What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 167 added, 259 removed, 302 unchanged (59% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

(IN THOUSANDS, EXCEPT SHARE DATA)

September 30,

Current assets:

4 unchanged sentences

Total current assets

Property and equipment, net

Property and equipment:

Property and equipment

Accumulated depreciation and amortization

( 1,197,136 )

( 1,170,476 )

Total property and equipment, net

Right-of-use leased assets

Deposits and other assets

Liabilities and stockholders’ deficit

Liabilities and stockholders’ equity

Current liabilities:

1 unchanged sentence

Accrued and other current liabilities

Installment payment agreement, current portion, net of discount of $ 6

Current maturities, operating lease liabilities

Current maturities, finance lease obligations

Finance lease obligations, current maturities

Total current liabilities

Senior unsecured 2027 notes, net of unamortized debt costs of $ 1,228 and net of discount of $ 2,572

Senior secured 2026 notes, net of unamortized debt costs of $ 969 and $ 1,156 , respectively, and net of discounts of $ 1,287 and $ 1,536 , respectively

Senior unsecured 2024 Euro notes, net of unamortized debt costs of $ 2,121 and net of discount of $ 772

Senior secured 2026 notes, net of unamortized debt costs of $ 840 and $ 905 , respectively, and discount of $ 1,118 and $ 1,203 , respectively

Senior unsecured 2027 notes, net of unamortized debt costs of $ 1,116 and $ 1,173 , respectively, and discount of $ 2,338 and $ 2,456 , respectively

Operating lease liabilities, net of current maturities

8 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive loss — foreign currency translation

Accumulated other comprehensive loss

Accumulated deficit

( 1,113,751 )

( 1,074,588 )

Total stockholders’ deficit

3 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND MARCH 31, 2022

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Three Months Ended

September 30, 2022

September 30, 2021

Service revenue

Operating expenses:

Network operations (including $ 176 and $ 163 of equity-based compensation expense, respectively, exclusive of depreciation and amortization shown separately below)

Selling, general, and administrative (including $ 6,035 and $ 6,425 of equity-based compensation expense, respectively)

Acquisition costs – Sprint (T-Mobile Wireline) (Note 1)

Depreciation and amortization

Total operating expenses

Losses on lease transactions

Operating income

Interest expense

Change in valuation – interest rate swap

Foreign exchange gain – 2024 Euro Notes

Interest income and other expenses, net

Income before income taxes

Income tax expense

Net (loss) income

Comprehensive (loss) income:

Net (loss) income

Foreign currency translation adjustment

Comprehensive (loss) income

Net (loss) income per common share:

Basic net (loss) income per common share

Diluted net (loss) income per common share

Dividends declared per common share

Weighted-average common shares - basic

Weighted-average common shares - diluted

The accompanying notes are an integral part of these condensed consolidated financial statements.

COGENT COMMUNICATIONS HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

Service revenue

5 unchanged sentences

Total operating expenses

(Losses) gains on lease terminations and equipment transactions

Gains on lease terminations

Operating income

Interest expense

Change in valuation – interest rate swap

Foreign exchange gain - 2024 Euro Notes

Loss on debt extinguishment and redemption- 2024 Euro Notes

Loss on debt extinguishment and redemption- 2022 Notes

Interest income and other expenses, net

Change in valuation – interest rate swap agreement

Unrealized foreign exchange gain on 2024 Euro Notes

Interest income and other, net

Income before income taxes

Income tax expense

Comprehensive (loss) income:

Comprehensive income (loss):

Foreign currency translation adjustment

Comprehensive (loss) income

Comprehensive income (loss)

Net income per common share:

Basic net income per common share

Diluted net income per common share

Basic and diluted net income per common share

Dividends declared per common share

1 unchanged sentence

Weighted-average common shares - diluted

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated statements.

COGENT COMMUNICATIONS HOLDINGS, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND SEPTEMBER 30, 2021

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND MARCH 31, 2022

(IN THOUSANDS)

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

Cash flows from operating activities:

1 unchanged sentence

Depreciation and amortization

Amortization of debt costs, discounts and premiums

Amortization of debt discount and premium

Equity-based compensation expense (net of amounts capitalized)

Loss on debt extinguishment and redemption – 2024 Euro Notes

Loss on debt extinguishment and redemption – 2022 Notes

Gains on foreign exchange – 2024 Euro Notes

(Losses) gains - equipment transactions and other, net

Gains – lease transactions

Gains - equipment transactions and other, net

Unrealized foreign currency exchange gain on 2024 Euro Notes

Deferred income taxes

11 unchanged sentences

Dividends paid

Redemption and extinguishment – 2024 Euro Notes

Redemption and extinguishment – 2022 Notes

Net proceeds from issuance of senior unsecured 2027 Notes - net of debt costs of $ 1,290

Net proceeds from issuance of senior secured 2026 Notes - net of debt costs of $ 1,317

Proceeds from exercises of stock options

Principal payments on installment payment agreement

Principal payments of finance lease obligations

Proceeds from exercises of stock options

Net cash used in financing activities

3 unchanged sentences

Cash, cash equivalents and restricted cash, end of period

Supplemental disclosure of non-cash investing and financing activities:

Supplemental disclosure of non-cash financing activities:

Fair value of equipment acquired in leases

Finance lease obligations incurred

The accompanying notes are an integral part of these condensed consolidated financial statements.

COGENT COMMUNICATIONS HOLDINGS, INC.

AND SUBSIDIARIES

The accompanying notes are an integral part of these condensed consolidated statements.

COGENT COMMUNICATIONS HOLDINGS, INC., AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Description of the business and recent developments:

Description of the business:

Reorganization and merger

On May 15, 2014, pursuant to the Agreement and Plan of Reorganization (the “Merger Agreement”) by and among Cogent Communications Group, Inc.

