equipment		690,296		14,352			—			704,648
Selling, general and administrative expenses(2)		389,896		57,686			—			447,582
Adjusted EBITDA (deficit) (3)		901,751		(118,618	)		—
Depreciation and amortization		230,603		6,502			18,214			255,319
Loss on disposal of assets		18,897		4			4			18,905
Stock-based compensation expense		32,227		8,915			—			41,142
Income (loss) from operations		620,024		(134,039	)		(18,218	)		467,767
Interest expense		—		—			179,398			179,398
Accretion of put option in majority-owned subsidiary		—		—			1,258			1,258
Interest and other income		—		—			(23,170	)		(23,170	)
Impairment loss on investment securities		—		—			30,857			30,857
Income (loss) before provision for income taxes		620,024		(134,039	)		(206,561	)		279,424
Capital expenditures		402,724		491,518			60,370			954,612
Total assets		3,204,860		2,062,320			1,154,968			6,422,148

F-33

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Year Ended December 31, 2007	Core Markets			Northeast Markets			Other			Total
Service revenues	$	1,919,197		$	—		$	—		$	1,919,197
Equipment revenues		316,537			—			—			316,537
Total revenues		2,235,734			—			—			2,235,734
Cost of service(1)		642,206			5,304			—			647,510
Cost of equipment		597,233			—			—			597,233
Selling, general and administrative expenses(2)		323,572			28,448			—			352,020
Adjusted EBITDA (deficit) (3)		694,761			(27,766	)		—
Depreciation and amortization		170,876			319			7,007			178,202
(Gain) loss on disposal of assets		(2,621	)		21			3,255			655
Stock-based compensation expense		22,037			5,987			—			28,024
Income (loss) from operations		504,468			(34,092	)		(10,262	)		460,114
Interest expense		—			—			201,746			201,746
Accretion of put option in majority-owned subsidiary		—			—			1,003			1,003
Interest and other income		—			—			(63,936	)		(63,936	)
Impairment loss on investment securities		—			—			97,800			97,800
Income (loss) before provision for income taxes		504,468			(34,092	)		(246,875	)		223,501
Capital expenditures		579,131			77,926			110,652			767,709
Total assets		2,927,498			1,020,718			1,857,914			5,806,130

Year Ended December 31, 2006	Core Markets		Northeast Markets		Other			Total
Service revenues	$	1,290,947	$	—	$	—		$	1,290,947
Equipment revenues		255,916		—		—			255,916
Total revenues		1,546,863		—		—			1,546,863
Cost of service(1)		445,281		—		—			445,281
Cost of equipment		476,877		—		—			476,877
Selling, general and administrative expenses(2)		243,618		—		—			243,618
Adjusted EBITDA(3)		395,559		—		—
Depreciation and amortization		131,567		—		3,461			135,028
Loss on disposal of assets		8,798		—		8			8,806
Stock-based compensation expense		14,472		—		—			14,472
Income (loss) from operations		240,722		—		(3,469	)		237,253
Interest expense		—		—		115,985			115,985
Accretion of put option in majority-owned subsidiary		—		—		770			770
Interest and other income		—		—		(21,543	)		(21,543	)
Loss on extinguishment of debt		—		—		51,518			51,518
Income (loss) before provision for income taxes		240,722		—		(150,199	)		90,523
Capital expenditures		531,523		—		19,226			550,749
Total assets(4)		2,009,942		—		2,143,180			4,153,122

(1) Cost of service includes stock-based compensation expense disclosed separately. For the years ended December 31, 2008, 2007 and 2006, cost of service includes $2.9 million, $1.8 million and $1.3 million, respectively, of stock-based compensation expense. Additionally, cost of service in the Northeast Markets during the year ended December 31, 2007 represents operating costs incurred prior to the launch of service in those markets.

(2) Selling, general and administrative expenses include stock-based compensation expense disclosed separately. For the years ended December 31, 2008, 2007 and 2006, selling, general and administrative expenses include $38.2 million, $26.2 million and $13.2 million, respectively, of stock-based compensation expense.

(3) Adjusted EBITDA (deficit) is presented in accordance with SFAS No. 131 as it is the primary financial measure utilized by management to facilitate evaluation of each segments’ ability to meet future debt service, capital expenditures and working capital requirements and to fund future growth.

