##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC, 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the
quarterly period ended March 31, 2004



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the
transition period from  to



Commission File Number 333-111470



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MetroPCS, Inc.

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 75-2550006                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



8144 Walnut Hill
Lane, Suite 800, Dallas, Texas 75231

(Address of principal executive offices)

(Zip Code)



(214) 265-2550

(Registrants telephone number, including area code)



Not Applicable

(Former name, if changed since last report)



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Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days:    Yes ̈No  x



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



The number of shares outstanding of the Registrants Common Stock, $0.0001 par value, on May 10, 2004 was 86,222,135.



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##### Table of Contents

MetroPCS, Inc.



INDEX



|                                                                                                     |  |        
|---------------------------------------------------------------------------------------------------- |  | -------
|                                                                                                     |  | PAGE   
|PART I -
FINANCIAL INFORMATION                                                                       |  |        
|                                                                                                     | 
|Item 1.
Financial Statements                                                                         |  |        
|                                                                                                     | 
|Consolidated Balance Sheets as of December 31, 2003 and March 31, 2004 (unaudited)                   |  | 1      
|                                                                                                     | 
|Consolidated Statements of Operations for the three months ended March 31, 2003 and 2004 (unaudited) |  | 2      
|                                                                                                     | 
|Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2004 (unaudited) |  | 3      
|                                                                                                     | 
|Notes to Consolidated Financial Statements (unaudited)                                               |  | 4 - 8  
|                                                                                                     | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations        |  | 9 - 20 
|                                                                                                     | 
|Item 3.
Quantitative and Qualitative Disclosures About Market Risk                                   |  | 20     
|                                                                                                     | 
|Item 4.
Controls and Procedures                                                                      |  | 21     
|                                                                                                     | 
|PART II -
OTHER INFORMATION                                                                          |  |        
|                                                                                                     | 
|Item 1.
Legal Proceedings                                                                            |  | 21     
|                                                                                                     | 
|Item 2.
Changes in Securities and Use of Proceeds.                                                   |  | 21     
|                                                                                                     | 
|Item 6.
Exhibits and Reports on Form 8-K                                                             |  | 21 - 22
|                                                                                                     | 
|Signature Page                                                                                       |  | 22     



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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



MetroPCS, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share Information)

(Unaudited)



|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                                                                                                                                                                                                                    |  | December 31,2003 |         |   | March 31,2004 |  
|CURRENT ASSETS:                                                                                                                                                                                                                                                                                                                                     |  |                  |         |   |               |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                                                                                                                                           |  | $                | 235,965 |   |               | $ | 185,109 |  
|Inventory, net                                                                                                                                                                                                                                                                                                                                      |  |                  | 21,210  |   |               |   | 22,957  |  
|Accounts receivable (net of allowance of $1,085 and $1,377 at December 31, 2003 and March 31, 2004, respectively)                                                                                                                                                                                                                                   |  |                  | 8,678   |   |               |   | 9,042   |  
|Prepaid expenses                                                                                                                                                                                                                                                                                                                                    |  |                  | 5,292   |   |               |   | 7,528   |  
|Deferred charges                                                                                                                                                                                                                                                                                                                                    |  |                  | 6,498   |   |               |   | 8,894   |  
|Current deferred tax asset                                                                                                                                                                                                                                                                                                                          |  |                  | 6,675   |   |               |   | 6,675   |  
|Other current assets                                                                                                                                                                                                                                                                                                                                |  |                  | 8,833   |   |               |   | 11,774  |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|Total current assets                                                                                                                                                                                                                                                                                                                                |  |                  | 293,151 |   |               |   | 251,979 |  
|Property and equipment, net                                                                                                                                                                                                                                                                                                                         |  |                  | 482,965 |   |               |   | 519,549 |  
|Restricted cash and investments                                                                                                                                                                                                                                                                                                                     |  |                  | 1,248   |   |               |   | 1,422   |  
|Long-term investments                                                                                                                                                                                                                                                                                                                               |  |                  | 19,000  |   |               |   | 15,999  |  
|PCS licenses                                                                                                                                                                                                                                                                                                                                        |  |                  | 90,619  |   |               |   | 90,619  |  
|Microwave relocation costs                                                                                                                                                                                                                                                                                                                          |  |                  | 10,000  |   |               |   | 9,872   |  
|Other assets                                                                                                                                                                                                                                                                                                                                        |  |                  | 5,511   |   |               |   | 5,780   |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|Total assets                                                                                                                                                                                                                                                                                                                                        |  | $                | 902,494 |   |               | $ | 895,220 |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                                                                |  |                  |         |   |               |   |         |  
|Accounts payable and accrued expenses                                                                                                                                                                                                                                                                                                               |  | $                | 153,688 |   |               | $ | 121,677 |  
|Current maturities of long-term debt                                                                                                                                                                                                                                                                                                                |  |                  | 13,362  |   |               |   | 13,579  |  
|Deferred revenue                                                                                                                                                                                                                                                                                                                                    |  |                  | 31,091  |   |               |   | 36,472  |  
|Other current liabilites                                                                                                                                                                                                                                                                                                                            |  |                  | 2,295   |   |               |   | 1,673   |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|Total current liabilities                                                                                                                                                                                                                                                                                                                           |  |                  | 200,436 |   |               |   | 173,401 |  
|Long-term debt, net                                                                                                                                                                                                                                                                                                                                 |  |                  | 182,433 |   |               |   | 179,523 |  
|Deferred tax liabilities                                                                                                                                                                                                                                                                                                                            |  |                  | 30,791  |   |               |   | 38,208  |  
|Long-term deferred revenue                                                                                                                                                                                                                                                                                                                          |  |                  | 30      |   |               |   | 105     |  
|Deferred rents                                                                                                                                                                                                                                                                                                                                      |  |                  | 3,961   |   |               |   | 4,397   |  
|Other long-term liabilities                                                                                                                                                                                                                                                                                                                         |  |                  | 20,554  |   |               |   | 20,933  |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|Total liabilities                                                                                                                                                                                                                                                                                                                                   |  |                  | 438,205 |   |               |   | 416,567 |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|COMMITMENTS AND CONTINGENCIES (Note 9)                                                                                                                                                                                                                                                                                                              |  |                  |         |   |               |   |         |  
|SERIES D CUMULATIVE CONVERTIBLE REDEEMABLE PARTICPATING PREFERRED STOCK, par value $.0001 per share, 4,000,000 shares designated, 3,500,947
and 3,500,953 shares issued and outstanding at December 31, 2003 and March 31, 2004, respectivelyLiquidation preference of $384,841 and $389,588, at December 31, 2003 and March 31, 2004, respectively |  |                  | 379,401 |   |               |   | 384,267 |  
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                                                                                                                                               |  |                  |         |   |               |   |         |  
|Preferred stock, par value $.0001 per share, 5,000,000 shares authorized, 4,000,000 of which have been designated as Series D Preferred Stock,
no shares issued and outstanding at December 31, 2003 and March 31, 2004, respectively                                                                                                               |  |                  |        |   |               |   |        |  
|Common stock, par value $.0001 per share -                                                                                                                                                                                                                                                                                                          |  |                  |         |   |               |   |         |  
|Class A, 300 shares authorized, 180 shares issued and outstanding at December 31, 2003 and March 31, 2004, respectively                                                                                                                                                                                                                             |  |                  |        |   |               |   |        |  
|Class B, 60,000,000 shares authorized, 7,817,570 and 8,227,570 shares issued and outstanding at December 31, 2003 and March 31, 2004,
respectively                                                                                                                                                                                                  |  |                  | 1       |   |               |   | 1       |  
|Class C, 240,000,000 shares authorized, 65,365,806 shares and 74,478,750 shares issued and outstanding at December 31, 2003 and March 31,
2004, respectively                                                                                                                                                                                        |  |                  | 7       |   |               |   | 8       |  
|Additional paid-in capital                                                                                                                                                                                                                                                                                                                          |  |                  | 88,908  |   |               |   | 92,415  |  
|Subscriptions receivable                                                                                                                                                                                                                                                                                                                            |  |                  | (92     | ) |               |   | (93     | )
|Deferred compensation                                                                                                                                                                                                                                                                                                                               |  |                  | (4,229  | ) |               |   | (4,328  | )
|Retained earnings                                                                                                                                                                                                                                                                                                                                   |  |                  | 293     |   |               |   | 6,383   |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|Total stockholders equity                                                                                                                                                                                                                                                                                                                          |  |                  | 84,888  |   |               |   | 94,386  |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                                                                                                          |  | $                | 902,494 |   |               | $ | 895,220 |  
|                                                                                                                                                                                                                                                                                                                                                    |  |                  |         |   |               |   |         |  



