MetroPCS Communications (PCS)

Q2 2012 Earnings Call

July 26, 2012 9:00 am ET

Executives

Keith D. Terreri - Vice President of Finance and Treasurer

Roger D. Linquist - Founder, Chairman and Chief Executive Officer

Thomas C. Keys - President and Chief Operating Officer

J. Braxton Carter - Vice Chairman and Chief Financial Officer

Analysts

Brett Feldman - Deutsche Bank AG, Research Division

Richard H. Prentiss - Raymond James & Associates, Inc., Research Division

Jonathan Chaplin - Crédit Suisse AG, Research Division

Philip Cusick - JP Morgan Chase & Co, Research Division

Timothy K. Horan - Oppenheimer & Co. Inc., Research Division

Simon Flannery - Morgan Stanley, Research Division

Matthew Niknam - Goldman Sachs Group Inc., Research Division

Michael McCormack - Nomura Securities Co. Ltd., Research Division

James M. Ratcliffe - Barclays Capital, Research Division

Presentation

Operator

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Good morning, ladies and gentlemen and thank you for standing by. Welcome to the MetroPCS Communications Second Quarter 2012 Conference Call. [Operator Instructions] This conference call is being recorded today, July 26, 2012. I would now like to turn the conference over to Mr. Keith Terreri, Vice President and Treasurer for MetroPCS. Please go ahead, sir.

Keith D. Terreri

Thank you, Yvonne, and good morning, everyone. Welcome to our second quarter 2012 conference call. The speakers with me this morning are Roger Linquist, our Chairman and CEO; Tom Keys, our President and Chief Operating Officer; and Braxton Carter, our Vice Chairman and Chief Financial Officer.

During today's call, we will refer to certain non-GAAP financial measures. We have reconciled these historical non-GAAP measures the GAAP measures in our second quarter earnings release, which has been filed as an 8-K with the SEC and is also available within the Investor Relations section of our website.

Before I turn call over Roger, I want to remind you that information presented on this call may contain forward-looking statements about our plans, objectives, beliefs, opinions, expectations, strategies, goals, financial expectations, future capital expenditures, performance, financing needs, competition, planned future events and financial results or other statements which are not of historical facts. Words such as believes, anticipates, expects, intends, plans, should, could, would, view, estimates, projects, will and other similar expressions typically identify forward-looking statements. These statements are subject to risks, assumptions and uncertainties, many of which are beyond our control and that may not occur, or could cause actual results or the timing of events to materially differ from those made in the forward-looking statements. The risk factors that may affect the forward-looking statements in our future operational and financial results are set forth in the Safe Harbor statement available in the company slide's deck to this oral presentation and in the section entitled Risk Factors filed in our Annual Report on our Form 10-K; quarterly reports on Form 10-Q, including our 10-Q for the period ended June 30, 2012, which was filed earlier this morning; and our current reports on Form 8-K. Copies of any of these filings may be obtained free of charge from the SEC at www.sec.gov or from our website, or directly from contacting our Investor Relations department.

For anyone listening to a taped or webcast replay or doing a written transcript of today's call, please note that all information presented is current and should be considered valid only as of July 26, 2012, regardless of the date reviewed, read or replayed. And at this time, I'd like to turn the call over to our Chairman and Chief Executive Officer, Roger Linquist.

Roger D. Linquist

Thank you, Keith. The exciting transition towards 4G LTE is close at hand. As we stated on our first quarter call, during the second and third quarters, we would focus on operating margins and enhancing cash flows over subscriber growth. With this focus, I am pleased to report both the highest part of the adjusted EBITDA and EBITDA margins in company history. A revolution began at MetroPCS in 2010 with the proliferation of smartphones. Now only 2.5 years later, the revolution continues as 4G LTE is about to transform the wireless experience for the no-contract segment. At the end of the third quarter, affordable 4G LTE handsets will be available and we'll be very near completion of our 4G LTE network build-out with over 97% of all our POPs covered. With these 2 elements of our next generation business complete, we can rapidly accelerate our 4G LTE For All initiatives.

We have been the best deal in town in the voice-centric world, and we are aiming to the best deal in town in this evolving data-centric world, taxes the regulatory fees included, of course. With over leading position in 4G LTE, we have an advanced network, fully operational, that is more advanced than many others in the wireless industry. Worldwide production, driving the experience curve, is rapidly moving 4G LTE standardization in chipsets and handsets design that will lead to lower unit cost in the future. This should drive lower cost to reduce handsets subsidies and help manage CPGA costs in future years.

Furthermore, we are taking steps in the network to ensure that we can support our business growth with our current spectrum holdings. However, we continue to look at spectrum acquisition opportunities for the most cost-effective approach to meet our capacity requirements. By the end of the year, most of our markets will be 4G LTE ready with a 5x5 megahertz channel bandwidth. We are also an industry leader in deployment of VoLTE cable handsets, since VoLTE servers is foundational to reform CDMA spectrum for LTE service. During the third quarter, we plan on introducing the first VoLTE-enabled handset. We decided to introduce VoLTE additional handsets this year to further capitalize on the benefits of this technology and prepare for reforming spectrum.

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