(“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings” or the “Company”) and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings.

(“Group”), a Delaware corporation, Cogent Communications Holdings, Inc., a Delaware corporation (“Holdings”) and Cogent Communications Merger Sub, Inc., a Delaware corporation, Group adopted a new holding company organizational structure whereby Group is now a wholly owned subsidiary of Holdings.

Holdings is a “successor issuer” to Group pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Cogent Communications, Inc.

is wholly owned by Group and the vast majority of Group’s assets, contractual arrangements, and operations are executed by Cogent Communications, Inc.

References to the “Company” for events that occurred prior to May 15, 2014 refer to Cogent Communications Group, Inc.

and its subsidiaries and on and after May 15, 2014 the “Company” refers to Cogent Communications Holdings, Inc.

and its subsidiaries.

Cogent Communications, Inc.

is wholly owned by Group and the vast majority of Cogent’s assets, contractual arrangements, and operations are executed by Cogent Communications, Inc.

Description of business

1 unchanged sentence

The Company’s network is specifically designed and optimized to transmit packet switched data.

The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in 51 countries across North America, Europe, Asia, South America, Australia and Africa.

The Company is a Delaware corporation and is headquartered in Washington, DC.

4 unchanged sentences

The Company provides its on-net Internet access and private network services to its corporate and net-centric customers.

The Company’s corporate customers are located in multi-tenant office buildings (“MTOBs”) and typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses.

The Company’s corporate customers are located in multi-tenant office buildings that typically include law firms, financial services firms, advertising and marketing firms, as well as health care providers, educational institutions and other professional services businesses.

The Company’s net-centric customers include bandwidth-intensive users that leverage its network to either deliver content to end users or to provide access to residential or commercial internet users.

Content delivery customers include over the top (“OTT”) media service providers, content delivery networks, web hosting companies, and commercial content and application software providers.

Access customers include access networks comprised of other Internet Service Providers (“ISPs”), telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world.

Content delivery customers include over the top media service providers, content delivery networks, web hosting companies, and commercial content and application software providers.

Access customers include access networks comprised of other Internet Service Providers, telephone companies, mobile phone operators and cable television companies that collectively provide internet access to a substantial number of broadband subscribers and mobile phone subscribers across the world.

These net-centric customers generally receive the Company’s services in carrier neutral colocation facilities and in the Company’s own data centers.

4 unchanged sentences

The Company continues to support but does not actively sell these non-core services.

In connection with the Company’s Sprint acquisition (discussed below), the Company will begin to provide optical wavelength services over the Company’s fiber network.

The Company will sell these wavelength services to its existing customers, Sprint customers and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

In connection with the Company’s acquisition of the Wireline Business of Sprint Communications (as discussed below), the Company will begin to provide optical wavelength services and optical transport services over its fiber network.

The Company will sell these wavelength services to its existing customers, customers of Sprint Communications and to new customers who require dedicated optical transport connectivity without the capital and ongoing expenses associated with owning and operating network infrastructure.

Acquisition of Sprint Communications

On September 6, 2022, Cogent Infrastructure, Inc., a Delaware corporation (the “Buyer”) and a wholly owned subsidiary of Holdings, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sprint Communications LLC, a Kansas limited liability company (“Sprint”) and an indirect wholly owned subsidiary of T-Mobile US, Inc., a Delaware corporation (“T-Mobile”), and Sprint LLC, a Delaware limited liability company and a direct wholly owned subsidiary of T-Mobile (the “Seller”), pursuant to which Holdings will acquire the U.S.

On September 6, 2022, Cogent Infrastructure, Inc., a Delaware corporation (the “Buyer”) and a direct wholly owned subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Sprint Communications LLC, a Kansas limited liability company (“Sprint Communications”) and an indirect wholly owned subsidiary of T-Mobile US, Inc., a Delaware corporation (“T-Mobile”), and Sprint LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of T-Mobile (the “Seller”), pursuant to which the Company acquired the U.S.

long-haul fiber network (including the non-U.S.

extensions thereof) of Sprint Communications and its subsidiaries (the “Wireline Business”).

The Purchase Agreement provides that, upon the terms and conditions set forth therein, Holdings will purchase from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of a Delaware limited liability company that holds Sprints’ assets and liabilities relating to the Wireline Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

The parties have agreed to a $ 1 purchase price in consideration for the Purchased Interests, subject to customary adjustments set forth in the Purchase Agreement.

In addition, at the consummation of the Transaction (the “Closing”), a T-Mobile affiliate will enter into an agreement for IP transit services, pursuant to which T-Mobile will pay Holdings an aggregate of $ 700 million, consisting of (i) $ 350 million in equal monthly installments during the first year after the Closing and (ii) $ 350 million in equal monthly installments over the subsequent 42 months.

The Purchase Agreement provides that, upon the terms and conditions set forth therein, the Company purchased from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of Wireline Network Holdings LLC, a Delaware limited liability company that, following an internal restructuring and divisive merger, holds Sprint Communications’ assets and liabilities relating to the Wireline Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

The Purchase Agreement includes customary representations, warranties, indemnities and covenants, including regarding the conduct of the Wireline Business prior to the Closing.

In addition, the Closing is subject to customary closing conditions, including as to the receipt of certain required regulatory approvals and consents.

Subject to the satisfaction or waiver of certain conditions and the other terms and conditions of the Purchase Agreement, the Transaction is expected to close in the second half of 2023.

The Purchase Agreement contains certain termination rights for the Buyer and Seller, including that, subject to certain limitations, either the Buyer or the Seller may terminate the Purchase Agreement if the Transaction is not consummated by September 6, 2023, subject to two automatic six-month extensions if certain regulatory approvals have not been obtained.

The Purchase Agreement also provides that each party may specifically enforce the other party’s obligations under the Purchase Agreement.

