Q4 2012 Earnings Call Transcript
Transcript Call Date 02/26/2013

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the MetroPCS Communications Fourth Quarter and Year End 2012 Conference Call. During today's presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions.

This conference call is being recorded today February 26, 2013.

I would now like to turn the conference over to Mr. Jim Mathias, Director of Investor Relations for MetroPCS. Please go ahead, sir.

Jim Mathias - Director IR: Thank you, Matt and, good morning, everyone. I'm Jim Mathias and I'd like to welcome you to our fourth quarter and year end 2012 conference call. The speakers with me this morning are Roger Linquist, our Chairman and Chief Executive Officer; Tom Keys, our President and Chief Operating Officer; and Braxton Carter, our Vice Chairman and Chief Financial Officer.

The format for today's call is as follows. First, Roger will provide an overview of our business. Tom will then provide an update on a number of operational results and initiatives and finally, Braxton will review the financial highlights for the fourth quarter and year-end of 2012, followed by a question-and-answer session.

During today's call, we will refer to certain non-GAAP financial measures. We have reconciled these historical non-GAAP measures to GAAP measures in our earnings release, which is available at www.metropcs.com under the Investor Relations section.

Before I turn the call over to Roger, I want to remind you that information presented on this call may constitute forward-looking statements within the meaning of the Federal Securities Laws. Forward-looking statements or any statements not of historical fact and involve risks, assumptions and uncertainties that may not occur or could cause actual results for the timing of the events to materially differ from those made in the forward-looking statements.

Words such as believes, anticipates, expects, intends, plans, should, could, would, view, estimates, projects, will, and other similar expressions typically identify forward-looking statements. Forward-looking statements include but are not limited to statements we make regarding our future operational and financial plans, our estimates of capital expenditures, our prospects for success, our beliefs, our strategies and our positioning in the highly competitive wireless industry.

Furthermore included in our forward-looking statements are statements regarding our competitive positioning and promotional strategies, continued growth of the no-contract space, the advantages of and our plans with respect to 4G LTE, the growth and expansion of 4G LTE worldwide and development of the 4G ecosystem, the availability of 4G LTE handsets and their costs, reductions in cost to provide data services, consumer demand for data, the capacity of our 4G LTE network and timing of 4G Wireless For All, the projected cost savings, expected future benefits and synergies of the proposed business combination T-Mobile, our ability to reuse churn and increase the margin, manageability of our debt maturities, our positioning from balance sheet perspective, capital expenditure guidance and other statements which are not historical. Management may make additional forward-looking statements in response to questions.

Additionally, our forward-looking statements are subject to a number of risks, many of which are beyond our control, including but not limited to the competitive environment, our proposed business combination with T-Mobile, delays in income tax refunds and the other risk factors described in our earnings release, and our Annual Report on Form 10-K, quarterly reports on Form 10-Q, including our 10-Q for the third quarter ending September 30, 2012, our 10-Ks for the period ended December 31, 2012, which we will file, and current reports on Form 8-K, copies of which can be obtained free of charge from the SEC at www.sec.gov or from the Investor Relations section located under the About Us tab on our website or directly from contacting the Investor Relations department.

We encourage you to review these documents.

We have also provided supplemental slides that are available for download and printing on our Investor Relations website. We may refer to these slides during our prepared remarks and in response to questions. We would also like to draw your attention to the Safe Harbor statement in such slides as it provides additional information on our forward-looking statements. I’d like to remind you that the results for the fourth quarter and full year 2012 may not be reflective of results for any subsequent periods. For anyone listening to a tape or webcast replay or reviewing a written transcript of today's call, please note that all information presented is current and should be considered valid only as of February 26, 2013, regardless of the day reviewed, read or replayed.

MetroPCS claims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or developments or otherwise except as required by law. The Company does not plan to update or reaffirm guidance except through a formal public disclosure pursuant to Regulation FD. Certain terms that are used in today's call are registered trademarks of MetroPCS. We intend to file our Annual Report on Form 10-K for period ended December 31, 2012 with the SEC by March 29.

At this time, I'd like to turn the call over to our Chairman and Chief Executive Officer, Roger Linquist.

Roger D. Linquist - Chairman and CEO: Thank you, Jim. I want to make a few comments before Tom and Braxton walk you through operational and financial results. For a few years now the wireless experience has been evolving. With a move towards high-capacity broadband networks and smartphones, the main focus for many wireless subscribers is easy access to high-speed wireless data and more diverse set of data applications.

