What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-06 · 488 added, 435 removed, 1260 unchanged (42% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in millions, except share and per share amounts) June 30, 2020 December 31, 2019

(in millions, except share and per share amounts) September 30, 2020 December 31,

Current assets

5 unchanged sentences

Prepaid expenses 659 333

Assets held for sale 1,910 —

Other current assets 2,889 1,972

14 unchanged sentences

Short-term debt 3,713 25

Short-term debt to affiliates 1,235 —

Deferred revenue 1,078 631

1 unchanged sentence

Short-term financing lease liabilities 1,050 957

Liabilities held for sale 606 —

Other current liabilities 1,817 1,673

22 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions, except share and per share amounts) 2020 2019 2020 2019

19 unchanged sentences

Interest income 3 5 21 17

Other expense, net ( 195 ) ( 22 ) ( 205 ) ( 15 )

Other (expense) income, net ( 99 ) 3 ( 304 ) ( 12 )

Total other expense, net ( 905 ) ( 276 ) ( 2,215 ) ( 850 )

(Loss) income from continuing operations before income taxes ( 208 ) 1,240 1,049 2,443

Income from continuing operations before income taxes 1,660 1,195 2,709 3,638

Income tax expense ( 407 ) ( 325 ) ( 715 ) ( 921 )

(Loss) income from continuing operations ( 210 ) 939 741 1,847

Income from continuing operations 1,253 870 1,994 2,717

Income from discontinued operations, net of tax — — 320 —

4 unchanged sentences

33 ( 257 ) ( 757 ) ( 738 )

Unrealized gain on foreign currency translation adjustment, net of tax effect of $ 1 , $ 0 , $ 1 , and $ 0

Other comprehensive income (loss) 37 ( 257 ) ( 753 ) ( 738 )

Total comprehensive income $ 1,290 $ 613 $ 1,561 $ 1,979

Earnings per share

Basic earnings (loss) per share:

Basic earnings per share:

Continuing operations $ 1.01 $ 1.02 $ 1.79 $ 3.18

1 unchanged sentence

Basic $ 1.01 $ 1.02 $ 2.08 $ 3.18

Diluted earnings (loss) per share:

Diluted earnings per share:

Continuing operations $ 1.00 $ 1.01 $ 1.78 $ 3.15

8 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2020 2019 2020 2019

6 unchanged sentences

Bad debt expense 143 74 489 218

Losses from sales of receivables 30 28 55 63

(Gains) losses from sales of receivables ( 18 ) 28 37 91

Losses on redemption of debt 108 — 271 19

14 unchanged sentences

( 3,217 ) ( 1,514 ) ( 7,227 ) ( 5,234 )

Purchases of spectrum licenses and other intangible assets, including deposits ( 745 ) ( 665 ) ( 844 ) ( 850 )

Refunds (purchases) of spectrum licenses and other intangible assets, including deposits 17 ( 13 ) ( 827 ) ( 863 )

Proceeds related to beneficial interests in securitization transactions 855 900 2,325 2,896

1 unchanged sentence

Acquisition of companies, net of cash and restricted cash acquired — ( 31 ) ( 5,000 ) ( 31 )

Proceeds from the divestiture of prepaid business 1,238 — 1,238 —

Other, net ( 25 ) 1 ( 209 ) ( 6 )

6 unchanged sentences

Repayments of financing lease obligations ( 246 ) ( 235 ) ( 764 ) ( 550 )

Repayments of short-term debt for purchases of inventory, property and equipment, net ( 151 ) — ( 176 ) —

Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities ( 231 ) ( 300 ) ( 407 ) ( 300 )

Repayments of long-term debt ( 5,678 ) — ( 16,207 ) ( 600 )

6 unchanged sentences

Other, net 137 ( 4 ) 139 ( 13 )

Net cash provided by (used in) financing activities 15,628 ( 866 ) 15,175 ( 1,056 )

Change in cash and cash equivalents 10,049 ( 334 ) 9,633 ( 98 )

Net cash (used in) provided by financing activities ( 6,144 ) ( 543 ) 9,031 ( 1,599 )

Change in cash and cash equivalents, including restricted cash ( 4,504 ) 548 5,129 450

Cash and cash equivalents, including restricted cash

6 unchanged sentences

(in millions, except shares) Common Stock Outstanding Treasury Shares at Cost Par Value and Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity

Balance as of March 31, 2020 861,128,106 $ ( 11 ) $ 38,597 $ ( 1,660 ) $ ( 7,949 ) $ 28,977

Balance as of June 30, 2020 1,237,338,994 $ ( 12 ) $ 72,505 $ ( 1,658 ) $ ( 7,839 ) $ 62,996

Net income — — — — 1,253 1,253

Other comprehensive loss — — — 2 — 2

Other comprehensive income — — — 37 — 37

Stock-based compensation — — 177 — — 177

5 unchanged sentences

Shares issued in secondary offering (1)

Shares repurchased from SoftBank (1)

24,750,000 — 2,550 — — 2,550

Merger consideration 373,396,310 — 33,533 — — 33,533

Balance as of June 30, 2020 1,237,338,994 $ ( 12 ) $ 72,505 $ ( 1,658 ) $ ( 7,839 ) $ 62,996

Shares repurchased from SoftBank ( 24,750,000 ) — ( 2,546 ) — — ( 2,546 )

Balance as of September 30, 2020 1,240,458,618 $ ( 11 ) $ 72,705 $ ( 1,621 ) $ ( 6,586 ) $ 64,487

Balance as of December 31, 2019 856,905,400 $ ( 8 ) $ 38,498 $ ( 868 ) $ ( 8,833 ) $ 28,789

9 unchanged sentences

Shares issued in secondary offering (1)

198,314,426 — 19,766 — — 19,766

Shares repurchased from SoftBank (2)

2 unchanged sentences

Prior year Retained Earnings — — — — ( 67 ) ( 67 )

Balance as of June 30, 2020 1,237,338,994 $ ( 12 ) $ 72,505 $ ( 1,658 ) $ ( 7,839 ) $ 62,996

Balance as of September 30, 2020 1,240,458,618 $ ( 11 ) $ 72,705 $ ( 1,621 ) $ ( 6,586 ) $ 64,487

(1) Shares issued includes 5.0 million shares purchased by Marcelo Claure.

(2) In connection with the SoftBank Monetization (as defined below) we received a payment of $ 304 million from SoftBank (as defined below).

5 unchanged sentences

Balance as of March 31, 2019 854,380,118 $ ( 5 ) $ 38,100 $ ( 521 ) $ ( 11,393 ) $ 26,181

Balance as of June 30, 2019 854,452,642 $ ( 8 ) $ 38,242 $ ( 813 ) $ ( 10,454 ) $ 26,967

Net income — — — — 870 870

Other comprehensive income — — — ( 292 ) — ( 292 )

Other comprehensive loss — — — ( 257 ) — ( 257 )

Stock-based compensation — — 140 — — 140

2 unchanged sentences

Issuance of vested restricted stock units 179,155 — — — — —

Issuance of restricted stock awards ( 20,769 ) — — — — —

Shares withheld related to net share settlement of stock awards and stock options ( 53,349 ) — ( 4 ) — — ( 4 )

Transfer RSU from NQDC plan 3,755 — — — — —

Balance as of June 30, 2019 854,452,642 $ ( 8 ) $ 38,242 $ ( 813 ) $ ( 10,454 ) $ 26,967

Balance as of September 30, 2019 855,557,671 $ ( 8 ) $ 38,433 $ ( 1,070 ) $ ( 9,584 ) $ 27,771

Balance as of December 31, 2018 850,180,317 $ ( 6 ) $ 38,010 $ ( 332 ) $ ( 12,954 ) $ 24,718

9 unchanged sentences

Prior year Retained Earnings — — — — 653 653

Balance as of June 30, 2019 854,452,642 $ ( 8 ) $ 38,242 $ ( 813 ) $ ( 10,454 ) $ 26,967

Balance as of September 30, 2019 855,557,671 $ ( 8 ) $ 38,433 $ ( 1,070 ) $ ( 9,584 ) $ 27,771

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

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Subsequent Events

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T-Mobile US, Inc.

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Upon closing of the Prepaid Transaction, we received $ 1.4 billion from DISH, subject to a working capital adjustment.

The assets and liabilities of the Prepaid Business are presented as held for sale as of June 30, 2020 and revenues and expenses are presented as discontinued operations for the three and six months ended June 30, 2020.

The revenues and expenses of the Prepaid Business are presented as discontinued operations for the nine months ended September 30, 2020.

The condensed consolidated financial statements include the balances and results of operations of T-Mobile and our consolidated subsidiaries.

5 unchanged sentences

Significant Accounting Policies

Upon the close of our Merger with Sprint, we have adopted or applied the significant accounting policies below to the applicable transactions and activities of the consolidated company.

Upon the close of our Merger with Sprint, we have adopted or applied the significant accounting policies described below to the applicable transactions and activities of the consolidated company.

Spectrum Leases

1 unchanged sentence

In addition to the Agreements with educational institutions and private owners who hold the license, the Company also acquired direct ownership of spectrum licenses previously acquired by Sprint through government auctions or other acquisitions.

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The Agreements with educational and certain non-profit institutions are typically for five to ten years with automatic renewal provisions, bringing the total term of the agreement up to 30 years.

Majority of the Agreements include a right of first refusal to acquire, lease or otherwise use the license at the end of the two automatic renewal periods.

A majority of the Agreements include a right of first refusal to acquire, lease or otherwise use the license at the end of the automatic renewal periods.

Leased FCC spectrum licenses are recorded as executory contracts whereby, as a result of business combination accounting, an intangible asset or liability is recorded reflecting the extent to which contractual terms are favorable or unfavorable to current market rates.

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This enhanced value from combining owned and leased spectrum licenses to create contiguous spectrum is referred to as an aggregation premium.

We recognized the aggregation premium as part of the FCC spectrum licenses indefinite-lived intangible assets which are assessed for impairment annually or more frequently if facts and circumstances warrant.

We recognized the aggregation premium as part of the FCC spectrum licenses indefinite-lived intangible assets.

Brightstar Distribution

1 unchanged sentence

(“Brightstar”), a subsidiary of SoftBank, whereby Brightstar provides supply chain and inventory management services to us in our indirect channels.

T-Mobile may sell devices through Brightstar to T-Mobile indirect dealers.

T-Mobile may sell devices through Brightstar to T-Mobile indirect dealers who then sell the device to the end customer (i.e., the service subscriber).

The supply chain and inventory management arrangement includes, among other things, that Brightstar may purchase inventory from the original equipment manufacturers (“OEM”) to sell directly to our indirect dealers.

As compensation for these services, we remit per unit fees to Brightstar for each device sold to these indirect dealers.

Devices sold from T-Mobile to Brightstar do not meet the criteria for a sale, as control is not transferred until devices are sold through to indirect dealers, and in some cases, end customers.

Devices transferred from T-Mobile to Brightstar remain in inventory until control is transferred to the indirect dealers or end customers.

For service subscribers who choose to lease a device previously sold to the dealer, T-Mobile will repurchase the device from the dealer and originate a lease directly with the service subscriber.

Repurchase activity from the dealer is estimated and treated as a right of return, reducing equipment revenue at the time of sale to the dealer.

Devices sold from T-Mobile to Brightstar do not meet the criteria for a sale.

Devices transferred from T-Mobile to Brightstar remain in inventory until control is transferred upon the sale of the device to the end customers, and in some circumstances to the indirect dealer.

For service subscribers who choose to lease a device previously sold to the indirect dealer, T-Mobile will repurchase the device from the indirect dealer and originate a lease directly with the end customer.

Repurchase activity from the indirect dealer is estimated and treated as a right of return, reducing equipment revenue at the time of sale to the indirect dealer.

Upon lease to the end customer, T-Mobile recognizes lease revenue over the associated lease term within Equipment revenues in our Condensed Consolidated Statements of Comprehensive Income.

Device Leases

Through the Merger, we acquired device lease contracts in which Sprint is the lessor, substantially all of which are classified as operating leases, and the associated fixed assets.

Through the Merger, we acquired device lease contracts in which Sprint is the lessor (the “Sprint Flex Lease Program”), substantially all of which are classified as operating leases, as well as the associated fixed assets (i.e., the leased devices).

These leased devices were recorded as fixed assets at their acquisition date fair value and presented within Property and equipment, net on our Condensed Consolidated Balance Sheets.

These devices are depreciated using the group method over the estimated remaining useful life to their estimated residual value.

Our leasing programs include JUMP!

On Demand and the Sprint Flex Lease Program acquired through the Merger.

We depreciate leased devices on a group basis using the straight-line method over the estimated useful life of the device.

The estimated useful life reflects the period for which we estimate the group of leased devices will provide utility to us, which may be longer than the initial lease term based on customer options in the Sprint Flex Lease program to renew the lease on a month-to-month basis after the initial lease term concludes.

Revenues associated with the leased wireless devices, net of lease incentives, are generally recognized straight-line over the lease term.

T-Mobile depreciates leased devices on a group basis using the straight-line method over the estimated useful life of the device, which considers the lease term (e.g., 18 months and month-to-month renewal options for the Sprint Flex Lease program), trade-in activity and write-offs for lost and stolen devices.

In determining the estimated useful life, we consider the lease term (e.g., 18 months and month-to-month renewal options for the Sprint Flex Lease Program), trade-in activity and write-offs for lost and stolen devices.

Lost and stolen devices are incorporated into the estimates of depreciation expense and recognized as an adjustment to accumulated depreciation when the loss event occurs.

The Company’s policy using the group method of depreciation has been applied to acquired leased devices as well as leases originated subsequent to the Merger close.

Our policy of using the group method of depreciation has been applied to acquired leased devices as well as leases originated subsequent to the Merger close.

Acquired leased devices are grouped based on the age of the device.

Index for Notes to th e Condensed Consolidated Financi al Statements

Upon device upgrade or at lease end, customers in the Jump on Demand lease program must return or purchase their device.

Customers in the Sprint Flex Lease program have the option to return or purchase their device or to renew their lease on a month-to-month basis at the end of the lease term.

Revenues associated with the leased wireless devices, net of lease incentives, are generally recognized straight-line over the lease term.

Index for Notes to the Condensed Consolidated Financial Statements

Upon device upgrade or at lease end, customers in the JUMP!

on Demand lease program must return or purchase their device, and customers in the Sprint Flex Lease Program have the option to return or purchase their device or to renew their lease on a month-to-month basis at the end of the lease term.

Returned devices are transferred from Property and equipment, net to Inventory on our Condensed Consolidated Balance Sheets and are valued at the lower of cost or net realizable value, with any write-down recognized as Cost of equipment sales in our Condensed Consolidated Statements of Comprehensive Income.

Cost to Acquire a Contract

T-Mobile capitalizes postpaid sales commissions for service activation as costs to acquire a contract and amortizes them over 24 months.

We capitalize postpaid sales commissions for service activation as costs to acquire a contract and amortize them over the estimated period of benefit, currently 24 months.

Prepaid commissions are expensed as incurred as their estimated period of benefit does not extend beyond 12 months.

1 unchanged sentence

Commissions paid when the customer has a lease are treated as initial direct costs and recognized over the lease term.

T-Mobile policies for the capitalization and amortization of costs to acquire a contract are applied to the Sprint, Boost and Assurance Wireless brands subsequent to Merger close.

Our policies for the capitalization and amortization of costs to acquire a contract are applied to the Sprint, Boost (up to the sale of the Boost prepaid business to Dish on July 1, 2020) and Assurance Wireless brands subsequent to the Merger close.

Device Purchases Cash Flow Presentation

T-Mobile classifies all device purchases as operating cash outflows as T-Mobile’s predominant strategy is to sell devices to customers rather than lease them.

Devices acquired for sale or lease to Sprint, Boost and Assurance Wireless customers are similarly classified as operating cash outflows.

We classify all device purchases, whether acquired for sale or lease, as operating cash outflows as our predominant strategy is to sell devices to customers rather than lease them.

See Note 19 – Additional Financial Information for disclosures of Leased devices transferred from inventory to property and equipment and Returned leased devices transferred from property and equipment to inventory.

Imputed Interest on EIP Receivables

T-Mobile records the effects of financing on all equipment installment plan (“EIP”) loans regardless as to whether the financing is considered to be significant or not.

We record the effects of financing on all equipment installment plan (“EIP”) loans regardless of whether or not the financing is considered to be significant.

The imputation of interest results in a discount of the EIP receivable, thereby adjusting the transaction price of the contract with the customer, which is then allocated to the performance obligations of the arrangement.

For indirect channel loans to the end service customer in which the sale of the device was to the dealer (sell-in basis), the effect of imputing interest is recognized as a reduction to service revenue, the only performance obligation with the service customer as the device sale was recognized when transferred to the dealer, and over the service contract period.

T-Mobile policies for imputed interest on EIP receivables are applied to loans originated for Sprint and Boost customers subsequent to Merger close.

For indirect channel loans to the end service customer in which the sale of the device was to the dealer (sell-in basis), the effect of imputing interest is recognized as a reduction to service revenue over the service contract period, the only performance obligation with the service customer as the device sale was recognized when transferred to the dealer.

Our policies for imputed interest on EIP receivables are applied to loans originated for Sprint and Boost (up to the sale of the Boost prepaid business to DISH on July 1, 2020) customers subsequent to Merger close.

Cell Tower Lease-Out and Leaseback Arrangement

Prior to the Merger, Sprint entered into a lease-out and leaseback agreement with a tower operator (Global Signal, Inc.

Prior to the Merger, Sprint entered into a lease-out and leaseback agreement with Global Signal, Inc.

a third party that was subsequently acquired by Crown Castle International Corp.

The tower operator was granted exclusive rights to lease 6,600 communications towers (lease-out) for 32 years, which were originally constructed by Sprint on land that Sprint leased from individual landowners.

Sprint received upfront proceeds in 2005 of $ 1.2 billion and obtained the right to use a portion of the space on the towers with a stipulated monthly payment (leaseback), generally with a 10-year initial term with five-year renewal options.

CCI was granted exclusive rights to lease 6,600 communications towers (lease-out) for 32 years, which were originally constructed by Sprint on land that Sprint leased from individual landowners.