Holdings has agreed to guarantee the obligations of the Buyer under the Purchase Agreement pursuant to the terms of a Guaranty, dated as of September 6, 2022, by and between Holdings and the Seller (the “Parent Guaranty”).

The Parent Guaranty contains customary representations, warranties and covenants of Holdings and the Seller.

In addition, the Closing was subject to customary closing conditions, including as to the receipt of certain required regulatory approvals and consents, which have been received.

As discussed in Note 10, the acquisition closed on May 1, 2023 (the “Closing Date”).

On the Closing Date, the Buyer consummated the Transaction pursuant to the terms of the Purchase Agreement, providing a purchase price of $ 1 payable to the Seller for the Purchased Interests, subject to adjustments for cash, working capital and other customary items, which resulted in the Buyer paying to the Seller approximately $ 61.1 million.

The Company has agreed to guarantee the obligations of the Buyer under the Purchase Agreement pursuant to the terms of a Guaranty, dated as of September 6, 2022, by and between the Company and the Seller (the “Parent Guaranty”).

The Parent Guaranty contains customary representations, warranties and covenants of the Company and the Seller.

Acquisition-Related Costs

In connection with the Transaction and negotiation of the Purchase Agreement the Company incurred $ 2.0 million of professional fees in the three months ended September 30, 2022.

In connection with the Transaction and negotiation of the Purchase Agreement, the Company incurred a total of $ 2.6 million in professional fees, including $ 0.4 million incurred in the three months ended March 31, 2023.

Basis of presentation

8 unchanged sentences

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results may differ from these estimates.

Financial instruments

At September 30, 2022 and December 31, 2021, the carrying amount of cash and cash equivalents, restricted cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short-term nature of these instruments.

At March 31, 2023 and December 31, 2022, the carrying amount of cash and cash equivalents, restricted cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short-term nature of these instruments.

The Company measures its cash equivalents and restricted cash at amortized cost, which approximates fair value based upon quoted market prices (Level 1).

Based upon recent trading prices (Level 2—market approach) at September 30, 2022 the fair value of the Company’s $ 450.0 million senior unsecured notes due 2027 was $ 426.4 million, the fair value of the Company’s $ 500.0 million senior secured notes due 2026 was $ 438.8 million, and the estimated liability fair value of the Company’s interest rate swap agreement was $ 54.7 million.

Based upon recent trading prices (Level 2—market approach) at March 31, 2023 the fair value of the Company’s $ 500.0 million aggregate principal amount Senior Secured Notes due 2027 (the “2027 Notes”) was $ 460.0 million, the fair value of the Company’s $ 450.0 million aggregate principal amount Senior Notes due 2026 (the “2026 Notes”) was $ 441.0 million and the estimated liability fair value of the Company’s interest rate swap agreement was $ 50.3 million.

Restricted cash and interest rate swap agreement

Restricted cash represents amounts held in segregated bank accounts by our clearing broker as margin in support of our Swap Agreement as discussed in Note 3 and was $ 50.3 million as of March 31, 2023.

Additional cash may be further restricted to maintain our swap agreement as interest rates fluctuate and margin requirements change.

The Company does not use derivative financial instruments for trading purposes.

Gross receipts taxes, universal service fund and other surcharges

1 unchanged sentence

Such charges may be presented gross or net based upon the Company’s accounting policy election.

The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenues and network operations expense.

Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and network operations expense)were $ 4.1 million and $ 4.8 million for the three months ended September 30, 2022 and 2021, respectively, and $ 11.3 million and $ 14.2 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company records certain excise taxes and surcharges on a gross basis and includes them in its revenue and network operations expense.

Excise taxes and surcharges billed to customers and recorded on a gross basis (as service revenue and costs of network operations) were $ 4.2 million and $ 3.7 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

Basic and diluted net income per common share

3 unchanged sentences

The following details the determination of diluted weighted average shares:

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

Weighted average common shares - basic

2 unchanged sentences

Weighted average common shares - diluted

The following details unvested shares of restricted common stock as well as anti-dilutive stock options and restricted stock awards outstanding:

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

The following details unvested shares of restricted common stock as well as the anti-dilutive effects of stock options and restricted stock awards outstanding:

March 31, 2023

March 31, 2022

Unvested shares of restricted common stock

2 unchanged sentences

Stockholders’ Deficit

The following details the changes in stockholders’ deficit for the three and nine months ended September 30, 2022 and September 30, 2021 (in thousands except share amounts):

Comprehensive

Stockholders’

Income (Loss)

Equity (Deficit)

Balance at June 30, 2022

Forfeitures of shares granted to employees

Equity-based compensation

Foreign currency translation

Issuances of common stock

Exercises of options

Dividends paid

Balance at September 30, 2022

( 1,031,465 )

Comprehensive

Stockholders’

Income (Loss)

Equity (Deficit)

Balance at June 30, 2021

Forfeitures of shares granted to employees

Equity-based compensation

Foreign currency translation

Issuances of common stock

Exercises of options

Dividends paid

Balance at September 30, 2021

Page 10 of 40

The following details the changes in stockholders’ deficit for the three months ended March 31, 2023 and March 31, 2022, respectively (in thousands except share data):

Comprehensive

9 unchanged sentences

Dividends paid

Balance at September 30, 2022

( 1,031,465 )

Balance at March 31, 2022

Comprehensive

3 unchanged sentences

Balance at December 31, 2022

( 1,074,588 )

Forfeitures of shares granted to employees

4 unchanged sentences

Dividends paid

Balance at September 30, 2021

Balance at March 31, 2023

( 1,113,751 )

Revenue recognition

The Company recognizes revenue under Accounting Standards Update (“ASU”) No.

The Company recognizes revenue under ASU No.

2014-09, Revenue from Contracts with Customers (“ASC 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

1 unchanged sentence

The Company believes that the installation fee does not give rise to a material right as defined by ASC 606 for contracts with terms longer than month-to-month.