In 2009, we saw this dramatic shift in consumer demand, and we set about to build the first commercial 4G LTE network in the U.S. We then worked fully to leverage our capabilities afforded by our high-speed 4G LTE network through the launch of 4G LTE For All. Now early in 2013, and less than six months into our 4G LTE For All initiative, I can already see that subscribers enjoy superior experience on their 4G LTE smartphones.

A tremendous change has occurred in wireless during the past couple of years, more than in the prior decade. Wireless providers around the world are building networks around 4G LTE technology. With this worldwide adoption of 4G LTE touchscreen smartphones, prices have started to decline as volumes have increased. We anticipate these price trends will accelerate in the future and our subscribers will ultimately reap the benefit.

During 2012, we transformed our Company to be the leading pay-in-advance no-annual contract provider of 4G LTE service. We began 2012 with just over 310,000 subscribers utilizing 4G LTE. Throughout 2012, we introduced the number of 4G LTE smartphones at lower price points and with our legacy of industry disrupting service plans we introduced 4G LTE For All in September of 2012.

We also introduced Rich Communication Services with a joint client, which is now just emerging in Europe as a premier service delivery platform. With the high-speed 4G LTE network and differentiated services we can distance ourselves from MVNOs and other prepaid providers.

I'm pleased to report that we ended this year with over 2.2 million subscribers on 4G LTE service or 26% of the total subscriber base, all enjoying higher speed and more robust services. As today on this call I'm very pleased to announce that we have over 3 million subscribers on 4G LTE a remarkable achievement in effectively the previous six months.

Looking to the future our proposed business combination with T-Mobile allows us to create a leading value carrier in the U.S. with a spectrum to provide us with a clear path towards a nationwide 4G LTE network. This superior spectrum position eventually reaches 20x20 megahertz in 90% of the top 25 major metropolitan areas and is the platform for future growth.

We filed our Definitive Proxy on February 25, 2013, and we have set our meeting date for March 28, 2013. Currently, we anticipate closing of the transaction in early April. Post-closing, the combined company will possess much greater spectrum depth. In MetroPCS coverage areas prior to the combination, we had an average of 22-megahertz in our metropolitan areas. Following this combination, through the addition of T-Mobile spectrum, our metropolitan areas will have an average depth of over 80-megahertz. With increased spectrum, our wireless subscribers will enjoy a superb wireless experience.

Also, after combining the companies, we will eventually be able to offer seamless nationwide 4G LTE coverage. Additionally, with nationwide coverage utilizing the T-Mobile network, we can expand the MetroPCS pay-in-advance platform into many new major metropolitan areas. Clearly, the combined company will be a value leader within the fastest-growing part of the wireless industry.

Synergies, we believe this combination will deliver 5 billion to 6 billion of network synergies and approximately 1 billion in in non-network synergies. With a total of 6 billion to 7 billion in estimated synergies, we are very excited about the ability to create substantial shareholder value. We continue to be enthusiastic about the combination and look forward to the shareholder vote in closing. Post-closing, we believe MetroPCS legacy of being the best deal in town combined with T-Mobile's Challenger initiative will prove to be very attractive for wireless customers throughout the U.S.

Now, I'll turn the call over to Tom.

Thomas C. Keys - President and COO: Thank you, Roger. Good morning, everyone. On this morning's call, I will talk about our fourth quarter and year end 2012 results, our 4G LTE transformation, and how we are approaching our pending business combination with T-Mobile.

During 2012, while preparing for our 4G LTE initiatives our primary focus was on generating adjusted EBITDA and cash flow over customer growth. In September of 2012 we introduced our 4G LTE For All campaign. At the end of this year, we're about four months into our major transformation. During the fourth quarter, we are pleased with the interest our subscribers showed towards 4G LTE and their subsequent migration towards these services. We ended 2011 with approximately 3% of subscribers on a 4G LTE plan. By the end of 2012, coinciding with the launch of 4G for all, we saw a dramatic increase in 4G LTE penetration.

We ended 2012 with over 2.2 million subscribers on a 4G LTE plan, or 26% of total subscribers. While total gross additions to client on a year-over-year basis due primarily to a de-emphasis on CDMA growth, interest in 4G LTE remains strong, and 57% of all gross additions during the quarter were 4G LTE smartphones. Upgrades in the fourth quarter totaled 14% of the base and approximately 78% of upgrades were to a 4G LTE handset.

During the quarter, approximately 73% of total handset sold were smartphones and approximately 55% of total subscribers were on a smartphone plan at the end of the fourth quarter. Family plan penetration at the end of the quarter was approximately 37%. We are pleased with the momentum of the migration of the base to 4G LTE thus far. It's important to realize that we're only four months into this transformation and subscriber acceptance to our offer has been strong and steady.