Sprint received upfront proceeds in 2005 of $ 1.2 billion and obtained the right to use a portion of the space on the towers with a stipulated monthly payment (leaseback), generally with a ten-year initial term with five-year renewal options.

The arrangement is accounted for as a financing, with the cell towers owned by Sprint included in Property and equipment and a financing obligation for the amounts contractually due to CCI included in Tower obligations in our Condensed Consolidated Balance Sheets.

The tower assets are depreciated to their estimated residual value and payments to CCI are recognized as interest expense and a reduction to the financing obligation.

See Note 9 – Tower Obligati ons for further information on this arrangement.

See Note 9 – Tower Obligations for further information on this arrangement.

Wireline revenue

2 unchanged sentences

Amounts due for services are invoiced and collected periodically over the relevant service period.

Wireline contracts are not subject to significant amounts of variable consideration, other than charges intended to partially recover taxes imposed on the Company, including fees related to the Universal Service Fund.

Wireline contracts are not subject to significant amounts of variable consideration, other than charges intended to partially recover taxes imposed on the Company, including fees related to

Index for Notes to the Condensed Consolidated Financial Statements

the Universal Service Fund.

Such fees are based on the customer's monthly usage and are therefore included in the corresponding distinct months of Wireline services.

Our Wireline contracts do provide the customer with monthly options to

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purchase goods or services at prices commensurate with the standalone selling prices for those goods or services, as determined at contract inception.

Our Wireline contracts do provide the customer with monthly options to purchase goods or services at prices commensurate with the standalone selling prices for those goods or services, as determined at contract inception.

Wireline revenues are included within Roaming and other service revenues in our Condensed Consolidated Statements of Comprehensive Income.

6 unchanged sentences

Certain provisions of our debt agreements require us to maintain specified cash collateral balances.

Amounts associated with these balances are considered to be restricted cash.

Amounts associated with these balances are considered to be restricted cash and are included within Other assets in our Condensed Consolidated Balance Sheets.

Advertising and Search Revenues

Effective April 1, 2020, certain of our advertising and search revenues are now presented within Roaming and other service revenues, resulting in a reclassification of $ 133 million of revenue for the three months ended March 31, 2020, and $ 120 million and $ 234 million for the three and six months ended June 30, 2019, respectively.

Effective April 1, 2020, certain of our advertising and search revenues are now presented within Roaming and other service revenues, resulting in a reclassification of $ 130 million and $ 364 million for the three and nine months ended September 30, 2019, respectively.

These revenues were previously presented within Other revenues in our Condensed Consolidated Statements of Comprehensive Income.

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For EIP receivables acquired in the Merger, we also recognize expected credit losses separately from, and in addition to, the acquisition date fair value of the acquired EIP receivables.

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Accounts Receivable Portfolio Segment

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We have an arrangement to sell certain of our customer service accounts receivable on a revolving basis, which are treated as sales of financial assets.

EIP Receivables Portfolio Segment

Equipment Installment Plan Receivables Portfolio Segment

We offer certain retail customers the option to pay for their devices and other purchases in installments, generally over a period of 24 months using an EIP.

EIP receivables are presented in our Condensed Consolidated Balance Sheets at the amortized cost basis (i.e., the receivables’ outstanding principal balance adjusted for any write-offs and unamortized discounts), net of the allowance for expected credit losses.

At the time of an installment sale, we impute a discount for interest if the EIP term exceeds 12 months as there is no stated rate of interest on the EIP receivables.

The EIP receivables are recorded at their present value, which is determined by discounting expected future cash payments at the imputed interest rate.

The difference between the recorded amount of the EIP receivables and their unpaid principal balance (i.e., the contractual amount due from the customer) results in a discount which is allocated to the performance obligations of the arrangement and recorded as a reduction in transaction price in Total service revenues and Equipment revenues in our Condensed Consolidated Statements of Comprehensive Income.

We determine the imputed discount rate based primarily on current market interest rates and the estimated credit risk on the EIP receivables.

The imputed discount on EIP receivables is amortized over the financed installment term using the effective interest method and recognized as Other revenues in our Condensed Consolidated Statements of Comprehensive Income.

EIP receivables are presented in our Condensed Consolidated Balance Sheets at the amortized cost basis (i.e., the receivables’ unpaid principal balance adjusted for any write-offs and unamortized discounts), net of the allowance for expected credit losses.

At the time of an installment sale, we impute a discount for interest if the term exceeds 12 months as there is no stated rate of interest on the receivables.

The receivables are recorded at their present value, which is determined by discounting expected future cash payments at the imputed interest rate.

This adjustment results in a discount which is allocated to the performance obligations of the arrangement and recorded as a reduction in transaction price in Total service revenues and Equipment revenues in our Condensed Consolidated Statements of Comprehensive Income.

The imputed discount rate is the current market interest rate and is predominately comprised of the estimated credit risk underlying the EIP receivable, reflecting the estimated credit worthiness of the customer.

The imputed discount on receivables is amortized over the financed installment term using the effective interest method and recognized as Other revenues in our Condensed Consolidated Statements of Comprehensive Income.

At the time that we originate EIP loans to customers, we recognize an allowance for credit losses that we expect to incur over the lifetime of such assets.

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We maintain an allowance for expected credit losses and determine its appropriateness through an established process that assesses the lifetime credit losses that we expect to incur related to our receivable portfolio.

We develop and document our allowance methodology at the portfolio segment level for the accounts receivable portfolio and EIP receivables portfolio segments.

Each period, management assesses the appropriateness of the level of allowance for credit losses by considering credit risk inherent within the portfolio of receivables, as of period end.

We develop and document our allowance methodology for each of our accounts receivable and EIP receivable portfolio segments.

While we attribute portions of the allowance to our respective accounts receivable and EIP portfolio segments, the entire allowance is available to absorb expected credit losses related to the total receivable portfolio.

Determining the appropriate level of allowance for credit losses requires significant judgment.

Our process involves procedures to appropriately consider the unique risk characteristics of our accounts receivable and EIP receivable portfolio segments.

1 unchanged sentence

Our allowance levels are influenced by receivable volumes, receivable delinquency status, historical loss experience and other conditions influencing loss expectations, such as changes in credit and collections policies and forecasts of macro-economic conditions.

Total imputed discount and allowances, which includes all accounts receivable and EIP receivables acquired in the Merger or issued thereafter, were approximately 7.8 % and 7.0 % of the total amount of gross accounts receivable, including EIP receivables, at June 30, 2020 and December 31, 2019, respectively.

We consider a receivable past due when a customer has not paid us by the contractually specified payment due date.

We write-off account balances if collection efforts are unsuccessful and the receivable balance is deemed uncollectible, based on customer credit quality and the aging of the receivable.

Index for Notes to th e Condensed Consolidated Financi al Statements

Account balances are written off against the allowance for credit losses if collection efforts are unsuccessful and the receivable balance is deemed uncollectible, based on factors such as customer credit ratings as well as the length of time the amounts are past due.

If there is a deterioration of our customers’ financial condition or if future actual default rates on receivables in general

differ from those currently anticipated, we will adjust our allowance for credit losses accordingly, which may materially affect our financial results in the period the adjustments are made.

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Cloud Computing Arrangements

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We adopted the standard on a prospective basis applying it to implementation costs incurred subsequent to January 1, 2020 and as a result did not restate the prior periods presented in the condensed consolidated financial statements.

The adoption of the standard did not have a material impact on our condensed consolidated financial statements for the six months ended June 30, 2020.

The adoption of the standard did not have a material impact on our condensed consolidated financial statements for the nine months ended September 30, 2020.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

1 unchanged sentence

We early adopted the standard on January 1, 2020 and have applied the standard retrospectively to all periods presented.

The adoption of this standard did not have an impact on our condensed consolidated financial statements.

The adoption of this standard did not have a material impact on our condensed consolidated financial statements for the nine months ended September 30, 2020.

Guarantor Financial Information

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Sprint stockholders other than SoftBank received the original fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or the equivalent of approximately 9.75 shares of Sprint common stock for each share of T-Mobile common stock.

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The Letter Agreement requires T-Mobile to issue to SoftBank 48,751,557 shares of T-Mobile common stock, subject to the

Index for Notes to the Condensed Consolidated Financial Statements

terms and conditions set forth in the Letter Agreement, for no additional consideration, if certain conditions are met.

The issuance of these shares is contingent on the trailing 45-day volume-weighted average price per share of T-Mobile common stock on the NASDAQ Global Select Market being equal to or greater than $ 150.00 , at any time during the period commencing on April 1, 2022 and ending on December 31, 2025.

If the threshold price is not met, then none of the SoftBank Specified Shares Amount will be issued.

Closing of Sprint Merger

On April 1, 2020, we completed the Merger, and as a result, Sprint and its subsidiaries became wholly owned consolidated subsidiaries of T-Mobile.

Sprint is a communications company offering a comprehensive range of wireless and wireline communications products and services.

Sprint was the fourth-largest telecommunications company in the U.S.

offering a comprehensive range of wireless and wireline communication products and services.

As a combined company, we expect to be able to rapidly launch a broad and deep nationwide 5G network, accelerate innovation, increase competition in the U.S.

wireless, video and broadband industries and achieve significant synergies and cost reductions by eliminating redundancies within the combined network as well as other business processes and operations.

We combined the Sprint and T-Mobile operations under the T-Mobile brand nationwide on August 2, 2020.

Upon completion of the Merger, each share of Sprint common stock was exchanged for 0.10256 shares of T-Mobile common stock, or 9.75 shares of Sprint common stock for each share of T-Mobile common stock.

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The fair value of the T-Mobile common stock provided in exchange for Sprint common stock was approximately $ 31.3 billion.

Additional components of consideration included the repayment of certain of Sprint’s debt, replacement equity awards attributable to pre-combination services and contingent consideration.

Additional components of consideration included the repayment of certain of Sprint’s debt, replacement equity awards attributable to pre-combination services, contingent consideration and a cash payment received for certain reimbursed Merger expenses.

Immediately following the closing of the Merger and the surrender of the SoftBank Specified Shares Amount, pursuant to the Letter Agreement described above, DT and SoftBank held, directly or indirectly, approximately 43.6 % and 24.7 %, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 31.7 % of the outstanding T-Mobile common stock held by other stockholders.

4 unchanged sentences

Fair value of T-Mobile replacement equity awards attributable to pre-combination service (2)

Repayment of Sprint’s debt (including accrued interest, prepayment penalties) (3)

Repayment of Sprint’s debt (including accrued interest and prepayment penalties) (3)

Value of contingent consideration (4)

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(5) Represents receipt of a cash payment from SoftBank for certain expenses associated with the Merger and is presented in Cash paid for acquisition of companies, net of cash acquired within our Condensed Consolidated Statements of Cash Flows.

The contingent consideration arrangement described within the Letter Agreement requires T-Mobile to issue to SoftBank 48,751,557 shares of T-Mobile common stock, subject to the terms and conditions set forth in the Letter Agreement, for no additional consideration.

If the threshold price is not met, then none of the SoftBank Specified Shares Amount will be issued.

The SoftBank Specified Shares Amount was determined to be contingent consideration with an acquisition-date fair value of $ 1.9 billion.

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This fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement as defined in ASC 820.

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assumptions in applying the income approach include estimated future share-price volatility, which was based on historical market trends and estimated future performance of T-Mobile.

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The identifiable assets acquired and liabilities assumed of Sprint were recorded at their preliminary fair values as of the acquisition date and consolidated with those of T-Mobile.

Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires the use of significant judgments regarding estimates and assumptions.

Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires the use of significant judgment regarding estimates and assumptions.

For the preliminary fair values of the assets acquired and liabilities assumed, we used the cost, income and market approaches, including market participant assumptions.

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We are in the process of finalizing the valuation of the assets acquired and liabilities assumed including income tax related amounts.

Therefore, the preliminary fair values set forth below are subject to adjustment as additional information is obtained and the valuations are completed.

Therefore, the preliminary fair values set forth below are subject to further adjustment as additional information is obtained and the valuations are completed.

(in millions) April 1, 2020

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(1) Included in Other assets acquired is $ 80 million in restricted cash.

Index for Notes to the Condensed Consolidated Financial Statements

Amounts previously disclosed for the estimated values of certain acquired assets and liabilities assumed have been revised based on additional information arising subsequent to the initial valuation.

These revisions to the estimated values did not have a significant impact on our Condensed Consolidated Statements of Comprehensive Income.

Intangible Assets and Liabilities

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Goodwill with a provisionally assigned value of $ 9.2 billion represents the excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed.

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All of the goodwill acquired is allocated to the Wireless reporting unit.

Other intangible assets include $ 4.9 billion of subscriber relationships with an 8 year weighted-average useful life and tradenames of $ 207 million with a useful life of 2 years.

Leased spectrum arrangements that have favorable (asset) and unfavorable (liability) terms compared to current market rates were provisionally assigned fair values of $ 790 million and $ 197 million, with 18 -year and 19 -year weighted average useful lives, respectively.

Other intangible assets include $ 4.9 billion of subscriber relationships with a weighted-average useful life of eight years and tradenames of $ 207 million with a useful life of two years .

Leased spectrum arrangements that have favorable (asset) and unfavorable (liability) terms compared to current market rates were provisionally assigned fair values of $ 790 million and $ 197 million, respectively, with 18 year and 19 year weighted average useful lives, respectively.

The preliminary fair value of Spectrum licenses of $ 45.4 billion was estimated using the income approach and the Greenfield Method.

This fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement as defined in ASC 820.

The key assumptions in applying the income approach include estimated capital and operating expenditures and forecasted subscriber growth rates and revenue over an estimated period of time for a hypothetical market participant that enters the wireless industry and builds a nationwide wireless network.

The key assumptions in applying the income approach include the discount rate, market share, estimated capital and operating expenditures and forecasted long-term growth rates and service revenue over an estimated period of time for a hypothetical market participant that enters the wireless industry and builds a nationwide wireless network.

Acquired Receivables

The fair value of the assets acquired include Accounts receivable of $ 1.7 billion and EIP receivables of $ 1.3 billion.

The unpaid principal balance under these contracts is $ 1.7 billion and $ 1.6 billion, respectively.

The unpaid principal balance under these contracts as of the Merger date was $ 1.7 billion and $ 1.6 billion, respectively.

The difference between the fair value and the unpaid principal balance primarily represents amounts expected to be uncollectible.

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to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses.

As of the Merger close date and June 30, 2020, we have not recorded an indemnification asset or contingent liability associated with these matters as the potential liabilities and associated reimbursement by SoftBank cannot be reasonably estimated.

We expect that any liability incurred related to these indemnified matters would be indemnified and reimbursed by SoftBank.

See Note 17 - Commitments and Contingencies for further information.

As of September 30, 2020, we have recorded contingent liabilities and an offsetting indemnification asset for the expected reimbursement by SoftBank.

The liabilities are presented in Accounts payable and accrued liabilities, and the indemnification asset is presented in Other current assets within our Condensed Consolidated Balance Sheets.

Subsequent to September 30, 2020, we reached an agreement on certain matters, which will result in a payment of $ 200 million to resolve the FCC’s investigation.

SoftBank has agreed to indemnify us for the settlement amount.

We expect that any additional liabilities related to these indemnified matters would be indemnified and reimbursed by SoftBank.

Transaction Costs

We recognized transaction costs of $ 145 million and $ 25 million for the three months ended June 30, 2020 and 2019, respectively, and $ 184 million and $ 51 million for the six months ended June 30, 2020 and 2019, respectively.

We recognized transaction costs of $ 8 million and $ 30 million for the three months ended September 30, 2020 and 2019, respectively, and $ 192 million and $ 81 million for the nine months ended September 30, 2020 and 2019, respectively.

These costs were associated with legal and professional services and were recognized as Selling, general and administrative expenses in our Condensed Consolidated Statements of Comprehensive Income.

Pro Forma Information

The following unaudited pro forma financial information gives effect to the Merger transactions as if they had been completed on January 1, 2019.

The following unaudited pro forma financial information gives effect to the Transactions as if they had been completed on January 1, 2019.

The unaudited pro forma information was prepared in accordance with the requirements of ASC 805, which is a different basis than pro forma information prepared under Article 11 of Regulation S-X (“Article 11”).

As such, they are not directly comparable with historical results for stand-alone T-Mobile prior to April 1, 2020, historical results for T-Mobile from April 1, 2020 that reflect the Merger transactions and are inclusive of the results and operations of Sprint, nor our previously provided pro forma financials prepared in accordance with Article 11.

The pro forma results for the three and six months ended June 30, 2020 and 2019, include the impact of several adjustments to previously reported operating results.

As such, they are not directly comparable with historical results for stand-alone T-Mobile prior to April 1, 2020, historical results for T-Mobile from April 1, 2020 that reflect the Transactions and are inclusive of the results and operations of Sprint, nor our previously provided pro forma financials prepared in accordance with Article 11.

The pro forma results for the three and nine months ended September 30, 2020 and 2019, include the impact of several adjustments to previously reported operating results.

The pro forma adjustments are based on historically reported transactions by the respective companies.

The pro forma results do not include any anticipated synergies or other expected benefits of the acquisition.

Three Months Ended June 30, Six Months Ended June 30,

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Three Months Ended September 30, Nine Months Ended September 30,

(in millions, except per share amounts) 2020 2019 2020 2019

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Income from discontinued operations, net of tax — 393 677 1,239

Net income (loss) 285 1,154 1,747 ( 218 )

Net income 1,359 849 3,132 623

Significant nonrecurring pro forma adjustments include:

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• Transaction costs of $ 550 million are assumed to have occurred on January 1, 2019, and are recognized as if incurred in the first quarter of 2019;

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• Permanent financing issued and debt redemptions occurring in connection with the closing of the Merger are assumed to have occurred on January 1, 2019, and historical interest expense associated with repaid borrowings is removed;

• Tangible and intangible assets are assumed to be recorded at their assigned fair values as of the pro forma close date of January 1, 2019 and are depreciated or amortized over their estimated useful lives;

• Accounting policies of Sprint are conformed to those of T-Mobile including depreciation for leased devices, Brightstar distribution and amortization of costs to acquire a contract as described in Note 1 - Summary of Significant Accounting P olicies for further information.