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



1



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##### Table of Contents

MetroPCS, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Share Information)

(Unaudited)



|                                                                                   |  |                             |        |   |      |   |         |  
|---------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                   |  | Three Months EndedMarch 31, |       
|                                                                                   |  | 2003                        |        |   | 2004 |  
|REVENUES:                                                                          |  |                             |        |   |      |   |         |  
|Service revenues                                                                   |  | $                           | 75,999 |   |      | $ | 132,921 |  
|Equipment revenues                                                                 |  |                             | 23,399 |   |      |   | 40,077  |  
|                                                                                   |  |                             |        |   |      |   |         |  
|Total revenues                                                                     |  |                             | 99,398 |   |      |   | 172,998 |  
|                                                                                   |  |                             |        |   |      |   |         |  
|OPERATING EXPENSES:                                                                |  |                             |        |   |      |   |         |  
|Cost of service (excluding depreciation included below)                            |  |                             | 25,929 |   |      |   | 40,909  |  
|Cost of equipment                                                                  |  |                             | 44,213 |   |      |   | 64,047  |  
|Selling, general and administrative expenses (excludes non-cash compensation)      |  |                             | 18,046 |   |      |   | 28,916  |  
|Non-cash compensation                                                              |  |                             | 241    |   |      |   | 3,256   |  
|Depreciation and amortization                                                      |  |                             | 9,047  |   |      |   | 12,774  |  
|Loss on sale of assets                                                             |  |                             | 111    |   |      |   | 87      |  
|                                                                                   |  |                             |        |   |      |   |         |  
|Total operating expenses                                                           |  |                             | 97,587 |   |      |   | 149,989 |  
|                                                                                   |  |                             |        |   |      |   |         |  
|INCOME FROM OPERATIONS                                                             |  |                             | 1,811  |   |      |   | 23,009  |  
|                                                                                   |  |                             |        |   |      |   |         |  
|OTHER (INCOME) EXPENSE:                                                            |  |                             |        |   |      |   |         |  
|Interest expense                                                                   |  |                             | 1,755  |   |      |   | 5,572   |  
|Interest income                                                                    |  |                             | (140   | ) |      |   | (616    | )
|Gain on extinguishment of debt                                                     |  |                             |       |   |      |   | (201    | )
|                                                                                   |  |                             |        |   |      |   |         |  
|Total other expense                                                                |  |                             | 1,615  |   |      |   | 4,755   |  
|                                                                                   |  |                             |        |   |      |   |         |  
|INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |  |                             | 196    |   |      |   | 18,254  |  
|Provision for income taxes                                                         |  |                             | (113   | ) |      |   | (7,417  | )
|                                                                                   |  |                             |        |   |      |   |         |  
|INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                  |  |                             | 83     |   |      |   | 10,837  |  
|Cumulative effect of change in accounting principle, net of tax                    |  |                             | (74    | ) |      |   |        |  
|                                                                                   |  |                             |        |   |      |   |         |  
|NET INCOME                                                                         |  |                             | 9      |   |      |   | 10,837  |  
|ACCRUED DIVIDENDS ON SERIES D PREFERRED STOCK                                      |  |                             | (4,268 | ) |      |   | (4,747  | )
|                                                                                   |  |                             |        |   |      |   |         |  
|NET INCOME (LOSS) APPLICABLE TO COMMON STOCK                                       |  | $                           | (4,259 | ) |      | $ | 6,090   |  
|                                                                                   |  |                             |        |   |      |   |         |  
|NET INCOME (LOSS) PER SHARE: (Note 8)                                              |  |                             |        |   |      |   |         |  
|BASIC                                                                              |  |                             |        |   |      |   |         |  
|Income before cumulative effect of change in accounting principle                  |  | $                           | (0.06  | ) |      | $ | 0.04    |  
|Cumulative effect of change in accounting principle                                |  |                             | (0.00  | ) |      |   |        |  
|                                                                                   |  |                             |        |   |      |   |         |  
|NET INCOME (LOSS) PER SHARE  BASIC                                                |  | $                           | (0.06  | ) |      | $ | 0.04    |  
|                                                                                   |  |                             |        |   |      |   |         |  
|DILUTED                                                                            |  |                             |        |   |      |   |         |  
|Income before cumulative effect of change in accounting principle                  |  | $                           | (0.06  | ) |      | $ | 0.03    |  
|Cumulative effect of change in accounting principle                                |  |                             | (0.00  | ) |      |   |        |  
|                                                                                   |  |                             |        |   |      |   |         |  
|NET INCOME (LOSS) PER SHARE  DILUTED                                              |  | $                           | (0.06  | ) |      | $ | 0.03    |  
|                                                                                   |  |                             |        |   |      |   |         |  



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



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MetroPCS, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)



|                                                                                             |  |                              |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                             |  | Three Months Ended March 31, |        
|                                                                                             |  | 2003                         |         |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                        |  |                              |         |   |      |   |         |  
|Net income                                                                                   |  | $                            | 9       |   |      | $ | 10,837  |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities - |  |                              |         |   |      |   |         |  
|Cumulative effect of change in accounting                                                    |  |                              | 74      |   |      |   |        |  
|Gain on extinguishment of debt                                                               |  |                              |        |   |      |   | (201    | )
|Loss on sale of assets                                                                       |  |                              | 111     |   |      |   | 87      |  
|Depreciation and amortization                                                                |  |                              | 9,047   |   |      |   | 12,774  |  
|Non-cash interest expense                                                                    |  |                              | 784     |   |      |   | 688     |  
|Bad debt expense                                                                             |  |                              | 749     |   |      |   | 433     |  
|Equity based compensation expense                                                            |  |                              |        |   |      |   | 2,965   |  
|Amortization of deferred compensation                                                        |  |                              | 241     |   |      |   | 291     |  
|Accretion of asset retirement obligation                                                     |  |                              | 25      |   |      |   | 79      |  
|Deferred rent                                                                                |  |                              | 414     |   |      |   | 435     |  
|Deferred taxes                                                                               |  |                              | 113     |   |      |   | 7,417   |  
|Costs of abandoned cell sites                                                                |  |                              | 477     |   |      |   | 183     |  
|Changes in assets and liabilities -                                                          |  |                              |         |   |      |   |         |  
|Inventory                                                                                    |  |                              | (2,057  | ) |      |   | (1,747  | )
|Accounts receivable                                                                          |  |                              | (4,883  | ) |      |   | (797    | )
|Prepaid expenses                                                                             |  |                              | (1,208  | ) |      |   | (2,236  | )
|Deferred charges and other current assets                                                    |  |                              | 1,295   |   |      |   | (5,337  | )
|Accounts payable, accrued expenses & deferred revenue                                        |  |                              | (10,017 | ) |      |   | (1,503  | )
|                                                                                             |  |                              |         |   |      |   |         |  
|Net cash provided by (used in) operating activities                                          |  |                              | (4,826  | ) |      |   | 24,368  |  
|                                                                                             |  |                              |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                        |  |                              |         |   |      |   |         |  
|Purchase of investments                                                                      |  |                              | (390    | ) |      |   | (3,174  | )
|Proceeds from sale of investments                                                            |  |                              | 762     |   |      |   | 6,004   |  
|Microwave relocation                                                                         |  |                              | (96     | ) |      |   | (19     | )
|Purchase of property and equipment                                                           |  |                              | (26,899 | ) |      |   | (73,338 | )
|                                                                                             |  |                              |         |   |      |   |         |  
|Net cash used in investing activities                                                        |  |                              | (26,623 | ) |      |   | (70,527 | )
|                                                                                             |  |                              |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                        |  |                              |         |   |      |   |         |  
|Change in book overdraft                                                                     |  |                              | 5,671   |   |      |   | (1,908  | )
|Repayment of notes                                                                           |  |                              | (90     | ) |      |   | (3,059  | )
|Proceeds from sale of Series D Preferred Stock, net of issuance cost                         |  |                              |        |   |      |   | 1       |  
|Proceeds from exercise of stock options                                                      |  |                              |        |   |      |   | 269     |  
|                                                                                             |  |                              |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                                          |  |                              | 5,581   |   |      |   | (4,697  | )
|                                                                                             |  |                              |         |   |      |   |         |  
|DECREASE IN CASH AND CASH EQUIVALENTS                                                        |  |                              | (25,868 | ) |      |   | (50,856 | )
|                                                                                             |  |                             
|CASH AND CASH EQUIVALENTS, beginning of period                                               |  |                              | 61,717  |   |      |   | 235,965 |  
|                                                                                             |  |                              |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                                     |  | $                            | 35,849  |   |      | $ | 185,109 |  
|                                                                                             |  |                              |         |   |      |   |         |  



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



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##### Table of Contents

MetroPCS, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 1  Organization and Business Operations



MetroPCS, Inc., a Delaware corporation (MetroPCS), together with its wholly owned subsidiaries (collectively, the Company), is a wireless communications carrier that offers digital wireless
service in the metropolitan areas of Atlanta, Miami, San Francisco and Sacramento. The Company initiated the commercial launch of its first market in January 2002 and was in the development stage for 2000 and 2001. The Company is headquartered in
Dallas, Texas and has approximately 859 employees Company-wide as of March 31, 2004.