Looking at the bigger picture, this continued focus on migrating subscribers for 4G LTE will allow a combined MetroPCS T-Mobile to have a higher percentage of the base using an LTE network, which in turn reduces the total amount of CDMA users that will need to migrate off that network during the next 24 months.

We continue to see an improved churn profile from our 4G LTE subscribers as on average 4G LTE churn has been at least 100 basis points lower than consolidated churn. Currently 4G LTE subscribers total over 3 million, representing over 34% of our subscriber base.

Going forward, our focus will continue to be on the transformation of business to 4G LTE ensuring that we provide our subscribers with the quality network experience and supporting our distribution partners as we reach out in the market with our new We Have It, messaging campaign.

We are dedicated towards exceeding customer expectations and are pleased to have been recognized by J.D. Power as being ranked number one for 2013 in the entire U.S. prepaid wireless segment and delivering an outstanding customer care experience.

In the first quarter we introduced Simplified 4G LTE service plans, which offer subscribers unlimited talk, text and 4G LTE data speeds for $60 per month. Our subscribers continue to demand cutting-edge handsets and we currently offer 10 different for 4G LTE smartphones.

As we move further along into 2013 we are looking forward to completing the business combination with T-Mobile. Once completed, the opportunities presented with this business combination will allow our distribution partners the ability to grow as we open up new greenfield metropolitan areas previously unavailable to MetroPCS.

Over time, we will be in a position to sell services on a larger and faster network; when the migration to the T-Mobile network happens, opportunities such as BYOD, bring-your-own-device become a reality and a tremendous advantage for our distribution partners. New devices, our faster network experience, advertising and branding scale, coupled with new market expansion are just a few of the combination benefits awaiting our distribution partners in 2013.

Now I'll turn the call over to Braxton.

J. Braxton Carter - Vice Chairman and CFO: Thank you Tom. Good morning. We ended the quarter with 93,000 net losses and ended the year with 460,000 net losses. At the end of the fourth quarter, we served approximately 8.9 million total subscribers, a decrease of 5% from fourth quarter 2011 and up 9% over the past two years. The decrease in subscriber additions we believe is primarily attributable to our focus on generating adjusted EBITDA and cash flow versus CDMA customer growth, competitive pressures, continued economic pressures and a lack of economic recovery and customer expectations for high-speed 4G data service.

Adjusted EBITDA for the fourth quarter was $307 million, a decrease of 15% year-over-year. Our adjusted EBITDA margin for the quarter was 27.9%. For the year, we have generated record adjusted EBITDA of over $1.5 billion. Our adjusted EBITDA margin for the year was 33.3%. We have a very strong balance sheet and substantial liquidity with $2.6 billion in cash and short-term investments at year end. Our total leverage as of December 31, 2012, was 3.16 times computed in accordance with the indentures governing our senior notes. We believe our maturity schedule is very manageable, with our first substantial maturity of approximately $1 billion coming due in November 2016. Our weighted average cost of debt for the fourth quarter was approximately 5.8%.

The majority of our debt is fixed by its nature or through interest rate swaps. We believe we are very well positioned from a balance sheet perspective. Churn for the quarter was 3.6%, down 10 basis points when compared to the fourth quarter of 2011 and to the third quarter of 2012. The decrease in churn was primarily driven by normal seasonal effects related to traditional retail selling periods, continued investments in our network and lower year-to-date subscriber growth.

As Tom alluded to, our 4G LTE churn for the quarter was approximatley 2.3%. Our fourth quarter 2012 ARPU was $40.86, up $0.31 on a year-over-year basis and up $0.36 on a sequential basis. The increase in ARPU was primarily attributable to continued demand for our 4G LTE service plans, partially offset by promotional service plans. For the fourth quarter, our CPGA was $228, up $62 over the fourth quarter of 2011. The increase is primarily driven by a 29% decrease in gross additions, as well as increased promotional activities when compared to the three months ended December 31, 2011.

Our CPU for the quarter was $21.91 as compared to $20 in the prior year's fourth quarter. This year-over-year increase was primarily driven by the increase in retention expense for existing customers as well as the increasing costs associated with our 4G LTE network upgrade and increase in commission paid to our dealers for customer reactivation and an increase in legal and professional fees.

These items were partially offset by a decrease in long-distance cost and taxes and regulatory fees. During the quarter we experienced $5.62 CPU directly related to handset upgrades, compared to $4.36 in the prior year's fourth quarter.