(4) Total assets as of December 31, 2006 include the Auction 66 AWS licenses that the Company was granted on November 29, 2006 for a total aggregate purchase price of approximately $1.4 billion. These AWS licenses are presented in the “Other” column as the Company had not allocated the Auction 66 licenses to its reportable segments as of December 31, 2006.

F-34

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

The following table reconciles segment Adjusted EBITDA (Deficit) for the years ended December 31, 2008, 2007 and 2006 to consolidated income before provision for income taxes:

	2008			2007			2006
Segment Adjusted EBITDA (Deficit):
Core Markets Adjusted EBITDA	$	901,751		$	694,761		$	395,559
Northeast Markets Adjusted EBITDA (Deficit)		(118,618	)		(27,766	)		—
Total		783,133			666,995			395,559
Depreciation and amortization		(255,319	)		(178,202	)		(135,028	)
Loss on disposal of assets		(18,905	)		(655	)		(8,806	)
Stock-based compensation expense		(41,142	)		(28,024	)		(14,472	)
Interest expense		(179,398	)		(201,746	)		(115,985	)
Accretion of put option in majority-owned subsidiary		(1,258	)		(1,003	)		(770	)
Interest and other income		23,170			63,936			21,543
Impairment loss on investment securities		(30,857	)		(97,800	)		—
Loss on extinguishment of debt		—			—			(51,518	)
Consolidated income before provision for income taxes	$	279,424		$	223,501		$	90,523

21. Guarantor Subsidiaries:

In connection with Wireless’ sale of the 9¹/4% Senior Notes and the entry into the Senior Secured Credit Facility, MetroPCS and all of MetroPCS’ subsidiaries, other than Wireless and Royal Street (the “guarantor subsidiaries”), provided guarantees on the 9¹/4% Senior Notes and Senior Secured Credit Facility. These guarantees are full and unconditional as well as joint and several. Certain provisions of the Senior Secured Credit Facility and the indenture relating to the 9 ¹/4% Senior Notes restrict the ability of Wireless to loan funds to MetroPCS. However, Wireless is allowed to make certain permitted payments to MetroPCS under the terms of the Senior Secured Credit Facility and the indenture relating to the 9 ¹/4% Senior Notes. Royal Street (the “non-guarantor subsidiaries”) is not a guarantor of the 9¹/4% Senior Notes or the Senior Secured Credit Facility.

The following information presents condensed consolidating balance sheets as of December 31, 2008 and 2007, condensed consolidating statements of income for the years ended December 31, 2008, 2007 and 2006, and condensed consolidating statements of cash flows for the years ended December 31, 2008, 2007 and 2006 of the parent company (MetroPCS), the issuer (Wireless), the guarantor subsidiaries and the non-guarantor subsidiaries (Royal Street). Investments in subsidiaries held by the parent company and the issuer have been presented using the equity method of accounting.