The selected unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations would have been had the Merger actually occurred on January 1, 2019, nor do they purport to project the future consolidated results of operations.

For the periods subsequent to the Merger date, the acquired Sprint subsidiaries contributed total revenues of $ 6.3 billion and operating income of $ 15 million that were included in our Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020.

• Tangible and intangible assets are assumed to be recorded at their preliminary assigned fair values as of the pro forma close date of January 1, 2019 and are depreciated or amortized over their estimated useful lives;

• Accounting policies of Sprint are conformed to those of T-Mobile including depreciation for leased devices, Brightstar distribution, amortization of costs to acquire a contract and certain lessee transactions as described in Note 1 - Summary of Significant Accounting Policies and Note 9 - Tower Obligations .

The selected unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations would have been had the Transactions actually occurred on January 1, 2019, nor do they purport to project the future consolidated results of operations.

For the periods subsequent to the Merger close date, the acquired Sprint subsidiaries contributed total revenues of $ 7.2 billion and $ 13.5 billion to the three and nine months ended September 30, 2020, respectively, and operating income of $ 897 million and $ 912 million to the three and nine months ended September 30, 2020, respectively, that were included in our Condensed Consolidated Statements of Comprehensive Income.

In connection with the entry into the Business Combination Agreement, T-Mobile USA, Inc.

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See Note 8 – Debt for further information.

In connection with the entry into the Business Combination Agreement, DT and T-Mobile USA entered into a Financing Matters Agreement, dated as of April 29, 2018 (the “Financing Matters Agreement”), pursuant to which DT agreed, among other things, to consent to, subject to certain conditions, certain amendments to certain existing debt owed to DT, in connection with the Merger.

In connection with the entry into the Business Combination Agreement, DT and T-Mobile USA entered into a Financing Matters Agreement, dated as of April 29, 2018 (the “Financing Matters Agreement”), pursuant to which DT agreed, among other things, to consent to, subject to certain conditions, amendments to certain existing debt owed to DT, in connection with the Merger.

On April 1, 2020, in connection with the closing of the Merger, we made a payment for requisite consents to DT of $ 13 million.

See Note 8 – Debt for further information.

On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement dated as of May 14, 2018 (the “Consent Solicitation Statement”), we obtained consents necessary to effect certain amendments to certain existing debt of us and our subsidiaries.

On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement dated as of May 14, 2018 (the “Consent Solicitation Statement”), we obtained consents necessary to effect amendments to certain existing debt of us and our subsidiaries.

On April 1, 2020, in connection with the closing of the Merger, we made payments for requisite consents to third-party note holders of $ 95 million.

See Note 8 – Debt for further information.

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Regulatory Matters

On June 18, 2018, we filed a Public Interest Statement and applications for approval of the Merger with the FCC.

On July 18, 2018, the FCC issued a Public Notice formally accepting our applications and establishing a period for public comment.

On May 20, 2019, to facilitate the FCC’s review and approval of the FCC license transfers associated with the proposed Merger, we and Sprint filed with the FCC a written ex parte presentation (the “Presentation”) relating to the proposed Merger.

The Presentation included proposed commitments from us and Sprint.

The FCC approved the Merger on November 5, 2019.

On June 11, 2019, a number of state attorneys general filed a lawsuit against us, DT, Sprint, and SoftBank in the U.S.

District Court for the Southern District of New York, alleging that the Merger, if consummated, would violate Section 7 of the Clayton Act and so should be enjoined.

In connection with the lawsuit, we settled with certain state attorneys general by making

Index for Notes to th e Condensed Consolidated Financi al Statements

commitments regarding our operations, employment and network capabilities in those states.

The Transactions were the subject of various legal and regulatory proceedings involving a number of state and federal agencies.

In connection with those proceedings and the approval of the Transactions, we have certain commitments and other obligations to various state and federal agencies and certain nongovernmental organizations.

See Note 17 - Commitments and Contingencies for further information.

On February 11, 2020, the U.S.

District Court for the Southern District of New York issued judgment in favor of us, Sprint, and the other defendants, concluding the Merger was not reasonably likely to reduce competition, and denying the plaintiffs’ request to enjoin the Merger.

On July 26, 2019, the DOJ filed a Consent Decree which was agreed to by us, DT, Sprint, SoftBank and DISH with the U.S.

District Court for the District of Columbia.

The Consent Decree, which was approved by the Court on April 1, 2020 (the “Final Judgment”), fully resolved the DOJ’s investigation into the Merger and requires the parties to, among other things, carry out the divestitures to be made pursuant to the Asset Purchase Agreement (defined below) upon closing of the Merger.

On April 16, 2020, the California Public Utilities Commission voted unanimously to approve the Merger of our and Sprint’s operations within the state of California with several conditions, including requirements for faster speeds, broader coverage, job creation, and offerings for low-income customers.

Prepaid Transaction

On July 26, 2019, we entered into the Asset Purchase Agreement with Sprint and DISH, pursuant to which, following the consummation of the Merger, DISH would acquire the Prepaid Business.

On June 17, 2020, the DOJ determined that we have complied with the requirement in the Final Judgment to provide DISH the ability to cross-provision any new or existing customer of the Prepaid Business with a compatible handset onto our network.

In connection with the DOJ determination, on June 17, 2020, T-Mobile, Sprint and DISH entered into the First Amendment to the Asset Purchase Agreement (the “First Amendment”).

Pursuant to the First Amendment, T-Mobile, Sprint and DISH agreed to proceed with the closing of the Prepaid Transaction (as defined below) in accordance with the Asset Purchase Agreement on July 1, 2020, subject to the terms and conditions of the Asset Purchase Agreement and the terms and conditions of the Final Judgment.

Subsequent to June 30, 2020, on July 1, 2020, pursuant to the Asset Purchase Agreement, we completed the Prepaid Transaction.

On June 17, 2020, T-Mobile, Sprint and DISH entered into the First Amendment to the Asset Purchase Agreement.

Pursuant to the First Amendment of the Asset Purchase Agreement, T-Mobile, Sprint and DISH agreed to proceed with the closing of the Prepaid Transaction in accordance with the Asset Purchase Agreement on July 1, 2020, subject to the terms and conditions of the Asset Purchase Agreement and the terms and conditions of the Consent Decree.

On July 1, 2020, pursuant to the Asset Purchase Agreement, we completed the Prepaid Transaction.

Upon closing of the Prepaid Transaction, we received $ 1.4 billion from DISH for the Prepaid Business, subject to a working capital adjustment.

See N ote 1 2 - Discontinued Operations for further information.

See Note 12 - Discontinued Operations for further information.

Shenandoah Personal Communications Company Affiliate Relationship

Sprint PCS (specifically Sprint Spectrum L.P.) is party to a variety of publicly filed agreements with Shenandoah Personal Communications Company (“Shentel”), pursuant to which Shentel is the exclusive provider of Sprint PCS’s wireless mobility communications network products in certain parts of Virginia, West Virginia, Kentucky, Ohio, and Pennsylvania to approximately 1.1 million subscribers.

T-Mobile has through at least August 29, 2020 to determine whether it will exercise an option to purchase Shentel’s wireless telecommunications network assets.

Should Sprint PCS exercise the purchase option, there will be an appraisal process, which could be subject to various legal challenges.

If Sprint PCS declines to do so, Shentel has an opportunity to purchase the legacy T-Mobile wireless telecommunications network assets in the Shentel service area and, should it decline to do so within 60 days, the affiliate agreement states that Sprint PCS must sell or decommission T-Mobile’s legacy wireless telecommunications network assets and transfer subscribers in the Shentel service area within two years .

Pursuant to one such agreement, the Sprint PCS Management Agreement, dated November 5, 1999 (as amended, supplemented and modified from time to time, the “Management Agreement”), Sprint PCS was granted an option to purchase Shentel’s wireless telecommunications assets.

On August 26, 2020, Sprint, on behalf of and as the direct or indirect owner of Sprint PCS, exercised its option by delivering a binding notice of exercise to Shentel.

The purchase price for the Shentel wireless telecommunications assets to be purchased by Sprint will be determined through the appraisal process prescribed in the Management Agreement.

We expect the appraisal process to be completed in the first quarter of 2021.

Note 3 – Receivables and Expected Credit Losses

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Accounts Receivable Portfolio Segment

Our accounts receivable segment primarily consists of amounts currently due from customers, including service and leased device receivables, handset insurance administrators, wholesale partners, other carriers and third-party retail channels.

We estimate expected credit losses associated with our accounts receivable portfolio using an aging schedule methodology that utilizes historical information and current conditions to develop expected credit losses by aging bucket, including for receivables that are not past due.

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frequency and severity, credit quality of the customer base, and other qualitative factors such as macro-economic conditions, including the expected economic impacts of the COVID-19 pandemic.

To determine the appropriate credit loss percentages by aging bucket, we consider a number of factors, including our overall historical credit losses, net of recoveries and timely payment experience as well as current collection trends such as write-off frequency and severity, credit quality of the customer base, and other qualitative factors such as macro-economic conditions, including the expected economic impacts of the COVID-19 pandemic.

We consider the need to adjust our estimate of expected credit losses for reasonable and supportable forecasts of future economic conditions.

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We also periodically evaluate other economic indicators such as unemployment rates to assess their level of correlation with our historical credit loss statistics.

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EIP Receivables Portfolio Segment

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The following table summarizes the EIP receivables, including imputed discounts and related allowance for credit losses:

(in millions) June 30, 2020 December 31, 2019

(in millions) September 30, 2020 December 31,

EIP receivables, gross (1)

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As they were recorded at fair value, an imputed discount was not recognized on the acquired receivables.

(2) Allowance for credit losses as of June 30, 2020 was impacted by the cumulative effect of initially applying the new credit loss standard on our receivables portfolio on January 1, 2020, which resulted in an increase to our allowance for credit losses of $ 91 million.

We manage our EIP receivables portfolio using customer credit class and tenure as key credit quality indicators.

(2) Allowance for credit losses as of September 30, 2020 was impacted by the cumulative effect of initially applying the new credit loss standard on our receivables portfolio on January 1, 2020, which resulted in an increase to our allowance for credit losses of $ 91 million.

We manage our EIP receivables portfolio using delinquency and customer credit class as key credit quality indicators.

As a part of the adoption of the new credit loss standard, we now disclose our EIP receivables portfolio disaggregated by origination year.

EIP receivables acquired through the Merger are also presented by origination year.

The following table presents the amortized cost of our EIP receivables by delinquency status, customer credit class, and year of origination as of June 30, 2020.

The following table presents the amortized cost of our EIP receivables by delinquency status, customer credit class, and year of origination as of September 30, 2020.

Originated in 2020 Originated in 2019 Originated prior to 2019 Total EIP Receivables, net of

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EIP receivables, net of unamortized imputed discount $ 1,554 $ 1,487 $ 780 $ 682 $ 196 $ 71 $ 2,530 $ 2,240 $ 4,770

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We estimate expected credit losses on our EIP receivables by using historical data adjusted for current conditions to calculate default probabilities for our outstanding EIP loans.

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We multiply these estimated default probabilities by our estimated loss given default, which considers recoveries.

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As we do for our accounts receivable portfolio segment, we consider the need to adjust our estimate of expected losses on EIP receivables for reasonable and supportable forecasts of economic conditions through monitoring of external professional forecasts and periodic internal statistical analyses, including the expected economic impacts of the COVID-19 pandemic.

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acquisition date is accreted to interest income over the contractual life of the loan using the effective interest method.

EIP receivables had a combined weighted average effective interest rate of 7.7 % and 8.8 % as of June 30, 2020 and December 31, 2019, respectively.

Activity for the six months ended June 30, 2020 and 2019, in the allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivables segments were as follows:

June 30, 2020 June 30, 2019

EIP receivables had a combined weighted average effective interest rate of 7.6 % and 8.8 % as of September 30, 2020 and December 31, 2019, respectively.

Activity for the nine months ended September 30, 2020 and 2019, in the allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivables segments were as follows:

September 30, 2020 September 30, 2019

(in millions) Accounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance Total

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Off-Balance-Sheet Credit Exposures

We do not have material, unmitigated off-balance-sheet credit exposures as of June 30, 2020.

We do not have material, unmitigated off-balance-sheet credit exposures as of September 30, 2020.

In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets included in our Condensed Consolidated Balance Sheets measured at fair value that are based on a discounted cash flow model using unobservable Level 3 inputs, including customer default rates and credit worthiness, dilutions and recoveries.

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The maximum funding commitment of the service receivable sale arrangement is $ 950 million, and the facility expires in March 2021.

As of June 30, 2020 and December 31, 2019, the service receivable sale arrangement provided funding of $ 914 million and $ 924 million, respectively.

As of September 30, 2020 and December 31, 2019, the service receivable sale arrangement provided funding of $ 828 million and $ 924 million, respectively.

Sales of receivables occur daily and are settled on a monthly basis.

The receivables consist of service charges currently due from customers and are short-term in nature.

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In connection with the service receivable sale arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity, to sell service accounts receivable (the “Service BRE”).

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Pursuant to the service receivable sale arrangement, certain of our wholly owned subsidiaries transfer selected receivables to the Service BRE.

The Service BRE then sells the receivables to an unaffiliated entity (the “Service VIE”), which was established to facilitate the sale of beneficial ownership interests in the receivables to certain third parties.

The Service BRE then

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sells the receivables to an unaffiliated entity (the “Service VIE”), which was established to facilitate the sale of beneficial ownership interests in the receivables to certain third parties.

Variable Interest Entity

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The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price and liabilities included in our Condensed Consolidated Balance Sheets that relate to our variable interest in the Service VIE:

(in millions) June 30, 2020 December 31, 2019

(in millions) September 30,

2020 December 31,

Other current assets $ 386 $ 350

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In 2015, we entered into an arrangement to sell certain EIP accounts receivable on a revolving basis (the “EIP sale arrangement”).

The maximum funding commitment of the EIP sale arrangement is $ 1.3 billion, and the scheduled expiration date is November 2020.

In February 2020, we amended the EIP sale arrangement to provide for an alternative advance rate methodology for the EIP accounts receivables sold in the EIP sale arrangement and to make certain other administrative changes.

The maximum funding commitment of the sale arrangement is $ 1.3 billion.

In February 2020, we amended the sale arrangement to provide for an alternative advance rate methodology for the EIP accounts receivables sold in the sale arrangement and to make certain other administrative changes.

On April 30, 2020, we agreed with the purchaser banks to update our collection policies to temporarily allow for flexibility for modifications to the accounts receivable sold that are impacted by COVID-19 and exclusion of such accounts receivable from all pool performance triggers.

As of both June 30, 2020 and December 31, 2019, the EIP sale arrangement provided funding of $ 1.3 billion.

Subsequent to September 30, 2020, on November 2, 2020, we extended the scheduled expiration date of the EIP sale arrangement to November 18, 2021.

As of both September 30, 2020 and December 31, 2019, the EIP sale arrangement provided funding of $ 1.3 billion.

Sales of EIP receivables occur daily and are settled on a monthly basis.

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Pursuant to the EIP sale arrangement, our wholly owned subsidiary transfers selected receivables to the EIP BRE.

The EIP BRE then sells the receivables to a non-consolidated and unaffiliated third-party entity for which we do not exercise any level of control, nor does the third-party entity qualify as a VIE.

The EIP BRE then sells the receivables to a non-consolidated and unaffiliated third-party entity over which we do not exercise any level of control, nor does the third-party entity qualify as a VIE.

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Variable Interest Entity

We determined that the EIP BRE is a VIE as its equity investment at risk lacks the obligation to absorb a certain portion of its expected losses.

We have a variable interest in the EIP BRE and determined that we are the primary beneficiary based on our ability to direct the activities which most significantly impact the EIP BRE’s economic performance.

We have a variable interest in the EIP BRE and have determined that we are the primary beneficiary based on our ability to direct the activities which most significantly impact the EIP BRE’s economic performance.

Those activities include selecting which receivables are transferred into the EIP BRE and sold in the EIP sale arrangement and funding of the EIP BRE.

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Additionally, our equity interest in the EIP BRE obligates us to absorb losses and gives us the right to receive benefits from the EIP BRE that could potentially be significant to the EIP BRE.

Accordingly, we include the balances and results of operations of the EIP BRE in our condensed consolidated financial statements.

The following table summarizes the carrying amounts and classification of assets, which consists primarily of the deferred purchase price, and liabilities included in our Condensed Consolidated Balance Sheets that relate to the EIP BRE:

(in millions) June 30, 2020 December 31, 2019

The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, and liabilities included in our Condensed Consolidated Balance Sheets that relate to the EIP BRE:

(in millions) September 30, 2020 December 31,

Other current assets $ 353 $ 344

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The fair value of the deferred purchase price is determined based on a discounted cash flow model which uses primarily unobservable inputs (Level 3 inputs), including customer default rates.

As of June 30, 2020 and December 31, 2019, our deferred purchase price related to the sales of service receivables and EIP receivables was $ 841 million and $ 781 million, respectively.

As of September 30, 2020 and December 31, 2019, our deferred purchase price related to the sales of service receivables and EIP receivables was $ 846 million and $ 781 million, respectively.

Index for Notes to the Condensed Consolidated Financial Statements

The following table summarizes the impact of the sale of certain service receivables and EIP receivables in our Condensed Consolidated Balance Sheets:

(in millions) June 30, 2020 December 31, 2019

(in millions) September 30, 2020 December 31,

Derecognized net service receivables and EIP receivables $ 2,535 $ 2,584

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Net cash proceeds funded by reinvested collections 1,944 1,879

We recognized losses from sales of receivables, including adjustments to the receivables’ fair values and changes in fair value of the deferred purchase price, of $ 30 million and $ 28 million for the three months ended June 30, 2020 and 2019, respectively, and $ 55 million and $ 63 million for the six months ended June 30, 2020 and 2019, respectively, in Selling, general and administrative expense in our Condensed Consolidated Statements of Comprehensive Income.

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We recognized a gain from sales of receivables, including adjustments to the receivables’ fair values and changes in fair value of the deferred purchase price, of $ 18 million and a loss from sales of receivables of $ 28 million for the three months ended September 30, 2020 and 2019, respectively, and losses of $ 37 million and $ 91 million for the nine months ended September 30, 2020 and 2019, respectively, in Selling, general and administrative expense in our Condensed Consolidated Statements of Comprehensive Income.