I'd now like to highlight a few items from the income statement and cash flow statement. In the fourth quarter our service revenue and cost to service decreased 3% and 6%, respectively to approximately $1.1 billion and $360 million, respectively over the same quarter in 2011.

We generated $333 million in cash from operating activities in the quarter. We generated $32 million in consolidated net income during the fourth quarter or $0.09 per share. For the full year 2012 we generated $394 million in consolidated net income or $1.07 per share. This amount includes a $53 million gain on a settlement related to certain securities that were recognized during the year as well as $13 million in expenses net of tax incurred related to the proposed business combination for T-Mobile.

On a non-GAAP basis excluding the gain on settlement as well as the expenses related to the proposed business combination agreement, net income would have been $354 million or $0.97 per common share, up $0.15 per common share, an increase of 18% over the prior year. We incurred capital expenditures of $258 million during the fourth quarter, and during the full year 2012, we incurred capital expenditures of $846 million. For the year ended December 31, 2012, our unlevered free cash flow was over $650 million. Our current estimate for 2013 capital expenditures is $800 million to $900 million.

Now we'll move to Q&A. Operator?

Transcript Call Date 02/26/2013

Operator: Phil Cusick, JPMorgan.

Philip Cusick - JPMorgan: Let's start with upgrades, can you give me an idea of -- historically, upgrades have picked up pretty aggressively from 4Q to 1Q. Would you expect that to happen again this quarter and given how expensive each of the upgrades were, should we see that that mix start to come down a little bit as these 4G phones get a little less expensive or should we expect that per device subsidy to remain high?

Thomas C. Keys - President and COO: Phil, it was fully untrusting looking a little bit at the upgrade rate for the fourth quarter. It came in at 14% of the base compared to 13% of the base in the fourth quarter of 2011, so it was up slightly. Some of our initial estimates were higher from an upgrade standpoint. What was really interesting with the phenomena that we saw here was a rapid acceleration of upgrades throughout the fourth quarter. In December we saw an incredible amount of upgrades and we do accept that trend to continue into at least be at historical upgrade rates for the first quarter. You go back to our messaging earlier in the year, we always said that the 4G LTE For All initiative, the first wave of it would really be upgrades. The fourth quarter was extremely successful in that regard where we increased our LTE subscribers 117% to 26% of the base which was, as Roger said, a remarkable achievement; one of the fastest transitions of technology we believe in the history of wireless. We do expect that acceleration to continue into the first quarter. As Tom mentioned, over 75% of our upgrades were 4G LTE, and from a gross add standpoint over 57% of our mix was 4G LTE. On the subsidy related to 4G LTE handsets is higher than the CDMA handsets which really drove the balance of the increase in retention expense in CPU. Remember, we said it was 562 in the fourth quarter of '12 versus 436 in the fourth quarter of '11. We would expect that that differential would continue on into the first quarter. But all in all we're very, very pleased with what we're seeing. We're rapidly migrating our base to a service that customers demand and as we mentioned we have a prepaid churn on 4G LTE that's lower than some carrier's postpaid churn. So, we're very pleased with the momentum that we're seeing.

Philip Cusick - JPMorgan: Then if I can so far in the first quarter we've heard from a number of people that tax rebate season was even more delayed than we've seen in the past, but it's sort of now at a – the business is now at a full run rate, is that similar to what you've seen?

Thomas C. Keys - President and COO: Yes. I would say that probably two to three weeks late than last year. I think right now we're in full swing. So, I think it's consistent with what you've heard from everybody else, absolutely.

Operator: Michael McCormack, Nomura Securities.

Michael McCormack - Nomura Securities: Maybe if you could just sort of lay out your thoughts as we approach the T-Mobile closing, obviously this year has been more of a focus on cash flow EBITDA, post-closing should we be thinking about rebalancing your priorities around subscriber and revenue growth versus profitability? Then just secondly, and I know this might be a stretch but it sounds like you got 8,000 LTE ads quarter to-date any chance if you can get any idea of how many of those are new to Metro?