The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the fee represents a material right as defined by ASC 606.

The Company recognizes revenue over the estimated average customer life for installation fees associated with month-to-month contracts, because the installation fee represents a material right as defined by ASC 606.

The Company capitalizes certain contract acquisition costs that relate directly to a customer contract, including commissions paid to its sales team and sales agents, and amortizes these costs on straight-line basis over the period the services are transferred to the customer for commissions paid to its sales team (estimated customer life) and over the remaining original contract term for agent commissions.

2 unchanged sentences

Fixed fees are billed monthly in advance and usage fees are billed monthly in arrears.

Amounts billed are due upon receipt and contract lengths range from one month to 60 months .

Amounts billed are due upon receipt and contract lengths range from month to month to 60 months .

The Company satisfies its performance obligations to provide services to customers over time as the services are rendered.

4 unchanged sentences

1) Identification of the contract, or contracts with a customer

Page 11 of 40

2) Identification of the performance obligations in the contract

1 unchanged sentence

4) Allocation of the transaction price to the performance obligations in the contract

5) Recognition of revenue when, or as, the Company satisfies a performance obligation

5) Recognition of revenue when, or as, the Company satisfies its performance obligations

Fees billed in connection with customer installations are deferred (as deferred revenue) and recognized as noted above.

If a customer contract is terminated prior to its contractual end, the customer is subject to termination fees.

The Company vigorously seeks payment of these amounts.

The Company recognizes revenue for these amounts as they are collected.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended September 30, 2022 was $ 1.8 million and during the three months ended September 30, 2021 was $ 1.9 million.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the nine months ended September 30, 2022 was $ 4.4 million and during the nine months ended September 30, 2021 was $ 4.1 million.

Amortization expense for contract costs was $ 4.9 million for the three months ended September 30, 2022 and $ 4.6 million for the three months ended September 30, 2021.

Amortization expense for contract costs was $ 14.5 million for the nine months ended September 30, 2022 and $ 13.8 million for the nine months ended September 30, 2021.

To the extent a customer contract is terminated prior to its contractual end the customer is subject to termination fees.

The Company vigorously seeks payment of these termination fees.

The Company recognizes revenue for termination fees as they are collected.

Service revenue recognized from amounts in deferred revenue (contract liabilities) at the beginning of the period during the three months ended March 31, 2023 was $ 1.8 million and during the three months ended March 31, 2022 was $ 1.9 million.

Amortization expense for contract costs was $ 4.8 million for the three months ended March 31, 2023 and $ 4.7 million for the three months ended March 31, 2022.

In February 2016, the FASB issued ASU No.

4 unchanged sentences

The Company has also elected to apply certain practical expedients under ASU 2016-02 including not separating lease and non-lease components on its finance and operating leases.

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Finance lease cost

March 31, 2023

March 31, 2022

Finance lease costs

Amortization of right-of-use assets

2 unchanged sentences

Total lease costs

Page 12 of 40

September 30, 2022

September 30, 2021

Other lease information

9 unchanged sentences

Weighted average discount rate — operating leases

Page 10 of 34

Finance leases—fiber lease agreements

8 unchanged sentences

Finance lease assets are included in property and equipment in the Company’s consolidated balance sheets.

As of September 30, 2022, the Company had committed to additional dark fiber IRU lease agreements totaling $ 120.6 million in future payments to be paid over periods of up to 22 years .

As of March 31, 2023, the Company had committed to additional dark fiber IRU lease agreements totaling $ 100.0 million in future payments to be paid over periods of up to 20 years .

These obligations begin when the related fiber is accepted, which is generally expected to occur in the next 12 months.

Operating leases

The Company leases office space and data center facilities under operating leases.

The Company leases office space and certain data center facilities under operating leases.

In certain cases the Company also enters into short-term operating leases for dark fiber.

2 unchanged sentences

The implicit rates within the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments.

The determination of the Company’s incremental borrowing rate requires some judgment.

The Company determines its incremental borrowing rate for each lease using its current borrowing rate, adjusted for various factors, including level of collateralization and term, to align with the term of the lease.

The determination of the Company’s incremental borrowing rate requires judgment.

Certain of the Company’s leases include options to extend or terminate the lease.

4 unchanged sentences

Lease expense for lease payments is recognized on a straight-line basis over the term of the lease.

Page 13 of 40

The future minimum payments under these operating lease and finance lease agreements are as follows (in thousands):

For the Twelve Months Ending September 30,

For the Twelve Months Ending March 31,

Total minimum lease obligations

3 unchanged sentences

Lease obligations, net of current maturities

Page 11 of 34

Allowance for credit losses

The Company maintains an allowance for credit losses to cover its current expected credit losses on its trade receivables arising from the failure of customers to make contractual payments.

As of January 1, 2020, the Company maintained an allowance for credit losses to cover its current expected credit losses on its trade receivables arising from the failure of customers to make contractual payments.

The Company estimates credit losses expected over the life of its trade receivables based on historical information combined with current conditions that may affect a customer’s ability to pay and reasonable and supportable forecasts.

6 unchanged sentences

Allowance for credit losses (deducted from accounts receivable)

Three months ended September 30, 2022

Three months ended September 30, 2021

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Net bad debt expense for the three and nine months ended September 30, 2022 was $ 0.5 million and $ 1.5 million, respectively, which is net of bad debt recoveries of $ 0.5 million and $ 1.5 million respectively.

Net bad debt expense for the three and nine months ended September 30, 2021 was $ 1.0 million and $ 2.6 million, respectively, which is net of bad debt recoveries of $ 0.3 million and $ 1.9 million, respectively.

Three months ended March 31, 2023

Three months ended March 31, 2022

Net bad debt expense for the three months ended March 31, 2023 was $ 1.2 million which is net of bad debt recoveries of $ 0.3 million.