Continuing Involvement

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Pursuant to the EIP sale arrangement, under certain circumstances, we are required to deposit cash or replacement EIP receivables primarily for contracts terminated by customers under our JUMP!

On Demand program.

In addition, we have continuing involvement with the sold receivables as we may be responsible for absorbing additional credit losses pursuant to the sale arrangements.

Our maximum exposure to loss related to the involvement with the service receivables and EIP receivables sold under the sale arrangements was $ 1.1 billion as of June 30, 2020.

Our maximum exposure to loss related to the involvement with the service receivables and EIP receivables sold under the sale arrangements was $ 1.1 billion as of September 30, 2020.

The maximum exposure to loss, which is a required disclosure under U.S.

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We believe the probability of these circumstances occurring is remote and the maximum exposure to loss is not an indication of our expected loss.

Index for Notes to the Condensed Consolidated Financial Statements

Note 5 – Property and Equipment

The components of property and equipment were as follows:

(in millions) Useful Lives June 30, 2020 December 31, 2019

(in millions) Useful Lives September 30, 2020 December 31,

Land $ 236 $ —

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Property and equipment, net $ 38,567 $ 21,984

Total depreciation expense relating to property and equipment and financing lease right-of-use assets was $ 3.8 billion and $ 1.7 billion for the three months ended September 30, 2020 and 2019, respectively, and $ 9.2 billion and $ 4.8 billion for the nine months ended September 30, 2020 and 2019, respectively.

These amounts include depreciation expense related to leased wireless devices of $ 1.0 billion and $ 108 million for the three months ended September 30, 2020 and 2019 respectively, and $ 2.1 billion and $ 417 million for the nine months ended September 30, 2020 and 2019, respectively.

We capitalize interest associated with the acquisition or construction of certain property and equipment and spectrum intangible assets.

We recognized capitalized interest of $ 119 million and $ 125 million for the three months ended June 30, 2020 and 2019, respectively, and $ 231 million and $ 243 million for the six months ended June 30, 2020 and 2019, respectively.

Total depreciation expense relating to property and equipment and financing lease right-of-use assets was $ 3.7 billion and $ 1.6 billion for the three months ended June 30, 2020 and 2019, respectively, and $ 5.4 billion and $ 3.1 billion for the six months ended June 30, 2020 and 2019, respectively.

These amounts include depreciation expense related to leased wireless devices of $ 947 million and $ 125 million for the three months ended June 30, 2020 and 2019 respectively, and $ 1.1 billion and $ 309 million for the six months ended June 30, 2020 and 2019, respectively.

We recognized capitalized interest of $ 108 million and $ 118 million for the three months ended September 30, 2020 and 2019, respectively, and $ 339 million and $ 361 million for the nine months ended September 30, 2020 and 2019, respectively.

Asset retirement obligations are primarily for certain legal obligations to remediate leased property on which our network infrastructure and administrative assets are located.

Index for Notes to th e Condensed Consolidated Financi al Statements

Activity in our asset retirement obligations was as follows:

(in millions) Six Months Ended June 30, 2020 Twelve Months Ended

(in millions) Nine Months Ended September 30, 2020 Twelve Months Ended

December 31, 2019

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Other long-term liabilities $ 1,751 $ 659

The corresponding assets, net of accumulated depreciation, related to asset retirement obligations were $ 1.1 billion and $ 159 million as of June 30, 2020 and December 31, 2019, respectively.

The corresponding assets, net of accumulated depreciation, related to asset retirement obligations were $ 965 million and $ 159 million as of September 30, 2020 and December 31, 2019, respectively.

Postpaid Billing System Impairment

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In order to facilitate customer migration from the Sprint legacy billing platform, our postpaid billing system replacement plan and associated development will no longer serve our future needs.

As a result, we recorded a non-cash impairment of $ 200 million related to capitalized software development costs for the three and six months ended June 30, 2020.

As a result, we recorded a non-cash impairment of $ 200 million related to capitalized software development costs for the nine months ended September 30, 2020, all of which relates to the impairment recognized during the three months ended June 30, 2020.

The expense is included within Impairment expense in our Condensed Consolidated Statements of Comprehensive Income.

There were no impairments recognized for the three and six months ended June 30, 2019.

There were no impairments recognized for the three and nine months ended September 30, 2019.

Index for Notes to the Condensed Consolidated Financial Statements

Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets

The changes in the carrying amount of goodwill for the six months ended June 30, 2020 and year ended December 31, 2019, are as follows:

The changes in the carrying amount of goodwill for the nine months ended September 30, 2020 and year ended December 31, 2019, are as follows:

(in millions) Goodwill

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Layer3 goodwill impairment ( 218 )

Balance as of June 30, 2020 $ 10,910

Accumulated impairment losses at June 30, 2020 $ ( 10,984 )

Balance as of September 30, 2020 $ 10,906

Accumulated impairment losses at September 30, 2020 $ ( 10,985 )

On April 1, 2020, we completed our Merger with Sprint, which was accounted for as a business combination resulting in $ 9.2 billion in goodwill.

The acquired goodwill was allocated to the Wireless reporting unit and will be tested for impairment at this level.

See Note 2 - Business Combination for further information.

Goodwill Impairment Assessment

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Our enhanced in-home broadband opportunity following the Merger, along with the acquisition of certain content rights, has created a strategic shift in our TVision TM Home service offering, allowing us the ability to develop a video product that will be complementary to the in-home broadband offering.

As a result of the change in the stand-alone product offering plans and

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timing, we completed an interim goodwill impairment analysis for the Layer3 reporting unit and recognized a goodwill impairment of $ 218 million for the three and six months ended June 30, 2020.

As a result of the change in the stand-alone product offering plans and timing, we completed an interim goodwill impairment analysis for the Layer3 reporting unit and recognized a goodwill impairment of $ 218 million for the nine months ended September 30, 2020, all of which relates to the impairment recognized during the three months ended June 30, 2020.

The expense is included within Impairment expense in our Condensed Consolidated Statements of Comprehensive Income.

There were no goodwill impairments recognized for the three and six months ended June 30, 2019.

There were no goodwill impairments recognized for the three and nine months ended September 30, 2019.

Application of the goodwill impairment test requires judgment including the determination of the fair value of the reporting unit.

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The discount rate used was based on the weighted average cost of capital adjusted for the risk associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash flows.

Index for Notes to the Condensed Consolidated Financial Statements

Intangible Assets

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The following table summarizes the fair value of the intangible assets acquired in the Merger:

Weighted Average Useful Life (in years) Fair Value (in millions)

Weighted Average Useful Life (in years) Fair Value as of April 1, 2020

(in millions)

Spectrum licenses Indefinite-lived $ 45,400

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(1) Tradenames include the Sprint brand

Spectrum licenses are issued for a fixed period of time, typically for up to fifteen years ;

Spectrum licenses are issued for a fixed period of time, typically up to 15 years;

however, the FCC has granted license renewals routinely and at a nominal cost.

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Spectrum Licenses

The following table summarizes our spectrum license activity for the six months ended June 30, 2020:

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(in millions) 2020

The following table summarizes our spectrum license activity for the nine months ended September 30, 2020:

(in millions) Nine Months Ended September 30, 2020

Spectrum licenses, beginning of year $ 36,465

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Prior to the Merger, the FCC announced that Sprint was the winning bidder of 127 licenses in Auction 103 (37/39 GHz and 47 GHz spectrum bands).

All payments related to the licenses won were made by Sprint prior the Merger.

The licenses are included in Spectrum licenses in our Condensed Consolidated Balance Sheets as of June 30, 2020.

Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in Purchases of spectrum licenses and other intangible assets, including deposits in our Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2020.

All payments related to the licenses won were made by Sprint prior to the Merger.

Index for Notes to the Condensed Consolidated Financial Statements

The licenses are included in Spectrum licenses in our Condensed Consolidated Balance Sheets as of September 30, 2020.

Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in Refunds (purchases) of spectrum licenses and other intangible assets, including deposits in our Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2020.

In April 2020, we acquired FCC licenses in the 800 MHz, 1.9 GHz, and 2.5 GHz bands as part of the Merger with Sprint at an estimated fair value of approximately $ 45.4 billion.

See Note 2 - Business Com bination for further information.

See Note 2 - Business Combination for further information.

Other Intangible Assets

The components of Other intangible assets were as follows:

Useful Lives June 30, 2020 December 31, 2019

Useful Lives September 30, 2020 December 31, 2019

(in millions) Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount

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Other intangible assets $ 7,866 $ ( 2,206 ) $ 5,660 $ 1,527 $ ( 1,412 ) $ 115

Amortization expense for intangible assets subject to amortization was $ 387 million and $ 18 million for the three months ended June 30, 2020 and 2019, respectively, and $ 411 million and $ 35 million for the six months ended June 30, 2020 and 2019, respectively.

Amortization expense for intangible assets subject to amortization was $ 383 million and $ 18 million for the three months ended September 30, 2020 and 2019, respectively, and $ 794 million and $ 53 million for the nine months ended September 30, 2020 and 2019, respectively.

The estimated aggregate future amortization expense for intangible assets subject to amortization are summarized below:

(in millions) Estimated Future Amortization

Twelve Months Ending June 30,

Twelve Months Ending September 30,

Thereafter 1,176

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Substantially all of the estimated future amortization expense is associated with intangible assets acquired in the Merger.

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Note 7 – Fair Value Measurements

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Derivative Financial Instruments

Interest rate lock derivatives

Periodically, we use derivatives to manage exposure to market risk, such as interest rate risk.

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We do not use derivatives for trading or speculative purposes.

We record interest rate lock derivatives on our Condensed Consolidated Balance Sheets at fair value that is derived primarily from observable market data, including yield curves.

Interest rate lock derivatives were classified as Level 2 in the fair value hierarchy.

Cash flows associated with qualifying hedge derivative instruments are presented in the same category on the Condensed Consolidated Statements of Cash Flows as the item being hedged.

Index for Notes to the Condensed Consolidated Financial Statements

Interest Rate Lock Derivatives

In October 2018, we entered into interest rate lock derivatives with notional amounts of $ 9.6 billion.

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For the three months ended March 31, 2020, we made net collateral transfers to certain of our derivative counterparties totaling $ 580 million, which included variation margin transfers to (or from) such derivative counterparties based on daily market movements.

No amounts were transferred in the three months ended June 30, 2020.

No amounts were transferred in the three months ended June 30, 2020, or in the three months ended September 30, 2020.

These collateral transfers are included in Net cash related to derivative contracts under collateral exchange arrangements within Net cash used in investing activities in our Condensed Consolidated Statements of Cash Flows.

The net collateral transfers to certain of our derivative counterparties totaled $ 632 million for the three months ended December 31, 2019, and was presented in Other current assets in our Condensed Consolidated Balance Sheets.

There was no collateral receivable balance as of September 30, 2020.

We record interest rate lock derivatives on our Condensed Consolidated Balance Sheets at fair value that is derived primarily from observable market data, including yield curves.

Interest rate lock derivatives were classified as Level 2 in the fair value hierarchy.

Cash flows associated with qualifying hedge derivative instruments are presented in the same category on the Condensed Consolidated Statements of Cash Flows as the item being hedged.

The fair value of interest rate lock derivatives was a liability of $ 1.2 billion as of December 31, 2019, and was included in Other current liabilities in our Condensed Consolidated Balance Sheets.

Aggregate changes in fair value, net of tax, of $ 1.6 billion and $ 868 million are presented in Accumulated other comprehensive loss as of September 30, 2020 and December 31, 2019, respectively.

Between April 2 to April 6, 2020, in connection with the issuance of an aggregate of $ 19.0 billion in Senior Secured Notes bearing interest rates ranging from 3.500 % to 4.500 % and maturing in 2025 through 2050, we terminated our interest rate lock derivatives.

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The cash flows associated with the settlement of interest rate lock derivatives are presented on a gross basis in our Condensed Consolidated Statements of Cash Flows, with the total cash payments to settle the swaps of $ 2.3 billion presented in changes in Other current and long-term liabilities within Net cash provided by operating activities and the return of cash collateral of $ 1.2 billion presented as an inflow in Net cash related to derivative contracts under collateral exchange arrangements within Net cash used in investing activities.

The fair value of interest rate lock derivatives was a liability of $ 1.2 billion as of December 31, 2019, and was included in Other current liabilities in our Condensed Consolidated Balance Sheets.

Aggregate changes in fair value, net of tax, of $ 1.7 billion and $ 868 million are presented in Accumulated other comprehensive loss as of June 30, 2020 and December 31, 2019, respectively.

Upon the termination of the interest rate lock derivatives, we began amortizing the Accumulated other comprehensive loss with the derivatives into Interest expense.

For both the three and six months ended June 30, 2020, $ 39 million was amortized from Accumulated other comprehensive loss into Interest expense in the Condensed Consolidated Statements of Comprehensive Income.

Upon the issuance of debt to which the hedged interest rate risk related, we began amortizing the Accumulated other comprehensive loss with the derivatives into Interest expense in a manner consistent with how the hedged interest payments affect earnings.

For the three and nine months ended September 30, 2020, $ 44 million and $ 83 million, respectively, was amortized from Accumulated other comprehensive loss into Interest expense in the Condensed Consolidated Statements of Comprehensive Income.

We expect to amortize $ 185 million of the Accumulated other comprehensive loss associated with the derivatives into interest expense over the next 12 months.

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See Note 4 – Sales of Certain Receivables for further information.

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The carrying amounts and fair values of our assets measured at fair value on a recurring basis included in our Condensed Consolidated Balance Sheets were as follows:

Level within the Fair Value Hierarchy June 30, 2020 December 31, 2019

(in millions) Carrying Amount Fair Value Carrying Amount Fair Value

Deferred purchase price assets 3 $ 841 $ 841 $ 781 $ 781

The carrying amounts of our deferred purchase price assets, which are measured at fair value on a recurring basis and included in our Condensed Consolidated Balance Sheets, were $ 846 million and $ 781 million at September 30, 2020, and December 31, 2019, respectively.

Fair value was equal to carrying amount at September 30, 2020, and December 31, 2019.

The fair value of our Senior Unsecured Notes, Senior Secured Notes, and Secured Term Loan Facility to third parties was determined based on quoted market prices in active markets, and therefore were classified as Level 1 within the fair value hierarchy.

The fair values of our Senior Notes to affiliates and Incremental Term Loan Facility to affiliates were determined based on a discounted cash flow approach using market interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk.

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estimate for our standalone credit risk.

Accordingly, our Senior Notes to affiliates and Incremental Term Loan Facility to affiliates were classified as Level 2 within the fair value hierarchy.

Although we have determined the estimated fair values using available market information and commonly accepted valuation methodologies, considerable judgment was required in interpreting market data to develop fair value estimates for the Senior Notes to affiliates and Incremental Term Loan Facility to affiliates.

The fair value estimates were based on information available as of June 30, 2020, and December 31, 2019.

The fair value estimates were based on information available as of September 30, 2020 and December 31, 2019.

As such, our estimates are not necessarily indicative of the amount we could realize in a current market exchange.

The carrying amounts and fair values of our short-term and long-term debt included in our Condensed Consolidated Balance Sheets were as follows:

Level within the Fair Value Hierarchy June 30, 2020 December 31, 2019

Level within the Fair Value Hierarchy September 30, 2020 December 31, 2019

(in millions) Carrying Amount (1)

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Secured Term Loan Facility to third parties 1 3,890 3,990 — —

(1) Excludes $ 353 million and $ 25 million as of June 30, 2020 and December 31, 2019, respectively, in vendor financing arrangements and other debt as the carrying values approximate fair value primarily due to the short-term maturities of majority of these instruments.

(1) Excludes $ 312 million and $ 25 million as of September 30, 2020 and December 31, 2019, respectively, in vendor financing arrangements and other debt as the carrying values approximate fair value primarily due to the short-term maturities of these instruments.

Guarantee Liabilities

We offer a device trade-in program, JUMP!, which provides eligible customers a specified-price trade-in right to upgrade their device.

For customers who enroll in JUMP!, we recognize a liability and reduce revenue for the portion of revenue which represents the estimated fair value of the specified-price trade-in right guarantee, incorporating the expected probability and timing of handset upgrade and the estimated fair value of the handset which is returned.

We offer device trade-in programs that provide eligible customers a specified-price trade-in right to upgrade their device.

For customers who enroll in these programs, we recognize a liability and reduce revenue for the portion of revenue which represents the estimated fair value of the specified-price trade-in right guarantee, incorporating the expected probability and timing of handset upgrade and the estimated fair value of the handset which is returned.

Accordingly, our guarantee liabilities were classified as Level 3 within the fair value hierarchy.

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Guarantee liabilities are included in Other current liabilities in our Condensed Consolidated Balance Sheets.

The carrying amounts of our guarantee liabilities measured at fair value on a non-recurring basis included in our Condensed Consolidated Balance Sheets were $ 51 million and $ 62 million as of June 30, 2020, and December 31, 2019, respectively.

The total estimated remaining gross EIP receivable balances of all enrolled handset upgrade program customers, which are the remaining EIP amounts underlying the JUMP!

guarantee, including EIP receivables that have been sold, was $ 2.8 billion as of June 30, 2020.

The carrying amounts of our guarantee liabilities measured at fair value on a non-recurring basis included in our Condensed Consolidated Balance Sheets were $ 45 million and $ 62 million as of September 30, 2020 and December 31, 2019, respectively.

The total estimated remaining gross EIP receivable balances of all enrolled handset upgrade program customers, which are the remaining EIP amounts underlying the trade-in right guarantee, including EIP receivables that have been sold, was $ 2.9 billion as of September 30, 2020.

This is not an indication of our expected loss exposure as it does not consider the expected fair value of the used handset or the probability and timing of the trade-in.

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Note 8 - Debt

The following table sets forth the debt balances and activity as of, and for the six months ended, June 30, 2020 :

The following table sets forth the debt balances and activity as of, and for the nine months ended, September 30, 2020 :

(in millions) December 31, 2019 Proceeds from Issuances and Borrowings (1)

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Reclassifications (1)

June 30, 2020

September 30, 2020

Short-term debt $ 25 $ 18,943 $ 2,760 $ ( 21,413 ) $ ( 2,355 ) $ 5,696 $ 57 $ 3,713

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(1) Issuances and borrowings, note redemptions, and reclassifications are recorded net of related issuance costs, discounts and premiums.