J. Braxton Carter - Vice Chairman and CFO: So, I'll take the first question the trajectory of the combined company I think is very, very exciting. You go back and you look at the guidance that has been put out, we're looking for topline growth for NewCo over a five-year period at a 3% to 5% CAGR, and has been communicated multiple times, since the announcement of transaction, there’s multiple of components of that. The first component really being the stabilization of the postpaid part of the business, and with very significant enhancements to T-Mobile and NewCo, the Apple products, a very significant investment in network modernization and the un-carrier strategy that John Legere has talked about with the great amount of enthusiasm and we are all very, very excited about the prospects there, and we're highly confident that the postpaid part of the business will stabilize during the year and we'll be back into positive territory 2014 on. When we looked at the CAGR, we assumed very small growth in postpaid for years after 2013, very, very modest, and I think that’s just really a reflection of the overall saturation of the environment, and we think that there's tremendous opportunity on the prepaid side of the business. T-Mobile has done an excellent job of positioning there prepaid platform during the year and you got to remember the net loss situation at MetroPCS was absolutely deliberate from a strategic standpoint. We saw no wisdom whatsoever in pursuing CDMA growth when we invested over $1 billion in the 4G LTE network and we knew where affordable 4G LTE handsets were coming. You can look at the churn differential relating to CDMA customers versus 4G LTE customers as a major part of that rush now and it certainly has proven the theory under which we executed during the year. Going forward there will be 4G products. So, absolutely we're looking at a more aggressive growth coming out of the MetroPCS platform as well as the T-Mobile platform from a prepaid standpoint. We also have the opportunity to significantly expand the MetroPCS brand into other geographical locations in the U.S. leveraging existing T-Mobile infrastructure that's already in place. So, without having to invest in incremental spectrum or incremental network, we're looking at a highly accretive growth expansion strategy relating to the Metro brand. So, all-in-all we think that the growth story going forward for NewCo's. can be very exciting and positions MetroPCS and T-Mobile in a much better place than either Company would be on a standalone basis.

Thomas C. Keys - President and COO: Touching on the second point, the mixture between upgrades and new grosses, we don't break that out at this point in time. As we mentioned, it's still relatively early in the tax season, but we have seen customers liking our new messaging campaign, We Have It, it's a simplified approach. We certainly think that what we've done for the quarter to-date on LTE is really exciting. We have new handset devices, but I also want to point out that in changing our rate structure we've done away with our promotional rate plan of $30, which is important. We're now on a $40, $50, $60 structure. So for everything we get either new customer or upgrade, it's accretive to ARPU in the long-term.

Michael McCormack - Nomura Securities: Braxton, just a quick follow-up. When you guys closed T-Mobile, have you given any thought to how you plan to report, I guess is there any sort of new breakout on as Metro launches new markets or any breakout financially?

J. Braxton Carter - Vice Chairman and CFO: Yeah, I think we're definitely going to have to quantify the impact of any expansion relating to the Metro model, because that will create some upfront investment that is certainly fully embedded in the guidance that we've given and in the CAGRs that we've given. But I think that's just good disclosure.

Operator: Brett Feldman, Deutsche Bank.

Brett Feldman - Deutsche Bank: Sorry, I'm joining a little late, so I apologize if this may have been asked. When we look at the fourth quarter prepaid results across the industry, it's been softer than we would normally expect this time of the year. Obviously you guys saw some of that and so I was hoping maybe if you could just unpack this for us a little bit, even thinking about your own business how much of some of the subscriber weakness you saw was related to some activities that were intentional meaning you talked about not wanting to put all CDMA devices into the base knowing that you had a transitioning coming up with T-Mobile? Then how much of it is sort of structural shift that you're seeing and how people are buying prepaid and how do we think about whether that's temporary change in the environment and you just need to reposition for or what do you think there is something more meaningful happening going on?

Roger D. Linquist - Chairman and CEO: Brett let me try to deal with I think a very important question is structurally is there a significant shift in the growth of or a decline in the growth of pay-in-advance, pre-paid, no-contract as a general category. I think from our own experience, I think it would be an improper indictor, because as we have said since the second quarter earnings call that we have shifted very substantially away from the growth show as a posture to driving free cash flow and EBITDA and that really brought about a very significant in promotion and advertising expense. So over the second and third quarter and carrying in even into the fourth quarter, we took the recent judgment that stop trying to grow on a technology that we are phasing out until we can get handsets that were in the economic region and where we could sell and where we could support in terms of subsidies, we really back off the throttle. So I think our story is probably not a good one to gauge the future performance of the no-contract area, and again, this late start this year that everybody has been talking about due to the tax refunds, we're seeing momentum now. So, I think the 2012 in general was – we were not a good marker for what would take place in the no-contract business.

Brett Feldman - Deutsche Bank: Then, we've also heard that the higher price points on handsets particularly high-end smartphones is increasingly challenging, You are about to combine with a carrier that has significantly more scale in purchasing handsets. Can you talked about where do you think that's going to create an advantage for you guys after the integration in terms of marking those devices into the no-contract base?