Net bad debt expense for the three months ended March 31, 2022 was $ 0.3 million which is net of bad debt recoveries of $ 0.6 million.

Property and equipment:

Depreciation and amortization expense related to property and equipment and finance leases was $ 22.9 million and $ 22.6 million for the three months ended September 30, 2022 and 2021, respectively, and $ 68.7 million and $ 66.7 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company capitalized salaries and related benefits of employees working directly on the construction and build-out of its network of $ 3.0 million and $ 3.1 million for the three months ended September 30, 2022 and 2021, respectively, and $ 9.3 million and $ 10.4 million for the nine months ended September 30, 2022 and 2021, respectively.

Page 14 of 40

Depreciation and amortization expense related to property and equipment and finance leases was $ 25.2 million and $ 22.7 million for the three months ended March 31, 2023 and 2022, respectively.

The Company capitalized the compensation costs of employees directly involved with its construction activities of $ 3.7 million and $ 3.2 million for the three months ended March 31, 2023 and 2022, respectively.

Long-term debt:

As of September 30, 2022, the Company had outstanding $ 450.0 million aggregate principal amount of Senior Unsecured Notes due 2027 (the “2027 Notes”) and $ 500.0 million aggregate principal amount of Senior Secured Notes due 2026 (the “2026 Notes”).

As of March 31, 2023, the Company had outstanding $ 450.0 million aggregate principal amount of 2027 Notes and $ 500.0 million aggregate principal amount of 2026 Notes.

The 2027 Notes were issued in June 2022, are due on June 15, 2027 and bear interest at a rate of 7.00 % per year.

5 unchanged sentences

Interest on the 2024 Notes was paid semi-annually on June 30 and December 30 of each year.

Issuance of 2027 Notes and redemption of 2024 Notes

On June 22, 2022 (the “2027 Notes Closing Date”), Group completed its offering of $ 450.0 million aggregate principal amount of its 2027 Notes for issuance in a private placement not registered under the Securities Act of 1933, as amended (the “Securities Act”).

The 2027 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers in an unregistered offering pursuant to Rule 144A under the Securities Act and to certain non-U.S.

persons in transactions outside the United States in compliance with Regulation S under the Securities Act.

The 2027 Notes were issued pursuant to, and are governed by, an indenture (the “2027 Notes Indenture”), dated the 2027 Notes Closing Date by and among Group, Holdings, the other guarantors named therein and the trustee.

The 2027 Notes are jointly and severally guaranteed on a senior unsecured basis by each of the Company’s existing and future material domestic subsidiaries, subject to certain exceptions, and by the Company.

Under certain circumstances, the Guarantors may be released from these Guarantees without the consent of the holders of the 2027 Notes.

The net proceeds from the 2027 Notes offering were $ 446.0 million after deducting the $ 2.7 million discount and $ 1.3 million of offering expenses.

The Company used a portion of the net proceeds from the 2027 Notes offering to redeem its 2024 Notes.

The Company expects to use the remaining net proceeds from the 2027 Notes offering for general corporate purposes, and/or to repurchase the Company’s common stock or for special or recurring dividends to the Company’s stockholders.

In connection with full redemption of its 2024 Notes, Group issued a conditional notice of full redemption to holders of the 2024 Notes, specifying June 30, 2022 as the redemption date (the “Redemption Date”).

On the 2027 Notes Closing Date, Group satisfied and discharged its obligations under the 2024 Notes by depositing with a designee of the trustee for the 2024 Notes sufficient funds to pay the principal of the Premium (defined below) and accrued and unpaid interest on the Euro Notes to the Redemption Date.

The 2024 Notes were issued in Euros and were reported in the Company’s reporting currency, US Dollars, until they were extinguished and redeemed.

Prior to the redemption of the 2024 Notes, the gain on foreign exchange on the 2024 Notes from converting the 2024 Notes into US Dollars was $ 10.2 million for the three months ended September 30, 2021, $ 31.6 million for the nine months ended September 30, 2022 and $ 23.8 million for the nine months ended September 30, 2021.

Unless earlier redeemed or repurchased, the 2027 Notes will mature on June 15, 2027.

Group may redeem some or all of the 2027 Notes at any time prior to June 15, 2024 at a price equal to 100 % of the principal amount of the 2027 Notes, plus a “make-whole” premium, as set forth in the 2027 Notes Indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, or may redeem up to 40.0 % of the 2027 Notes using proceeds of certain equity offerings completed prior to June 15, 2024 at 107.0 % of the principal amount plus accrued and unpaid interest, if any.

Thereafter, Group may redeem the 2027 Notes, in whole or in part, at a redemption price ranging from 103.5 % of the aggregate principal amount of the 2027 Notes redeemed to par (depending on the year), in each case, as set forth in the 2027 Notes Indenture, plus accrued and unpaid interest, if any.

On the Redemption Date, Group redeemed its € 350.0 million of 2024 Notes at a price of 101.094 % (€ 353.8 million or $ 375.2 million) of the principal amount (the “Premium”) plus € 7.7 million ($ 8.1 million) of interest paid through June 30, 2022, the Redemption Date where the Premium reduced to 101.094 %, for a total payment of € 361.5 million ($ 383.4 million).

Group entered into a short-term USD to Euro forward purchase agreement to mitigate the risk of foreign currency fluctuations.

As a result of these transactions, the Company incurred a loss on debt extinguishment and redemption of $ 11.9 million.

Page 12 of 34

Issuance of the 2026 Notes and redemption of 2022 Notes

On May 7, 2021 (the “2026 Notes Closing Date”), Group completed an offering of $ 500.0 million aggregate principal amount of its 2026 Notes for issuance in a private placement exempt from registration under the Securities Act.

The 2026 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S.

persons in transactions outside the United States in compliance with Regulation S under the Securities Act.