Includes the issuance of $ 38 million in vendor financing agreements as well as payments for requisite consents to DT and third-party note holders of $ 13 million and $ 95 million, respectively, made on April 1, 2020 in connection with closing of the Merger, which were recognized as a reduction to Long-term debt in our Condensed Consolidated Balance Sheets.

Includes the issuance of $ 200 million in vendor financing agreements and other debt as well as payments for requisite consents to DT and third-party note holders of $ 13 million and $ 95 million, respectively, made on April 1, 2020 in connection with the closing of the Merger, which were recognized as a reduction to Long-term debt in our Condensed Consolidated Balance Sheets.

(2) In connection with the Merger, we assumed certain of Sprint’s indebtedness, as described below.

(3) Other includes the amortization of premiums, discounts, debt issuance costs and consent fees.

(3) In conjunction with the Merger, the total principal amount outstanding under Sprint’s accounts receivable facility of $ 2.3 billion was repaid on April 1, 2020, and the facility was terminated.

(4) Other includes the amortization of premiums, discounts, debt issuance costs and consent fees.

Issuances and Borrowings

During the six months ended June 30, 2020, we issued the following Senior Secured Notes and entered into the following Secured loan facilities:

During the nine months ended September 30, 2020, we issued the following Senior Secured Notes and entered into the following Secured loan facilities:

(in millions) Principal Issuances Discounts and Issuance Costs Net Proceeds from Issuance of Long-Term Debt Issue Date

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Total Issuances and Borrowings $ 46,000 $ 567 $ 45,433

Commitment Letter

Commitment Letters

In connection with the entry into the Business Combination Agreement, T-Mobile USA entered into the Commitment Letter, with certain financial institutions named therein that committed to provide up to $ 27.0 billion in secured debt financing through May 1, 2020, including a $ 4.0 billion secured revolving credit facility, a $ 4.0 billion secured term loan facility, and a $ 19.0 billion secured bridge loan facility.

The funding of the debt facilities provided for in the Commitment Letter was subject to the satisfaction of the conditions set forth therein, including consummation of the Merger.

On April 1, 2020, in connection with the closing of the Merger, T-Mobile USA and certain of its affiliates, as guarantors, entered into a Bridge Loan Credit Agreement with certain financial institutions named therein, providing for a $ 19.0 billion

Index for Notes to th e Condensed Consolidated Financi al Statements

secured bridge loan facility (“New Secured Bridge Loan Facility”).

The New Secured Bridge Loan Facility bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 1.25 % and matures on March 31, 2021.

Index for Notes to the Condensed Consolidated Financial Statements

On April 1, 2020, in connection with the closing of the Merger, T-Mobile USA and certain of its affiliates, as guarantors, entered into a Credit Agreement (the “New Credit Agreement”) with certain financial institutions named therein, providing for a $ 4.0 billion secured term loan facility (“New Secured Term Loan Facility”) and a $ 4.0 billion revolving credit facility (“New Revolving Credit Facility”).

On September 16, 2020, we increased the aggregate commitment under the New Revolving Credit Facility to $ 5.5 billion through an amendment (the “Incremental Amendment”) to the New Credit Agreement.

The New Secured Term Loan Facility bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 3.00 % and matures on April 1, 2027.

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On June 24, 2020, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate of $ 4.0 billion in Senior Secured Notes bearing interest rates ranging from 1.500 % to 2.550 % and maturing in 2026 through 2031.

The Senior Secured Notes were issued for refinancing callable Senior Notes and, subsequent to the issuance, we delivered and expect to deliver the notices of redemption on certain Senior Notes as set forth below under “Senior Secured Notes – Redemptions and Repayments” and “Senior Notes to Affiliates.”

Index for Notes to th e Condensed Consolidated Financi al Statements

The Senior Secured Notes were issued for refinancing callable Senior Notes and, subsequent to the issuance, we redeemed certain Senior Notes as set forth below under “Senior Secured Notes – Redemptions and Repayments” and “Senior Notes to Affiliates.”

Subsequent to September 30, 2020, on October 6, 2020, T-Mobile USA issued $ 500 million of 2.050 % Senior Secured Notes due 2028, $ 750 million of 2.550 % Senior Secured Notes due 2031, $ 1.25 billion of 3.000 % Senior Secured Notes due 2041, and $ 1.5 billion of 3.300 % Senior Secured Notes due 2051.

On October 9, 2020, we used the net proceeds of $ 4.0 billion to repay at par all of the outstanding amounts under, and terminate, our New Secured Term Loan Facility.

Subsequent to September 30, 2020, on October 28, 2020, T-Mobile USA issued $ 1.0 billion of 2.250 % Senior Secured Notes due 2031, $ 1.25 billion of 3.000 % Senior Secured Notes due 2041, $ 1.5 billion of 3.300 % Senior Secured Notes due 2051 and $ 1.0 billion of 3.600 % Senior Secured Notes due 2060.

We intend to use the net proceeds of $ 4.6 billion for general corporate purposes, which may include among other things, acquisitions of additional spectrum and refinancing existing indebtedness on an ongoing basis.

Subsequent to September 30, 2020, on October 30, 2020, we entered into a $ 5.0 billion senior secured term loan commitment with certain financial institutions.

Up to $ 5.0 billion of loans under the commitment may be drawn at any time (subject to customary conditions precedent) through June 30, 2021.

If drawn, the facility matures in 364 days with one six-month extension exercisable at our discretion.

Proceeds may be used for general corporate purposes and will accrue interest at a rate of LIBOR plus a margin of 1.25 % per annum.

Index for Notes to the Condensed Consolidated Financial Statements

In connection with the Merger, we assumed the following indebtedness of Sprint:

(in millions) Fair value as of April 1, 2020 Principal Outstanding as of June 30, 2020 Carrying Value as of June 30, 2020

(in millions) Fair value as of April 1, 2020 Principal Outstanding as of September 30, 2020 Carrying Value as of September 30, 2020

7.250 % Senior Notes due 2021

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7.000 % Senior Notes due 2020

1,510 1,500 1,503

11.500 % Senior Notes due 2021

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See “Spectrum Financing” section below for further information.

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Index for Notes to the Condensed Consolidated Financial Statements

Redemptions and Repayments

During the six months ended June 30, 2020, we repaid the following loan facilities and redeemed the following Senior Notes to affiliates:

During the nine months ended September 30, 2020, we repaid the following loan facilities and redeemed the following Senior Notes held by third parties and Senior Notes held by affiliates:

(in millions) Principal Amount Write-off of Premiums and Issuance Costs (1)

Redemption or Repayment Date Redemption Price

Secured bridge loan facility due 2021

$ 19,000 $ 251 $ ( 47 ) April 9, 2020 100 %

Total of Secured loan facility with Third Parties redeemed $ 19,000 $ 251 $ ( 47 )

Secured bridge loan facility due 2021 $ 19,000 $ 251 $ ( 47 ) April 9, 2020 100.128 %

6.500 % Senior Notes due 2024

1,000 12 22 July 4, 2020 102.167 %

6.375 % Senior Notes due 2025

1,700 24 36 September 1, 2020 102.125 %

Total of Secured bridge loan facility and Senior Notes to third parties redeemed 21,700 287 11

5.300 % Senior Notes to affiliates due 2021 (3)

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Incremental term loan facility to affiliates due 2024 2,000 — — April 1, 2020 100.000 %

5.125 % Senior Secured Notes to affiliates due 2021

1,250 15 — July 4, 2020 100.000 %

Total of Senior Notes and Incremental term loan facilities to affiliates redeemed 9,250 ( 26 ) —

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3.360 % Senior Secured Series 2016-1 A-1 Notes due 2021

219 — — June 1, 2020 N/A

438 — — Various N/A

7.000 % Senior Notes due 2020

1,500 — — August 15, 2020 N/A

Secured term loan facility due 2027

10 — — September 29, 2020 N/A

Other debt 407 — — Various N/A

Total Repayments $ 4,665 $ — $ —

(1) Write-off of premiums and issuance costs are included in Other expense, net in our Condensed Consolidated Statements of Comprehensive Income.

(1) Write-off of premiums, discounts and issuance costs are included in Other expense, net in our Condensed Consolidated Statements of Comprehensive Income.

Write-off of issuance costs are included in Loss on redemption of debt within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows.

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Additionally, in connection with the repayment of our New Secured Bridge Loan Facility, we received a reimbursement of $ 71 million, which represents a portion of the Commitment Letter fees that were paid to certain financial institutions when we drew down on the New Secured Bridge Loan Facility on April 1, 2020.

The reimbursement is presented in Other expense, net in our Condensed Consolidated Statements of Comprehensive Income.

Prior to June 30, 2020, we delivered a notice of redemption on $ 1.0 billion aggregate principal amount of our 6.500 % Senior Notes due 2024.

The notes were redeemed on July 4, 2020 at a redemption price equal to 102.170 % of the principal amount of the notes (plus accrued and unpaid interest thereon), payable on July 6, 2020.

The redemption premium was approximately $ 22 million and the write-off of issuance costs and consent fees was approximately $ 12 million.

The outstanding principal amount was reclassified from Long-term debt to Short-term debt in our Condensed Consolidated Balance Sheets as of June 30, 2020.

We also delivered a notice of redemption on $ 1.25 billion aggregate principal amount of our 5.125 % Senior Notes to affiliates due 2021, as further described below under “Senior Notes to Affiliates.”

In August 2020, we expect to deliver a notice of redemption on $ 1.7 billion aggregate principal amount of our 6.375 % Senior Notes due 2025 and expect to redeem the Senior Notes on September 1, 2020.

The reimbursement is presented in Other (expense) income, net in our Condensed Consolidated Statements of Comprehensive Income.

On July 4, 2020, we redeemed $ 1.0 billion aggregate principal amount of our 6.500 % Senior Notes due 2024.

The notes were redeemed at a redemption price equal to 102.167 % of the principal amount of the notes (plus accrued and unpaid interest thereon), and were paid on July 6, 2020.

The redemption premium was approximately $ 22 million and the write off of issuance costs and consent fees was approximately $ 12 million, which were included in Other (expense) income, net in our Condensed Consolidated Statements of Comprehensive Income and Losses on redemption of debt in our Condensed Consolidated Statements of Cash Flows.

On August 15, 2020, we repaid at maturity $ 1.5 billion aggregate principal amount of our 7.000 % Senior Notes due 2020 (plus accrued and unpaid interest thereon).

On September 1, 2020, we redeemed $ 1.7 billion aggregate principal amount of our 6.375 % Senior Notes due 2025.

The notes were redeemed at a redemption price equal to 102.125 % of the principal amount of the notes (plus accrued and unpaid interest thereon), and were paid on September 1, 2020.

The redemption premium was approximately $ 36 million and the write off of issuance costs and consent fees was approximately $ 24 million, which were included in Other (expense) income, net in our

Index for Notes to the Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Comprehensive Income.

Subsequent to September 30, 2020, on October 9, 2020, we repaid at par all of the outstanding amounts under, and terminated, our New Secured Term Loan Facility.

On July 4, 2020, we also redeemed $ 1.25 billion aggregate principal amount of our 5.125 % Senior Notes to affiliates due 2021, as further described below under “Senior Notes to Affiliates.”

Financing Matters Agreement

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On April 1, 2020, in connection with the closing of the Merger, we:

Index for Notes to th e Condensed Consolidated Financi al Statements

• Repaid our $ 4.0 billion Incremental Term Loan Facility with DT, consisting of a $ 2.0 billion Incremental Term Loan Facility due 2022 and a $ 2.0 billion Incremental Term Loan Facility due 2024;

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Senior Notes to Affiliates

Prior to June 30, 2020, we delivered a notice of redemption on $ 1.25 billion aggregate principal amount of our 5.125 % Senior Notes to affiliates due 2021.

The notes were redeemed on July 4, 2020 at a redemption price equal to 100 % of the principal amount of the notes (plus accrued and unpaid interest thereon), payable on July 6, 2020.

The write-off of discounts were approximately $ 15 million.

The outstanding principal amount was reclassified from Long-term debt to Short-term debt in our Condensed Consolidated Balance Sheets as of June 30, 2020.

On July 4, 2020, we redeemed $ 1.25 billion aggregate principal amount of our 5.125 % Senior Notes to affiliates due 2021.

The notes were redeemed at a redemption price equal to 100.00 % of the principal amount of the notes (plus accrued and unpaid interest thereon), and were paid on July 6, 2020.

The write off of discounts was approximately $ 15 million and was included in Other (expense) income, net in our Condensed Consolidated Statements of Comprehensive Income and Losses on redemption of debt in our Condensed Consolidated Statements of Cash Flows.

Consents on Debt to Third Parties

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These upfront payments increased the effective interest rate of the related debt.

In addition, note holders agreed, among other things, to allow certain entities related to Sprint’s existing spectrum securitization notes program (“Existing Sprint Spectrum Program”) to be non-guarantor Restricted Subsidiaries, provided that the principal amount of the spectrum notes issued and outstanding under the Existing Sprint Spectrum Program does not exceed $ 7.0 billion and that the principal amount of such spectrum notes reduces the amount available under the Credit Facilities ratio basket, and to revise the definition of GAAP to mean generally accepted accounting principles in effect from time to time, unless the Company elects to “freeze” GAAP as of any date, and to exclude the effect of the changes in the accounting treatment of lease obligations (the “Existing Sprint Spectrum and GAAP Amendments,” and together with the Ratio Secured Debt Amendments, the “Debt Amendments”).

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to revise the definition of GAAP to mean generally accepted accounting principles in effect from time to time, unless the Company elects to “freeze” GAAP as of any date, and to exclude the effect of the changes in the accounting treatment of lease obligations (the “Existing Sprint Spectrum and GAAP Amendments,” and together with the Ratio Secured Debt Amendments, the “Debt Amendments”).

In connection with receiving the requisite consents for the Existing Sprint Spectrum and GAAP Amendments, we made upfront payments to third-party note holders of $ 14 million during the second quarter of 2018.

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We paid third-party bank fees associated with obtaining the requisite consents related to the Debt Amendments of $ 6 million during the second quarter of 2018, which we recognized as Selling, general and administrative expenses in our Condensed Consolidated Statements of Comprehensive Income.

On April 1, 2020, in connection with the closing of the Merger, we made additional payments to third-party note holders for requisite consents related to the Ratio Secured Debt Amendments of $ 54

Index for Notes to th e Condensed Consolidated Financi al Statements

million and related to the Existing Sprint Spectrum and GAAP Amendments of $ 41 million.

On April 1, 2020, in connection with the closing of the Merger, we made additional payments to third-party note holders for requisite consents related to the Ratio Secured Debt Amendments of $ 54 million and related to the Existing Sprint Spectrum and GAAP Amendments of $ 41 million.

These payments were recognized as a reduction to Long-term debt in our Condensed Consolidated Balance Sheets.

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Spectrum Financing

On April 1, 2020, in connection with the closing of the Merger, we assumed Sprint’s spectrum-backed notes which are collateralized by the acquired directly held and third-party leased Spectrum licenses (collectively, “Spectrum Portfolio“) transferred to wholly-owned bankruptcy-remote special purpose entities (collectively, “Spectrum Financing SPEs”).

As of June 30, 2020, the total outstanding obligations under these Notes was $ 5.0 billion.

On April 1, 2020, in connection with the closing of the Merger, we assumed Sprint’s spectrum-backed notes which are collateralized by the acquired directly held and third-party leased Spectrum licenses (collectively, the “Spectrum Portfolio“) transferred to wholly owned bankruptcy-remote special purpose entities (collectively, the “Spectrum Financing SPEs”).

As of September 30, 2020, the total outstanding obligations under these Notes was $ 4.8 billion.

In October 2016, certain subsidiaries of Sprint Communications, Inc.

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The 2016 Spectrum-Backed Notes are repayable over a five-year term, with interest-only payments over the first four quarters and amortizing quarterly principal payments thereafter commencing December 2017 through September 2021.

During the quarter ended June 30, 2020, we made scheduled principal repayments of $ 219 million, resulting in a total principal amount outstanding related to the 2016 Spectrum-Backed Notes of $ 1.1 billion as of June 30, 2020, of which $ 875 million was classified as Short-term debt in the Condensed Consolidated Balance Sheets .

During the nine months ended September 30, 2020, we made scheduled principal repayments of $ 438 million, resulting in a total principal amount outstanding related to the 2016 Spectrum-Backed Notes of $ 875 million as of September 30, 2020, which was classified as Short-term debt in the Condensed Consolidated Balance Sheets .

In March 2018, Sprint issued approximately $ 3.9 billion in aggregate principal amount of senior secured notes (the “2018 Spectrum-Backed Notes” and together with the 2016 Spectrum-Backed Notes, the “Spectrum-Backed Notes”) under the existing $ 7.0 billion securitization program, consisting of two series of senior secured notes.

The first series of notes totaled $ 2.1 billion in aggregate principal amount, bears interest at 4.738 % per annum, and has quarterly interest-only payments until June 2021, and amortizing quarterly principal amounts thereafter commencing in June 2021 through March 2025.

As of June 30, 2020, $ 131 million of the aggregate principal amount was classified as Short-term debt in the Condensed Consolidated Balance Sheets.

As of September 30, 2020, $ 263 million of the aggregate principal amount was classified as Short-term debt in the Condensed Consolidated Balance Sheets.

The second series of notes totaled approximately $ 1.8 billion in aggregate principal amount, bears interest at 5.152 % per annum, and has quarterly interest-only payments until June 2023, and amortizing quarterly principal amounts thereafter commencing in June 2023 through March 2028.

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Each Spectrum Financing SPE is a separate legal entity with its own separate creditors who will be entitled, prior to and upon the liquidation of the respective Spectrum Financing SPE, to be satisfied out of the Spectrum Financing SPE’s assets prior to any assets of such Spectrum Financing SPE becoming available to T-Mobile.

Accordingly, the assets of each Spectrum Financing SPE are not available to satisfy the debts and other obligations owed to other creditors of T-Mobile until the obligations of such Spectrum Financing SPE under the spectrum-backed senior secured notes are paid in full.