Thomas C. Keys - President and COO: Brett, I'll take this one quickly then I think Roger might have the comment as well. The price difference between GSM-based devices and CDMA devices will certainly benefit us in the long run. The other exciting thing is really the opportunity as we expand into new markets and our own original 15market is the opportunity for bringing our own device. We've never had the ability to do that before, we've always had walkways. If somebody wanted to use a GSM device in our retail opportunity. So, this is really exciting for us. We've done some investigation that way and we think that's a really big upside for us going forward.

Operator: Matthew Niknam, Goldman Sachs.

Matthew Niknam - Goldman Sachs: So, we've seen a number of carrier prepaid brands and sub-brands launched over the last few years. Most recently T-Mobile launched their GoSmart brand; Metro, we've talked about expanding nationally post-merger. So I wanted to know, how do you balance the potential growth opportunities here versus the growing risk from potential over fragmentation of multiple brands in the marketplace?

Thomas C. Keys - President and COO: Matt, I think this one is kind of easy and simple. Today, we don't. As of April 2 or so, we probably will. We're in some HSR territory that we can't talk about certain things of the companies in terms of competitive stances so today we're competitors. It's just what we have to do. We have to battle each other in the marketplace. Once we come together and we have an opportunity to really think through the strategy then I think we have another opportunity to rationalize accordingly, but today, all I can tell you is that we're out there scrapping, we're fighting, it's how it has to be.

J. Braxton Carter - Vice Chairman and CFO: Matt, John Legere really talked several times publicly about a full continuum of product offerings that are all complementary to each other and positioned in specific demographics in specific market segments in the market, and really having a full lineup including tablets more business to business, so the flanker brand strategy leaving Metro really fits nicely into that whole continuum of product offering that John has talked about. So stay tuned more to come. As Tom says, collaboration from a marketing standpoint was very difficult at this stage in the transaction but obviously, there's a lot of thought being given independently between the two team on this.

Operator: Richard Prentiss, Raymond James.

Richard Prentiss Jr. - Raymond James: When we saw one of the carrier's report there was somewhat of a dilemma going on looked like in their results as far as high level of CPGA and high level of churn. As you look at the business model, how do you guys look to the future of that operating model playing out and being able to successfully generate the EBITDA like you did this quarter?

J. Braxton Carter - Vice Chairman and CFO: Yeah. I think that we're very confident. We gave a five-year CAGR for EBITDA for NewCo of 7% to 10%. Earlier on the call, we talked about churn on 4G LTE handsets being in the 2.4% range. A lot of fundamentals that are very different with the carrier that's positioned for 4G and providing those high-speed services to consumers. Roger, do you want to answer that?

Roger D. Linquist - Chairman and CEO: Yeah. I think this a great opportunity to highlight the fact that back in '09, it was a fairly daring investment for us as a company to provide the first 4G LTE network activations in the U.S., but the fact is that the speed, the performance and now the service that I mentioned, the Rich Communication Services or RCS was a joint client. That's going to be another tremendous attribute for us. So we see the momentum. We've reported on our LTE churn. You see the growth. We're over roughly 35% of our subscriber base now on LTE which one might say that we've gone over the 50% mark, because realistically there will always be some feature phones and 1x phones in the hands of our customers. So, we've had this tremendous change and I think that's really been the, I should say the credibility of what we started on some years ago and the joint client will allow our customers to get access to what now is over the top type downloads straight from their – from an icon and immediately go from one phone to another or a tablet or any other device. So I think with the technologies evolving, I think the other party you referenced does not really have a full commitment to the kind of broadband services that we've made a commitment to and we will continue as we make the transition to this business combination.

Richard Prentiss Jr. - Raymond James: Another side question, speaking of the combination, I appreciate the 35% base on LTE, I think that's a critical item, one for your operation, standalone too, when you combine as far as what you have to convert CDMA versus LTE, you don't have to convert. When you think about the combination, there's the new thought about the financing of handsets or the installment payment, whatever you want to call it. Have you any more thought to providing some clarity on how that would get reported and booked. I think there is some confusion in the street as far as how that would affect or the reported numbers?

J. Braxton Carter - Vice Chairman and CFO: Yeah, Rick, I think that there definitely has to be some more investor education relating to the value plan and we're certainly committed to putting transparency into making sure people fully understand that going forward. So, definitely stay tuned.

Operator: Michael Rollins, Citi Investment Research.

Michael Rollins - Citi Investment Research: I was wondering if you talk a little bit more about the profitable maturation in the prepaid market. If you look at the results just across the industry, what's your take broadly of what's happened in the prepaid category, maybe how much of what we spent industry level was lifeline-related versus what you might call the core? If you had to put a percentage on it or a level of dependence on it, how much is the next leg of growth of prepaid depend on getting more postpaid market versus getting those that are just either late to the party in adopting service or just underserved from a credit perspective?