The 2026 Notes were issued pursuant to, and are governed by, an indenture (the “2026 Notes Indenture”), dated the 2026 Notes Closing Date by and among Group, Holdings, the other guarantors named therein, the trustee and the collateral agent.

The 2026 Notes are guaranteed on a senior secured basis, jointly and severally, by Group’s material domestic subsidiaries, subject to certain exceptions (the “Subsidiary Guarantors”).

In addition, the 2026 Notes are guaranteed on a senior unsecured basis by Holdings (together with the Subsidiary Guarantors, the “Guarantors”).

Under certain circumstances, the Guarantors may be released from these guarantees without the consent of the holders of the 2026 Notes.

The net proceeds from the 2026 Notes offering were $ 496.9 million after deducting the $ 1.8 million discount and $ 1.3 million of offering expenses.

Unless earlier redeemed or repurchased, the 2026 Notes will mature on May 1, 2026.

Group may redeem some or all of the 2026 Notes at any time prior to February 1, 2026 at a price equal to 100 % of the principal amount of the 2026 Notes, plus a “make-whole” premium as set forth in the 2026 Notes Indenture, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

Thereafter, Group may redeem the 2026 Notes, in whole or in part, at a price equal to 100 % of the principal amount of the 2026 Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

In March 2021, Group redeemed $ 115.9 million aggregate principal amount of its 5.375 % Senior Secured Notes due 2022 (the “2022 Notes”) at an average price of 103.2 % of the principal amount plus $ 0.4 million of accrued and unpaid interest.

As a result of this transaction, the Company incurred a loss on debt extinguishment and redemption of $ 3.9 million from the premium payment above par value, the amortization of the remaining unamortized notes cost and certain transaction expenses.

In May 2021, Group redeemed $ 45.0 million aggregate principal amount of its 2022 Notes at par plus the “make-whole amount” as defined in the 2022 Notes indenture of $ 1.9 million ($ 41.41533 per $1,000 aggregate principal amount) plus accrued interest to, but excluding, the redemption date of $ 0.4 million ($ 9.70486 per aggregate principal amount).

Following the $ 115.9 million and the $ 45.0 million redemptions there was $ 284.1 million aggregate principal amount of 2022 Notes remaining.

On the 2026 Notes Closing Date, Group used the net proceeds from the offering of its 2026 Notes to fully satisfy and discharge its remaining obligations under its 2022 Notes.

As a result of these transactions, the Company incurred an additional loss on debt extinguishment and redemption of $ 10.8 million from the payment of $ 11.5 million of interest on the 2022 Notes through December 1, 2021 and the amortization of the remaining unamortized notes costs and debt premium.

Limitations under the indentures

The 2027 Notes Indenture and the 2026 Notes Indenture (the “Indentures”), among other things, limit the Company’s ability to incur indebtedness;

The indentures governing the 2027 Notes and the 2026 Notes (the “Indentures”), among other things, limit the Company’s ability to incur indebtedness;

to pay dividends or make other distributions;

7 unchanged sentences

Under the Indentures, the Company can pay dividends, make other distributions, make certain investments and make other restricted payments under certain circumstances, including if, after giving pro forma effect to such restricted payment, the Company could still incur $ 1 of indebtedness, as defined (i.e., either its consolidated leverage ratio is less than 6.0 to 1.0 or its fixed charge coverage ratio is 2.0 to 1.0 or greater).

The Company’s consolidated leverage ratio was below 6.0 , the Company’s consolidated secured leverage ratio was below 4.0 and the Company’s fixed charge coverage ratio was above 2.0 as of September 30, 2022.

As of September 30, 2022, a total of $ 207.4 million was unrestricted and permitted for restricted payments including dividends and stock purchases.

Page 16 of 40

As of March 31, 2023, the Company’s consolidated leverage ratio was below 6.0 , the Company’s consolidated secured leverage ratio was below 4.0 and the Company’s fixed charge coverage ratio was above 2.0 .

As of March 31, 2023, a total of $ 426.1 million (inclusive of a $ 250.0 general basket) was unrestricted and permitted for restricted payments, including dividends and stock purchases.

Interest rate swap agreement

As of September 30, 2022, the Company was party to an interest rate swap agreement (the “Swap Agreement”) that has the economic effect of modifying the fixed interest rate obligation associated with its 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate (“SOFR”) so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR.

As of March 31, 2023, the Company was party to an interest rate swap agreement (the “Swap Agreement”) that has the economic effect of modifying the fixed interest rate obligation associated with its 2026 Notes to a variable interest rate obligation based on the Secured Overnight Financing Rate (“SOFR”) so that the interest payable on the 2026 Notes effectively became variable based on overnight SOFR.

The critical terms of the Swap Agreement match the terms of the 2026 Notes, including the notional amount and the optional redemption date on February 1, 2026.

4 unchanged sentences

The values that the Company reports for the Swap Agreement as of each reporting date are recognized as “change in valuation – interest rate swap” with the corresponding amounts included in assets or liabilities in the Company’s consolidated balance sheets.

As of September 30, 2022 the fair value of the Swap Agreement was a net liability of $ 54.7 million of which $ 12.1 million is presented with accrued and other current liabilities and $ 42.6 million is presented with other long-term liabilities.

The Company recorded an unrealized loss related to the Swap Agreement of $ 16.9 million and $ 45.7 million in the three and nine months ended September 30, 2022, respectively.

The Company recorded an unrealized loss related to the Swap Agreement of $ 3.1 million and $ 3.1 million in the three and nine months ended September 30, 2021, respectively.

As of March 31, 2023 the fair value of the Swap Agreement was a net liability of $ 50.3 million of which $ 20.2 million is presented with accrued and other current liabilities and $ 30.1 million is presented with other long-term liabilities.

In the three months ended March 31, 2023 and 2022, the Company recorded an unrealized gain (loss) related to the Swap Agreement of $ 1.8 million and ($ 21.3 ) million, respectively.