Accordingly, the assets of each Spectrum

Index for Notes to the Condensed Consolidated Financial Statements

Financing SPE are not available to satisfy the debts and other obligations owed to other creditors of T-Mobile until the obligations of such Spectrum Financing SPE under the spectrum-backed senior secured notes are paid in full.

Certain provisions of the Spectrum Financing facility require us to maintain specified cash collateral balances.

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We assumed certain of Sprint’s standby letters of credit in the Merger.

Our outstanding standby letters of credit were $ 631 million and $ 113 million as of June 30, 2020 and December 31, 2019, respectively.

Index for Notes to th e Condensed Consolidated Financi al Statements

Our outstanding standby letters of credit were $ 546 million and $ 113 million as of September 30, 2020 and December 31, 2019, respectively.

Note 9 – Tower Obligations

Existing CCI Tower Lease Arrangements

In 2012, we conveyed to CCI the exclusive right to manage and operate approximately 7,100 tower sites (“CCI Lease Sites”) via a master prepaid lease with site lease terms ranging from 23 to 37 years (the “2012 Tower Transaction”).

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Upon closing of the 2012 Tower Transaction, CCI acquired an option to acquire the CCI Lease Sites at the end of their respective lease terms and entered into a master lease agreement under which we agreed to lease back space at certain of the tower sites.

We determined the SPEs containing the CCI Lease Sites (“Lease Site SPEs”) are VIEs as our equity investment lacks the power to direct the activities that most significantly impact the economic performance of the VIEs.

We determined the SPEs containing the CCI Lease Sites (“Lease Site SPEs”) are VIEs as they lack sufficient equity to finance their activities.

We have a variable interest in the Lease Site VIE but are not the primary beneficiary as we lack the power to direct the activities that most significantly impact the Lease Site VIE’s economic performance.

These activities include managing tenants and underlying ground leases, performing repair and maintenance on the towers, the obligation to absorb expected losses and the right to receive the expected future residual returns from the purchase option to acquire the CCI Lease Sites.

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The tower obligations are increased by interest expense and amortized through contractual leaseback payments made by us to CCI and through net cash flows generated and retained by CCI from operation of the tower sites.

The principal payments on the tower obligations are included in Other, net within Net cash provided by (used in) financing activities in our Condensed Consolidated Statements of Cash Flows.

The principal payments on the tower obligations are included in Other, net within Net cash (used in) provided by financing activities in our Condensed Consolidated Statements of Cash Flows.

Our historical tower site asset costs are reported in Property and equipment, net in our Condensed Consolidated Balance Sheets and are depreciated.

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We concluded that a sale has not occurred for the CCI Lease Sites and these sites continue to be accounted for as a failed sale-leaseback.

CCI Tower Lease Arrangements

Index for Notes to the Condensed Consolidated Financial Statements

Acquired CCI Tower Lease Arrangements

Prior to the Merger, Sprint entered into a lease-out and leaseback arrangement with Global Signal Inc., a third party that was subsequently acquired by CCI, whereby the third party would lease (“Master Lease Sites”) or otherwise manage (“Managed Sites”) approximately 6,400 cell sites which included the towers and related assets.

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CCI has a fixed-price purchase option for all (but not less than all) of the leased or subleased sites for approximately $ 2.3 billion, exercisable one year prior to the expiration of the agreement and ending 120 days prior to the expiration of the agreement.

As of Merger close date, we recognized Property and equipment at a fair value of $ 1.5 billion and tower obligations related to amounts owed to CCI under the leaseback of $ 1.1 billion as the transfer of control criteria in the revenue standard for the tower assets was not met.

During the three months ended June 30, 2020, we recognized interest expense on the tower obligations at a rate of approximately 6 % using the effective interest method.

As of Merger close date, we recognized Property and equipment with a preliminary fair value of $ 1.5 billion and tower obligations related to amounts owed to CCI under the leaseback of $ 1.1 billion as the transfer of control criteria in the revenue standard for the tower assets was not met.

We are in the process of finalizing the valuation of the assets acquired and liabilities assumed in the Merger, including income tax related amounts.

Therefore, the preliminary fair values are subject to further adjustment as additional information is obtained and the valuations are completed.

During the three months ended September 30, 2020, we recognized interest expense on the tower obligations at a rate of approximately 6 % using the effective interest method.

The tower obligations are increased by interest expense and amortized through contractual leaseback payments made by us to CCI.

The principal payments on the tower obligations are included in Other, net within Net cash provided by (used in) financing activities in our Condensed Consolidated Statements of Cash Flows.

The tower assets are reported in Property and equipment, net in our Condensed Consolidated Balance Sheets and are depreciated to their estimated residual values over the current leaseback periods, for which the weighted average remaining term was six years as of June 30, 2020.

The principal payments on the tower obligations are included in Other, net within Net cash (used in) provided by financing activities in our Condensed Consolidated Statements of Cash Flows.

The following table summarizes the balances associated with both of the tower arrangements in the Condensed Consolidated Balance Sheets:

Index for Notes to th e Condensed Consolidated Financi al Statements

(in millions) June 30, 2020 December 31, 2019

(in millions) September 30, 2020 December 31, 2019

Property and equipment, net $ 1,544 $ 198

Tower obligations 3,079 2,236

Future minimum payments related to the tower obligations are approximately $ 391 million for the year ending June 30, 2021, $ 763 million in total for the years ending June 30, 2022 and 2023, $ 588 million in total for years ending June 30, 2024 and 2025, and $ 768 million in total for years thereafter.

Future minimum payments related to the tower obligations are approximately $ 393 million for the year ending September 30, 2021, $ 738 million in total for the years ending September 30, 2022 and 2023, $ 591 million in total for years ending September 30, 2024 and 2025, and $ 694 million in total for years thereafter.

We are contingently liable for future ground lease payments through the remaining term of the CCI Lease Sites and the Master Lease Sites.

These contingent obligations are not included in Operating lease liabilities as any amount due is contractually owed by CCI based on the subleasing arrangement.

Under the Global Signal arrangement, we remain primarily liable for ground lease payments on approximately 900 Managed Sites and have included lease liabilities of $ 292 million in our Operating lease liabilities as of June 30, 2020.

Under the arrangement, we remain primarily liable for ground lease payments on approximately 900 Managed Sites and have included lease liabilities of $ 285 million in our Operating lease liabilities as of September 30, 2020.

Note 10 – Revenue from Contracts with Customers

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• Wholesale customers include Machine-to-Machine and Mobile Virtual Network Operator customers that operate on our network but are managed by wholesale partners.

P ostpaid service revenues, including postpaid phone revenues and postpaid other revenues, were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Index for Notes to the Condensed Consolidated Financial Statements

Postpaid service revenues, including postpaid phone revenues and postpaid other revenues, were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2020 2019 2020 2019

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We provide wireline communication services to domestic and international customers.

Wireline service revenues of $ 211 million for the three and six months ended June 30, 2020 relate to the wireline operations acquired in the Merger and are presented in Roaming and other service revenues in our Condensed Consolidated Statements of Comprehensive Income.

Wireline service revenues of $ 213 million and $ 424 million for the three and nine months ended September 30, 2020, respectively, relate to the wireline operations acquired in the Merger and are presented in Roaming and other service revenues in our Condensed Consolidated Statements of Comprehensive Income.

Equipment revenues from the lease of mobile communication devices were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2020 2019 2020 2019

Equipment revenues from the lease of mobile communication devices $ 1,350 $ 142 $ 2,936 $ 446

Index for Notes to th e Condensed Consolidated Financi al Statements

Contract Balances

The opening and closing balances of our contract asset and contract liability balances from contracts with customers as of December 31, 2019 and June 30, 2020, were as follows:

The opening and closing balances of our contract asset and contract liability balances from contracts with customers as of December 31, 2019 and September 30, 2020, were as follows:

(in millions) Contract Assets Contract Liabilities

Balance as of December 31, 2019 $ 63 $ 560

Balance as of June 30, 2020 197 845

Balance as of September 30, 2020 243 783

Change $ 180 $ 223

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The change in the existing and acquired contract asset balance includes customer activity related to new promotions, offset by billings on existing contracts and impairment which is recognized as bad debt expense.

The current portion of our Contract assets of approximately $ 168 million and $ 50 million as of June 30, 2020 and December 31, 2019, respectively, was included in Other current assets in our Condensed Consolidated Balance Sheets.

The current portion of our Contract assets of approximately $ 187 million and $ 50 million as of September 30, 2020 and December 31, 2019, respectively, was included in Other current assets in our Condensed Consolidated Balance Sheets.

Contract liabilities are recorded when fees are collected, or we have an unconditional right to consideration (a receivable) in advance of delivery of goods or services.

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Contract liabilities are primarily included in Deferred revenue in our Condensed Consolidated Balance Sheets.

Revenues for the three and six months ended June 30, 2020 and 2019, include the following:

Three Months Ended June 30, Six Months Ended June 30,

Revenues for the three and nine months ended September 30, 2020 and 2019, include the following:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2020 2019 2020 2019

Amounts included in the beginning of year contract liability balance $ 5 $ 39 $ 543 $ 642

Index for Notes to the Condensed Consolidated Financial Statements

Remaining Performance Obligations

As of June 30, 2020, the aggregate amount of transaction price allocated to remaining service performance obligations for postpaid contracts with subsidized devices and promotional bill credits that result in an extended service contract is $ 1.1 billion.

We expect to recognize revenue as service is provided on these postpaid contracts over the extended contract term of 24 months.

As of September 30, 2020, the aggregate amount of transaction price allocated to remaining service performance obligations for postpaid contracts with subsidized devices and promotional bill credits that result in an extended service contract is $ 1.3 billion.

We expect to recognize revenue as service is provided on these postpaid contracts over an extended contract term of 24 months.

Transaction price allocated to remaining service performance obligations associated with subsidized devices and promotional bill credits acquired through the Merger at April 1, 2020, was $ 1.0 billion.

Through the Merger, on April 1, 2020, we acquired contracts associated with lease promotional credits with aggregate amount of transaction price allocated to remaining service and lease performance obligations of $ 4.8 billion and $ 2.6 billion, respectively.

As of June 30, 2020, the aggregate amount of transaction price allocated to remaining service and lease performance obligations associated with operating leases was $ 4.4 billion and $ 2.5 billion, respectively.

As of September 30, 2020, the aggregate amount of transaction price allocated to remaining service and lease performance obligations associated with operating leases was $ 3.3 billion and $ 1.8 billion, respectively.

We expect to recognize this revenue as service is provided over the lease contract term of 18 months.

Information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less have been excluded from the above, which primarily consists of monthly service contracts.

Certain of our wholesale, roaming and other service contracts include variable consideration based on usage.

This variable consideration has been excluded from the disclosure of remaining performance obligations.

As of June 30, 2020, the aggregate amount of the contractual minimum consideration for wholesale, roaming and other service contracts is $ 696 million, $ 1.0 billion and $ 921 million for 2021, 2022 and 2023 and beyond, respectively.

These contracts have a remaining duration ranging from less than one year to ten years .

As of September 30, 2020, the aggregate amount of the contractual minimum consideration for wholesale, roaming and other service contracts is $ 382 million, $ 1.3 billion and $ 1.4 billion for 2020, 2021, and 2022 and beyond, respectively.

These contracts have a remaining duration ranging from less than one year to nine years .

Contract Costs

The total balance of deferred incremental costs to obtain contracts was $ 939 million and $ 906 million as of June 30, 2020 and December 31, 2019, respectively.

The total balance of deferred incremental costs to obtain contracts was $ 1.0 billion and $ 906 million as of September 30, 2020 and December 31, 2019, respectively.

Deferred contract costs incurred to obtain postpaid service contracts are amortized over a period of 24 months.

The amortization period is monitored to reflect any significant change in assumptions.

Amortization of

Index for Notes to th e Condensed Consolidated Financi al Statements

deferred contract costs is included in Selling, general and administrative expenses in our Condensed Consolidated Statements of Comprehensive Income and was $ 205 million and $ 137 million for the three months ended June 30, 2020 and 2019, respectively, and $ 410 million and $ 253 million for the six months ended June 30, 2020 and 2019, respectively.

Amortization of deferred contract costs is included in Selling, general and administrative expenses in our Condensed Consolidated Statements of Comprehensive Income and was $ 221 million and $ 162 million for the three months ended September 30, 2020 and 2019, respectively, and $ 631 million and $ 415 million for the nine months ended September 30, 2020 and 2019, respectively.

Immediately preceding the close of the Merger, Sprint had deferred costs to obtain postpaid contracts of approximately $ 1.7 billion.

This balance was adjusted to zero as part of our purchase price allocation.

Contract costs capitalized for new postpaid contracts will accumulate in Other assets in our Condensed Consolidated Balance Sheets from the Merger date.

Contract costs capitalized for new postpaid contracts will accumulate in Other assets in our Condensed Consolidated Balance Sheets from the Merger close date.

As a result, there will be a net benefit to Operating income in our Condensed Consolidated Statements of Comprehensive Income during the remainder of the year as capitalization of costs exceed amortization.

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The deferred contract cost asset is assessed for impairment on a periodic basis.

There were no impairment losses recognized on deferred contract cost assets for the three and six months ended June 30, 2020 and 2019.

There were no impairment losses recognized on deferred contract cost assets for the three and nine months ended September 30, 2020 and 2019.

Note 11 – Employee Compensation and Benefit Plans

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Under the Incentive Plan, we can grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), and performance awards to eligible employees, consultants, advisors and non-employee directors.

As of June 30, 2020, there were approximately 25 million shares of common stock available for future grants under the Incentive Plan.

As of September 30, 2020, there were approximately 25 million shares of common stock available for future grants under the Incentive Plan.

We grant RSUs to eligible employees, key executives and certain non-employee directors and performance-based restricted stock units (“PRSUs”) to eligible key executives.

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We also maintain an employee stock purchase plan (“ESPP”), under which eligible employees can purchase our common stock at a discounted price.

Index for Notes to the Condensed Consolidated Financial Statements

Stock-based compensation expense and related income tax benefits were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions, except shares, per share and contractual life amounts) 2020 2019 2020 2019

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Any accrued but unpaid dividend equivalents with respect to any such award of time-based RSUs or performance-based RSUs were assumed by T-Mobile at the Effective Time and became an obligation with respect to the applicable award of RSUs in respect of shares of T-Mobile common stock.

Index for Notes to th e Condensed Consolidated Financi al Statements

On April 22, 2020, we filed a Form S-8 to register a total of 25,304,224 shares of common stock, representing those covered by the Sprint Corporation 1997 Long-Term Stock Incentive Program, the Sprint Corporation 2007 Omnibus Incentive Plan and the Sprint Corporation Amended and Restated 2015 Omnibus Incentive Plan that T-Mobile assumed in connection with the closing of the Merg er.

This included 7,043,843 shares of T-Mobile common stock issuable upon exercise or settlement of the Assumed Awards held by current directors, officers, employees and consultants of T-Mobile or its subsidiaries who were directors, officers, employees and consultants of Sprint or its subsidiaries immediately prior to the Effective Time, as well as (a) 12,420,945 shares of T-Mobile common stock that remain available for issuance under the 2015 Plan and (b) 5,839,436 additional shares of T-Mobile common stock subject to awards granted under the 2015 Plan that may become available for issuance under the 2015 Plan if any awards under the 2015 Plan are forfeited, lapse unexercised or are settled in cash.

Index for Notes to the Condensed Consolidated Financial Statements

Time-Based Restricted Stock Units and Restricted Stock Awards

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Forfeited ( 861,098 ) 84.14

Nonvested, June 30, 2020 12,034,894 81.64 1.2 1,253

Nonvested, September 30, 2020 10,941,618 81.90 1.0 1,251

Performance-Based Restricted Stock Units and Restricted Stock Awards

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Forfeited ( 136,359 ) 83.90

Nonvested, June 30, 2020 5,666,526 83.68 0.9 592

Nonvested, September 30, 2020 4,044,513 83.69 0.9 465

PRSUs included in the table above are shown at target.

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We have agreed to withhold shares of common stock otherwise issuable under the RSU awards to cover certain of these tax obligations, with the net shares issued to the employee accounted for as outstanding common stock.

We withheld 1,564,635 and 56,041 shares of common stock to cover tax obligations associated with the payment of shares upon vesting of stock awards and remitted cash of $ 138 million and $ 4 million to the appropriate tax authorities for the three months ended June 30, 2020 and 2019, respectively.

We withheld 3,055,034 and 1,420,662 shares of common stock to cover tax obligations associated with the payment of shares upon vesting of stock awards and remitted cash of $ 279 million and $ 104 million to the appropriate tax authorities for the six months ended June 30, 2020 and 2019, respectively.

We withheld 648,872 and 53,349 shares of common stock to cover tax obligations associated with the payment of shares upon vesting of stock awards and remitted cash of $ 72 million and $ 4 million to the appropriate tax authorities for the three months ended September 30, 2020 and 2019, respectively.

We withheld 3,703,906 and 1,474,011 shares of common stock to cover tax obligations associated with the payment of shares upon vesting of stock awards and remitted cash of $ 351 million and $ 108 million to the appropriate tax authorities for the nine months ended September 30, 2020 and 2019, respectively.

Employee Stock Purchase Plan

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Employees can purchase stock at a 15 % discount applied to the closing stock price on the first or last day of the six-month offering period, whichever price is lower.

The number of shares issued under our ESPP was 1,246,304 and 1,135,801 for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, the number of securities remaining available for future sale and issuance under the ESPP was 5,151,590 .

Sprint’s ESPP was terminated prior to the Merger close and legacy Sprint employees will be eligible to enroll in our ESPP on August 15, 2020.

Index for Notes to th e Condensed Consolidated Financi al Statements

(i) 5,000,000 shares of our common stock, and (ii) the number of shares of T-Mobile common stock determined by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”).

The number of shares issued under our ESPP was 2,144,036 and 2,091,650 for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, the number of securities remaining available for future sale and issuance under the ESPP was 4,253,858 .

Sprint’s ESPP was terminated prior to the Merger close and legacy Sprint employees were eligible to enroll in our ESPP on August 15, 2020.

