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T-Mobile US, Inc. Annual Report, Year Ended Dec 31, 2007

Filing Date
Filed February 29, 2008
Period End
December 31, 2007
In the record · 2016–202610-K1110-Q338-K226

TMUS filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 226 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Mar ’18Mar ’18
  2. Leadership change8-K · Apr ’20Apr ’20
  3. Auditor change8-K · Apr ’22Apr ’22
  4. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed February 29, 2008. Cited figures are marked; the original filing is the authoritative source.

This 10-K covers MetroPCS Communications, Inc. (ticker PCS on the NYSE, which the filing refers to in the TMUS-era context you named) for fiscal 2007.

Note the filing itself is MetroPCS's report, not T-Mobile US; MetroPCS later merged with T-Mobile USA in 2013 to form the current T-Mobile US, Inc. The company is a prepaid-style, flat-rate, no-contract wireless carrier serving eight metro areas, with about 4.0 million customers at year-end 2007 (up 35%). FY2007 total revenues rose 45% to $2.24 billiona and income from operations rose 94% to $460 million. Net income grew 87% to $100.4 million, but was held down by a $97.8 million impairment on auction rate securities and higher interest expense of $201.7 million, as average debt rose to about $2.8 billion.

Growth was driven by the Expansion Markets, where service revenue more than tripled to $504 millionb and Adjusted EBITDA turned positive at $12.9 million after a $97.2 million deficit in 2006. Core Markets remained the profit engine, with Adjusted EBITDA of $654 million (46% of service revenue). Consolidated Adjusted EBITDA reached $667 million, and operating cash flow was $589 million.

The company completed its IPO in April 2007, raising about $818 millionc in net proceeds, and ended the year with $1.47 billion in cash and equivalents and $1.85 billion in stockholders' equity. Key risks for investors include roughly $3.0 billion of debt, the build-out of roughly $1.4 billion of Auction 66 AWS spectrum (with capex guided to $1.1 to $1.3 billion for 2008), dependence on a single infrastructure vendor (Alcatel-Lucent), the Verisign billing-vendor transition, patent litigation with Leap and Freedom Wireless, and a pending FCC challenge to the Auction 66 licenses. Because the company offers unlimited flat-rate plans with no long-term contracts, churn runs around 4.7% monthly, which is structurally higher than traditional carriers.

02—Key points

Key Highlights

  1. Revenue growth: total revenues rose 45% to $2.24 billion in 2007, with service revenues up 49% to $1.92 billion, led by 664,000 net additions in Expansion Markets.
  2. Profitability inflection: income from operations rose 94% to $460 million, and Expansion Markets Adjusted EBITDA moved from a $97 million deficit to a $13 million gain.
  3. Core Markets strength: Core Adjusted EBITDA reached $654 million, 46% of Core service revenue, up from 43% in 2006.
  4. Customer base: 3.96 million customers at December 31, 2007 (up 35%), with ARPU stable at $43.03 and CPU improved to $18.33.
  5. Auction rate securities hit: a $97.8 million other-than-temporary impairment on $133.9 million of AAA-rated auction rate securities reduced net income to $100.4 million.
  6. Capital structure: IPO in April 2007 raised about $818 million net, and a $421 million add-on of 9¼% senior notes was issued; debt totals about $3.0 billion, with $1.47 billion in cash at year end.
  7. Forward investment: 2008 capex guidance of $1.1 to $1.3 billion, including $600 to $700 million for Auction 66 markets, targeting 30 to 32 million covered population by late 2008 to mid-2009.

03—Questions

Frequently Asked Questions

  1. Is this filing from T-Mobile US (TMUS)?

    No. This 10-K is from MetroPCS Communications, Inc. (NYSE: PCS), filed for fiscal year 2007. T-Mobile US was formed in 2013 when MetroPCS merged with T-Mobile USA, so the TMUS entity did not exist under this name at the time of this filing.

  2. What drove the strong 2007 earnings growth?

    Net income rose 87% to $100.4 million, driven by customer growth of 35%, scale efficiencies in Core Markets, and a 197% increase in interest income from IPO proceeds. These gains were partly offset by a $97.8 million auction rate securities impairment and interest expense that nearly doubled to $201.7 million.

  3. How risky is the company's debt load and spectrum spending?

    Debt is about $3.0 billion, with a senior secured leverage ratio of 2.10x versus a covenant maximum of 4.5x. The company must fund a large Auction 66 AWS build-out, with 2008 capex of $1.1 to $1.3 billion. Management says cash and operating cash flow are sufficient, but covenants could limit additional borrowing if Adjusted EBITDA falls.

  4. What is the main legal and regulatory exposure?

    The most significant items are Leap's patent suit seeking injunctive relief and treble damages, Freedom Wireless's patent suit against the company and its billing vendor, and an appeal by petitioners asking the court to overturn Auction 66 results. If the Auction 66 licenses were revoked, the company would receive a refund without interest, while its costs and interest on the payments would not be recovered.

  5. Why does churn matter for this business model?

    Because customers pay monthly in advance with no long-term contract, average monthly churn was 4.7% in 2007, versus 4.6% in 2006. Higher churn would reduce revenue and increase the marketing spend needed to replace customers, so retention is central to sustaining margins as competitors launch similar unlimited plans.

04—Continue

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