In March 2004, MetroPCS formed a wholly owned subsidiary named MetroPCS Communications, Inc. On March 23, 2004, MetroPCS Communications, Inc. filed a registration statement on Form S-1 with the Securities and Exchange
Commission to effect an initial public offering of its common stock. MetroPCS plans to merge with a subsidiary of MetroPCS Communications, Inc., pursuant to a transaction that will result in the stock of MetroPCS converting into stock of MetroPCS
Communications, Inc. and thus MetroPCS becoming a wholly owned subsidiary of MetroPCS Communications, Inc. The consummation of this merger is contingent upon the receipt of FCC approval.



Note 2  Basis of Presentation of Unaudited Interim Financial Statements



The unaudited consolidated balance sheet as of March 31, 2004, the unaudited
consolidated statements of operations for the three months ended March 31, 2003 and 2004, the unaudited consolidated statements of cash flows for the three months ended March 31, 2003 and 2004 and related footnotes have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles
generally accepted in the United States of America. The financial information presented should be read in conjunction with the Companys audited consolidated financial statements as of and for the year ended December 31, 2003. In the opinion of
management, the interim data includes all normal and recurring adjustments necessary for a fair presentation of results for the interim periods. Operating results for the three months ended March 31, 2004 are not necessarily indicative of results
that may be expected for the year ending December 31, 2004.



Certain reclassifications have been made to prior period balances to conform to current period presentation. These reclassifications had no effect on the results of operations or stockholders equity as previously reported.



Note 3  Principles of Consolidation



The unaudited consolidated financial statements include the accounts of
MetroPCS and its wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated. The Company manages the business as one reportable business segment  wireless voice and data services and products.



As of March 31, 2004, MetroPCS Communications, Inc. was the only
non-guarantor subsidiary of MetroPCS. All other subsidiaries were guarantors of MetroPCSs 103/4% Senior
Notes due 2011 with such guarantees being full and unconditional and joint and several. MetroPCS Communications, Inc. was considered a minor subsidiary as of and for the three months ended March 31, 2004 and therefore, no condensed consolidating
financial statements of the Company have been presented.



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##### Table of Contents

Note 4  Effects of Recent Accounting Pronouncements



In March 2004, the Emerging Issues Task Force (EITF) reached
consensus on EITF Issue 03-06, Participating Securities and the Two-Class Method under FASB Statement No. 128, which requires, among other items, the use of the two-class method for calculating earnings per share when participating
convertible securities exist. The consensus is effective for fiscal periods beginning after March 31, 2004 and requires restatement of prior periods if the two-class method has not been used. The Companys accounting policy, under FASB
Statement No. 128, Earnings per Share, was to calculate earnings per share under both the two-class and if-converted method and report earnings per share on the method that was most dilutive. The adoption of EITF 03-06 will not have an
effect on the Companys financial statements as the two-class method is currently being followed.



Note 5 Stock Based Compensation



The Company follows the disclosure requirements of SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, which amends the disclosure requirements of SFAS No. 123,
Accounting for Stock-Based Compensation, to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported
results.



As permitted by SFAS No. 123, the Company measures
compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed by the Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. The Company
has adopted the disclosure-only provisions of SFAS No. 123. The following table illustrates the effect on net income (loss) available to common stockholders as if the Company had elected to recognize compensation costs based on the fair value at the
date of grant for the Companys common stock awards consistent with the provisions of SFAS No. 123.



|                                                                                                                                   |  |                              |        |   |      |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ----- | -
|                                                                                                                                   |  | Three Months Ended March 31, |       
|                                                                                                                                   |  | 2003                         |        |   | 2004 |  
|                                                                                                                                   |  | (in thousands)               |       
|Net income (loss) applicable to common stock  As reported                                                                         |  | $                            | (4,259 | ) |      | $ | 6,090 |  
|Add: Amortization of deferred compensation determined under the intrinsic method for employee stock awards, net of tax             |  |                              | 146    |   |      |   | 1,933 |  
|Less: Total stock-based employee compensation expense determined under the fair value method for employee stock awards, net of
tax |  |                              | (484   | ) |      |   | (548  | )
|                                                                                                                                   |  |                              |        |   |      |   |       |  
|Net income (loss) applicable to common stock  Pro forma                                                                           |  | $                            | (4,597 | ) |      | $ | 7,475 |  
|                                                                                                                                   |  |                              |        |   |      |   |       |  
|Basic net income (loss) per share  As reported                                                                                    |  | $                            | (0.06  | ) |      | $ | 0.04  |  
|Basic net income (loss) per share  Pro forma                                                                                      |  | $                            | (0.06  | ) |      | $ | 0.05  |  
|Diluted net income (loss) per share  As reported                                                                                  |  | $                            | (0.06  | ) |      | $ | 0.03  |  
|Diluted net income (loss) per share  Pro forma                                                                                    |  | $                            | (0.06  | ) |      | $ | 0.04  |  



5



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##### Table of Contents

During the first three months of 2004, the Company recognized compensation expense of $3.0 million
related to options outstanding that are required to be marked-to-market under variable accounting, as a result of the increase in the estimated fair market value of the Companys common stock.



Note 6  Long-Term Investments



During the three months ended March 31, 2004, long-term investments
classified as held-to-maturity were called by the issuer, thereby accelerating the maturity. Proceeds from the sale were approximately $6.0 million and the Company recognized no gain or loss on the transactions. Also during the three months ended
March 31, 2004, the Company purchased additional long-term investments of approximately $3.0 million. These investments consist of federal home loan mortgage notes and bonds, are classified as held to maturity, are stated at cost, which approximates
market value, and mature between September 2005 and March 2007.



Note 7
 Stockholders Equity



During the three months
ended March 31, 2004, warrants to purchase 9,011,880 shares of Class C common stock and 150,000 shares of Class B common stock were exercised for $.0002 per share. In addition, options to purchase 260,000 shares of Class B common stock and 101,064
shares of Class C common stock were exercised for proceeds of approximately $30,000 and $237,000, respectively.



Note 8  Net Income (Loss) Per Common 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 basic EPS after assuming the issuance of common stock for all potentially dilutive shares, whether exercisable or not.



The Series D Preferred Stock is a participating security, 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 Series D Preferred Stock as if the Series D Preferred Stock had been converted into common stock. The EITFs Topic D-95, Effect of Participating Convertible Securities on the Computation of
Basic Earnings per Share, requires that the Preferred Stock be included in the computation of basic earnings per share if the effect of inclusion is dilutive. The Companys accounting policy requires the use of the two-class method for
its participating securities for EPS calculations. The Series D Preferred Stock is considered in the calculation of diluted earnings per share under the if-converted method, if dilutive.



|                                                                                                             |  |                              |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                             |  | Three Months Ended March 31, |       
|                                                                                                             |  | 2003                         |        |   | 2004 |  
|Basic EPS  Two-Class Method:                                                                                |  |                              |        |   |      |   |        |  
|Income before cumulative effect of change in accounting principle                                            |  | $                            | 83     |   |      | $ | 10,837 |  
|Accrued dividends on Series D Preferred Stock                                                                |  |                              | (4,268 | ) |      |   | (4,747 | )
|                                                                                                             |  |                              |        |   |      |   |        |  
|Income (loss) attributable to Common Stockholders before cumulative effect of change in accounting principle |  | $                            | (4,185 | ) |      | $ | 6,090  |  
|Amount allocable to Common Stockholders                                                                      |  |                              | 100    | % |      |   | 49     | %
|                                                                                                             |  |                              |        |   |      |   |        |  
|Rights to undistributed earnings (losses)                                                                    |  | $                            | (4,185 | ) |      | $ | 2,984  |  
|                                                                                                             |  |                              |        |   |      |   |        |  