F-35

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Consolidated Balance Sheet

As of December 31, 2008

	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CURRENT ASSETS:
Cash and cash equivalents	$	598,823		$	78,121		$	624	$	20,380		$	—		$	697,948
Inventories, net		—			144,784			11,171		—			—			155,955
Accounts receivable, net		—			34,579			—		87			—			34,666
Prepaid charges		—			17,994			32,274		6,079			—			56,347
Deferred charges		—			49,716			—		—			—			49,716
Deferred tax asset		—			1,832			—		—			—			1,832
Current receivable from subsidiaries		—			244,212			—		10,467			(254,679	)		—
Other current assets		426			4,472			41,945		577			—			47,420
Total current assets		599,249			575,710			86,014		37,590			(254,679	)		1,043,884
Property and equipment, net		—			18,174			2,430,597		398,980			—			2,847,751
Restricted cash and investments		—			—			4,250		325			—			4,575
Long-term investments		5,986			—			—		—			—			5,986
Investment in subsidiaries		610,581			1,760,327			—		—			(2,370,908	)		—
FCC licenses		—			—			2,112,997		293,599			—			2,406,596
Microwave relocation costs		—			—			16,478		—			—			16,478
Long-term receivable from subsidiaries		250,000			796,462			—		—			(1,046,462	)		—
Other assets		—			37,391			34,544		24,943			—			96,878
Total assets	$	1,465,816		$	3,188,064		$	4,684,880	$	755,437		$	(3,672,049	)	$	6,422,148
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	—		$	195,619		$	344,325	$	28,488		$	—		$	568,432
Current maturities of long-term debt		—			16,000			990		19			—			17,009
Current payable to subsidiaries		—			—			10,467		244,212			(254,679	)		—
Deferred revenue		—			30,011			121,768		—			—			151,779
Advances to subsidiaries		(568,507	)		(1,365,057	)		1,933,564		—			—			—
Other current liabilities		—			30			5,106		—			—			5,136
Total current liabilities		(568,507	)		(1,123,397	)		2,416,220		272,719			(254,679	)		742,356
Long-term debt		—			2,967,649			88,906		1,428			—			3,057,983
Long-term payable to subsidiaries		—			250,000			—		796,462			(1,046,462	)		—
Deferred tax liabilities		—			389,509			—		—			—			389,509
Deferred rents		—			—			49,850		6,575			—			56,425
Redeemable minority interest		—			6,290			—		—			—			6,290
Other long-term liabilities		—			87,432			41,377		6,453			—			135,262
Total liabilities		(568,507	)		2,577,483			2,596,353		1,083,637			(1,301,141	)		4,387,825
COMMITMENTS AND CONTINGENCIES (See Note 12)
STOCKHOLDERS’ EQUITY:
Preferred stock		—			—			—		—			—			—
Common stock		35			—			—		—			—			35
Additional paid-in capital		1,578,972			—			—		20,000			(20,000	)		1,578,972
Retained earnings (deficit)		487,849			643,955			2,088,527		(348,200	)		(2,384,282	)		487,849
Accumulated other comprehensive (loss) income		(32,533	)		(33,374	)		—		—			33,374			(32,533	)
Total stockholders’ equity		2,034,323			610,581			2,088,527		(328,200	)		(2,370,908	)		2,034,323
Total liabilities and stockholders’ equity	$	1,465,816		$	3,188,064		$	4,684,880	$	755,437		$	(3,672,049	)	$	6,422,148

F-36

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Consolidated Balance Sheet

As of December 31, 2007

	Parent			Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
CURRENT ASSETS:
Cash and cash equivalents	$	801,472		$	633,277		$	444	$	35,015		$	—		$	1,470,208
Inventories, net		—			101,904			7,235		—			—			109,139
Accounts receivable, net		—			31,790			—		19			—			31,809
Prepaid charges		—			10,485			46,105		3,879			—			60,469
Deferred charges		—			34,635			—		—			—			34,635
Deferred tax asset		—			4,920			—		—			—			4,920
Current receivable from subsidiaries		—			154,758			—		—			(154,758	)		—
Other current assets		2,369			3,024			16,129		182			—			21,704
Total current assets		803,841			974,793			69,913		39,095			(154,758	)		1,732,884
Property and equipment, net		—			44,636			1,546,647		300,128			—			1,891,411
Long-term investments		36,050			—			—		—			—			36,050
Investment in subsidiaries		471,392			1,362,710			—		—			(1,834,102	)		—
FCC licenses		—			—			1,779,296		293,599			—			2,072,895
Microwave relocation costs		—			—			10,105		—			—			10,105
Long-term receivable from subsidiaries		—			618,191			—		—			(618,191	)		—
Other assets		—			42,524			6,442		13,819			—			62,785
Total assets	$	1,311,283		$	3,042,854		$	3,412,403	$	646,641		$	(2,607,051	)	$	5,806,130
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	77		$	154,205		$	244,913	$	40,254		$	—		$	439,449
Current maturities of long-term debt		—			16,000			—		154,758			(154,758	)		16,000
Deferred revenue		—			24,369			96,112		—			—			120,481
Advances to subsidiaries		(537,540	)		(949,296	)		1,486,836		—			—			—
Other current liabilities		—			124			4,211		225			—			4,560
Total current liabilities		(537,463	)		(754,598	)		1,832,072		195,237			(154,758	)		580,490
Long-term debt		—			2,986,177			—		—			—			2,986,177
Long-term note to parent		—			—			—		618,191			(618,191	)		—
Deferred tax liabilities		—			290,128			—		—			—			290,128
Deferred rents		—			—			32,939		2,840			—			35,779
Redeemable minority interest		—			5,032			—		—			—			5,032
Other long-term liabilities		—			44,723			11,637		3,418			—			59,778
Total liabilities		(537,463	)		2,571,462			1,876,648		819,686			(772,949	)		3,957,384
COMMITMENTS AND CONTINGENCIES (See Note 12)
SERIES D PREFERRED STOCK		—			—			—		—			—			—
SERIES E PREFERRED STOCK		—			—			—		—			—			—
STOCKHOLDERS’ EQUITY:
Preferred stock		—			—			—		—			—			—
Common stock		35			—			—		—			—			35
Additional paid-in capital		1,524,769			—			—		20,000			(20,000	)		1,524,769
Retained earnings (deficit)		338,411			485,871			1,535,755		(193,045	)		(1,828,581	)		338,411
Accumulated other comprehensive loss		(14,469	)		(14,479	)		—		—			14,479			(14,469	)
Total stockholders’ equity		1,848,746			471,392			1,535,755		(173,045	)		(1,834,102	)		1,848,746
Total liabilities and stockholders’ equity	$	1,311,283		$	3,042,854		$	3,412,403	$	646,641		$	(2,607,051	)	$	5,806,130