Roger D. Linquist - Chairman and CEO: I'll take the first part of that because it's a very important and I think very involved question you raised. There are so many complements. The complement – the market segment that we were keen on addressing with our 4G strategy was the fact that we felt that we could provide a fulsome experience across all types of applications with our 4G LTE platform because we saw early on that there would be additional IMS. Now, that's been defined as Joyn or Rich Communication Services, I should say, one of the clients is this Joyn which is now, as you probably know, started in Spain is in early days of deployment, but pertains a very significant avenue. For instance, Wi-Fi video calling, this is something that people in different international settings calling parents or relatives back in foreign countries using the Wi-Fi over, what we call VoWiFi will I think stimulate a lot of markets that put these devices enhance the people that either our challenge for credit or can't get credit and there's a very large and unfortunately increasing segment there. So, as we raised the bar in technology I think we have a much better opportunity to address what now is the postpaid business and people creating and going shall we say overboard to try to get these types of phones when they really would belong much better in our space in the no-contract area. Tom?

Thomas C. Keys - President and COO: Let me take this from a different perspective. I think what we see is that all segments demand speed regardless of your economics. The question is, how much dependencies one person have on the device and what we're finding in the value segment, everybody wants speed, but there's not an education loop that's the same as it is in postpaid. So we have to educate our consumers as to where to find the value, where to put the handsets and then what the speed means to them. It's an ongoing educational effort, but you take our experience with the GS3 as an example. We've sold more of those probably four to five times more than we ever anticipated with the price of $400 to $500 to a consumer in a value segment where people really want devices that give them multiple utilities, in home, at home broadband. So I think that's an educational loop that as we get more providers providing 4G LTE in prepaid. I think you'll see more activity in that space going forward.

Roger D. Linquist - Chairman and CEO: Mike, I think you also brought up a very good point on the lifeline. It's been highly reported that there's been tremendous amount of abuse in that program, astronomical growth of nonqualified people using it and with the crackdown that's happened, there's certainly a fairly significant churn relating to that product as that program gets rationalized.

Operator: Jonathan Chaplin, New Street Research.

Jonathan Chaplin - New Street Research: A quick question on the proxy update if I may. So it looks like in the latest update to proxy, you guys have some adjustments to the long-term forecast. Specifically, it looks like you've increased churn and load growth that for the pro forma company, it looks like predominantly to postpaid and then there are one-time cost savings in 2013 that you've factored in there. So what I'm wondering if you could give us more context around those changes?

J. Braxton Carter - Vice Chairman and CFO: Sure and Jonathan, there hasn't been any changes to the forecast that we're in the proxy. Those numbers for the first three years are exactly that it's been what it's been in there since we've been following it. The change that we made was adding an additional two years' worth of disclosure to match the period that the DCF (looked to offer) with the terminal multiple after year five. You'll see that the changes are fairly modest, it's judgmental changes, really putting a tad to more conservatism in the overall plan for years 2014 and subsequent. For the year 2013, as we disclosed in the proxy, there is a $250 million non-recurring investments, that is a one-time distortion of the EBITDA impact for T-Mobile and it's not reflective of the ongoing rent rate and that specifically relates to the Apple products. It's been disclosed at the Deutsche Telekom Capital Markets, Dan, Germany back in December and it was also disclosed that the characteristics of launch of the Apple product for 2014 on are EBITDA operating free cash flow positive. There's another $200 million adjustment in 2013 that really related to the overall perception that there was upside to the forecast that were given, it was based upon the data at that point, but we do think that there is tremendous opportunity with Newco and the benefits to both companies on the combination and the significant investments that each has done in 4G technologies are really going to reap the dividends.

Operator: Tom Seitz, Jefferies.

Tom Seitz - Jefferies & Company, Inc.: In the journal today they had an article about VoLTE and they talked about you guys sort of leading the way in the States. Can you tell us what you are experimenting in your tests and when you think iconic devices out of the manufacturers will have that capacity and how that sort of layers into the model over time?

Roger D. Linquist - Chairman and CEO: Let me take a crack at that and say that our testing and operation as we now have VoLTE devices and we are offering that service in the selective markets as we roll it out, the voice quality that we're finding is exceptional. We had some concerns early on about voice quality on the internet protocol, but it's proving to be better on (mass) scores than what we're seeing on the average of net ads in the CDMA network. So, I think from the clients that we have now, we are very encouraged by going forward. All our new handsets are VoLTE-capable, and as I believe this last month, we had roughly half a dozen markets operational on VoLTE. We're being cautious in this regard, because we want to make sure that we have the same coverage on LTE as we view on CDMA. But we're very encouraged and it will be the technology going forward we believe in LTE.

