This excerpt taken from the PCS 10-K filed May 12, 2006.
MetroPCS was formed in 1994 as General Wireless, Inc. for the purpose of bidding on, acquiring and operating broadband PCS licenses as a very small business under the FCCs designated entity rules. In 1996, MetroPCS participated in the FCCs C-Block auctions of broadband PCS spectrum licenses and was declared the high bidder on licenses in the Miami, Atlanta, Sacramento and San Francisco metropolitan areas. Although the auctions declaring MetroPCS the high bidder concluded in May 1996, the FCC did not issue the licenses to MetroPCS until January 1997, by which time the market value of PCS licenses had declined dramatically due to, among other things, the FCCs intervening auction of broadband PCS licenses in the D-, E- and F-Blocks. In connection with the C-Block auction, each of MetroPCS license-holding subsidiaries had executed a separate promissory note payable to the FCC in an amount equal to the purchase price of that subsidiarys FCC license less any payments made to the FCC. As a result of the decline in market value of its licenses, MetroPCS was unable to obtain the financing necessary to service its debt to the FCC and build its networks.
MetroPCS Communications was formed in 2004 as a subsidiary of MetroPCS as part of the Companys planned initial public offering of its Common Stock. In October 1997, after repeated efforts by MetroPCS to obtain a commercially viable restructuring of its debt to the FCC, the subsidiaries in which MetroPCS held its FCC licenses at the time each filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. In January 1998, MetroPCS filed its own voluntary Chapter 11 petition, joining its license subsidiaries bankruptcy proceedings.
The bankruptcy court found that the FCC made a fraudulent conveyance and reduced the amount of the FCCs loan secured by the licenses to $166.0 million. As a result of the bankruptcy court proceedings, after crediting the $106.0 million MetroPCS had paid to the FCC as down payments for its licenses, the total amount MetroPCS owed to the FCC was reduced to $60.0 million. In September 1998, the bankruptcy court confirmed MetroPCS plan of reorganization and it emerged from bankruptcy in October 1998. The bankruptcy courts order was affirmed in October 2000 and a subsequent appeal by the FCC was denied in 2001.
In July 2004, MetroPCS Communications and MetroPCS completed a restructuring under which MetroPCS became a wholly-owned subsidiary of MetroPCS Communications. The restructuring converted all outstanding shares of MetroPCS capital stock (and all options and warrants to purchase shares of MetroPCS capital stock) into capital stock (or options and warrants to purchase shares of capital stock) of MetroPCS Communications on a share for share basis and MetroPCS became a wholly-owned subsidiary of MetroPCS Communications. MetroPCS business constitutes substantially all of the business of MetroPCS Communications and the Company continues to conduct business under the MetroPCS brand.