F-37

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Consolidated Statement of Income

Year Ended December 31, 2008

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
REVENUES:
Service revenues	$	—		$	—		$	2,441,374		$	98,179		$	(102,303	)	$	2,437,250
Equipment revenues		—			11,977			302,289			—			—			314,266
Total revenues		—			11,977			2,743,663			98,179			(102,303	)		2,751,516
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			869,063			90,535			(102,303	)		857,295
Cost of equipment		—			11,292			693,356			—			—			704,648
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			684			425,889			21,009			—			447,582
Depreciation and amortization		—			212			215,624			39,483			—			255,319
Loss on disposal of assets		—			—			18,889			16			—			18,905
Total operating expenses		—			12,188			2,222,821			151,043			(102,303	)		2,283,749
Income (loss) from operations		—			(211	)		520,842			(52,864	)		—			467,767
OTHER EXPENSE (INCOME):
Interest expense		—			219,530			(32,665	)		102,931			(110,398	)		179,398
Earnings from consolidated subsidiaries		(158,083	)		(397,617	)		—			—			555,700			—
Accretion of put option in majority-owned subsidiary		—			1,258			—			—			—			1,258
Interest and other income		(22,212	)		(110,796	)		80			(640	)		110,398			(23,170	)
Impairment loss on investment securities		30,857			—			—			—			—			30,857
Total other (income) expense		(149,438	)		(287,625	)		(32,585	)		102,291			555,700			188,343
Income (loss) before provision for income taxes		149,438			287,414			553,427			(155,155	)		(555,700	)		279,424
Provision for income taxes		—			(129,331	)		(655	)		—			—			(129,986	)
Net income (loss)	$	149,438		$	158,083		$	552,772		$	(155,155	)	$	(555,700	)	$	149,438

F-38

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Consolidated Statement of Income

Year Ended December 31, 2007

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
REVENUES:
Service revenues	$	—		$	3,219		$	1,919,067		$	24,508		$	(27,597	)	$	1,919,197
Equipment revenues		—			10,675			305,862			—			—			316,537
Total revenues		—			13,894			2,224,929			24,508			(27,597	)		2,235,734
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			620,032			55,075			(27,597	)		647,510
Cost of equipment		—			10,226			587,007			—			—			597,233
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			449			332,691			18,880			—			352,020
Depreciation and amortization		—			55			169,452			8,695			—			178,202
Loss on disposal of assets		—			—			655			—			—			655
Total operating expenses		—			10,730			1,709,837			82,650			(27,597	)		1,775,620
Income (loss) from operations		—			3,164			515,092			(58,142	)		—			460,114
OTHER EXPENSE (INCOME):
Interest expense		—			234,711			(16,639	)		52,506			(68,832	)		201,746
Earnings from consolidated subsidiaries		(166,009	)		(423,701	)		—			—			589,710			—
Accretion of put option in majority-owned subsidiary		—			1,003			—			—			—			1,003
Interest and other income		(32,194	)		(97,956	)		(28	)		(2,590	)		68,832			(63,936	)
Impairment loss on investment securities		97,800			—			—			—			—			97,800
Total other (income) expense		(100,403	)		(285,943	)		(16,667	)		49,916			589,710			236,613
Income (loss) before provision for income taxes		100,403			289,107			531,759			(108,058	)		(589,710	)		223,501
Provision for income taxes		—			(123,098	)		—			—			—			(123,098	)
Net income (loss)	$	100,403		$	166,009		$	531,759		$	(108,058	)	$	(589,710	)	$	100,403

