Share-Based Payments:

In accordance with ASC 718, the Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments, which includes stock options granted and restricted stock awards to employees and non-employee members of MetroPCS' Board of Directors. The Company records stock-based compensation expense in cost of service and selling, general and administrative expenses. Stock-based compensation expense was $41.8 million, $46.5 million and $47.8 million and related deferred tax benefits of approximately $15.8 million, $17.9 million, and $18.9 million were recognized for the years ended December 31, 2011, 2010 and 2009, respectively. Cost of service for the years ended December 31, 2011, 2010 and 2009 includes $3.5 million, $3.5 million and $4.2 million, respectively, of stock-based compensation. Selling, general and administrative expenses for the years ended December 31, 2011, 2010 and 2009 include $38.3 million, $43.0 million and $43.6 million, respectively, of stock-based compensation.

MetroPCS has three equity compensation plans (the “Equity Plans”) under which it grants stock awards: the Second Amended and Restated 1995 Stock Option Plan, as amended (“1995 Plan”), the Amended and Restated 2004 Equity Incentive Compensation Plan (“2004 Plan”), and the MetroPCS Communications, Inc. 2010 Equity Incentive Compensation Plan (“2010 Plan”). The 1995 Plan was terminated in November 2005 and no further awards can be made under the 1995 Plan, but all awards previously granted will remain valid in accordance with their original terms. The 2004 Plan has 40,500,000 shares of common stock reserved for issuance under the plan, and in June 2010, shareholders of MetroPCS Communications, Inc. approved the adoption of the 2010 Plan which authorized a reserve of up to an additional 18,075,825 shares of common stock for issuance under the 2010 Plan. Vesting periods and terms for stock awards are determined by the plan administrator, which is MetroPCS' Board of Directors for the 1995 Plan and the Compensation Committee of the Board of Directors of MetroPCS for the 2004 Plan and the 2010 Plan. No award granted under the 1995 Plan has a term in excess of fifteen years and no awards granted under the 2004 Plan and the 2010 Plan shall have a term in excess of ten years. Awards granted during the years ended December 31, 2011, 2010 and 2009 have a vesting period of three to four years and options to purchase common stock are only exercisable upon vesting.

Compensation expense is recognized over the requisite service period for the entire award, which is generally the maximum vesting period of the award.

Stock Option Grants

The value of the options is determined by using a Black-Scholes pricing model that includes the following variables: 1) exercise price of the instrument, 2) fair market value of the underlying stock on date of grant, 3) expected life, 4) estimated volatility and 5) the risk-free interest rate. The Company utilized the following weighted-average assumptions in estimating the fair value of the option grants in the years ended December 31, 2011, 2010 and 2009:



	2011			2010			2009
Expected dividends	—		%	—		%	—		%
Expected volatility	49.88		%	54.74		%	50.01		%
Risk-free interest rate	2.06		%	2.24		%	1.99		%
Expected lives in years	5.00			5.00			5.00
Weighted-average fair value of options:
Granted at fair value	$	6.49		$	3.23		$	6.43
Weighted-average exercise price of options:
Granted at fair value	$	14.37		$	6.62		$	14.23

The Black-Scholes model requires the use of subjective assumptions including expectations of future dividends and stock price volatility. Expected volatility is calculated based on an analysis of historic and implied volatility measures for a set of peer companies. The average expected life is based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. Such assumptions are only used for making the required fair value estimate and should not be considered as indicators of future dividend policy or stock price appreciation. Because changes in the subjective assumptions can materially affect the fair value estimate, and because employee stock options have characteristics significantly different from those of traded options, the use of the Black-Scholes option pricing model may not provide a reliable estimate of the fair value of employee stock options.