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##### Table of Contents

|                                                                                                          |  |                              |            |   |      |   |            |  
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                          |  | Three Months Ended March 31, |           
|                                                                                                          |  | 2003                         |            |   | 2004 |  
|Basic EPS  Two-Class Method (continued):                                                                 |  |                              |            |   |      |   |            |  
|                                                                                                          |  |                             
|Cumulative effect of change in accounting principle                                                       |  | $                            | (74        | ) |      | $ |           |  
|Amount allocable to Common Stockholders                                                                   |  |                              | 100        | % |      |   | 49         | %
|                                                                                                          |  |                              |            |   |      |   |            |  
|Rights to undistributed earnings (losses)                                                                 |  | $                            | (74        | ) |      | $ |           |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Net income (loss) attributable to Common Stockholders                                                     |  | $                            | (4,259     | ) |      | $ | 6,090      |  
|Amount allocable to Common Stockholders                                                                   |  |                              | 100        | % |      |   | 49         | %
|                                                                                                          |  |                              |            |   |      |   |            |  
|Rights to undistributed earnings (losses)                                                                 |  | $                            | (4,259     | ) |      | $ | 2,984      |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Weighted average common shares outstanding:                                                               |  |                              |            |   |      |   |            |  
|Common Stock, Class A                                                                                     |  |                              | 180        |   |      |   | 180        |  
|Common Stock, Class B                                                                                     |  |                              | 7,687,570  |   |      |   | 7,977,900  |  
|Common Stock, Class C                                                                                     |  |                              | 65,158,854 |   |      |   | 70,124,270 |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|                                                                                                          |  |                              | 72,846,604 |   |      |   | 78,102,350 |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Basic EPS  before cumulative effect of change in accounting Principal                                    |  | $                            | (0.06      | ) |      | $ | 0.04       |  
|Cumulative effect of change in accounting principal                                                       |  |                              | (0.00      | ) |      |   |           |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Basic EPS                                                                                                 |  | $                            | (0.06      | ) |      | $ | 0.04       |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Diluted EPS:                                                                                              |  |                              |            |   |      |   |            |  
|Income (loss) before cumulative effect of change in accounting principle allocable to Common Stockholders |  | $                            | (4,185     | ) |      | $ | 2,984      |  
|Cumulative effect of change in accounting principle, allocable to Common Stockholders                     |  |                              | (74        | ) |      |   |           |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Net income (loss), allocable to Common Stockholders                                                       |  | $                            | (4,259     | ) |      | $ | 2,984      |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Weighted average common shares outstanding:                                                               |  |                              |            |   |      |   |            |  
|Common Stock, Class A                                                                                     |  |                              | 180        |   |      |   | 180        |  
|Common Stock, Class B                                                                                     |  |                              | 7,687,570  |   |      |   | 7,977,900  |  
|Common Stock, Class C                                                                                     |  |                              | 65,158,854 |   |      |   | 70,124,270 |  
|Dilutive effect of warrants                                                                               |  |                              |           |   |      |   | 10,466,574 |  
|Dilutive effect of stock options                                                                          |  |                              |           |   |      |   | 10,491,354 |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Weighted average common stock and common stock equivalents outstanding                                    |  |                              | 72,846,604 |   |      |   | 99,060,278 |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Diluted EPS  before cumulative effect of change in accounting principle                                  |  | $                            | (0.06      | ) |      | $ | 0.03       |  
|Cumulative effect of change in accounting principle                                                       |  |                              | (0.00      | ) |      |   |           |  
|                                                                                                          |  |                              |            |   |      |   |            |  
|Diluted EPS                                                                                               |  | $                            | (0.06      | ) |      | $ | 0.03       |  
|                                                                                                          |  |                              |            |   |      |   |            |  



All classes of the
Companys common stock share equally in the earnings and losses of the Company, and, accordingly, EPS is the same for each class of common stock.



7



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##### Table of Contents

At March 31, 2003 and 2004, 64.9 million and 82.9 million, respectively, of convertible shares of Series D Preferred
Stock were excluded from the calculation of diluted EPS since the effect was anti-dilutive.



At March 31, 2003, 15.4 million warrants and 8.4 million options to purchase common stock were excluded from the calculation of diluted EPS since the effect was anti-dilutive.



Note 9  Commitments and Contingencies



Until April 2005, the Company may be required to share radio frequency
spectrum with existing fixed microwave licensees operating on the same spectrum as the Company. To the extent that the Companys PCS operations interfere with those of existing microwave licensees, the Company is required to pay for the
relocation of the existing microwave station paths to alternate spectrum locations or transmission technologies. The FCC adopted a transition plan, so that if the relocation of a microwave user benefits more than one PCS licensee, all benefiting PCS
licensees are required to share the relocation costs. After the expiration of the FCC mandated transition and cost sharing plans in April 2005, any remaining microwave user operating in the PCS spectrum must relocate if it interferes with a PCS
licensees operation, and it will be responsible for its own relocation costs. The Company does not believe the costs to relocate existing microwave station paths to alternate spectrum locations or transmission technologies will be material to
the Companys financial position or results of operations.



The Company entered into non-cancelable purchase agreements with a vendor for the acquisition of expansion carriers installed in base stations which are recorded in property and equipment upon shipment. Under these agreements, the Company
agrees to pay for the base stations upon shipment, and the expansion carriers at the earlier of the date the carrier is turned on or twelve months from the shipment date of the base station for the first expansion carrier, and the earlier of the
date the carrier is turned on or twenty-four months from the shipment date of the base station for the second expansion carrier. Outstanding obligations under these purchase agreements were $22.1 million and $21.7 million at December 31, 2003 and
March 31, 2004, respectively. Of the these amounts $13.6 million and $12.8 million were included in accounts payable and accrued expenses at December 31, 2003 and March 31, 2004, respectively, and $8.5 million and $8.9 million, respectively, were
included in other long-term liabilities.



Litigation



The Company is involved in various claims and legal
actions arising in the ordinary course of business. The ultimate disposition of these matters is not expected to have a material adverse impact on the Companys financial position, results of operation or liquidity.



Note 10  Supplemental Cash Flow Information



The change in accounts payable and accrued expenses for purchases of
property and equipment was $4.8 million and $24.1 million for the three month period ended March 31, 2003 and 2004, respectively.



Note 11  Subsequent Event



On April 15, 2004, upon receiving FCC approval, the Company purchased four additional PCS licenses to expand the Sacramento market for approximately $10.9
million.



8



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##### Table of Contents

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



This quarterly report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as
amended. These forward-looking statements are subject to risks and uncertainties. You should not place undue reliance on these statements. Forward-looking statements include information concerning possible or assumed future results of operations,
including descriptions of our business strategies. These statements often include words such as anticipate, expect, plan, intend and similar expressions. We base these statements on assumptions that we
have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. As you read and consider
this report, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions,
you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. These factors include, but are not
limited to, the following:



| |  | managements expectations and estimates concerning future financial performance, financing plans and the effect of competition;
| | - | -------------------------------------------------------------------------------------------------------------------------------



| |  | pricing and market strategies, and expansion, consolidation and other activities of our competitors;
| | - | ----------------------------------------------------------------------------------------------------



| |  | our leverage and debt service requirements;
| | - | -------------------------------------------



| |  | anticipated trends and general economic and business conditions in the wireless communications industry, both nationally and in our markets; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  | existing and future governmental regulation.
| | - | --------------------------------------------



All future written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by our
cautionary statements. We do not intend to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events, except as required by law.



Overview



We are a wireless communications carrier that offers digital wireless voice and data service in the metropolitan areas of
Atlanta, Miami, San Francisco and Sacramento. We initiated the commercial launch of our Miami, Atlanta and Sacramento markets in the first quarter of 2002, and our San Francisco market in September 2002. The year 2003 was the first full year of
operations in all our four market clusters. We sell products and services to customers through our 49 company-owned retail stores as well as through relationships with indirect retailers. We primarily offer two monthly calling plans to our
customers. One plan provides customers with unlimited calling within the local calling area for $35 per month; the other plan, provides customers with unlimited calling from within a local calling area to anywhere within the continental United
States for $40 per month. For additional fees, we also provide caller ID, voicemail, text messaging, camera functions, downloads of ring tones, games and content applications, international long distance and other value-added services. In 2002, we
offered only one handset model to customers for $149. Our offering of handset models has grown, and as of March 31, 2004, we offered seven different handset models priced from $109 to $239. As of March 31, 2004, we had 1,150,954 customers.



Our principal executive offices are located at 8144 Walnut
Hill Lane, Suite 800, Dallas, Texas 75231, and our telephone number is (214) 265-2550. Our website URL is www.MetroPCS.com. References to we, us, our or MetroPCS, Inc. refer to MetroPCS,
Inc. and its subsidiaries.



9



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##### Table of Contents

Critical Accounting Policies and Estimates



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. You should read this discussion and analysis in conjunction with our consolidated financial statements and
the related notes contained elsewhere in this report. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, inventory valuations, deferred income taxes, and the impairment of long-lived and
indefinite-lived assets. 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. Disenabling service for non-payment is known as hotlining. We do not recognize revenue on
hotlined customers. In connection with their audit of our financial statements for the year ended December 31, 2003, our independent accountants reported a material weakness in our internal controls over revenue reporting. See our Annual Report on
Form 10-K for the year ended December 31, 2003 for further discussion.



