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Rating Action:

Moody's Assigns B2 to New MetroPCS Wireless, Inc. Debt; Outlook Changed to Positive

05 Nov 2010

New Debt Rated B2

New York, November 05, 2010 -- Moody's Investors Service assigned a B2 rating to MetroPCS Wireless, Inc.'s ("MetroPCS" or the company) proposed issuance of $500 million of Senior Unsecured Notes due 2020, the proceeds of which will fund the coincident call of a portion of its existing 9.25% Senior Unsecured Notes, currently due in November of 2014. At the same time, Moody's changed its outlook for all ratings of the company to positive from stable, and affirmed all existing ratings, including the B1 corporate family rating and B1 probability of default rating. The B2 rating assigned to the proposed new notes reflects their senior unsecured ranking and is consistent with the ratings for MetroPCS's other existing senior unsecured debt.

"The change in the rating outlook is driven by the increasing likelihood that the company will turn solidly free cash flow positive this year, much earlier than previously expected," according to Moody's Senior Vice President, Dennis Saputo. In addition, should the company continue to execute crisply, the resultant strong operating performance will lead to robust earnings growth and further de-leveraging.

MetroPCS Wireless, Inc.

Corporate Family Rating.B1

Probability of Default Rating.B1

Sr. Secured RCF due 11/2011..Ba1, LGD-2 (20%)

Sr. Secured Term Loan due 2013Ba1, LGD-2 (20%)

Sr. Secured Term Loan due 2016Ba1, LGD-2 (20%)

Sr. Unsec. Notes, 7.875% due 2018..B2, LGD-5 (75%)

Sr. Unsec. Notes, 9.25% due 2014..B2, LGD-5 (75%)

Sr. Unsec. Notes, (New), due 2020..B2, LGD-5 (75%)

SGL / Short-Term Rating..SGL-1

Outlook.. Positive

RATINGS RATIONALE

MetroPCS' B1 CFR reflects superior execution, an expectation for strong earnings and cash flow growth, a very strong liquidity profile and the company's valuable spectrum assets. Offsetting these favorable attributes, however, MetroPCS remains a relatively small player in a highly competitive market that is nearing saturation for voice services.

Based on the company's recent strong subscriber growth, Moody's has raised the outlook for MetroPCS to positive from stable. The positive outlook reflects our view that the company's credit metrics should continue to improve from strong growth, low churn and stable ARPU and margins. This solid operating performance may result in meaningful deleveraging and, once the company's LTE rollout tapers off, strong free cash flow. Moody's Senior Vice President Dennis Saputo comments, "MetroPCS is leading the pre-paid sector with its success in lowering churn and generating steady pricing." MetroPCS added 223,000 subscribers in the third quarter and has added 1.2 million year-to-date. The company's shift to a simplified pricing plan and the addition of higher-end smartphones has resulted in churn falling 200 basis points, from 5.8% in 3Q'09 to 3.8% in Q3'10. ARPU has remained relatively stable for the last three quarters.

The $500 million senior unsecured notes due in 2020 are rated B2 (LGD-5, 75%), one notch below the company's B1 CFR due to their subordination to MetroPCS's existing senior secured credit faclity (rated Ba1, LGD-2). MetroPCS will utilize the proceeds of this debt issuance to retire a portion of its existing 9.25% senior unsecured notes due in 2014, and for general corporate purposes. This refinance activity will perfect the July 2010 credit agreement amendments by reducing the amount of debt that is both junior to and which matures prior to the term loan due in 2016 to below $500 million. The refinancing action also improves the company's maturity profile by distributing future maturities into smaller amounts. Moody's projects that cash on hand at year-end 2010 will be sufficient to retire all debt maturities through 2015.

MetroPCS's rating could be moved up if the company continues on its current growth trajectory while keeping churn and pricing stable. Specifically, if churn remains below 4% and ARPU stays near $40, leading to EBITDA growth and improved free cash flow the rating could be raised.

The company's rating could be at risk if churn reverts above 5% or if pricing weakens leading to EBITDA and cash flow deterioration. Additionally, if CAPEX does not trend down as anticipated or if the company were to undertake a material debt-funded acquisition of assets or spectrum leading to leverage above 4.5x, the rating could be at risk.

Moody's last rating action for MetroPCS was on September 7, 2010 when when the company's $1.0 billion senior unsecured notes were rated B2.

The principal methodologies used in rating MetroPCS Wireless, Inc were the Global Telecommunications Industry Rating Methodology published in December 2007, Speculative Grade Liquidity Ratings published in September 2002, Moody's Approach to Global Standard Adjustments in the Analysis of Financial Statements for Non-Financial Corporations -- Part I, published in February 2006, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Dennis Saputo
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Russell Solomon
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's Assigns B2 to New MetroPCS Wireless, Inc. Debt; Outlook Changed to Positive
No Related Data.
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