The Company has made a $ 52.4 million deposit with the counterparty to the Swap Agreement.

If the fair value of the Swap Agreement exceeds a net liability of $ 52.4 million the Company will be required to deposit additional funds with the counterparty equal to the net liability fair value.

As of September 30, 2022, $ 54.7 million of the deposit was restricted and $ 2.4 million was unrestricted.

As of March 31, 2023, $ 50.3 million of the deposit was restricted and $ 2.1 million was unrestricted.

Under the Swap Agreement, the Company pays the counterparty a semi-annual payment based upon overnight SOFR plus a contractual interest rate spread, and the counterparty pays the Company a semi-annual fixed 3.50 % interest payment.

3 unchanged sentences

Under the settlement payment made in November 2022, the Company made a payment of $ 3.4 million to the counterparty for a net cash interest cost of $ 3.4 million for the period from May 1, 2022 to October 31, 2022.

Under the settlement payment to be made in May 2023, the Company made a payment of approximately $ 9.5 million to the counterparty for a net cash interest cost of approximately $ 9.5 million for the period from November 1, 2022 to April 30, 2023.

Page 13 of 34

Commitments and contingencies :

3 unchanged sentences

The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible to result in a loss of up to $ 3.8 million in excess of the amount accrued at September 30, 2022.

The Company was engaged in litigation in Virginia in which a former provider of transoceanic capacity to the Company was seeking approximately $ 0.6 million for alleged unpaid fees and the Company’s early termination of the arrangement.

The complaint was filed in December 2021 in the Circuit Court of Fairfax County, Virginia.

The trial took place in July 2022, and in August 2022, the Circuit Court issued an order requiring the Company to pay approximately $ 0.4 million in damages, inclusive of attorneys’ fees.

The Company paid a final payment of approximately $ 0.4 million, reflecting accumulated interest and additional attorneys’ fees, in October 2022.

The Company has taken certain positions related to its obligations for leased circuits for which it is reasonably possible could result in a loss of up to $ 3.9 million in excess of the amount accrued at March 31, 2023.

In the ordinary course of business the Company is involved in other legal activities and claims.

3 unchanged sentences

Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.

Page 17 of 40

Income taxes:

The components of (loss) income before income taxes consist of the following (in thousands):

The components of income before income taxes consist of the following (in thousands):

Three Months Ended

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Common stock buyback program:

The Company’s Board of Directors has approved purchases of the Company’s common stock under a buyback program (the “Buyback Program”) through December 31, 2023.

At September 30, 2022, there was approximately $ 30.4 million remaining for purchases under the Buyback Program.

There were no purchases of common stock during the three or nine months ended September 30, 2022 and the three or nine months ended September 30, 2021.

March 31, 2023

March 31, 2022

Common stock buyback program and stock options and award plan:

The Company’s Board of Directors has approved purchases of shares of the Company’s common stock under a buyback program (the “Buyback Program”) through December 31, 2023.

As of March 31, 2023, there was $ 30.4 million remaining for purchases under the Buyback Program.

There were no purchases of common stock during both the three months ended March 31, 2023 and March 31, 2022.

During the three months ended March 31, 2023 the Company granted 258,762 shares of restricted stock to primarily to its executive employees valued at $ 16.0 million that primarily vest over periods ending in December 2026.

The vesting of 104,850 of these shares is subject to certain performance conditions.

Of the total performance shares granted, the vesting of up to 29,334 performance shares granted to the Company’s CEO is subject to the total shareholder return of the Company’s common stock compared to the total shareholder return of the Nasdaq Telecommunications Index.

Dividends on common stock:

On November 2, 2022, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.915 per common share.

This estimated $ 42.8 million dividend payment is expected to be made on December 2, 2022.

On May 3, 2023, the Company’s Board of Directors approved the payment of a quarterly dividend of $ 0.935 per common share.

This estimated $ 44.0 million dividend payment is expected to be made on June 2, 2023.

The payment of any future dividends and any other returns of capital, including stock buybacks will be at the discretion of the Company’s Board of Directors and may be reduced, eliminated or increased and will be dependent upon the Company’s financial position, results of operations, available cash, cash flow, capital requirements, limitations under the Company’s debt indentures and other factors deemed relevant by the Company’s Board of Directors.

1 unchanged sentence

The indentures governing the Company’s notes limit the Company’s ability to return cash to its stockholders.

Page 14 of 34

Related party transactions:

The Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer.

Office leases

The Company’s headquarters is located in an office building owned by Sodium LLC whose owner is the Company’s Chief Executive Officer, David Schaeffer.

The fixed annual rent for the headquarters building is $ 1.0 million per year plus an allocation of taxes and utilities.

The lease began in May 2015, and the lease term was for five years .

In February 2020 the lease term was extended to May 2025 and is cancellable by the Company upon 60 days ’ notice.

The Company’s audit committee reviews and approves all transactions with related parties.

The Company paid $ 0.5 million and $ 0.5 million in the three months ended September 30, 2022 and 2021, respectively, and $ 1.4 million and $ 1.3 million in the nine months ended September 30, 2022 and 2021, respectively, for rent and related costs (including taxes and utilities) to Sodium LLC for this lease.

Page 18 of 40

In February 2020, the lease term was extended to May 2025.The lease is cancellable at no cost by the Company upon 60 days ’ notice.

The Audit Committee of the Company’s Board of Directors (the “Audit Committee”) reviews and approves all transactions with related parties.

The Company paid $ 0.4 million and $ 0.5 million in the three months ended March 31, 2023 and 2022, respectively, for rent and related costs (including taxes and utilities) for this lease.

On January 6, 2023, the Company entered into two lease agreements (the “New Leases”), one with Thorium LLC and one with Germanium LLC, entities owned by the Company’s Chief Executive Officer, David Schaeffer.