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. Customers have the right to return handsets within a
specified time or usage, whichever occurs first. Of the total paid by the customer for the activation, we record an activation fee of $15, which, since July 1, 2003, is generally recognized in equipment revenue at the time service is activated. We
record an estimate for returns at the time of recognizing revenue.



Beginning July 1, 2003, we implemented EITF No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables, prepared by the Emerging Issues Task Force, or EITF, of the Financial Accounting Standards Board, or FASB.
EITF 00-21 requires us to allocate amounts charged to customers between the sale of handsets and the sale of wireless telecommunication services on a relative fair value basis. This has resulted in the amount collected from the customer being
allocated to the sale of the handset and to the first months service fee. As a result of this treatment, activation fees included in the consideration at the time of sale are recorded as handset revenue. Prior to the adoption of EITF 00-21, we
had deferred activation fee revenue and amortized these revenues over the average life of our customers. The existing deferred revenue at July 1, 2003 is being amortized over the average life of our customers. On October 1, 2003, we changed the
estimated average customer life from 25 months to 14 months, based on a historical disconnect rates, resulting in an increase in activation revenue of $5.1 million in the fourth quarter of 2003 over amounts that would have been recognized using the
prior estimated average life.



Allowance for Doubtful Accounts and Returns



We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our indirect retailers to pay for equipment purchases and for returns. If the financial condition of a material portion of our indirect retailers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.



10



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##### Table of Contents

Inventory



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. If actual market conditions are less favorable than those projected, additional inventory write-downs may be required.



Deferred Income Tax Asset



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 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 income 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 reserve positions and changes to 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 would require the use of cash. Favorable resolution
would be recognized as a reduction to the effective rate in the year of resolution. The tax reserves are presented on the balance sheet in other long term liabilities.



Impairment of Long-Lived Assets and Indefinite Lived Assets



We assess the impairment of long-lived assets, other than indefinite-lived intangible 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.



Our primary indefinite-lived intangible assets
are our FCC licenses. We test investments in our FCC licenses for impairment annually or more frequently if events or changes in circumstances indicate that our FCC licenses may be impaired. The impairment test consists of a comparison of the fair
value with the carrying value. We segregate our FCC licenses by regional market for the purpose of performing the impairment test as each geographical region is uniquely different.



Valuation of Common Stock



Historically, we have assessed the value of our common stock at the end of each reporting period for the purpose of determining stock compensation on
variable stock options. This valuation was also used to determine deferred compensation, if any, on non-variable stock options awards granted in the period, as well as for purposes of determining whether a beneficial conversion feature was in
existence at each draw date of our Series D cumulative convertible redeemable participating preferred stock. Factors we considered were recent sales of stock to third parties, enterprise valuation ranges provided by third parties, the liquidation
preference of our outstanding preferred stock, significant milestones achieved in the business, as well as the overall economic climate of the wireless industry.



Customer Recognition and Disconnect Policies



When a new customer subscribes to our service, the first month of service and activation fee is included with the handset
purchase. Under GAAP, we are required to allocate the purchase price to each of the handset, the first month of service and the activation fee. Generally, the amount allocated to the handset will be less than our



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##### Table of Contents

cost, and this difference is included in cost per gross addition, or CPGA. We recognize new customers as gross additions
upon activation of service. We offer our customers the MetroPCS Promise, which allows a customer to return a newly purchased handset for a full refund prior to the earlier of seven days or 60 minutes of use. Customers who return their phones under
the MetroPCS Promise are reflected as a reduction to gross 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 handset will be
disenabled, or hotlined, and the customer will not be able to make or receive calls on our network. 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 his handset is unhotlined and 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, upon reactivation, we charge a $15 reconnect fee to reestablish service and the revenue associated with this fee is deferred and recognized over the
estimated life of the customer.



Revenues



We derive our revenues from the following sources:



Service. We sell wireless personal communications services. The
various types of service revenues associated with wireless communications services for our customers include monthly recurring charges for airtime, monthly recurring charges for optional features (including voicemail and text messaging) and charges
for long distance service. Service revenues also include intercarrier compensation and non-recurring activation service charges to customers to the extent not allocated to handset revenue. See Critical Accounting Policies and Estimates 
Revenue Recognition.



Equipment. We sell wireless
personal communications handsets and accessories that are used by our customers in connection with our wireless services. This equipment is also sold to indirect retailers to facilitate distribution to our subscribers.



Costs and Expenses



Our costs and expenses include:



Cost of Service. The major components of our cost of service are:



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



| |  | Intercarrier Compensation. We pay charges to other communications 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. Historically, these
charges have been declining on a per minute basis and we expect them to continue to decline, due principally to competitive pressures and new technologies.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Cell Site Costs. We incur expenses for the rent of towers, network facilities, engineering operations, field technicians and related utility and maintenance charges.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



Cost of Equipment. We purchase personal
communications handsets and accessories from third-party vendors to resell to our customers and indirect retailers in connection with our services. We subsidize the sale of handsets to encourage the sale and use of our services. We do not
manufacture any of this equipment.



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##### Table of Contents

Selling, General and Administrative Expenses. Our selling expense includes advertising and
promotional costs associated with capturing new customers and fixed charges such as store rent and retail associates salaries. General and administrative expense includes support functions including technical operations, finance, accounting,
human resources, information technology and legal services.



Non-Cash Compensation.We record compensation expense associated with employee stock options issued below estimated fair market value at the date of grant. In addition, we record compensation expense at the end of each reporting
period with respect to our variable stock options.



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 ten years for network infrastructure assets, three
to seven years for office equipment, including computer equipment, and three to seven years for furniture and fixtures. Leasehold improvements are amortized over the term of the respective leases or the estimated useful life of the improvement,
whichever is shorter.



Interest Expense and Interest
Income. Interest expense consists of interest on our FCC notes based on an estimated fair market borrowing rate at the time of issuance, of which 6.5% is paid in cash, and interest on our senior notes. Interest income is earned primarily on our
cash and cash equivalents.



Income Taxes. As a result of
our operating losses and additional depreciation available under federal tax law in 2003, we have paid no federal income tax to date. In addition, we have paid an immaterial amount of state income taxes to date.



Results of Operations



Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003



Set forth below is a summary of certain financial information for the
periods indicated:



|                                             |  |                             |        |      |   |         |  |     |  
|-------------------------------------------- |  | --------------------------- | ------ | ---- | - | ------- |  | --- | -
|                                             |  | Three Months EndedMarch 31, |        |      |  
|                                             |  | 2003                        |        | 2004 |   | Change  | 
|                                             |  | (Dollars in Thousands)      |        |      |  
|GAAP Measures:                               |  |                             |        |      |   |        
|Revenues                                     |  |                             |        |      |   |         |  |     |  
|Service revenues                             |  | $                           | 75,999 |      | $ | 132,921 |  | 75  | %
|Equipment revenues                           |  |                             | 23,399 |      |   | 40,077  |  | 71  | %
|Cost of service                              |  |                             | 25,929 |      |   | 40,909  |  | 58  | %
|Cost of equipment                            |  |                             | 44,213 |      |   | 64,047  |  | 45  | %
|Selling, general and administrative expenses |  |                             | 18,046 |      |   | 28,916  |  | 60  | %
|Non-cash compensation                        |  |                             | 241    |      |   | 3,256   |  |     | *
|Depreciation and amortization                |  |                             | 9,047  |      |   | 12,774  |  | 41  | %
|Interest Expense                             |  |                             | 1,755  |      |   | 5,572   |  | 217 | %
|Net income                                   |  |                             | 9      |      |   | 10,837  |  |     | *

---

|* | Not meaningful
|- | --------------



Revenues. For the three months ended March 31, 2004, our total revenues increased $73.6 million, or 74%, to $173.0 million from $99.4 million for
the comparable period in 2003.



13



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##### Table of Contents

Service revenues accounted for 77% of total revenues and equipment revenues accounted for 23% of total
revenues for the three months ended March 31, 2004. Service revenues increased $56.9 million or 75% to $132.9 million for the three months ended March 31, 2004 from $76.0 million for the three months ended March 31, 2003. The increase was
attributable to the continued strong demand for service in our four market clusters resulting in a 73% increase in average number of customers.