A summary of the status of stock options granted under the Company's Equity Plans as of December 31, 2011, and changes during the period then ended, is presented in the table below:



	2011
	Shares		Weighted Average Exercise Price
Outstanding, beginning of year	31,642,532		$	13.52
Granted	4,186,204		$	14.37
Exercised	(6,370,790	)	$	9.27
Forfeited	(712,384	)	$	15.21
Outstanding, end of year	28,745,562		$	14.54
Options vested or expected to vest at year-end	28,260,376		$	14.58
Options exercisable at year-end	21,385,013		$	15.25

Options vested or expected to vest under the Equity Plans as of December 31, 2011 have a total aggregate intrinsic value of approximately $14.8 million and a weighted average remaining contractual life of 6.16 years. Options exercisable under the Equity Plans as of December 31, 2011 have a total aggregate intrinsic value of approximately $11.0 million and a weighted average remaining contractual life of 5.43 years.

The intrinsic value of options exercised during the year ended December 31, 2011 was approximately $42.7 million and total proceeds were approximately $59.1 million. During the year ended December 31, 2010, the intrinsic value of options exercised was approximately $12.9 million and total proceeds were approximately $10.1 million. During the year ended December 31, 2009, the intrinsic value of options exercised was approximately $15.0 million and total proceeds were approximately $8.6 million.

The weighted average grant-date fair value of the stock option grants for the years ended December 31, 2011, 2010 and 2009 was $6.49, $3.23 and $6.43, respectively. The total fair value of stock options that vested during the year ended December 31, 2011, 2010 and 2009 was $26.7 million, $41.7 million, and $47.1 million, respectively.

As of December 31, 2011, there was approximately $32.7 million of unrecognized stock option compensation cost related to unvested share-based compensation arrangements, which is expected to be recognized over a weighted average period of approximately 2.49 years.

During the year ended December 31, 2010, 55,625 shares of common stock were tendered to the Company by an employee to cover the income tax obligation allocation with a stock option exercise. These shares were accounted for as treasury stock.

Restricted Stock Awards

Restricted stock awards are share awards that entitle the holder to receive shares of the Company's common stock which become fully tradable upon vesting. During the years ended December 31, 2011, 2010 and 2009, pursuant to the 2004 Plan and 2010 Plan, the Company issued 1,771,639, 1,947,574 and 1,414,410 restricted stock awards, respectively. The restricted stock awards granted generally vest on a four-year vesting schedule with 25% vesting on the first anniversary date of the award and the remainder pro-rata on a monthly or quarterly basis thereafter. The Company determined the grant-date fair value of the restricted stock awards granted during the years ended December 31, 2011, 2010 and 2009 to be approximately $25.4 million, $12.8 million and $20.1 million, respectively, based on the closing price of the Company's common stock on the New York Stock Exchange on the grant dates. The estimated compensation cost of the restricted stock awards, which is equal to the fair value of the awards on the date of grant net of estimated forfeitures, is recognized on a straight-line basis over the vesting period.

Vesting in the restricted stock awards triggers an income tax obligation for the employee that is required to be remitted to the relevant tax authorities. To effect the tax withholding, the Company has agreed to repurchase a sufficient number of common shares from the employee to cover the income tax obligation. The stock repurchase is being accounted for as treasury stock. During the year ended December 31, 2011, the Company repurchased 365,063 shares of stock, respectively, from certain employees to settle the income tax obligation associated with vesting in restricted stock awards.

The following table summarizes information about restricted stock award activity:



	2011
Restricted Stock Awards	Shares		Weighted Average Grant-Date Fair Value
Unvested balance, beginning of year	2,665,110		$	8.73
Grants	1,771,639		$	14.35
Vested shares	(1,136,002	)	$	8.74
Forfeitures	(153,361	)	$	11.52
Unvested balance, end of year	3,147,386		$	11.75

At December 31, 2011, there was $28.9 million of total unrecognized compensation cost related to unvested restricted stock and that cost is expected to be recognized over a weighted-average period of 2.60 years. The total fair value of vested shares granted that was recognized as compensation expense related to restricted stock for the year ended December 31, 2011 was $12.6 million.