Operator: David Barden, Bank of America.

David Barden - Bank of America: Just two if I could. One, when you guys were selling the 1x version of the smartphones, I think you guys were making the argument that there was a good enough customer experience to be compelling to the marketplace and you were able to kind of hold on your subscriber base for an extended period of time. But as we look ahead, you guys are obviously moving upmarket, but the larger carriers are going to be using the 3G capabilities that are opening up as they move subscribers to LTE to wholesale and create new MVNO products at the low end of the market, and I was wondering if you guys could maybe opine a little bit based on your experience about whether it's more compelling for the prepaid demographic today to have a $50 or $60 LTE experience or whether a $20 or $30 3G smartphone experience would be a potential competitive threat? then, I guess the second question, I don't know if it got addressed so far was just obviously there's been increased level of activism around the upcoming vote for the deal, and I was wondering kind of as you've gone and touched your stockholders, kind of what your degree of confidence is kind of zero to 10 that you are going to get the yes vote that you want to move ahead with the T-Mobile deal?

Thomas C. Keys - President and COO: David, I'll try to take the first part of it. We had a lot of success on our 1x Android platform. It was our first experience into what we call big data, but if you go back about two years, we were pretty transparent that we did have some network issues that came from there, a little bit of higher churn because we were finding some dissatisfied customers with speed. So, we were really excited as we moved to 4G LTE, and that base has been upgrading steadily with us. The 1x customer has realized that there's a handset that has an affordable device. So that's been a good experience of us to build a (firm) team initially. When we look at our competitors network and what they might do on other legacy 3G devices, I think it really does come down to where your distribution is and what the distribution intimacy is in terms of how you're going to get new customers and how you're going to compete. As Roger mentioned, competing against MVNO's is interesting, but historically we've seen different sign ways of activity come from that segment. So we think that our distribution is in the place it needs to be and we're finding even with a lower demographic, the value segment that we've been labeled as, that segment wants high speed. So, the question of 4G versus 3G legacy networks, I think it's all going to be in the value of the customer perceives and how you present that value. It's going to be a competitive, no doubt, but there's plenty of opportunity for us.

Roger D. Linquist - Chairman and CEO: Yeah, I'd just like to add something to that is that, the 4G speeds that we are talking about will be in the 5 to 10-megabit range and that is almost an order of magnitude above what you get on average in your 3G, so I think there's going to be perception there. There's a latency shall I say bonus that comes with 4G LTE, very low latency for gaming quick reaction time and RCS will be an overlay on all these 4G networks in the next couple of years that will allow the services I indicated just a few minutes ago. So I think there is going to be a significant differentiation between 3G and 4G. So just peddling, if you will, 3G networks access capacity tossing off in the no-contract world could very well be a, shall we say an industry strategy, but there will be a significant difference in the service perception with subscribers.

J. Braxton Carter - Vice Chairman and CFO: David, I think that's a huge point. Early on with CDMA smartphones 4G network did not been deployed. Consumers now understand the power of 4G and it substantially enhances the smartphone experience. So the key to taking share in the prepaid segment will be having competitive technology and competitive services to really mine that underbelly of the postpaid segment. So we think it's absolutely critical and a huge differentiator that we have today in that Newco actually enhances with what we'll ultimately do at more than a 20/20 LTE platform which will provide substantial benefits. As to your question about the shareholders, I think that we did a very good job in the proxy outlining a multi-year process that we went through in the search for spectrum for positioning our Company for the future and evaluation of all of the strategic alternatives that were on the table. As we've said multiple times, management and the Board is extremely confident that this is the right transaction at the right time in both MetroPCS and T-Mobile will be a much stronger combined entity versus honestly on a lone basis. We will certainly be doing a lot of communication relating to that, and when you really look at the merits of this combination and when all the facts are on the table, yes, we're highly confident that the shareholders will support this merger.

J. Braxton Carter - Vice Chairman and CFO: Okay, great. We thank you again for participating on today's call. We appreciate your interest and support at MetroPCS and we look forward to our next quarter continued progress. Operator?

Operator: Ladies and gentlemen, this concludes the MetroPCS Communications fourth quarter and year end 2012 conference call. Thank you for your participation. You may now disconnect and have a pleasant day.