Equipment revenues increased by $16.7 million, or 71%, to $40.1 million for the three months ended March 31, 2004 from $23.4 million for the three months
ended March 31, 2003. During 2003, we significantly expanded our handset product line, leading to significant upgrade sales to existing customers. Handset sales to existing customers increase to $16.7 million of revenue during the first quarter of
2004 as compared to $1.0 million of revenue in the first quarter of 2003. The remaining increase was attributable to the revenues generated by new customers selecting handsets from our expanded product line.



Cost of Service.Cost of service increased by $15.0 million, or 58%,
to $40.9 million for the three months ended March 31, 2004 from $25.9 million for the three months ended March 31, 2003. This increase was due to the overall growth of our business and increase in our customer base, including a $4.2 million increase
in long distance costs, a $3.8 million increase in call center expenses, and a $1.1 million increase in billing expenses and a $0.9 million in E-911 fees.



Cost of Equipment. Cost of equipment increased by $19.8 million, or 45%, to $64.0 million for the three months ended March 31, 2004, from $44.2
million for the three months ended March 31, 2003. This increase was attributable to the overall increase in customers as well as our increase in the number of equipment upgrades purchased by our existing customers due to our offering a broader line
of handsets in 2004. Cost of equipment related to existing customers totaled $21.2 million during the first quarter of 2004 as compared to $2.5 million for the same period last year.



Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $10.9 million or
60%, to $28.9 million for the three months ended March 31, 2004 from $18.0 million for the three months ended March 31, 2003. Selling expenses increased by approximately $2.3 million as a result of increased sales and marketing activities, including
advertising expenses aimed at growing our customer base. General and administrative expenses increased by $8.6 million. The increase was due to the overall growth of our business, including a $2.4 million increase in property taxes, a $2.0 million
in software and data services, a $1.6 million increase in professional services, a $1.1 million increase in credit card and bank charges, a $0.5 million increase in employee related costs and a $1.0 million increase in building lease, insurance and
other expenses.



Non-Cash Compensation. Non-cash
compensation was $3.3 million for the three months ended March 31, 2004, compared to $0.2 million for the three months ended March 31, 2003. The increase was primarily due to the increase in the estimated fair market value of our stock, which
resulted in a $3.0 million charge related to outstanding options accounted for under variable accounting.



Depreciation and Amortization. Depreciation and amortization expense increased $3.7 million or 41% to $12.8 million for the three months ended
March 31, 2004 from $9.0 million for the three months ended March 31, 2003. The increase related primarily to the increase in network assets in service for the period. In-service base stations and switching equipment increased by 33% from the three
months ended March 31, 2003. In addition, we had 177 more cell sites in service at March 31, 2004 than at March 31, 2003. We expect depreciation to continue to increase due to the additional cell sites and switches that we plan to place in service
to meet future customer growth and usage.



Interest
Expense. Interest expense was $5.6 million for the three months ended March 31, 2004, compared to $1.8 million for the three months ended March 31, 2003. The increase is due to interest on our $150.0 million of 103⁄4% senior notes issued in
September 2003.



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Net Income. We had net income of $10.8 million for the three months ended March 31, 2004, compared
to $9 thousand for the comparable period in 2003.



Set forth
below is a summary of certain non-GAAP financial information for the periods indicated:



|                                       |  |                              |         |   |      |   |           |        |  |     |   
|-------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | --------- | ------ |  | --- | --
|                                       |  | Three Months Ended March 31, |         |   |      |  
|                                       |  | 2003                         |         |   | 2004 |   |           | Change | 
|Non-GAAP Measures:                     |  |                              |         |   |      |   |           |        |  |     |   
|Customers:                             |  |                              |         |   |      |   |           |        |  |     |   
|End of period                          |  |                              | 708,965 |   |      |   | 1,150,954 |        |  | 62  | % 
|Net additions                          |  |                              | 195,481 |   |      |   | 174,055   |        |  | (11 | )%
|Churn                                  |  |                              |         |   |      |   |           |        |  |     |   
|Average monthly rate                   |  |                              | 3.5     | % |      |   | 3.8       | %      |  | 9   | % 
|ARPU                                   |  | $                            | 39.50   |   |      | $ | 40.00     |        |  | 1   | % 
|CPGA                                   |  |                              | 104.97  |   |      |   | 96.74     |        |  | (8  | )%
|CCPU                                   |  |                              | 18.64   |   |      |   | 18.80     |        |  | 1   | % 
|Adjusted EBITDA (dollars in thousands) |  |                              | 11,210  |   |      |   | 39,126    |        |  | 249 | % 



Customers.Net
customer additions were 174,055 for the three months ended March 31, 2004, bringing our total customers to 1,150,954 as of March 31, 2004, an increase of 62% over the customer total as of March 31, 2003. Since March 31, 2003, we have expanded our
network, offered new handsets and service plans, and expanded our distribution network. Although we have a limited operating history, we have historically generated the highest number of net customer additions during the first calendar quarter, with
the second highest number being generated during the fourth calendar quarter.



Churn.The average monthly rate of customer turnover, or churn, was 3.8% and 3.5% for the three months ended March 31, 2004 and 2003, respectively. 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 resubscribed to our service, divided by (b) the sum of the average monthly number of customers during that period.



Average Revenue Per User.Average revenue per user, or ARPU, was
$40.00 and $39.50 for the three months ended March 31, 2004 and 2003, respectively. ARPU represents (a) service revenues less activation revenues and 911 charges for the measurement period, divided by (b) the average number of customers during such
period divided by (c) the number of months in such period. The $0.50 increase, or 1%, was primarily the result of the increase in customers electing the unlimited long distance service plan, offset in part by an increase in the number of customers
that do not pay their service while in hotlined status. Revenue is only recognized for customers who pay for service. However, hotlined customers are included in our customer base until they are deactivated, and are therefore counted in the
denominator of the ARPU calculation although there is no corresponding revenue recorded for these hotlined customers in the numerator. Once a customer is deactivated, they are removed from the customer base and no longer included in the denominator
of the ARPU calculation. For more details regarding our calculation of ARPU, refer to Reconciliation of Non-GAAP Financial Measures below.



Cost Per Gross Addition.Cost per gross addition or CPGA was $96.74 and $104.97 for the three months ended March 31, 2004 and 2003, respectively.
The $8.23 decrease, or 8%, was primarily the result of lower handset subsidies and spreading selling costs over a larger number of gross additions. CPGA is determined by dividing (a)



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selling expenses plus the total cost of equipment associated with transactions with new customers less activation
revenues and equipment revenues associated with transactions with existing 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, including handset upgrade transactions, are excluded, as these costs are incurred specifically for existing customers. For more detail regarding our calculation of CPGA, refer to Reconciliation of Non-GAAP Financial Measures
below.



Cash Cost Per User.Cash cost per user, or CCPU,
was $18.80 and $18.64 for the three months ended March 31, 2004 and 2003, respectively. The $0.16 increase, or 1%, was primarily the result of increased customer retention expense and customer long distance costs that were partially offset by
spreading operating costs over a larger customer base. CCPU is calculated by dividing (a) cost of service plus general and administrative expenses (excluding non-cash compensation) and equipment costs associated with transactions with existing
customers, less E-911 charges and equipment revenues associated with existing customers during the measurement period by (b) the average number of customers during such periods divided by (c) the number of months in such period. For more detail
regarding our calculation of CCPU, refer to Reconciliation of Non-GAAP Financial Measures below.



Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization.Adjusted earnings before interest, taxes, depreciation and amortization,
or adjusted EBITDA, was $39.1 million and $11.2 million for the three months ended March 31, 2004 and 2003, respectively. For more details regarding the calculations of adjusted EBITDA, refer to Reconciliation of Non-GAAP Financial
Measures below.



Liquidity and Capital Resources



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 network construction, funding of operating
cash flow losses and other working capital costs, debt service and financing fees and expenses. We estimate that our aggregate capital expenditures for 2004, which will be primarily associated with our efforts to increase the capacity of our
network, will be approximately $210 million, of which $49.2 million had been incurred through March 31, 2004. We believe our cash on hand and cash generated from operations will be sufficient to meet our projected capital requirements for the
foreseeable future. Although we estimate that these funds will be sufficient to finance our continued growth, we may have additional capital requirements, which could be substantial, for future network upgrades, and advances in new technology.



Existing Indebtedness. As of March 31, 2004, we had
$193.1 million of total indebtedness. This indebtedness consists of $150.0 million of our senior notes, $43.5 million face amount of our FCC notes, which are recorded net of unamortized original issue discount of $4.2 million, and $3.8 million of
debt associated with our obligation to other carriers for the cost of clearing microwave links in areas covered by our licenses.