F-39

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Consolidated Statement of Income

Year Ended December 31, 2006

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(In thousands)
REVENUES:
Service revenues	$	—		$	695		$	1,290,945		$	1,005		$	(1,698	)	$	1,290,947
Equipment revenues		—			11,900			244,016			—			—			255,916
Total revenues		—			12,595			1,534,961			1,005			(1,698	)		1,546,863
OPERATING EXPENSES:
Cost of service (excluding depreciation and amortization expense shown separately below)		—			—			434,987			11,992			(1,698	)		445,281
Cost of equipment		—			11,538			465,339			—			—			476,877
Selling, general and administrative expenses (excluding depreciation and amortization expense shown separately below)		—			362			227,723			15,533			—			243,618
Depreciation and amortization		—			—			134,708			320			—			135,028
Loss on disposal of assets		—			—			8,806			—			—			8,806
Total operating expenses		—			11,900			1,271,563			27,845			(1,698	)		1,309,610
Income (loss) from operations		—			695			263,398			(26,840	)		—			237,253
OTHER EXPENSE (INCOME):
Interest expense		17,161			115,575			(7,370	)		30,956			(40,337	)		115,985
Earnings from consolidated subsidiaries		(77,506	)		(214,795	)		—			—			292,301			—
Accretion of put option in majority-owned subsidiary		—			770			—			—			—			770
Interest and other income		(2,807	)		(57,493	)		(699	)		(882	)		40,338			(21,543	)
Loss (gain) on extinguishment of debt		9,345			42,415			(242	)		—			—			51,518
Total other (income) expense		(53,807	)		(113,528	)		(8,311	)		30,074			292,302			146,730
Income (loss) before provision for income taxes		53,807			114,223			271,709			(56,914	)		(292,302	)		90,523
Provision for income taxes		—			(36,717	)		—			—			—			(36,717	)
Net income (loss)	$	53,807		$	77,506		$	271,709		$	(56,914	)	$	(292,302	)	$	53,806

F-40

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Consolidated Statement of Cash Flows

Year Ended December 31, 2008

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	149,438		$	158,083		$	552,772		$	(155,155	)	$	(555,700	)	$	149,438
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		—			212			215,624			39,483			—			255,319
Provision for uncollectible accounts receivable		—			8			—			—			—			8
Deferred rent expense		—			—			16,910			3,736			—			20,646
Cost of abandoned cell sites		—			—			4,558			4,034			—			8,592
Stock-based compensation expense		—			—			41,142			—			—			41,142
Non-cash interest expense		—			2,605			(50	)		24,878			(24,883	)		2,550
Loss on disposal of assets		—			—			18,889			16			—			18,905
Accretion of asset retirement obligation		—			—			2,942			600			—			3,542
Accretion of put option in majority-owned subsidiary		—			1,258			—			—			—			1,258
Impairment loss in investment securities		30,857			—			—			—			—			30,857
Deferred income taxes		—			124,347			—			—			—			124,347
Changes in assets and liabilities		(395,563	)		(582,147	)		12,265			(4,317	)		760,648			(209,114	)
Net cash (used in) provided by operating activities		(215,268	)		(295,634	)		865,052			(86,725	)		180,065			447,490
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		—			15,269			(858,004	)		(109,196	)		(2,681	)		(954,612	)
Change in prepaid purchases of property and equipment		—			19,225			(3,580	)		—			—			15,645
Proceeds from sale of property and equipment		—			—			642			214			—			856
Proceeds from sale of investments		37			—			—			—			—			37
Cash used in business acquisitions		—			(25,162	)		—			—			—			(25,162	)
Purchases of and Deposits for FCC for licenses		—			(328,519	)		—			—			—			(328,519	)
Microwave relocation costs		—			—			(2,520	)		—			—			(2,520	)
Net cash provided by (used in) investing activities		37			(319,187	)		(863,462	)		(108,982	)		(2,681	)		(1,294,275	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		—			75,665			—			3,688			—			79,353
Proceeds from long-term note to parent		—			—			—			380,000			(380,000	)		—
Repayment of debt		—			(16,000	)		—			(190,930	)		190,930			(16,000	)
Payments on capital lease obligations		—			—			(1,410	)		(11,686	)		11,686			(1,410	)
Proceeds from exercise of stock options		12,582			—			—			—			—			12,582
Net cash provided by (used in) financing activities		12,582			59,665			(1,410	)		181,072			(177,384	)		74,525
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(202,649	)		(555,156	)		180			(14,635	)		—			(772,260	)
CASH AND CASH EQUIVALENTS, beginning of period		801,472			633,277			444			35,015			—			1,470,208
CASH AND CASH EQUIVALENTS, end of period	$	598,823		$	78,121		$	624		$	20,380		$	—		$	697,948