Our ESPP provides for an annual increase in the aggregate number of shares of our common stock reserved for sale and authorized for issuance thereunder as of the first day of each fiscal year (beginning with fiscal year 2016) equal to the lesser of (i) 5,000,000 shares of our common stock, and (ii) the number of shares of T-Mobile common stock determined by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”).

For fiscal years 2016 through 2019, the Compensation Committee determined that no such increase in shares of our common stock was necessary.

However, an additional 5,000,000 shares of our common stock were automatically added to the ESPP share reserve as of January 1, 2020.

Index for Notes to the Condensed Consolidated Financial Statements

Stock Options

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2013 Stock Plan, and the Sprint 2015 Plan (collectively, the “Stock Option Plans”).

No new awards may be granted under the Stock Option Plans, and no awards were granted during the six months ended June 30, 2020.

No new awards may be granted under the Stock Option Plans, and no awards were granted during the nine months ended September 30, 2020.

The following activity occurred under the Stock Option Plans:

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Expired/canceled ( 4,296 ) 41.82

Outstanding at June 30, 2020 1,515,527 53.52 4.4

Exercisable at June 30, 2020 1,509,976 53.64 4.4

Outstanding at September 30, 2020 1,031,311 52.51 4.1

Exercisable at September 30, 2020 1,029,731 52.55 4.1

Weighted average grant date fair value of stock options assumed through acquisition is based on the fair value on the date assumed.

Stock options exercised under the Stock Option Plans generated proceeds of approximately $ 15 million and $ 1 million for the six months ended June 30, 2020 and 2019, respectively.

Stock options exercised under the Stock Option Plans generated proceeds of approximately $ 27 million for the three months ended September 30, 2020 and $ 42 million and $ 1 million for the nine months ended September 30, 2020 and 2019, respectively.

There were no proceeds for the three months ended September 30, 2019.

The grant-date fair value of share-based incentive compensation awards attributable to post-combination services, including restricted stock units and stock options, from our Merger with Sprint was approximately $ 163 million.

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The components of net expense recognized for the Pension Plan were as follows:

(in millions) Three and Six Months Ended June 30, 2020

(in millions) Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

Interest on projected benefit obligations $ 18 $ 35

1 unchanged sentence

Net pension expense $ 3 $ 5

The net expense associated with the Pension Plan is included in Other expense, net of our Condensed Consolidated Statements of Comprehensive Income.

The fair value of our pension plan assets and certain other postretirement benefit plan assets in aggregate was $ 1.2 billion and our projected benefit obligations in aggregate was $ 2.1 billion as of both April 1, 2020 and June 30, 2020.

As a result, the plans were underfunded by approximately $ 900 million as of both April 1, 2020 and June 30, 2020, and were recorded in Other long-term liabilities in our Condensed Consolidated Balance Sheets.

During the three months ended and six months ended June 30, 2020, we made contributions of $ 16 million to the benefit plan.

The net expense associated with the Pension Plan is included in Other (expense) income, net of our Condensed Consolidated Statements of Comprehensive Income.

As a result, the plans were underfunded by approximately $ 900 million as of both April 1, 2020 and September 30, 2020, and were recorded in Other long-term liabilities in our Condensed Consolidated Balance Sheets.

During the three and nine months ended September 30, 2020, we made contributions of $ 26 million and $ 42 million, respectively, to the benefit plan.

No contributions were made in fiscal periods prior to April 1, 2020.

We expect to make contributions to the Plan of $ 16 million through the year ended December 31, 2020.

Index for Notes to th e Condensed Consolidated Financi al Statements

Employee Retirement Savings Plan

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The plans provide that we match a percentage of employee contributions up to certain limits.

Employer matching contributions were $ 42 million and $ 29 million for the three months ended June 30, 2020 and 2019, respectively, and $ 79 million and $ 64 million for the six months ended June 30, 2020 and 2019, respectively.

Index for Notes to the Condensed Consolidated Financial Statements

matching contributions were $ 49 million and $ 24 million for the three months ended September 30, 2020 and 2019, respectively, and $ 128 million and $ 88 million for the nine months ended September 30, 2020 and 2019, respectively.

Note 12 - Discontinued Operations

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On June 17, 2020, T-Mobile, Sprint and DISH entered into the First Amendment.

Pursuant to the First Amendment to the Asset Purchase Agreement, T-Mobile, Sprint and DISH agreed to proceed with the closing of the Prepaid Transaction in accordance with the Asset Purchase Agreement on July 1, 2020, subject to the terms and conditions of the Asset Purchase Agreement and the terms and conditions of the Final Judgment.

Subsequent to June 30, 2020, on July 1, 2020, pursuant to the Asset Purchase Agreement, upon the terms and subject to the conditions thereof, we completed the Prepaid Transaction.

On July 1, 2020, pursuant to the Asset Purchase Agreement, upon the terms and subject to the conditions thereof, we completed the Prepaid Transaction.

Upon closing of the Prepaid Transaction, we received $ 1.4 billion from DISH for the Prepaid Business, subject to a working capital adjustment.

The net cash received for the Prepaid Business will be presented in Cash received for disposition of companies within Net cash used in investing activities in our Condensed Consolidated Statements of Cash Flows.

The close of the Prepaid Transaction did not have a significant impact on our Condensed Consolidated Statements of Comprehensive Income.

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We will temporarily continue to originate equipment installment contracts on DISH’s behalf under the same terms in exchange for an amount equal to the initial outstanding principal balance of the originated contracts, again without recourse against us for any credit losses.

Upon consummation of the Merger with Sprint, the assets and liabilities associated with the Prepaid Transaction were recorded at fair value and then subsequently classified as held for sale and are separately presented in our Condensed Consolidated Balance Sheets as of June 30, 2020.

The EIP receivables balance in which DISH is acquiring a participation interest but is not acquiring ownership do not meet the criteria to be classified as held for sale.

The components of Assets held for sale were as follows:

(in millions) June 30, 2020

Accounts receivable $ 339

Inventory 142

Goodwill and intangible assets 1,425

Operating lease right-of-use assets 4

Assets held for sale 1,910

Accounts payable and accrued liabilities 422

Deferred revenue 180

Operating lease liabilities 4

Liabilities held for sale 606

Assets held for sale, net $ 1,304

No amounts were classified as held for sale as of December 31, 2019.

The results of the Prepaid Business include revenues and expenses directly attributable to the operations to be disposed of.

Of the total $ 1.4 billion of proceeds received under the Prepaid Transaction, approximately $ 162 million was allocated to the EIP receivables to which we transferred DISH a 100 % participation interest.

We accounted for this portion of the proceeds as a secured borrowing and present it in Other, net, within Net cash (used in) provided by financing activities in our Condensed Consolidated Statements of Cash Flows accordingly.

The remaining $ 1.2 billion was allocated to the divested net assets of the Prepaid Business.

The net cash received for the Prepaid Business is presented in Proceeds from the divestiture of prepaid business within Net cash used in investing activities in our Condensed Consolidated Statements of Cash Flows.

The results of the Prepaid Business include revenues and expenses directly attributable to the operations disposed.

Corporate and administrative expenses not directly attributable to the operations were not allocated to the Prepaid Business.

The results of the Prepaid Business from April 1, 2020 through June 30, 2020 are presented in Income from discontinued operations, net of tax in our Condensed Consolidated Statements of Comprehensive Income.

The components of discontinued operations from the Merger date of April 1, 2020 through June 30, 2020 were as follows:

(in millions) Three and Six Months Ended June 30, 2020

The results of the Prepaid Business from April 1, 2020, through September 30, 2020, are presented in Income from discontinued operations, net of tax in our Condensed Consolidated Statements of Comprehensive Income.

The components of discontinued operations from the Merger close date of April 1, 2020, through September 30, 2020, were as follows:

(in millions) Nine Months Ended September 30, 2020

Major classes of line items constituting pretax income from discontinued operations

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Income from discontinued operations $ 320

Net cash provided by operating activities from the Prepaid Business included in the Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2020, were $ 611 million.

There were no cash flows from investing or financing related to the Prepaid Business for the three and six months ended June 30, 2020.

Net cash provided by operating activities from the Prepaid Business included in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020, were $ 611 million, all of which relates to the operations of the

Index for Notes to the Condensed Consolidated Financial Statements

Prepaid Business during the three months ended June 30, 2020.

There were no cash flows from investing or financing related to the Prepaid Business for the three and nine months ended September 30, 2020.

Continuing Involvement

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As the sale of 800 MHz spectrum licenses is not expected to close within one year, the criteria for presentation as an asset held for sale is not met.

Cash flows associated with the Master Network Services Agreement and Transition Services Agreement are included within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows.

Note 13 – Income Taxes

Within our Condensed Consolidated Statements of Comprehensive Income, we recorded Income tax expense on continuing operations of $ 2 million and $ 301 million for the three months ended June 30, 2020 and 2019, respectively, and $ 308 million and $ 596 million for the six months ended June 30, 2020 and 2019, respectively.

The change for the three and six months ended June 30, 2020 was primarily from lower income before income taxes.

The effective tax rate from continuing operations was negative 0.7 % for the three months ended June 30, 2020 and 24.4 % for the three months ended June 30, 2019, and 29.4 % and 24.4 % for the six months ended June 30, 2020 and 2019, respectively.

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The negative effective income tax rate for the three months ended June 30, 2020, due to a small pre-tax loss, was primarily attributable to expenses that are not deductible for income tax purposes, including our Layer3 goodwill impairment and certain Merger-related costs.

The increase in the effective income tax rate for the six months ended June 30, 2020, was primarily due to a reduction in income before income taxes and increase in expenses that are not deductible for income tax purposes, primarily related to our Layer3 goodwill impairment and certain Merger-related costs.

As a result of the Merger, the Company acquired an estimated $ 1.1 billion of additional deferred tax assets for which a valuation allowance reserve is deemed to be necessary, plus an estimated $ 534 million in additional uncertain tax benefit reserves.

Due to the size and complexity of the Merger, our estimate of these amounts is preliminary and is subject to finalization and adjustment, which could be material, during the measurement period of up to one year from the Merger date.

Within our Condensed Consolidated Statements of Comprehensive Income, we recorded Income tax expense on continuing operations of $ 407 million and $ 325 million for the three months ended September 30, 2020 and 2019, respectively, and $ 715 million and $ 921 million for the nine months ended September 30, 2020 and 2019, respectively.

The change for the three months ended September 30, 2020 was primarily from higher income before income taxes.

The change for the nine months ended September 30, 2020 was primarily from lower income before income taxes.

The effective tax rate from continuing operations was 24.5 % and 27.1 % for the three months ended September 30, 2020 and 2019, respectively, and 26.4 % and 25.3 % for the nine months ended September 30, 2020 and 2019, respectively.

The decrease in the effective income tax rate for the three months ended September 30, 2020 was primarily due to higher income before income taxes, an increase in excess tax benefits, and the benefit of a reduction in the valuation allowance against deferred tax assets related to federal tax credits for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

The increase in the effective income tax rate for the nine months ended September 30, 2020, was primarily due to lower income before income taxes and an increase in expenses that are not deductible for income tax purposes, including our Layer3 goodwill impairment and certain Merger-related costs.

As a result of the Merger, we acquired additional deferred tax assets for which a valuation allowance reserve is deemed to be necessary, as well as additional uncertain tax benefit reserves.

The estimated amount of the valuation allowance reserve and uncertain tax benefit reserves was $ 1.0 billion and $ 540 million, respectively, as of September 30, 2020.

During the measurement period, we will adjust these amounts if new information is obtained about facts or circumstances that existed as of the acquisition date that, if known, would have changed these amounts.

See Note 2 - Business Combination for further information.

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Note 14 - SoftBank Equity Transaction

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Upon the close of the Public Equity Offering (as defined below), we received a payment from SoftBank for $ 304 million for our role in facilitating the SoftBank Monetization.

The payment received from SoftBank, net of tax, of $ 226 million was recorded as Additional paid-in capital in our Condensed Consolidated Balance Sheets and is presented as a reduction of Repurchases of common stock within Net cash provided by (used in) financing activities within our Condensed Consolidated Statements of Cash Flows .

The payment received from SoftBank, net of tax, of $ 230 million was recorded as Additional paid-in capital in our Condensed Consolidated Balance Sheets and is presented as a reduction of Repurchases of common stock within Net cash (used in) provided by financing activities within our Condensed Consolidated Statements of Cash Flows .

Under the terms of the Master Framework Agreement and the agreements contemplated thereby, SBGC sold the Released Shares to us, and we participated in the following transactions:

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Treasury securities, to fund quarterly distributions on the mandatory exchangeable trust securities, and the holders of the mandatory exchangeable trust securities will be entitled to a final mandatory exchange amount on June 1, 2023 that will depend on the daily volume-weighted average price of shares of our common stock.

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The sale of shares through the Public Equity Offering and to the trust occurred simultaneously with the purchase of shares from SBGC.

These simultaneous transactions did not result in a net change to our treasury shares or shares of common stock outstanding.

As these transactions occurred with separate counterparties, the exchange of shares and cash are presented on a gross basis in our Condensed Consolidated Statement of Equity and Condensed Consolidated Statements of Cash Flows, respectively.

The shares sold are presented in Shares issued in secondary offering and the shares purchased from SBGC are presented in Shares repurchased from SoftBank within our Condensed Consolidated Statement of Equity.

The cash received from the sale of shares is presented in Issuance of common stock and the cash paid to purchase shares from SoftBank are presented in Repurchases of common stock within Net cash provided by (used in) financing activities within our Condensed Consolidated Statements of Cash Flows.

As these transactions occurred with separate counterparties, the exchange of shares and cash are presented on a gross basis in our Condensed Consolidated Statement of Stockholders’ Equity and Condensed Consolidated Statements of Cash Flows, respectively.

The cash received from the sale of shares is presented in Issuance of common stock and the cash paid to purchase shares from SoftBank are presented in Repurchases of common stock within Net cash (used in) provided by financing activities within our Condensed Consolidated Statements of Cash Flows.

The Company is not affiliated with the trust, will not retain any proceeds from the offering of the trust securities, and will have no ongoing interest, economic or otherwise, in the trust securities.

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Rights Offering

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Ownership Following the SoftBank Monetization

Immediately following the transactions above, DT and SoftBank held, directly or indirectly, approximately 43.4 % , and 8.6 % , respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.0 % of the outstanding T-Mobile common stock held by other stockholders.

As of September 30, 2020, DT and SoftBank held, directly or indirectly, approximately 43.4 % , and 8.6 %, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.0 % of the outstanding T-Mobile common stock held by other stockholders.

The SoftBank Proxy Agreement remains in effect with respect to the remaining shares of our common stock held by SoftBank.

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Claure’s role as a director or officer of the Company, will be voted in the manner as directed by DT.

Accordingly, as a result of the Proxy Agreements, DT has voting control as of August 3, 2020 over approximately 52.4 % of the outstanding T-Mobile common stock.

Accordingly, as a result of the Proxy Agreements, DT has voting control as of September 30, 2020 over approximately 52.4 % of the outstanding T-Mobile common stock.

In addition, as provided for in the Master Framework Agreement, DT also holds certain call options over approximately 101.5 million shares of our common stock held by SBGC.

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In exchange for DT consenting to the transfer of the Released Shares and as provided for in the Master Framework Agreement, DT received direct and indirect call options over up to approximately 101.5 million shares of our common stock held by SBGC.

The arrangement provides DT with a fixed-price call option to purchase up to approximately 44.9 million shares at a price of

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$ 101.46 per share indirectly from SBGC through a back-to-back arrangement where (i) DT can purchase such shares from us (the “DT Fixed-Price Call Option”) and (ii) we will fulfill our obligations under the DT Fixed-Price Call Option by simultaneously purchasing the same number of shares on the same economic terms from SBGC (the “T-Mobile Fixed-Price Call Option”).

The arrangement provides DT with a fixed-price call option to purchase up to approximately 44.9 million shares at a price of $ 101.46 per share indirectly from SBGC through a back-to-back arrangement where (i) DT can purchase such shares from us (the “DT Fixed-Price Call Option”) and (ii) we will fulfill our obligations under the DT Fixed-Price Call Option by simultaneously purchasing the same number of shares on the same economic terms from SBGC (the “T-Mobile Fixed-Price Call Option”).

In addition, DT has a floating-price call option to purchase up to approximately 56.6 million shares from SBGC directly (the “DT Floating Option”).

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Our obligations to DT under the DT Fixed-Price Call Option are secured solely by our rights under the T-Mobile Fixed-Price Call Option and DT has no recourse against us other than enforcement of this security arrangement.

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The DT Fixed-Price Call Option and the T-Mobile Fixed-Price Call Option represent free-standing derivatives and are recorded at fair value and marked-to-market each period.

The fair value of each call option was estimated at $ 875 million as of June 30, 2020 using the income approach.

The fair value of each call option was estimated at $ 1.0 billion as of September 30, 2020 using the income approach.

The fair value measurements are based on significant inputs not observable in the market and, therefore, represent a Level 3 measurement as defined in ASC 820.

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The asset associated with the T-Mobile Fixed-Price Call Option is recorded within Other current assets in the Condensed Consolidated Balance Sheets, and the liability associated with the DT Fixed-Price Call Option is recorded within Other current liabilities in the Condensed Consolidated Balance Sheets.

As the mark-to-market valuations of the T-Mobile Fixed-Price Call Option and the DT Fixed-Price Call Option move in equal and offsetting directions, there is no net impact on our Condensed Consolidated Income Statement.

Subsequent to September 30, 2020, on October 6, 2020, we assigned our rights under the T-Mobile Fixed-Price Call Option to DT and DT terminated its right to purchase shares from us under the DT Fixed-Price Call Option, resulting in derecognition of the related derivative asset and liability in equal and offsetting amounts such that there was no net impact to our Condensed Consolidated Statements of Comprehensive Income .