The Audit Committee, which is responsible for reviewing any related party transactions, reviewed and approved the Company’s entry into the New Leases.

The first of the New Leases is with Thorium LLC for approximately 54,803 square feet of office space, which will serve as office space for the Company replacing a portion of its current office space in the Northern Virginia area (“Office Lease”).

The second of the New Leases is with Germanium LLC for approximately 1,587 square feet of technical space, in the building which will serve as network operations space for the Company (“Network Operations Lease”).

The term for each of the New Leases is five years beginning March 1, 2023 (or an actual later date of occupancy).

Both of the New Leases are cancellable by the Company without penalty upon 60 days written notice.

The amount of fixed annual rent during the term of the Office Lease will be $ 1.2 million, and the Company is also responsible for paying its proportionate share of the building’s operating expenses that exceed a 2023 base year.

The Company made no payments in the three months ended March 31, 2023 for rent and related costs for the Office Lease as the Company did not take occupancy of the space until April 2023.

The amount of fixed annual rent during the term of the Network Operations Lease will be $ 34,914 , and the Company is also responsible for paying its metered utility costs and a proportionate share of the building’s other operating expenses that exceed a 2023 base year.

The Company made no payments in the three months ended March 31, 2023 for rent and related costs for the Network Operations Lease as the Company did not take occupancy of the space until April 2023.

Segment information:

1 unchanged sentence

The Company’s service revenue by geographic region and product class and long-lived assets by geographic region are as follows (in thousands):

Three Months Ended September 30, 2022

North America

Latin America

Three Months Ended September 30, 2021

North America

Latin America

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

North America

Latin America

Nine Months Ended September 30, 2021

South America

Three Months Ended March 31, 2022

North America

Latin America

September 30,

Page 15 of 34

Long-lived assets, net

2 unchanged sentences

The majority of North American revenue consists of services delivered within the United States.

Subsequent Events:

On May 1, 2023 (the “Closing Date”), Cogent Infrastructure, Inc., a Delaware corporation (the “Buyer”) and a direct wholly owned subsidiary of the Company, closed on its acquisition of the U.S.

long-haul fiber network (including the non-U.S.

extensions thereof) of Sprint Communications and its subsidiaries (the “Wireline Business”) in accordance with the terms and conditions of the Membership Interest Purchase Agreement (the “Purchase Agreement”), dated September 6, 2022, by and among the Buyer, Sprint Communications LLC, a Kansas limited liability company (“Sprint Communications”) and an indirect wholly owned subsidiary of T-Mobile US, Inc., a Delaware corporation (“T-Mobile”), and Sprint LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of T-Mobile (the “Seller”).

On the Closing Date, the Company purchased from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) of Wireline Network Holdings LLC, a Delaware limited liability company that, following an internal restructuring and divisive merger, holds Sprint Communications’ assets and liabilities relating to the Wireline Business (such transactions contemplated by the Purchase Agreement, collectively, the “Transaction”).

Purchase Price

On the Closing Date, the Buyer consummated the Transaction pursuant to the terms of the Purchase Agreement, providing a purchase price of $ 1 payable to the Seller for the Purchased Interests, subject to customary adjustments, including working capital (the “Working Capital Adjustment”), as set forth in the Purchase Agreement.

As consideration for the Purchased Interests, the Working Capital Adjustment (primarily related to acquired cash and cash equivalents of an estimated $ 43.4 million in order to fund the International operations of the Wireline Business) resulted in the Buyer making a payment of $ 61.1 million to the Seller on the Closing Date.

Additionally, the Working Capital Adjustment includes an estimated payment of $ 30.8 million from Seller to Buyer related to acquired lease obligations.

This amount will be paid in equal payments of 25 % each in months 55 to 58 after the Closing Date.

IP Transit Services Agreement

On the Closing Date, T-Mobile USA, Inc., a Delaware corporation and direct subsidiary of T-Mobile (“TMUSA”), entered into an agreement for IP transit services, pursuant to which TMUSA will pay an affiliate of the Company an aggregate of $ 700 million, consisting of (i) $ 350 million in equal monthly installments during the first year after the Closing Date and (ii) $ 350 million in equal monthly installments over the subsequent 42 months.

Transition Services Agreement

On the Closing Date, the Buyer entered into a transition services agreement (the “TSA”) with the Seller, pursuant to which the Seller and certain of its affiliates will provide to the Buyer and its affiliates, and the Buyer and certain of its affiliates will provide to the Seller and certain of its affiliates, on an interim basis following the Closing Date, certain specified services (the “Transition Services”) to ensure an orderly transition following the separation of the Wireline Business from Sprint Communications.

The services to be provided by the Seller and its affiliates include, among others, information technology support, back office and finance, real estate and facilities, vendor and supply chain management and human resources.

The services to be provided by the Buyer and its affiliates include, among others, information technology and network support, finance and back office and other wireless business support.

The Transition Services are generally intended to be provided for a period of up to two years following the Closing Date, although such period may be extended for an additional one-year term by either party upon 30 days ’ prior written notice.

The fees for the Transition Services will be calculated using either a per service monthly fee or an hourly rate for the employees allocated to provide such services.

Any third-party costs incurred in providing the Transition Services will be passed on to the party receiving such services at cost.

Page 16 of 34

Either party to the TSA may terminate the agreement (i) with respect to any individual service for convenience upon 30 days ’ prior written notice or (ii) in its entirety if the other party has failed to perform any of its material obligations and such failure is not cured within 30 days.

The TSA provides for customary indemnification and limits on liability.

Other Services Provided to Seller

In addition, on the Closing Date, the Buyer and TMUSA entered into an agreement for colocation, connectivity services, pursuant to which the Buyer and certain of its affiliates will provide such services to the Seller for a per service monthly fee plus certain third-party costs incurred in providing the services.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements