T-Mobile US Inc (TMUS) 2009 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by.

Welcome to the MetroPCS Communications fourth-quarter and year-end 2009 conference call.

During today's presentation all participants will be in a listen-only mode.

Following the presentation the conference will be open for questions, (Operator Instructions).

This conference call is being recorded today, February 25, 2010.

I would like to turn the conference over to Mr.

Keith Terreri, Vice President and treasurer for PCS.

Please go ahead, sir.

Thank you, Kerry, and good morning, everyone.

Welcome to our fourth-quarter and year-end 2009 conference call.

The speakers with me are Roger Linquist, our Chairman, President and Chief Executive Officer; Tom Keys, our Chief Operating Officer; and Braxton Carter, our Executive Vice President and Chief Financial Officer.

The format for today's call is as follows.

First, Roger will provide an overview of our business, then Tom will provide an update on a number of operational results and initiatives, and finally Braxton will review the financial highlights of the fourth-quarter and year-end 2009 followed by a question-and-answer session.

During today's call we will refer to certain non-GAAP financial measures.

We have reconciled these historical non-GAAP measures to GAAP in our earnings release, which is available in the investor relations section of our website at www.metropcs.com under the investor relations tab.

Before I turn the call over to Roger, I want to remind you that certain information that we will discuss in this conference call may constitute forward-looking statements within the meaning of the federal security laws.

Words such as believes, anticipates, expects, intends, plans, should, could, would, view, estimates, projects and other similar expressions typically identify forward-looking statements.

Forward-looking statements include, but are not limited to statements that we make regarding our future plans; our prospects for success in the highly-competitive wireless environment; the dynamics of the wireless marketplace; the value customers ascribe to our service; the rollout and launch of our 4G network and services; the impact of "Wireless for All" and its acceptance by consumers; our objectives, strategies, goals future events, revenues or performance; and other information that is not historical.

Forward-looking statements involve risks and uncertainties that could cause actual results or the timing of events to differ materially from those made in the forward-looking statements.

We cannot assure you that the forward-looking statements discussed on this conference call will be attained.

Our forward-looking statements are also subject to general economic conditions, financial, competitive, business, political, regulatory and other factors that are beyond our control including, but not limited to the risk factors described in our earnings release, which is available in the investor relations section of our website at www.metropcs.com under the investor relations tab, and also our annual report on Form 10-K, quarterly reports on Form 10-Q and periodic reports on Form 8-K, including our annual report on Form 10-K filed for the year December -- year ended December 31, 2009 to be filed on March 1st with the SEC, and other filings with the SEC, all of which can be obtained free of charge from the SEC at www.SEC.gov, or from the Company's website at metropcs.com under the investor relations tab, or directly from the Company by contacting the investor relations department and we encourage you to review them.

We would also like to remind you that the results for the fourth quarter may not be reflective of results of any subsequent period.

I would also like to remind everyone of our segment reporting format.

What our fourth-quarter and year-end results reflect core markets, which are comprised of all of our operating markets with the exception of Northeast markets, which include Philadelphia, New York City and Boston metropolitan areas.

The change in the composition of our segments became effective on January 1, 2009.

we filed a current report on Form 8-K on June 9, 2009, which retrospectively adjusted our 2008 financial and operational results to reflect this change.

We encourage you to review the 8-K.

For anyone listening to a taped or webcast replay, or reviewing a written transcript of today's call, please note that all information presented is current at only as of February 25, 2010 and should be considered valid only as of February 25, 2010, regardless of the date reviewed, read or replayed.

MetroPCS disclaims any intention or obligation to revise any forward-looking statements, whether as a result of new information, future events or developments or otherwise except as required by law.

The Company does not plan to update or reaffirm guidance except through formal public disclosure pursuant to Regulation FD.

Certain terms used in today's call are registered trademarks of MetroPCS.

I hope by now you've had a chance to review our earnings release issued this morning with the financial and operational results for the fourth-quarter and year-end 2009.

I would encourage everyone to read our earnings release in conjunction with the information discussed in the call, along with our previous SEC filings.

We intend to file our annual report on Form 10-K for the period ended December 31, 2009 by Monday March 1st

At this time I'd like to turn the call over to our Chairman, President and CEO, Roger Linquist.

Good morning, everyone, and thank you for joining us today on our fourth-quarter and year-and 2009 earnings call.

We are pleased to report full-year operating and financial results in what has been and continues to be a challenging environment.

In a year of significant industry change we are pleased to have approximately 1.3 million net subscriber additions in the year, a 24% growth in our subscriber base from 2008 and which represents the fourth year in a row in which we have reported over one million net additions.

We grew our total revenue and adjusted EBITDA by 27% and 22% respectably year over year.

Our core markets adjusted EBITDA, as well, as over $1 billion for the first time ever.

With our concurrent launches of the New York and Boston metropolitan areas in early 2009 and accompanied launch at year expenses, our year-end consolidated adjusted EBITDA was $956 million, another record for the Company.

Earlier in 2009 we made our already strong balance sheet stronger by issuing additional senior notes.

As a result of our year-end balance sheet, and cash position is very strong.

During the year we also have increased our coverage in existing metropolitan areas, including significant expansions in Dallas, Detroit and northern Florida, among others.

Importantly, we have also expanded our strategic agreements with other wireless providers last year, enabling our subscribers to roam on their networks, covering a population of over 210 million, providing nationwide coverage for our subscribers.

Looking briefly at our market segments, our core markets continued to grow for the full-year 2009.

Our recently-launched Northeast market performed well and we are pleased with the network quality and the performance of our extensive DAS networks throughout these metropolitan areas.

Importantly, we have done all this while continuing to manage one of the lowest cost networks of any US carrier.

Our industry-low CPU and CPGA are cornerstones of our business and we're proud of the ability to manage these metrics effectively.

It is because of this low-cost network that we believe we are well positioned as a wireless service provider to address the competitive challenges from wireless resellers, or both on offerings from national wireless carriers in the marketplace today.

According to a third-party study done in 2009, MetroPCS had more gross additions than any other service provider in the 17 metro PCS markets surveyed.

This was achieved while still maintaining one of the strongest adjusted EBITDA margins in the industry.

During the year we responded to an environment that continues to experience ongoing US macroeconomic weakness, particularly within some of the metropolitan areas has become increasingly competitive.

We introduced a number of initiatives and made strategic and operational decisions, which I will discuss further in a moment.

In addition to increased coverage area we introduce a consumer-friendly, affordable, unlimited international calling product, which has been well received.

Furthermore, recognizing the growing demand for feature-rich phones, we introduced introduced new and compelling smartphones with touch screens and QWERTY keyboards.

Providing a broad line of handsets, together with our superior cost structure, enables us, we believe, to compete effectively and price our service plans at a point that drives door swings and also delivers an attractive adjusted EBITDA margin.

With our successes in 2009 we have also encountered challenges.

Last year many of our operational and strategic accomplishments were overshadowed by increased competition in our market segment.

We believe these offerings have done two things; they have expanded the market segment and graded a greater awareness for our served markets and they have also fundamentally changed the service payment paradigm from a before tax and regulatory fee model to a tax and regulatory fee inclusive models.

As pioneers in offering no contract, unlimited flexible wireless service we helped to redefine the wireless experienced for the consumer and helped to usher in significant changes within the wireless industry.

In early January of 2010 we substantially changed our go-to-market strategy and began offering "Wireless for All" plans that include applicable tax and regulatory fees.

With these simplified offerings consumers have increased ease when comparing plans and pricing.

We intent to focus on retaining our market and category leadership, leveraging our best-of-class cost structure, winning mind share with the simplicity of the offerings and providing a superior value per dollar to our customers.

We have redefined predictability with all-in pricing and we have positioned the Company to capitalize on this dominant emerging paradigm of tax-inclusive pricing.

Although it's still early we believe our new tax-inclusive rate plans offer tremendous value in our segment.

While competitors have introduced unlimited plans at various price points we believe we offer the most value for talk, text and web service at the lowest price.

It is because we concentrate on managing a very cost-effective network that we're able to offer a superior value at the lowest prices to our subscribers on a profitable basis.

With over 6.6 million subscribers and nationwide coverage, we have grown tremendously in the past few years.

While this growth has been outstanding we have also continued to innovate and enhance our service plans, pricing, handsets and introduced new A la carte features intended to offer a post-pay experience on a no contact pay-in-advance basis.

Looking towards the future we are currently in preparation for our anticipated initial launch of our 4G network during the second half of 2010 in certain metropolitan areas.

The moral is moving toward the broadband services and we believe there could be a renaissance in the no contract wireless service segment as 4G becomes readily available.

In September of 2009 we announced that Ericsson is our infrastructure provider for the initial launch of 4G LTE.

We also announced Samsung will provide a dual-mode LTE CDMA smartphone offering to launch our service.

For the first time subscribers will have an ability to fully utilize smartphones and other wireless-enabled devices on a next-generation broadband network.

As the web continues to evolve and is increasingly going mobile we see an opportunity for subscribers to have multiple wireless devices.

MetroPCS in a 4G environment can leverage the power of our network and manage multiple devices for the subscriber, including smartphones, M2M devices and being able to evolve the smart form into a wireless communicator.

That application alone has endless possibilities for capture, storage and playback to interface with other devices, such as TVs and PCs.

The growth in our subscriber base has enabled us to help shape the future growth and direction of the wireless industry.

We continue to believe that the opportunity within the no contract service segment will drive much of the growth in the wireless service industry going toward.

Industry analysis continues to project the growth opportunity within the wireless space is primarily within the limited segment, growing at 24% CAGR 2009 to 2013.

In fact, by 2013 the unlimited segment is forecasted to grow to $15 billion.

As wireless subscriber continue to be attracted to the unlimited value proposition our new rate plans make available wireless for all.

We are committed to executing our strategic, operational and financial plans.

Our focus on managing our low-cost network enabled us to meet challenges in 2009, both the economic and competitive, and our new tax-inclusive rate plans provide subscribers with what we believe to be the greatest value in the unlimited no contract segment.

Looking forward we'll continue to innovate and manage the business for long-term profitable growth.

As we approach our initial 4G LTE launch later this year we believe 4G could provide an opportunity to accelerate value creation for our shareholders.

Now I'd like to hand it over to Tom.

Thanks, Roger, and good morning, everyone.

Today I'd like to address three issues; recent operational results, challenges that impact our operations in 2010, and lastly, opportunities for brand improvement in 2010.

As we look at 2009, and specifically the fourth quarter, we delivered solid financial results while we make progress operationally in a challenging environment.

Our fourth-quarter focus was directed at maintaining our share of decision while we retooled and planned for the rollout of our 2010 initiatives that I'll speak to later.

In Q4 2009 we generated over 317,000 net subscriber additions.

Our promotional family plans, $30 service plans, and targeted handset mail-in rebates helped fuel our growth throughout the quarter and provided needed momentum heading into 2010.

For the year 2009 we generated net subscriber additions of nearly 1.3 million units, resulting in over a 6.6 million total subscribers at year end.

Churn in the fourth quarter was 5.3% and is a focus for the Company.

As mentioned on previous calls, we believe increasing customer satisfaction, creating programs that promote positive distribution and customer behaviors are critical to our continued improvement efforts.

In closing out the 2009 operational highlights I'm excited to mention that for the full-year 2009 MetroPCS was ranked number one in overall share of decision when compared to all of our competitors in the same markets by a highly-respected, independent, national mobile performance measurement organization.

In 2009 our distribution channels continued to execute and remained a valuable part of our overall strategy.

As we enter 2010 we are mindful of the challenges ahead and the work that goes into meeting these challenges and turning them into opportunities.

We believe the most prominent challenges to our operations this year will come from the economy, our ability to the decrease churn and meet competitive threats.

We believe consumer spending will be tighter, that households will continue to budget and consumers will seek out value while demanding quality.

We have taken steps to reach out to our consumers and survey them regarding their future purchasing decision criteria.

What we have seen is that consumers want choices, specifically handset choices; new cool form factors with price points and rate plans that are affordable and feature rich.

We continue to recognize the need to serve our customers better at every touch point in an effort to reduce churn and improve our already strong net promoter scores among our embedded base.

Our foundational belief is that we must be seen as the best deal in town.

As other competitors offers come to market and distribution channels become cluttered with new MVNO entrants, as well as new offers from incumbent carriers, we plan to showcase our brand, swing doors and maintain our high per market share of decision numbers while changing behavior that increases customer value with predictability and choice.

Lastly, as it relates to our immediate challenges, we intend to be ready to react swiftly and decisively when faced with issues that impact a particular market or region that we serve.

Whether it's a local competitive threat or economic situation than impacted a particular region, having the flexibility to react quickly as we leverage our local market distribution model will benefit us going forward.

Understanding our challenges for 2010 and developing strategies and tactics that address these needs are essential for our Company.

Continuing to increase market share in a very competitive and uncertain economic climate is our goal.

In early 2010 we introduced our "Wireless for All" tax-inclusive service plan structure.

These new rate plans fundamentally changed the way we conduct business and have been received with open arms and renewed enthusiasm by our customers and distribution partners.

Consumers now have redefined predictability for their monthly service bill.

What you see is what you pay and a Applicable taxes and regulatory fees are included in your monthly service fee.

Additionally, we eliminated our long-standing policy of providing a free first month of service, while reducing the retail handset price correspondingly for the consumer.

Customers have greater choices for affordable handsets while fully appreciating the value of their service plan.

I'd like to remind everyone that these changes were the result of consumer surveys that overwhelmingly support our decision to make this important structural changes.

We believe that the new sales process involved in our new tax-inclusive offering will lead to greater customer satisfaction and help us in our efforts to reduce churn.

In conjunction with our decision to allow customers to vote with their wallet, we introduced a new our advertising campaign that surrounds our "Wireless for All" offer with the educational message that you can purchase an unlimited talk, text and web service plan for $40 period .

This campaign includes a heavy-up component that will accentuate our messaging in Q1 2010, as well as develop the story lines that surround our new tech and talk campaign.

Continuing to develop our value and quality behind our brand is essential for us in 2010.

Providing consumers with more choice, larger coverage footprints, trained sales and service professionals that communicate our value proposition to our customers is our priority.

We will be mindful of how the first quarter develops for us.

We plan to increase product and service offerings as the year continues.

Our team is highly focused and engaged at all levels.

I have personally been involved in multiple distribution meetings across the country with dealer partners and local leadership who have overwhelmingly embraced our change and responded with great focus and attention to detail.

Our no contract, pay-in-advance offerings now provide consumers with a set of experiences they would normally expect from traditional contacted post-pay plants.

MetroPCS continues to make it easy for contacted wireless consumers to step into a new way of managing their wireless needs; more choices, greater predictability, and a simpler way to attain wireless for all.

With that I'll turn the call over to

Thank you, Tom.

Good morning.

We reported solid fourth-quarter and full-year 2009 financial results, in large part due to our focus on profitable growth enabled by our superior cost structure.

As you can see from our results, our Company's ability to continually generate positive cash is a significant differentiator.

Generating increasing amounts of adjusted EBITDA and cash flow are queues to building long-term shareholder value.

We have a very strong balance sheet and substantial liquidity, with approximately $1.2 billion in cash and short-term investments.

We believe our strong financial position and liquidity is also a significant differentiator in today's environment.

Our total leverage was under four times computed in accordance with the indentures governing our 9.25% senior notes at the end of December and our net leverage was 2.64 times.

With debt maturities in late 2013 and 2014, a weighted average cost of debt for the quarter of below 8.25%, substantially all of our debt fixed by its nature or through interest rates swaps and with approximately $1.2 billion in cash and short-term investments, we believe we are very well positioned from a balance sheet perspective.

I would now like to touch on a few subscriber metrics.

Churn was down 50-basis points on a sequential quarterly basis; however, it was appear year over year by 20-basis points.

The increase in churn on a year-over-year basis related to incremental growth additions of the approximately 1.3 million customers during the nine months ended September 30, 2009 as compared to the same period in 2008.

Our fourth-quarter 2009 EBITDA -- ARPU was $40.70, down $0.38 from compared with $41.08 in the third quarter of 2009 and up $0.18 when compared to the same quarter a year ago.

The decrease in ARPU from the third-quarter 2009 was primarily due to our promotional service plans and family plans sold during the fourth quarter.

Our CPGA continues to be the lowest of any facilities-based wireless carrier in the United States.

For the fourth quarter our CPGA was $138, up from approximately $120 in the prior-year's fourth quarter and down sequentially from approximately $154.

The year-over-year increase in CPGA is due primarily to the continued ramp of our Northeast markets, as well as the effects of increased spending on our promotional activities in all of our markets.

Our business continues to scale and our CPU continues to be among the lowest in the wireless industry.

Our CPU for the quarter was $18.06 as compared to $17.55 in the prior-year's fourth quarter.

This increase will the primarily to the costs associated with our international long-distance program, as well as expenses related to the continued ramp-up of operations in the Northeast markets, and was partially offset by continued cost reduction efforts and increasing scale of our business.

The Northeast markets impacted consolidated of CPU by $2.09, making our core market CPU $15.97 for the fourth quarter of 2009.

Consolidated adjusted EBITDA for the fourth quarter was $251 million.

Our consolidated adjusted EBITDA margins for the quarter was 30.5% compared to 29.2% in the fourth quarter of 2008.

These results were after an adjusted EBITDA burn of $32 million for the fourth quarter in our Northeast markets.

Year to date, our Northeast markets have burned $205 million adjusted EBITDA.

our core markets adjusted EBITDA margin was 38.6% compared to 30.7% in the fourth quarter of 2008.

I would like to point out that within our core markets, for the full-year 2009 we have reported adjusted EBITDA of approximately $1.2 billion, representing adjusted EBITDA growth up for approximately 29% when compared to the same period of 2008.

I'd like to highlight a few items from the income statement and cash flow statement.

In the quarter on a consolidated basis, our service revenue and cost of service grew approximately 24% and 26% respectively, to approximately $825 million and $307 million respectively.

The increases are primarily due to growth of our subscriber base.

Our consolidated selling, general and administrative expenses were $150 million for the fourth quarter of 2009, representing an increase of $37 million when compared to the year-ago quarter.

This increase is primarily related to increased promotional activities in all of our markets and the ramp-up of operations in the Northeast markets.

We generated approximately $120 million in cash from operating activities in the quarter, whereas we used $80 million in cash from operating activities in the prior-year's fourth quarter.

Offsetting this operating cash flow we incurred capital expenditures of $195 million during the quarter.

We also generated $33 million in consolidated net income during the fourth quarter, or $0.09 per share, compared to $15 million, and $0.04 per share in the prior-year quarter.

For the full-year 2009 we generated approximately $899 million in cash from operating activities and incurred $832 million in capital expenditures, resulting in positive, unlevered free cash flow of approximately $125 million.

For the full-year 2009 we recorded an 18% increase in net income to $177 million, or $0.49 per share.

I would now like to take a moment and discuss reporting changes we will make beginning with the first quarter of 2010 with regards to our segment reporting.

Starting in the first quarter of 2010 we will consolidate all of our operating markets into one segment and will no longer break out core and Northeast market results.

We are past the launch point and initial ramp-up of our Northeast markets and therefore we believe conforming to wireless industry practice of consolidated results is appropriate moving forward.

As we previously mentioned on our third-quarter 2009 earnings call, for the year-ending December 31, 2010, MetroPCS does not intend to provide guidance given the uncertainty in the economic and competitive environment and pending the development of MetroPCS's current and planned marketing and sales initiatives.

Thank you.

We'll now move to Q&A.

Operator?

(Operator Instructions).

And your first question comes from Craig Moffett with Sanford Bernstein.

Hi, good morning, guys.

I'll see if I can slip in two questions, if I could.

First, yesterday we saw the announcement from the Leap about the JV with Pocket.

I wonder if you could comment on whether you see opportunities to consolidate either individual markets further or more broadly, and how you think about Metro's participation in that?

And then second, just more specifically with your new pricing plan, have you seen many of the prior $40 non tax-inclusive customer that were automatically transitioned into the $45 plan trade down, or is the automatic trade up sticking pretty well?

Let me deal,if I can, Craig, with the first question.

We really don't have any comments on the consolidation question.

We did see the Leap transaction with Pocket, but this point we don't have any comments on any further thoughts that we might have.

Can you confirm or deny the press reports that you have engaged bankers to at least explore options?

I guess at this time, again, we don't intend to comment on any specific transactions so that's the best I can do with that.

The other point is that our migration, I think, is positive.

We are not going to give out numbers of groups that have made transition.

As you know we've had some, which we've gone out and reached out to and made those conversions where it was clear and simple.

Unfortunately, many of our customers have advantaged themselves of the A la carte features and so those need to be done by the customer because we don't have a clear transition for them.

Tom, do you have anything else?

No.

I think our migrations have gone as planned, there's been no significant deviation once we've done the migrations.

Okay, thank you, guys.

Thank you.

Your next question comes from David Barden with Banc of America-Merrill Lynch.

Hey, guys, good morning, thanks for taking the questions.

Two if I could.

First, just from a higher-level industry standpoint, maybe Braxton or Tom, on the seasonality that we typically see on the first quarter, it's typically the stronger positive seasonality of the year because of the tax refund checks coming out, but obviously you guys have flagged the employment situation and such being relevant here.

If you could talk to whether you would expect -- one should expect to see the typical first-quarter seasonalities leading to typically stronger first quarter-results for the industry still holding, that'll be wonderful?

And then the second question, if I could, in October 2008 Sprint give the world a heads up that's plan was to launch an unlimited Boost plan in early 2009, which it did, and it ended up having -- forcing a lot of changes that I think a lot of people today maybe wish they'd done quicker.

At their most-recent results put Sprint announced that they plan to introduce new segmented prepay plans some time in the second quarter and I'd like to know how with your lessons learned you are teeing up your business to prepare for that incremental unit of potential competition, what you expect and what's going to be different this time than last time?

Thanks.

David, hi, this is Tom.

I'll jump on the first question regarding your seasonality question.

I think there's always tax season, as you're seen in the business over time, and it's always times when there are contracts that expire from post-paid customers, so some of that impact is probably dependent upon the decree to which customers are dissatisfied with wanting to stay with a contracted relationship.

But I don't there's any major difference in 2010 versus any other season that we would see, there's nothing that indicates any real difference.

The other thing I could address and maybe Braxton will take a second part of this, as well, but with regard to the introduction of any other competitive plan, as Roger mentioned and I think I highlighted, we have a fairly significant result of our share of decision in 2009 in all of our markets combined that irregardless of our competitive front that we face every day, we were able to put up some numbers that came up pretty good in the third-party study with regards to share of decision.

As we mentioned, we're always be mindful of how the first quarter goes and then we just have to see what happens on the competitive front.

David, I think the other thing to consider is that MetroPCS introduced a lot of innovation in the marketplace in 2009 and Roger touched on several of those points.

Some of the unlimited roll calling program was the first of its kind in the world and offers tremendous value to certain subsegments, as well as we did in our early January with "Wireless for All." And I think you can expect to see that MetroPCS will continue to be an innovator and a leader and a thought leader in the marketplace.

If that's it I guess I'll have to fol -- I'll follow up and just ask.

So when you say that -- your innovations have mostly been to cut price in response to other people who want to cut price.

Roger's comment was that you want to -- you must be perceived as the value player in the market.

I you anticipate new competition coming, should we anticipate that you guys are going to be more aggressive on price before competition comes, or are you going to wait to see competition and make it known that you'll respond on price so that you don't lose market share and that this is a no-win game.

How do we apply the lessons learned from Boost to 2010 so that the same kinds of mistakes and market share losses and scrambling don't need to happen again?

Well, I guess we don't have the same views.

You have mistakes and scrambling.

I guess the point is that we are one of the more profitable companies in this sector and we do make changes deliberately.

I think the foundational change and embracing the paradigm that has gotten traction and that's one of the lessons learned last year.

We've made that transition and now we expect that we can be in a position to tinker at the edges if we need to.

And, David, I think it's fair to say that our responses to the marketplace is more all cutting prices.

The world unlimited was definitely accretive to top line and to bottom line.

The thoughtfulness with which we approached wireless all from a mix standpoint and some of the things that we talked with you about at the analyst breakfast I think show that we're more than cutting price.

We're very thoughtful in the way that we approach the marketplace with new products.

Your next question comes from Ric Prentiss with Raymond James.

Thanks, morning, guys.

I apologize if the question's been asked, this is one of those mornings where I had to be in about five places at once.

My question is, the 2010 guidance, obviously it's a tough economic environment, the competitive arena, as David was just chatting to, is difficult.

It kind of feels like we're the freestyle skiers in Vancouver where it's pretty foggy out and you're trying to figure out how to stick your landing and it's difficult.

As you look at 2010 do you expect to provide guidance at some point is that visibility in the fog clears?

And then a related question is, within the CapEx side would expect you have a little more visibility on your plans on CapEx arena and what are your thoughts as far as spending there, given that the market launches are done but LTE is in the wings?

Rick, actually as a requirement for our SEC filings we'll be filing on Monday our 10-K and you will see CapEx estimates in that 10-K for the upcoming year.

And again, that is a requirement in the liquidity section in MD&A, so you won't have to wait long to see that.

As to providing guidance, we clearly said that our intent at this point is not to.

We don't have a crystal ball, we don't know when the fog is going to lift.

I think your analogy is a very good analogy and we'll make that decision, if appropriate, when we think we have better visibility.

And for now you should assume that we're not going to provide it.

Okay.

And then far as LTE, what are the early thoughts as far as pricing on that equipment, or what might need to be done at a cell site?

I know you guys have been looking at some innovative ways of handling the antennas and, again, I apologize if this was answered, but also just the device line-up as far as voice and data?

The think the best way to describe our progress now is that we're very pleased with integrating the LTE hardware and system into our current network.

As you referred to that's fundamental for us to be able to overlay that in a very cost-effective way and we're not surprised by what we're seeing.

We have begun our implementation in the initial markets, so -- and actually we had our first test call with our device this week so we're very confident that we can deliver on our broadband promise.

We do think that'll be very distinctive because we know the broadband services have been a very, shall we say, a foundational element in the development of the post-paid market.

We see that this leadership, carrying it over to the no contract and pay-in-advance is going to be the first and we think it'll be on a very cost-effective basis, or we wouldn't have done it at this early hour.

If you probably noted what occurred at Barcelona in the World Congress that I think carries all over the world now, understand that LTE for the incumbents -- the incumbent carriers, that is, will be the choice and the acceleration to VoIP is also given as the one of the key attributes.

So we think that being early in this with a technology that we feel is well established is going to be very appropriate for our market segment.

Great, thanks, guys.

Your next question comes from Phil Cusick with McGwire.

Hey, guys, Phil Cusick.

So Ric, as usual, got some of my ideas, but I wonder on the porting side in the quarter, have you seen a shift in porting rates from customers who are coming in?

Are there more customers coming over from the post-paid side, do you feel like these day, and whether it's in the fourth quarter or the first quarter, whatever you can talk about, or are we still churning around this customer base and seeing the same level of customer interest or the same type of customer interest that we've seen before?

Thanks.

Hi, Phil, this is Tom, I'll take that.

Porting wise we haven't seen anything significant.

The numbers appear to be consistent.

Some customers will go with new numbers, so sometimes the porting data isn't as meaningful as it used to be maybe two to three years back.

So there's really no change I could give you there that would be indicative of anything in the industry.

Okay.

And, Braxton, no chance you can give us a preview on the CapEx estimate?

I think we probably can.

It's -- what's going to be disclosed is $600 million to $800 million.

Okay, so consistent with what you've said before.

Thanks a lot.

You're welcome.

The next question comes from Brett Feldman with Deutsche Bank.

Thanks for taking the question and just to follow up on that last comment about CapEx, How should we think about the capital allocation strategy for this year?

For the last few years a large chunk of your capital budget has gone towards growth, primarily new markets.

Clearly, you've gotten through some of the biggest ones, but you've also talked in the past about continuing to edge out, continuing to move into the suburban areas outside your big markets.

You've also got a big LTE project you've been talking about.

Is there any way in broad terms you can talk about the general percentage that are going towards things that are growth oriented versus things that are maybe reinvestments in existing businesses?

Yes, I think we probably can give you some color there, Brett, it's a great question.

Remember, we have disclosed that we're doing LTE rollouts in the second half and actually launching in the second half of the year.

We've already started incurring LTE CapEx and directionally, for the range that we just talked about that will be in our 10-K, you should estimate that roughly half of that is related to the LTE spend.

The other half of the relates to ongoing expansion and increased in capacity to serve our customers, as we continue to go grow.

And if you look at it, without the LTE that would have been a substantial reduction in CapEx, but remember that we've just got off a doubling of our Company over the last two years with launching the Northeast markets and other markets were thrilled out of that.

We're certainly continuing to rationalize and build in the Northeast.

We have - never stop building in the L.A.

area and really have gotten very lose to reaching critical mass there, but we're continuing to invest there.

And there's normal footprint expansion that is due to remain relevant in other markets, but that is certainly less than what we have done in the last couple years.

I think the directional discussion there kind of frames that for you.

And I think it also reflects that there has been a shift.

Given it the overall environment our strategy has been more to rely on strategic roaming agreements with multiple other carriers versus significantly investing in new markets as we expand our footprint to become more a nationwide player.

Just as a follow up on that, I think that you'd talked in the past about targeting roughly 100,000 POPs by the end of this year, I think you ended in 2009 a about 92 million.

Is that still a decent way of thinking about how you're going to allocate some of your capital this year?

And then just in general, when you think about your overall coverage and strategic roaming partners, how much more expansive do you think you can get your on-net coverage, including your partners, over the course of 12 months or so, including what you might build yourself?

Well, I guess, Brett, the best way to say it is that I think you're right on in the 100 million and, yes, we intend to continue to build towards that -- well, we've indicated in the past in the Northeast, which will be probably the biggest growth area that we'll see going forward this year in 2010.

But I think as far as guesstimating what type of roaming agreements we might have, there are other providers, we are active in discussions, we do see enhancement of our footprint as being a nationwide basis being important to us, and all I can say is that we 'e active in discussions, but I cannot really give you any more color than that right now.

Okay.

Well, thank you for taking the questions.

Your next question comes from Simon Flannery with Morgan Stanley.

Thanks very much, good morning.

If we could come back on the LTE rollout.

Roger, could you just talk about how you're going to handle the backhauls?

We have a lot of concerns about some the wireless data demands and the opportunities there for you to offer a robust service.

And on the distribution side, you'll be one of the first to rollout a 4G service, so it's going to have a lot of appeal across different demographic groups, so I would assume that you probably need a somewhat different distribution strategy if you want to tap, really, the market potential for this.

So perhaps you could talk about how you're thinking about that?

Thanks.

Okay, and those are really good questions.

The backhaul, and I think is one word is suffice, is that we're moving to an ethernet environment and that has to be done in stages.

We do have a number of our cell sites -- I can't give you the exact percentage -- already that has fiber to the cell, and so conversions to ethernet and having stat mux' to combined traffic of both CDMA and LTE is really straightforward.

Other areas will be accommodated and upgraded and I think that 2010 is going to be a year of initial, shall we say, launches and I think we have a bit of time.

but it's clear that what we seek is to move toward the ethernet backhaul environment where largely, right now, that were, frankly, T1 oriented.

But we do see that as being a relatively cost-effective basis because most sites have enough traffic, given the environment we're working in right now, to support that in a cost-effective basis.

I guess the other question is distribution and I'll turn that over to Tom.

Thanks, Simon.

Yes, interesting on the distribution front, if you go back to what we've just done for "Wireless for All," the intent was to let the distribution partners and our sales people sell rate plans differently than having the free first month, and this is fundamental change but it was an important springboard to getting into LTE, because discussions at the counter surrounding values, rate plans, features and benefits are going to be extremely important.

So we think the work we do now in January is going to be extremely important inside of our existing distribution base.

Secondarily, the success we've had with launching smartphones inside of our existing distribution footprint is very encouraging for us.

We also think that there's work we can do as we try to expand distribution partners, expand distribution channels going forward we've got a full marketing plan in place, although below the radar right now because it's not time roll it out, and we feel confident that we're examining all the right areas to understand customer touch points and what their needs are.

Great, thank you.

Your next question comes from Jason Armstrong with Goldman Sachs.

Hey, thanks, good morning.

Maybe just one follow up on the new pricing (inaudible) and bringing in the new cheaper handsets you rolled out at the beginning of the quarter.

I'm just wondering how that's being received in the market so far?

Maybe specifically if you could tie it into change and share of gross adds that you're seeing in your markets?

And then second question just on competition, in -- for fourth quarter we saw a passing of the baton, at least as it relates to companies that are most directly compatible from Boose to the Verizon resellers -- Straight Talk and Page Plus -- can you talk about what you saw in your markets and, specifically, who do you see as your key competitor at this point?

There's a couple of questions in there, the first one is going to be regarding --

First one was new pricing that you rolled out at the beginning of the quarter just how that's tracking, has it changed your share of gross adds?

Right now in our first six weeks we're pleased with our customer response.

We'll provide quarter results on the first quarter call, it's certainly early, but indications are that the service plans have been well received by consumers, as well as distribution partners.

It's just too early to give any results at this point in time, but well received.

Regarding competition, I know we all have thoughts about competition.

We see this as somewhat of a bifurcated play between post-paid and pay-in-advance and to signal out one particular competitor who may be in a particular distribution channel, that impacts one competitor is very hard thing to do.

What we look at is overall share of decision in our markets as opposed to anything coming just from one particular player, but we do think it's interesting that there has to be sustainability in the voice MVNOs for those level of threats to become consistent into 2010.

So that remains to prove that over the course of the year, but with regards to any one particular player we don't see it that way.

And I think it's safe to say that the -- to Tom's comment that we do see a host of new MVNOs and as we've said before it's the rise of the resellers.

We think that there -- this is really an industry structure issue that will play out and we're very comfortable with being a facilities-based operator that has the best cost structure in the industry.

I think we have a good platform, so these little battles -- not the war -- that go on, we believe that we will continue to be an aggressive player in this area.

Lastly, we're mindful of the MVNO space back a few years ago was more based upon vertical applications and we had a lot of high-profile MVNO names that don't exist any more.

Now we see a resurgence of voice MVNO's, so to Roger's point it's got to play out over 2010, 2011 but we're not single down to one competitor or one company threat.

If I could just follow up, when you think about taking pricing action, is there a sustainability discount you look look at relative to some of the MVNOs, where you might not necessarily react to what they're doing but you would for Boost?

Interesting question, but I think that we'd have to say that we look at all the competitors as being very, very serious.

I think we go back to the very fundamentals of cost structure and that's the long term.

Anything can happen in these little skirmishes, but I think you have to look at how sound is the company, what is their cost structure and what's their ability to sustain their offerings.

Great, thank you.

Your next question comes from John Hodulik with UBS.

Okay, thanks.

Just a couple higher-level follow ups.

First on the question regarding cannibalization of post-paid.

Can you give us a sense of where your customers are coming from now, if you can tell.

Are they coming from other prepay customers or carriers, or people that are new to the new wireless, or how many do you think are coming from the post-paid players and do you expect that to continue as your service offering evolve?

And then secondly, maybe for Roger, a lot of these prepay guys are benefiting -- or if at least a couple are benefiting from the Safe Link program and it sounds like the early read from Washington, as part of the broadband plan that could be scaled back or even discontinued altogether.

Do you think that could help you guys?

I'd imagine that you've got -- the pool of potential customers is so much smaller because you don't necessarily participate in that plan and maybe these are customers you guys could get.

Just some commentary on that issue would be great, too.

Sure.

Well, I think the so-called cannibalization of post-paid, I don't think our numbers have changed dramatically over time.

We say that most -- that we have a -- interestingly enough a fairly large share of first-time customers then we do see as far as the ports -- there was a question which was asked earlier, that hasn't changed a lot in the -- so, shall we say from fourth quarter -- third quarter of last year and, of course, this quarter we're just now unfolding.

So we haven't seen a lot of change there.

We still get a lot of "first-time users," and I think that (inaudible) up and we have a very strong players, as you know, in the teens and tweens so it's to be unexpected, particularly with the family plan.

But is the plan to target post-paid base?

Obviously, given the penetration in the US that's a much, much bigger pool than going after people that don't have phones.

We totally agree.

Braxton, would you like --

Yes.

I think one interesting thing to look at, just on a macro basis, some of the trends going on in the industry and what you're seeing is prepay is garnering a much more significant share than it has in the past.

If you look at a lot of the independent research, the prepaid area is forecasted to be really the larger growth area given the saturation in voice that's occurred.

And if you want to take it down another level, independent research shows that unlimited, really is the sweet spot in a prepayer, pay-in-advance type environment and we think that this trend's going to continue.

When you look at the penetration rates that have been achieved in other parts of the world that had been in saturation you really see that prepaid is the driver there.

Tom ?

Yes, I would just cap with the concept of flexibility.

What we find is that a lot of the customer are amazed that they can get what we offer them and still have the flexibility of not to have a contract.

Yes, and just to finish that thought, for a time, one of our -- we looked at the handsets as being such a fundamental part of the purchase decision and I think Tom's point about the smartphones and QWERTY keyboard phones, what you will see from us is a -- in touchscreen you will see a very much and a very significant upgrading of the features, so I think technology's really the wind at our back right now.

And so for the post-paid area we have the notion that we have offered a wide choice.

We're up to around 20 SKUs in our offering and by the same token, we expect LTE to provide the broadband experience.

So we think that there will be a cannibalization opportunity and it's up to us to capitalize on it because as we close the gap, as I mentioned before, what we intend to do is to offer the post-paid experience, and I'm talking about services, I'm talking about handsets, as well as other A la carte's that are available in the app store, and we plan to do that at a no-contract basis.

So we do see that as the big opportunity going forward and we think that can an opportunity for all the pay-in-advance space.

And John, let me get to your last point about Save Link.

Some of the numbers that we see from third-party research we can see see waves going across the market over the course of 60-to-90 days, and some of those waves are sitting right on top of an introduction of Save Link product.

Obviously, it serves a needs and we understand that need.

It's a program that has a lot of merit, but at the same time the ARPU on those products are somewhat hampered, as well giving a free phone free does become free.

So it's hard to compete against that.

We've not yet been involved in the Safe Link product to date.

We're certainly looking at it, but we have seen those waves come across market by market and they will impact carrier share on a quarter-by-quarter basis absolutely.

All right.

Okay, thanks, guys.

Your next question comes from Michael Rollins with Citi Investment.

Hi, good morning.

I was wondering if you could talk just a little bit more about rate plan mix.

I know you talked about a little in terms of some of the early progress, but I'm just trying to think through a little bit more of the mechanics of what happened in the fourth quarter with the $30 promotion and is there a takeaway from that as we try to think about the potential for you to use additional promotions in the future and what kind of upselling you typically get from that?

Thank you, this is Tom, again.

So great question and part of this goes back to the efforts that we've really gone over the last 12 months that have taken place, and in the fourth quarter we really focused on traditional upselling.

Getting ready for the transition into 2010, but training our distribution partners on the value inside of the rate plans.

Things like ILD, we have to speak about those programs when people come in, we have to address their needs, and as we do more of that -- and we knew we were making the transition in 2010 to eliminating first month free -- it gave us a platform to get everybody engaged in selling the features of the rate plan and actually making the rate plan as important as the handset is to a lot of customers.

So the upselling side of that was probably a factor.

And if I could just follow up with a question on the cost side.

One of the things that you guys have talked a lot about is the ability to drive cost and scale the business over time.

If you look at the -- I guess the best way to look at that would be the core market performance and if you look at the sequential progression of -- I think what you call CPU or what it was call -- CCPU, or cash cost per user, can you talk about if you see any step functions in bringing that down, or is it just an evolution over time in terms of just blocking, tackling and moving that needle a little bit each quarter?

Thanks.

There's many account phones and it's kind of numerator, denominator factor.

Just to give you some thoughts on that, the numerator can be affected by efficiencies that we get in the network.

We go to direct connect with the other service providers and that does save significant money.

We have more efficiencies in how we choose our fixed network service providers, also, and there's costs that we can take here, both domestic long distance and international.

And then, obviously on the denominator side the growth gives us scale simply by the fact that we're enlarging our base.

But we are focusing very heavily on the numerator because, obviously, the denominator will take care of itself if we're successful and we intend to be.

Thank you very much.

We have reached our allotted time for questions.

Mr.

Carter, are there any closing remarks?

Yes.

Thank you, again, for participating on today's call.

We appreciate your interest and support of MetroPCS and we look forward to our next quarter of continued progress.

Operator?

Ladies and gentlemen, this concludes the MetroPCS Communications fourth-quarter and year-end 2009 conference call.

Thank you for your participation.

You may now disconnect and have a pleasant day.