Historical Cash Flow. As of March 31, 2004, we had $185.1 million in cash and cash equivalents, as compared to $236.0 million at December 31, 2003.
Cash provided by operating activities was $24.4 million during the three months ended March 31, 2004 as a result of net income of $10.8 million, $25.2 million of non-cash charges consisting primarily of depreciation and amortization, deferred
expenses, accretion of interest and non-cash compensation, and $11.6 million of cash used for changes in working capital. Cash used in investing activities was $70.5 million during the three months ended March 31, 2004, primarily relating to capital
expenditures associated with increasing the capacity of our network and expanding the footprint of our network during the first quarter of 2004 and payments made during the three months ended March 31, 2004 for network equipment accrued at December
31, 2003. We will continue to upgrade our network capacity and improve the quality of our service to support our anticipated customer growth and satisfy competitive requirements. Cash used by financing activities was $4.7 million during the three
months ended March 31, 2004, primarily due to a $3.1 million repayment on our FCC debt.



We have realized significant increases in cash flows from operating activities and adjusted EBITDA during the three months ended March 31, 2004 and 2003 as the scale of our business and the size of our customer base
has



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grown. While we believe that our current business will continue to generate increasing cash flows from operating
activities and adjusted EBITDA in the long-term, accelerated near-term growth could adversely affect operating cash flows and adjusted EBITDA as a result of the costs required to attract new customers, including handset subsidies and increased
advertising and marketing expenses. As a result of our growth strategy, our cash flows from operating activities and adjusted EBITDA for the remainder of 2004 and for 2005 may decline as compared to recent historical periods.



Reconciliation of Non-GAAP Financial Measures



We utilize certain financial measures that are not calculated in accordance
with GAAP to assess our financial 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 operations 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.



Adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, average revenue per user, or ARPU, cost per gross addition, or CPGA, and cash cost per user, or CCPU, are an integrated set
of non-GAAP financial measures utilized by our management to judge 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
wireless industry does not define each of these measures in exactly the same way, we believe that these measures (which are common in the wireless industry) facilitate key 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.



We have presented adjusted EBITDA because this financial measure, in combination with other GAAP and non-GAAP financial measures, is an integral part of
our internal reporting system utilized by management to assess and evaluate the performance of our business. Adjusted EBITDA is used by management to facilitate evaluation of our ability to meet future debt service, capital expenditure and working
capital requirements. Omitting interest, taxes and the enumerated non-cash items provides a financial measure that is useful to management in assessing operating performance because the cash our business operations generate enables us to grow. The
components of adjusted EBITDA include the key revenue and expense items for which our operating managers are responsible and upon which we evaluate their performance. Additionally, adjusted EBITDA is tied directly to the other key non-GAAP operating
measures we monitor, ARPU, CPGA and CCPU.



Adjusted EBITDA is a
supplement to GAAP financial information and should not be construed as an alternative to, or more meaningful than, net income (loss), as determined in accordance with GAAP, or cash flows from operating activities, as determined in accordance with
GAAP. We believe adjusted EBITDA is useful to investors as a means to evaluate our operating performance prior to financing costs, tax charges, non-cash depreciation and amortization expense, non-cash compensation charges, and certain other non-cash
items. The following table reconciles net income (loss) as determined in accordance with GAAP, to adjusted EBITDA for the periods indicated. We have also presented a reconciliation of adjusted EBITDA to net cash provided by (used in) operating
activities to provide information with respect to our ability to meet future debt service, capital expenditures and working capital requirements.



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Adjusted EBITDA



|                                                                |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                |  | Three Months EndedMarch 31, |        
|                                                                |  | 2003                        |         |   | 2004 |  
|Net income                                                      |  | $                           | 9       |   |      | $ | 10,837  |  
|Add back non adjusted EBITDA items included in net income:      |  |                             |         |   |      |   |         |  
|Non-cash compensation                                           |  |                             | 241     |   |      |   | 3,256   |  
|Depreciation and amortization                                   |  |                             | 9,047   |   |      |   | 12,774  |  
|Loss on sale of assets                                          |  |                             | 111     |   |      |   | 87      |  
|Interest expense                                                |  |                             | 1,755   |   |      |   | 5,572   |  
|Interest income                                                 |  |                             | (140    | ) |      |   | (616    | )
|Gain on extinguishment of debt                                  |  |                             |        |   |      |   | (201    | )
|Provision for income taxes                                      |  |                             | 113     |   |      |   | 7,417   |  
|Cumulative effect of change in accounting principle, net of tax |  |                             | 74      |   |      |   |        |  
|                                                                |  |                             |         |   |      |   |         |  
|Adjusted EBITDA                                                 |  |                             | 11,210  |   |      |   | 39,126  |  
|                                                                |  |                             |         |   |      |   |         |  
|Interest expense, net of interest income                        |  |                             | (1,615  | ) |      |   | (4,956  | )
|Bad debt expense                                                |  |                             | 749     |   |      |   | 433     |  
|Accretion of asset retirement obligation                        |  |                             | 25      |   |      |   | 79      |  
|Non-cash interest                                               |  |                             | 784     |   |      |   | 688     |  
|Deferred rent                                                   |  |                             | 414     |   |      |   | 435     |  
|Cost of abandoned cell sites                                    |  |                             | 477     |   |      |   | 183     |  
|Working capital changes                                         |  |                             | (16,870 | ) |      |   | (11,620 | )
|                                                                |  |                             |         |   |      |   |         |  
|Net cash provided by (used in) operating activities             |  | $                           | (4,826  | ) |      | $ | 24,368  |  
|                                                                |  |                             |         |   |      |   |         |  



We believe ARPU is a
useful measure to evaluate our per-customer service revenue realization and to assist in forecasting our future service revenues. 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.



Average Revenue per User (ARPU)



|                                        |  |                             |         |   |      |   |           |  
|--------------------------------------- |  | --------------------------- | ------- | - | ---- | - | --------- | -
|                                        |  | Three Months EndedMarch 31, |        
|                                        |  | 2003                        |         |   | 2004 |  
|Service revenue                         |  | $                           | 75,999  |   |      | $ | 132,921   |  
|Less: Activation revenues               |  |                             | (1,860  | ) |      |   | (3,186    | )
|E-911 revenues                          |  |                             | (1,166  | ) |      |   | (2,076    | )
|                                        |  |                             |         |   |      |   |           |  
|Net service revenues                    |  | $                           | 72,973  |   |      | $ | 127,659   |  
|                                        |  |                             |         |   |      |   |           |  
|Divided by: Average number of customers |  |                             | 615,876 |   |      |   | 1,063,815 |  
|                                        |  |                             |         |   |      |   |           |  
|ARPU                                    |  | $                           | 39.50   |   |      | $ | 40.00     |  
|                                        |  |                             |         |   |      |   |           |  



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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 provides a gauge to compare our average acquisition costs per new customer to that of other wireless communications providers.
The following table shows the calculation of CPGA for the periods indicated.



Cost per Gross Addition (CPGA)



|                                                          |  |                             |         |   |      |   |         |  
|--------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                          |  | Three Months EndedMarch 31, |        
|                                                          |  | 2003                        |         |   | 2004 |  
|Selling expenses                                          |  | $                           | 9,879   |   |      | $ | 12,214  |  
|Less: Activation revenues                                 |  |                             | (1,860  | ) |      |   | (3,186  | )
|Less: Equipment revenues                                  |  |                             | (23,399 | ) |      |   | (40,077 | )
|Plus: Equipment revenue not associated with new customers |  |                             | 1,035   |   |      |   | 16,729  |  
|Plus: Cost of equipment                                   |  |                             | 44,213  |   |      |   | 64,047  |  
|Less: Equipment costs not associated with new customers   |  |                             | (2,541  | ) |      |   | (21,201 | )
|                                                          |  |                             |         |   |      |   |         |  
|Gross addition expenses                                   |  | $                           | 27,327  |   |      | $ | 28,526  |  
|                                                          |  |                             |         |   |      |   |         |  
|Divided by: Gross customer additions                      |  |                             | 260,320 |   |      |   | 294,886 |  
|                                                          |  |                             |         |   |      |   |         |  
|CPGA                                                      |  | $                           | 104.97  |   |      | $ | 96.74   |  
|                                                          |  |                             |         |   |      |   |         |  



We believe cash cost
per user, or CCPU, is a useful measure to determine our operating efficiency and to gauge our customer cash costs in relation to those of other wireless communications providers. The following table shows the calculation of CCPU for the periods
indicated.