F-41

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Consolidated Statement of Cash Flows

Year Ended December 31, 2007

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	100,403		$	166,009		$	531,759		$	(108,058	)	$	(589,710	)	$	100,403
Adjustments to reconcile net income (loss) to net cash provided by (used in) activities:
Depreciation and amortization		—			55			169,452			8,695			—			178,202
Provision for uncollectible accounts receivable		—			129			—			—			—			129
Deferred rent expense		—			—			11,324			2,421			—			13,745
Cost of abandoned cell sites		—			—			1,920			4,784			—			6,704
Non-cash interest expense		—			3,266			—			47,915			(47,922	)		3,259
Loss on disposal of assets		—			—			655			—			—			655
Impairment loss on investment securities		97,800			—			—			—			—			97,800
Gain on sale of investments		(6,586	)		(3,920	)		—			—			—			(10,506	)
Accretion of asset retirement obligation		—			—			1,111			328			—			1,439
Accretion of put option in majority-owned subsidiary		—			1,003			—			—			—			1,003
Deferred income taxes		—			118,524			—			—			—			118,524
Stock-based compensation expense		—			—			28,024			—			—			28,024
Changes in assets and liabilities		(177,591	)		(402,354	)		(185,593	)		(1,040	)		816,503			49,925
Net cash provided by (used in) operating activities		14,026			(117,288	)		558,652			(44,955	)		178,871			589,306
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		—			(84,514	)		(543,962	)		(122,907	)		(16,326	)		(767,709	)
Change in prepaid purchases of property and equipment		—			(2,391	)		(17,601	)		—			—			(19,992	)
Proceeds from sale of property and equipment		—			—			3,759			—			—			3,759
Purchase of investments		(2,037,803	)		(1,320,624	)		—			—			—			(3,358,427	)
Proceeds from sale of investments		1,981,563			1,644,085			—			—			—			3,625,648
Change in restricted cash and investments		—			556			—			(262	)		—			294
Microwave relocation costs		—			—			(661	)		—			—			(661	)
Net cash (used in) provided by investing activities		(56,240	)		237,112			(558,465	)		(123,169	)		(16,326	)		(517,088	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		—			9,743			—			(5,632	)		—			4,111
Proceeds from 9 1/4% Senior Notes		—			423,500			—			—			—			423,500
Proceeds from initial public offering		862,500			—			—			—			—			862,500
Proceeds from long-term note to parent		—			—			—			196,000			(196,000	)		—
Cost of raising capital		(44,234	)		—			—			—			—			(44,234	)
Debt issuance costs		—			(3,091	)		—			—			—			(3,091	)
Payments on capital lease obligations		—			—			—			(931	)		931			—
Repayment of debt		—			(16,000	)		—			(32,524	)		32,524			(16,000	)
Proceeds from exercise of stock options		9,706			—			—			—			—			9,706
Net cash provided by financing activities		827,972			414,152			—			156,913			(162,545	)		1,236,492
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		785,758			533,976			187			(11,211	)		—			1,308,710
CASH AND CASH EQUIVALENTS, beginning of year		15,714			99,301			257			46,226			—			161,498
CASH AND CASH EQUIVALENTS, end of year	$	801,472		$	633,277		$	444		$	35,015		$	—		$	1,470,208

F-42

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Consolidated Statement of Cash Flows

Year Ended December 31, 2006

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated
	(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	53,807		$	77,504		$	271,709		$	(56,914	)	$	(292,300	)	$	53,806
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		—			—			134,708			320			—			135,028
Provision for uncollectible accounts receivable		—			31			—			—			—			31
Deferred rent expense		—			—			7,045			419			—			7,464
Cost of abandoned cell sites		—			—			1,421			2,362			—			3,783
Non-cash interest expense		4,810			1,681			473			40,129			(40,129	)		6,964
Loss on disposal of assets		—			—			8,806			—			—			8,806
Loss (gain) on extinguishment of debt		9,345			42,415			(242	)		—			—			51,518
Gain on sale of investments		(815	)		(1,570	)		—			—			—			(2,385	)
Accretion of asset retirement obligation		—			—			706			63			—			769
Accretion of put option in majority-owned subsidiary		—			770			—			—			—			770
Deferred income taxes		(613	)		32,954			—			—			—			32,341
Stock-based compensation expense		—			—			14,472			—			—			14,472
Changes in assets and liabilities		1,334,686			(1,758,916	)		29,988			13,162			432,474			51,394
Net cash provided by (used in) operating activities		1,401,220			(1,605,131	)		469,086			(459	)		100,045			364,761
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		—			(19,326	)		(472,020	)		(59,403	)		—			(550,749	)
Change in prepaid purchases of property and equipment		—			(7,826	)		2,564			—			—			(5,262	)
Proceeds from sale of property and equipment		—			—			3,021			—			—			3,021
Purchase of investments		(326,517	)		(943,402	)		—			—			—			(1,269,919	)
Proceeds from sale of investments		333,159			939,265			—			—			—			1,272,424
Change in restricted cash and investments		—			2,448			9			(51	)		—			2,406
Purchases of and deposits for FCC licenses		(1,391,410	)		—			(176	)		—			—			(1,391,586	)
Net cash used in investing activities		(1,384,768	)		(28,841	)		(466,602	)		(59,454	)		—			(1,939,665	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft		—			11,368			—			—			—			11,368
Proceeds from bridge credit agreements		1,500,000			—			—			—			—			1,500,000
Proceeds from Senior Secured Credit Facility		—			1,600,000			—			—			—			1,600,000
Proceeds from 9 1/4% Senior Notes		—			1,000,000			—			—			—			1,000,000
Proceeds from minority interest in subsidiary		—			2,000			—			—			—			2,000
Proceeds from long-term note to parent		—			—			—			100,045			(100,045	)		—
Debt issuance costs		(14,106	)		(44,683	)		—			—			—			(58,789	)
Repayment of debt		(1,500,000	)		(935,539	)		(2,446	)		—			—			(2,437,985	)
Proceeds from termination of cash flow hedging derivative		—			4,355			—			—			—			4,355
Proceeds from exercise of stock options and warrants		2,744			—			—			—			—			2,744
Net cash (used in) provided by financing activities		(11,362	)		1,637,501			(2,446	)		100,045			(100,045	)		1,623,693
INCREASE IN CASH AND CASH EQUIVALENTS		5,090			3,529			38			40,132			—			48,789
CASH AND CASH EQUIVALENTS, beginning of year		10,624			95,772			219			6,094			—			112,709
CASH AND CASH EQUIVALENTS, end of year	$	15,714		$	99,301		$	257		$	46,226		$	—		$	161,498

F-43

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

22. Related-Party Transactions:

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

	Year Ended December 31,
	2008		2007		2006
Fees received by the Company as compensation for providing billing and collection services.	$	7.1	$	5.7	$	2.7
Handsets sold to the related party		12.0		10.8		12.7

	2008		2007
Liability for fees collected from customers	$	3.7	$	3.3
Receivables from the related party which were included in:
Accounts receivable		0.8		0.7

The Company paid approximately $0.2 million, $0.1 million and $0.1 million for the years ended December 31, 2008, 2007 and 2006, respectively, to a law firm for professional services, a partner of which is related to a Company executive officer.

One of the Company’s current directors is the chairman of an equity firm that holds various investment funds affiliated with one of the Company’s greater than 5% stockholders. The equity firm is affiliated with a current director of a company that provides wireless caller id with name services to the Company. The Company paid approximately $0.1 million to the company for these services during the year ended December 31, 2008.

One of the Company’s current directors is a general partner of various investment funds affiliated with one of the Company’s greater than 5% stockholders. These funds own in the aggregate an approximate 15.6% interest in a company that provides advertising services to the Company. The Company paid approximately $4.4 million, $3.5 million and $1.3 million to the company for these services during the years ended December 31, 2008, 2007 and 2006, respectively.

23. Supplemental Cash Flow Information:

	Year Ended December 31,
	2008		2007		2006
	(In thousands)
Cash paid for interest	$	177,210	$	194,921	$	86,380
Cash paid for income taxes		2,617		423		3,375

Non-cash investing and financing activities:

The Company accrued dividends of $6.5 million and $21.0 million related to the Series D Preferred Stock for the years ended December 31, 2007 and 2006, respectively.

The Company accrued dividends of $0.9 million and $3.0 million related to the Series E Preferred Stock for the years ended December 31, 2007 and 2006, respectively.

Net changes in the Company’s accrued purchases of property, plant and equipment were $161.9 million, $42.5 million and $28.5 million for the years ended December 31, 2008, 2007 and 2006, respectively. Included within the Company’s accrued purchases are estimates by management for construction services received based on a percentage of completion.

F-44

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

Assets acquired under capital lease obligations were $92.9 million for the year-ended December 31, 2008.

On April 24, 2007, concurrent with the closing of the Offering, all outstanding shares of preferred stock, including accrued but unpaid dividends, were converted into 150,962,644 shares of common stock.

See Note 2 for the non-cash increase in the Company’s asset retirement obligations.

24. Quarterly Financial Data (Unaudited):

The following financial information reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s results of operations for the interim periods. Summarized data for each interim period for the years ended December 31, 2008 and 2007 is as follows (in thousands, except per share data):

	Three Months Ended
	March 31, 2008		June 30, 2008		September 30, 2008		December 31, 2008
Total revenues	$	662,354	$	678,807	$	686,721	$	723,634
Income from operations		112,028		135,644		120,653		99,442
Net income (1)		39,519		50,465		44,880		14,574
Net income per common share — basic	$	0.11	$	0.14	$	0.13	$	0.04
Net income per common share — diluted	$	0.11	$	0.14	$	0.13	$	0.04

	Three Months Ended
	March 31, 2007		June 30, 2007		September 30, 2007		December 31, 2007
Total revenues	$	536,686	$	551,176	$	556,738	$	591,134
Income from operations		102,676		132,062		133,138		92,238
Net income (loss)(2)		36,352		58,094		53,108		(47,150	)
Net income (loss) per common share — basic	$	0.11	$	0.17	$	0.15	$	(0.14	)
Net income (loss) per common share — diluted	$	0.11	$	0.17	$	0.15	$	(0.14	)
(1)    During the three months ended March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, the Company recognized an impairment loss on investment securities in the amount of approximately $8.0 million, $9.1 million, $3.0 million, and $10.8 million, respectively. (2)    During the three months ended September 30, 2007 and December 31, 2007, the Company recognized an impairment loss on investment securities in the amount of approximately $ 15.0 million and $82.8 million, respectively.

25. Subsequent Events:

On January 14, 2009, Wireless completed the sale of $550.0 million of 9 ¹/4% senior notes due 2014 (the “New 9 ¹/4% Senior Notes”) at a price equal to 89.50% of the principal amount of such New 9 ¹/4% Senior Notes. On January 20, 2009, Wireless consummated the sale of the New 9 ¹/4% Senior Notes resulting in net proceeds of approximately $480.5 million. The net proceeds from the sale of the New 9 ¹/4% Senior Notes will be used for general corporate purposes which could include working capital, capital expenditures, future liquidity needs, additional opportunistic spectrum acquisitions, corporate development opportunities and future technology initiatives. On January 20, 2009, Wireless entered into a registration rights agreement in connection with the consummation of the sale of the New 9 ¹/4% Senior Notes. Under the terms of the registration rights agreement, Wireless agrees to file a registration statement on or before the 270th day after the New 9 ¹/4% Senior Notes’ issue date covering the New 9 ¹/4% Senior Notes. Wireless also agreed to use commercially reasonable efforts to have such Registration Statement declared effective on or prior to the 300th day after the New 9 ¹/4% Senior Notes’ issue date. Alternatively, if Wireless is unable to consummate the Exchange Offer (as defined in the Registration Rights Agreement) or if holders of the New 9 ¹/4% Senior Notes cannot participate in the Exchange Offer for certain specified reasons, then Wireless and the Guarantors will use commercially reasonable efforts to file a shelf registration statement within the times specified in the Registration Rights Agreement to facilitate resale of the New 9 ¹/4% Senior Notes. All registration expenses will be paid by Wireless and the Guarantors. Should Wireless fail to

F-45

MetroPCS Communications, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

file the registration statement, have such registration statement declared effective, consummate the Exchange Offer or, in the alternative, have the shelf registration statement declared effective, Wireless will be required to pay certain liquidated damages as provided in the Registration Rights Agreement.

F-46