Square Circle

MetroPCS: A Short for 2009

You fail to realize some major problems with respect to your thesis:

1. Unit economics - this is the main reason why MetroPCS has a competitive advantage at the low-cost end of the spectrum. By focusing on low mobility, lower-end customers in major metro areas, MetroPCS can be much more efficient with its capital expenditures, spectrum acquisitions, marketing dollars, etc. Maintaining a nationwide network PREVENTS Verizon, AT&T, etc. from being able to be cost competitive at Metro's levels. This allows PCS to offer its wireless service at a much lower price point and maintain profitability.

2. FCC auction prices are fairly standardized and there are numerous comps to look at. $2.4 billion is a good estimate of fair value.

3. Growth in core markets where there is little investment capex is highly accretive to cash flows. As Metro's markets gain maturity (like 2009 will show), subscriber growth translates into a large amount of free cash flow.

4. If your thesis is based partly on a difficult economy, PCS is just about the worst short among US wireless carriers. They compete well on cost, which is of ultimate importance to an injured consumer. Switching costs have also been substantially reduced by the use of Houdini software.