Cash Cost per User (CCPU)



|                                                            |  |                             |         |   |      |   |           |  
|----------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | --------- | -
|                                                            |  | Three Months EndedMarch 31, |        
|                                                            |  | 2003                        |         |   | 2004 |  
|Cost of service                                             |  | $                           | 25,929  |   |      | $ | 40,909    |  
|Plus: Equipment costs associated with existing customers    |  |                             | 2,541   |   |      |   | 21,201    |  
|Plus: Selling general and administrative expenses           |  |                             | 18,046  |   |      |   | 28,916    |  
|Less: Selling expenses                                      |  |                             | (9,879  | ) |      |   | (12,214   | )
|Less: E-911 expenses                                        |  |                             | (1,166  | ) |      |   | (2,076    | )
|Less: Equipment revenues associated with existing customers |  |                             | (1,035  | ) |      |   | (16,729   | )
|                                                            |  |                             |         |   |      |   |           |  
|Existing customer cash costs                                |  | $                           | 34,436  |   |      | $ | 60,007    |  
|                                                            |  |                             |         |   |      |   |           |  
|Divided by: Average number of customers                     |  |                             | 615,876 |   |      |   | 1,063,815 |  
|                                                            |  |                             |         |   |      |   |           |  
|CCPU                                                        |  | $                           | 18.64   |   |      | $ | 18.80     |  
|                                                            |  |                             |         |   |      |   |           |  



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As noted above, we consider this set of non-GAAP financial measures to be an integrated set of metrics for evaluating our
performance. The table below reconciles the aggregate revenue, expense and cost amounts used in calculating ARPU, CPGA and CCPU to adjusted EBITDA.



Reconciliation of ARPU, CPGA and CCPU to Adjusted EBITDA



|                                                             |  |                             |         |   |      |   |         |  
|------------------------------------------------------------ |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                             |  | Three Months EndedMarch 31, |        
|                                                             |  | 2003                        |         |   | 2004 |  
|Net service revenue as used to calculate ARPU                |  | $                           | 72,973  |   |      | $ | 127,659 |  
|Less: Gross addition expenses as used to calculate CPGA      |  |                             | (27,327 | ) |      |   | (28,526 | )
|Less: Existing customer cash costs as used to calculate CCPU |  |                             | (34,436 | ) |      |   | (60,007 | )
|                                                             |  |                             |         |   |      |   |         |  
|Adjusted EBITDA                                              |  | $                           | 11,210  |   |      | $ | 39,126  |  
|                                                             |  |                             |         |   |      |   |         |  



Item 3. Quantitative and Qualitative Disclosures about Market Risk



Market risk is the potential loss arising from adverse changes in market prices and rates, including interest rates. We do not enter into derivatives or
other financial instruments for trading, speculative or hedging purposes. Our outstanding indebtedness bears interest at fixed rates.



Investments in fixed rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value
adversely impacted due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities which
have seen a decline in market value due to changes in interest rates. Our investment securities are held for purposes other than trading. The fair value of investments held at March 31, 2004 approximated amortized cost.



The following table presents the estimated future outstanding long-term debt
at the end of each year and future required annual principal payments for each year then ended associated with the senior notes, capital leases and the credit facility financing based on our projected level of long-term indebtedness:



|                        |  |                           |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |   |  |   |       |  
|----------------------- |  | ------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ---------- | - | ----- | - |  | - | ----- | -
|                        |  | Years Ending December 31, |      
|                        |  | 2004                      |       |   | 2005 |   |       | 2006 |  |   | 2007  |   |  | 2008 |       |   | Thereafter |  
|                        |  | (Dollars in millions)     |      
|Fixed Rate Instruments  |  |                           |       |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |       |   |  |   |       |  
|103/4% senior Notes (1) |  | $                         | 150   |   |      | $ | 150   |      |  | $ | 150   |   |  | $    | 150   |   |            | $ | 150   |   |  | $ |      |  
|Fixed interest rate     |  |                           | 10.75 | % |      |   | 10.75 | %    |  |   | 10.75 | % |  |      | 10.75 | % |            |   | 10.75 | % |  |   | 10.75 | %
|Principal payments      |  |                           |      |   |      |   |      |      |  |   |      |   |  |      |      |   |            |   |      |   |  |   | 150   |  
|FCC government notes    |  |                           | 33    |   |      |   | 19    |      |  |   | 4     |   |  |      |      |   |            |   |      |   |  |   |      |  
|Fixed interest rate     |  |                           | 6.50  | % |      |   | 6.50  | %    |  |   | 6.50  | % |  |      | 6.50  | % |            |   | 6.50  | % |  |   | 6.50  | %
|Principal payments      |  |                           | 13    |   |      |   | 14    |      |  |   | 15    |   |  |      | 4     |   |            |   |      |   |  |   |      |  
|Microwave clearing      |  |                           | 4     |   |      |   | 4     |      |  |   | 4     |   |  |      | 4     |   |            |   | 4     |   |  |   |      |  
|Fixed interest rate     |  |                           | 6.50  | % |      |   | 6.50  | %    |  |   | 6.50  | % |  |      | 6.50  | % |            |   | 6.50  | % |  |   | 6.50  | %
|Principal payments      |  |                           |      |   |      |   |      |      |  |   |      |   |  |      |      |   |            |   |      |   |  |   | 4     |  

---

|(1) | Interest will accrete on the senior discount notes through February 2005 at which time the notes will begin to require cash payments of interest with the first semi-annual cash
interest payment due in August 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 4. Controls and Procedures



(a) Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and our Interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (which we refer to as the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and
Interim Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective.



(b) Changes in Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial reporting, as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



From
time to time, we are involved in litigation that we consider to be in the normal course of business. We are not party to any pending legal proceedings that we believe would, individually or in the aggregate, have a material adverse effect on our
financial condition or results of operations.



Item 2. Changes in Securities and Use of Proceeds



On January 16, 2004, we issued 255,840 shares of our Class C common stock, par value $0.0001 per share, to investors upon their exercise of a warrant to purchase common stock at an exercise price of $0.0002 per share,
for a total of $42.64. On February 13, 2004, we issued 8,756,040 shares of our Class C common stock, par value $0.0001 per share, to investors upon their exercise of warrants to purchase common stock at an exercise price of $0.0002 per share and
25,000 shares of our Class C common stock, par value $0.0001 per share, to a former employee upon the exercise of his stock option at an exercise price of $2.35 per share, for a total of $1,459.33 and $58,750.00, respectively. Also, on February 13,
2004, we issued 150,000 shares of our Class B common stock, par value $0.0001 per share to an investor upon the exercise of his warrant to purchase common stock at an exercise price of $0.0002 per share, for a total of $25.00. On March 2, 2004, we
issued 260,000 shares of our Class B common stock, par value $0.0001 per share, to one of our officers upon the exercise of his stock option at an exercise price of $0.1167 per share, for total proceeds of $30,342.00. On March 9 and 31, 2004, we
issued 51,064 and 25,000 shares of our Class C common stock, par value $0.0001 per share, to a member of our Board of Directors and an employee upon the exercise of their stock options at an exercise price of $2.35 per share, for total proceeds of
$120,000.40 and $58,750.00, respectively. The shares were issued in a transaction exempt from Section 5 of the Securities Act of 1933, as amended, pursuant to Rule 701 under the Securities Act.



Item 6. Exhibits and Reports on Form 8-K



(a)
Exhibits



|     |  |                                                                                                                                                       
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14 and 15d-14(a) under the Securities Exchange Act.                                     
|     | 
|31.2 |  | Certification of Interim Chief Financial Officer Pursuant to Rule 13a-14 and 15d-14(a) under the Securities Exchange Act.                             
|     | 
|32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    
|     | 
|32.2 |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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##### Table of Contents

(b) Reports on Form 8-K



Form 8-K, furnished March 1, 2004 pursuant to Item 12, reporting the issuance of a press release announcing financial results for the quarter and year ended December
31, 2003.



Form 8-K, filed March 17, 2004 pursuant to Item 5, reporting a press
release announcing that Dennis G. Spickler assumed newly created position of Vice President, Business Development.



Form 8-K, filed March 24, 2004 pursuant to Item 5, reporting the issuance of a press release announcing that MetroPCS Communications, Inc. filed a registration statement
on Form S-1.



**********



SIGNATURES



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



|                   |  |                |  |                                                                        
|------------------ |  | -------------- |  | -----------------------------------------------------------------------
|                   |  | MetroPCS, Inc.
|                   |  |               
|Date: May 11, 2004 |  | By:            |  | /s/ Roger D. Linquist                                                  
|                   |  |                |  | Roger D. Linquist                                                      
|                   |  |                |  | President, Chief Executive Officer, Secretary and Chairman of the Board
|                   |  |                |  | (Principal Executive Officer)                                          
|                   |  |               
|Date: May 11, 2004 |  | By:            |  | /s/ Michael N. Lavey                                                   
|                   |  |                |  | Michael N. Lavey                                                       
|                   |  |                |  | Vice President, Controller and Interim Chief Financial Officer         
|                   |  |                |  | (Principal Financial and Accounting Officer)                           



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