Note 15 – Earnings Per Share

The computation of basic and diluted earnings per share was as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions, except shares and per share amounts) 2020 2019 2020 2019

(Loss) income from continuing operations $ ( 210 ) $ 939 $ 741 $ 1,847

Income from continuing operations $ 1,253 $ 870 $ 1,994 $ 2,717

Income from discontinued operations, net of tax — — 320 —

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Weighted average shares outstanding - diluted 1,249,798,740 862,690,751 1,122,040,528 862,854,654

Basic earnings (loss) per share:

Basic earnings per share:

Continuing operations $ 1.01 $ 1.02 $ 1.79 $ 3.18

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Earnings per share - basic $ 1.01 $ 1.02 $ 2.08 $ 3.18

Diluted earnings (loss) per share:

Diluted earnings per share:

Continuing operations $ 1.00 $ 1.01 $ 1.78 $ 3.15

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On April 1, 2020, in connection with the closing of the Merger, we amended and restated the Company’s certificate of incorporation in the form of the Fifth Amended and Restated Certificate of Incorporation (the “Restated Certificate”).

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to the Restated Certificate, the authorized capital stock of T-Mobile consists of 2,000,000,000 shares of T-Mobile common stock and 100,000,000 shares of preferred stock, par value $ 0.00001 per share.

As of June 30, 2020, we had authorized 100 million shares of preferred stock, with a par value of $ 0.00001 per share.

There was no preferred stock outstanding as of June 30, 2020 and 2019.

Pursuant to the Restated Certificate, the authorized capital stock of T-Mobile consists of 2,000,000,000 shares of T-Mobile common stock and 100,000,000 shares of preferred stock, par value $ 0.00001 per share.

As of September 30, 2020, we had authorized 100 million shares of preferred stock, with a par value of $ 0.00001 per share.

There was no preferred stock outstanding as of September 30, 2020 and 2019.

Potentially dilutive securities were not included in the computation of diluted earnings per share if to do so would have been anti-dilutive or if there was a loss from continuing operations for the period.

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The SoftBank Specified Shares Amount of 48,751,557 was determined to be contingent consideration for the Merger and is not dilutive until the defined volume-weighted average price per share is reached.

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Additionally, we lease dark fiber through non-cancelable operating leases with contractual terms that generally extend through 2041.

The majority of cell site leases have an initial non-cancelable term of five to ten years with several renewal options that can extend the lease term from five to thirty-five years .

The majority of cell site leases have an initial non-cancelable term of five to 10 years with several renewal options that can extend the lease term from five to 35 years.

In addition, we have financing leases for network equipment that generally have a non-cancelable lease term of two to five years ;

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Favorable and unfavorable leases are amortized on a straight-line basis over the associated remaining lease term.

On September 14, 2020, T-Mobile and American Tower Corporation (“American Tower”) entered into a lease agreement (the “American Tower Lease Agreement”) that will enable us to lease American Tower towers through April 2035 .

The American Tower Lease Agreement extended the term and modified the rental payments for approximately 20,729 American Tower towers currently leased by us.

As a result of this modification, we remeasured the associated right-of-use assets and lease liabilities resulting in an increase of $ 11.0 billion to each on the effective date of the modification .

The components of lease expense were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2020 2019 2020 2019

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Information relating to the lease term and discount rate is as follows:

June 30, 2020

September 30, 2020

Weighted Average Remaining Lease Term (Years)

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Financing leases 3.5 %

Maturities of lease liabilities as of June 30, 2020, were as follows:

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Maturities of lease liabilities as of September 30, 2020, were as follows:

(in millions) Operating Leases Finance Leases

Twelve Months Ending June 30,

Twelve Months Ending September 30,

2021 $ 4,717 $ 1,100

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Total lease payments 38,102 2,540

Less imputed interest 2,639 128

imputed interest 7,786 117

Total $ 30,316 $ 2,423

Interest payments for financing leases were $ 20 million and $ 21 million for the three months ended June 30, 2020 and 2019, respectively, and $ 40 million and $ 41 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, we have additional operating leases for cell sites and commercial properties that have not yet commenced with future lease payments of approximately $ 340 million.

As of June 30, 2020, we were contingently liable for future ground lease payments related to certain tower obligations.

Interest payments for financing leases were $ 19 million and $ 20 million for the three months ended September 30, 2020 and 2019, respectively, and $ 59 million and $ 61 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, we have additional operating leases for cell sites and commercial properties that have not yet commenced with future lease payments of approximately $ 283 million.

As of September 30, 2020, we were contingently liable for future ground lease payments related to certain tower obligations.

These contingent obligations are not included in the above table as the amounts owed are contractually owed by Crown Castle International Corp.

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The components of leased wireless devices under our Leasing Programs were as follows:

(in millions) Average Remaining Useful Life June 30, 2020 December 31, 2019

(in millions) Average Remaining Useful Life September 30, 2020 December 31, 2019

Leased wireless devices, gross 10 months

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Leased wireless devices, net $ 5,788 $ 732

For equipment revenues from the lease of mobile communication devices, see Note 10 - Revenue from Contracts with Customers .

For equipment revenues from the lease of mobile communication devices, see Note 10 - Revenue from Contracts with Cust o m e r s .

Future minimum payments expected to be received over the lease term related to leased wireless devices, which exclude optional residual buy-out amounts at the end of the lease term, are summarized below:

(in millions) Total

Twelve Months Ending June 30,

(in millions) Expected Payments

Twelve Months Ending September 30,

Total $ 2,471

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Note 17 – Commitments and Contingencies

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Purchase Commitments

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In addition, we have commitments to purchase wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary course of business, with various terms through 2050.

Our purchase commitments, including purchase commitments assumed through the Merger, are approximately $ 4.2 billion for the year ending September 30, 2021, $ 3.4 billion in total for the years ending September 30, 2022 and 2023, $ 1.6 billion in total for the years ending September 30, 2024 and 2025 and $ 1.5 billion in total for the years thereafter.

These amounts are not reflective of our entire anticipated purchases under the related agreements but are determined based on the non-cancelable quantities or termination amounts to which we are contractually obligated.

Our purchase commitments, including purchase commitments assumed through the Merger, are approximately $ 4.2 billion for the year ending June 30, 2021, $ 3.5 billion in total for the years ending June 30, 2022 and 2023, $ 1.6 billion in total for the years ending June 30, 2024 and 2025 and $ 1.3 billion in total for the years thereafter.

Spectrum Leases

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We expect that all renewal periods in our spectrum leases will be exercised by us.

Our spectrum lease and service credit commitments, including renewal periods, are approximately $ 277 million for the year ending June 30, 2021, $ 595 million in total for the years ending June 30, 2022 and 2023, $ 588 million in total for the years ending June 30, 2024 and 2025 and $ 5.2 billion in total for the years thereafter.

Our spectrum lease and service credit commitments, including renewal periods, are approximately $ 328 million for the year ending September 30, 2021, $ 698 million in total for the years ending September 30, 2022 and 2023, $ 609 million in total for the years ending September 30, 2024 and 2025 and $ 5.1 billion in total for the years thereafter.

We accrue a monthly obligation for the services and equipment based on the total estimated available service credits divided by the term of the lease.

The obligation is reduced by services provided and as actual invoices are presented and paid to the lessors.

The maximum remaining commitment on June 30, 2020 was $ 93 million and is expected to be incurred over the term of the related lease agreements, which generally range from 15 to 30 years.

The maximum remaining commitment on September 30, 2020 was $ 92 million and is expected to be incurred over the term of the related lease agreements, which generally range from 15 to 30 years.

Merger Commitments

In connection with the regulatory proceedings and approvals of the Transactions, we made commitments to various state and federal agencies, including the DOJ and FCC.

These commitments include, among other things, extensive 5G network build-out commitments, obligations to deliver high-speed wireless services to the vast majority of Americans, including Americans residing in rural areas, and the marketing of an in-home broadband product where spectrum capacity is available.

In connection with the regulatory proceedings and approvals of the Transactions, we have commitments and other obligations to various state and federal agencies and certain nongovernmental organizations, including pursuant to the Consent Decree agreed to by us, DT, Sprint, SoftBank and DISH and entered by the U.S.

District Court for the District of Columbia, and the FCC’s memorandum opinion and order approving our applications for approval of the Merger.

These commitments and obligations include, among other things, extensive 5G network build-out commitments, obligations to deliver high-speed wireless services to the vast majority of Americans, including Americans residing in rural areas, and the marketing of an in-home broadband product where spectrum capacity is available.

Other commitments relate to national security, pricing, service, employment and support of diversity initiatives.

Many of the commitments specify time frames for compliance.

Failure to fulfill our obligations under these commitments in a timely manner could result in substantial fines, penalties, or other legal and administrative actions.

Our monetary commitments associated with these settlements are approximately $ 12.2 million for the year ended June 30, 2021, $ 44.4 million in total for the years ended June 30, 2022 and 2023 and $ 17.2 million in total for the years ended June 30, 2024 and 2025.

These amounts do not represent our entire anticipated costs to achieve specified network coverage and performance requirements, employment targets or commitments to provide access to affordable rate plans, but represent only those amounts for which we are required to make a specified payment in connection with settlements.

Failure to fulfill our obligations and commitments in a timely manner could result in substantial fines, penalties, or other legal and administrative actions.

Our monetary commitments associated with these matters are approximately $ 24 million for the year ended September 30, 2021, $ 36 million in total for the years ended September 30, 2022 and 2023 and $ 13 million in total for the years ended September 30, 2024 and 2025.

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Contingencies and Litigation

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On February 28, 2020, we received a Notice of Apparent Liability for Forfeiture and Admonishment from the FCC (“FCC NAL”), which proposed a penalty against us for allegedly violating section 222 of the Communications Act and the FCC’s regulations governing the privacy of customer information.

We recorded an accrual for an estimated payment amount as of June 30, 2020, which was included in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets.

We recorded an accrual for an estimated payment amount as of September 30, 2020, which was included in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets.

On April 1, 2020, in connection with the closing of the Merger, we assumed the contingencies and litigation matters of Sprint.

Those matters include a wide variety of disputes, claims, government agency investigations and enforcement actions, and other proceedings, including, among other things, certain ongoing FCC and state government agency investigations into Sprint’s Lifeline program.

In September 2019, Sprint notified the FCC that it had claimed monthly subsidies for serving subscribers even though these subscribers may not have met usage requirements under Sprint's usage policy for the Lifeline program, due to an inadvertent coding issue in the system used to identify qualifying subscriber usage that occurred in July 2017 while the

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system was being updated.

Sprint has made a number of payments to reimburse the federal government and certain states for excess subsidy payments.

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We note that pursuant to Amendment No 2.

to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses (including the Lifeline matter noted above).

We expect that any liability incurred related to these indemnified matters would be indemnified and reimbursed by SoftBank.

to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses.

As of September 30, 2020, we have recorded contingent liabilities and an offsetting indemnification asset for the expected reimbursement by SoftBank (including the Lifeline matter noted above).

Subsequent to September 30, 2020, we reached an agreement on certain matters, which will result in a payment of $ 200 million to resolve the FCC’s investigation.

SoftBank has agreed to indemnify us for the settlement amount.

We expect that any additional liabilities related to these indemnified matters would be indemnified and reimbursed by SoftBank.

See Note 2 - Business Combination for further information.

We are involved in various lawsuits and disputes, claims, government agency investigations and enforcement actions, and other proceedings (“Litigation Matters”) that arise in the ordinary course of business, which include claims of patent infringement (most of which are asserted by non-practicing entities primarily seeking monetary damages), class actions, and proceedings to enforce FCC rules and regulations.

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As such, our view of these matters is subject to inherent uncertainties and may change in the future.

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Note 18 - Restructuring Costs

We have begun implementing a restructuring and integration plan as a part of our initiative to realize cost synergies from the acquisition of Sprint.

We recognized restructuring costs of $ 482 million for the three and six months ended June 30, 2020, including stock-based compensation of $ 67 million.

These restructuring costs were primarily related to severance costs and contract termination costs associated with store rationalization.

Our restructuring liability as of June 30, 2020 was $ 255 million.

Upon close of the Merger, we began implementing restructuring initiatives to realize cost efficiencies and reduce redundancies.

The major activities associated with the restructuring initiatives to date, include contract termination costs associated with the rationalization of retail stores, distribution channels, duplicative backhaul services and other agreements, severance costs associated with the integration of redundant processes and functions and the decommissioning of network infrastructure including cell sites and equipment to achieve synergies in network costs.

The following table summarizes the expenses incurred in connection with our restructuring initiatives:

Restructuring Expenses Incurred

(in millions) Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

Contract termination costs $ 56 $ 169

Severance costs 21 370

Network decommissioning 21 41

Total restructuring plan expenses $ 98 $ 580

The expenses associated with the restructuring initiatives are included in Costs of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.

No expenses were incurred related to our restructuring initiatives for the three and nine months ended September 30, 2019.

Our restructuring initiatives also include the acceleration or termination of certain of our operating and financing leases for cell sites, switch sites, retail stores, network equipment and office facilities.

Incremental expenses associated with accelerating amortization of the right-of-use assets on lease contracts were $ 80 million for both the three and nine months ended September 30, 2020 and are included within Costs of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.

The changes in the liabilities associated with our restructuring initiatives, including expenses incurred and cash payments, are as follows:

(in millions) April 1,

2020 Expenses Incurred Cash Payments Adjustments for Non-Cash Items (1)

September 30, 2020

Contract termination costs $ — $ 169 $ ( 74 ) $ ( 1 ) $ 94

Severance costs — 370 ( 174 ) ( 94 ) 102

Network decommissioning — 41 ( 20 ) ( 21 ) —

Total $ — $ 580 $ ( 268 ) $ ( 116 ) $ 196

(1) Non-cash items consists of non-cash stock-based compensation included within Severance costs and the write-off of assets within Network decommissioning.

The liabilities accrued in connection with our restructuring initiatives are presented in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets.

Our restructuring activities are expected to occur over the next three years with substantially all costs incurred by fiscal year 2023.

We are evaluating additional restructuring initiatives which are dependent on consultations and negotiation with certain counterparties and the expected impact on our business operations, which could affect the amount or timing of the restructuring costs and related payments.

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Note 19 – Additional Financial Information

Supplemental Condensed Consolidated Balance Sheets Information

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are summarized as follows:

(in millions) June 30, 2020 December 31, 2019

(in millions) September 30, 2020 December 31,

Accounts payable $ 3,862 $ 4,322

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Accounts payable and accrued liabilities $ 8,389 $ 6,746

Book overdrafts included in accounts payable and accrued liabilities were $ 380 million and $ 463 million as of June 30, 2020 and December 31, 2019, respectively.

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Supplemental Condensed Consolidated Statements of Comprehensive Income Information

Book overdrafts included in accounts payable and accrued liabilities were $ 240 million and $ 463 million as of September 30, 2020 and December 31, 2019, respectively.

Related Party Transactions

Deutsche Telekom

We have related party transactions associated with DT or its affiliates in the ordinary course of business, which are included in the Consolidated Financial Statements.

We have related party transactions associated with DT or its affiliates in the ordinary course of business, which are included in the condensed consolidated financial statements.

On April 1, 2020, in connection with the closing of the Merger, we:

• Repaid our $ 4.0 billion Incremental Term Loan Facility with DT, consisting of a $ 2.0 billion Incremental Term Loan Facility due 2022 and a $ 2.0 billion Incremental Term Loan Facility due 2024;

• Terminated our revolving credit facility with DT;

• Repurchased from DT $ 4.0 billion of indebtedness to affiliates, consisting of $ 2.0 billion of 5.300 % Senior Notes due 2021 and $ 2.0 billion of 6.000 % Senior Notes due 2024;

• Amended the $ 1.25 billion of 5.125 % Senior Notes due 2025 and $ 1.25 billion of 5.375 % Senior Notes due 2027, which represent indebtedness to affiliates, to change the maturity dates thereof to April 15, 2021 and April 15, 2022, respectively (the “2025 and 2027 Amendments”);

• Made an additional payment for requisite consents to DT of $ 13 million.

These payments were recognized as a reduction to Long-term debt to affiliates in our Condensed Consolidated Balance Sheets.

On July 4, 2020, we redeemed $ 1.25 billion aggregate principal amount of our 5.125 % Senior Notes to affiliates due 2021.

Amounts associated with the debt owed to DT are reflected as “Short-term debt to affiliates” and “Long-term debt to affiliates” in our Condensed Consolidated Balance Sheets.

Interest related to this debt is reflected as “Interest expense to affiliates” in our Condensed Consolidated Statements of Comprehensive Income.

The following table summarizes the impact of significant transactions with DT or its affiliates included in Operating expenses in the Condensed Consolidated Statements of Comprehensive Income:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2020 2019 2020 2019

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International long distance agreement 13 9 35 29

We have an agreement with DT in which we receive reimbursement of certain administrative expenses, which were $ 1 million and $ 3 million for the three months ended June 30, 2020 and 2019, respectively, and $ 3 million and $ 5 million for the six months ended June 30, 2020 and 2019, respectively.

We have arrangements with Brightstar, whereby Brightstar provides supply chain and inventory management services to us in our indirect channels.

As of June 30, 2020, T-Mobile began the process of terminating and restructuring most of its arrangements with Brightstar, save for reverse logistics and trade-in services.

Amounts included in our consolidated financial statements associated with these supply chain and inventory management arrangements with Brightstar were as follows:

(in millions) Three and Six Months Ended June 30, 2020

Consolidated balance sheet:

Accounts receivable $ 23

Accounts payable and accrued expenses and other current liabilities 46

Consolidated income statement:

Roaming and other service revenues $ 19

Equipment sales 42

Cost of equipment sales 66

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We have an agreement with DT in which we receive reimbursement of certain administrative expenses, which were $ 2 million and $ 3 million for the three months ended September 30, 2020 and 2019, respectively, and $ 5 million and $ 8 million for the nine months ended September 30, 2020 and 2019, respectively.

Amounts due from and to DT related to these agreements are included in the Condensed Consolidated Balance Sheets as “Accounts Receivables from affiliates” and “Payables to affiliates,” respectively.

On June 22, 2020, we entered into a Master Framework Agreement and related transactions with SoftBank related to the SoftBank Monetization as described in Note 14 - SoftBank Equity Transaction .

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In addition, as provided for in the Master Framework Agreement, DT also holds certain call options over approximately 101.5 million shares of our common stock held by SBGC.

We have arrangements with Brightstar, a subsidiary of SoftBank, whereby Brightstar provides supply chain and inventory management services to us in our indirect channels.

We are currently in the process of terminating and restructuring most of our arrangements with Brightstar, except for reverse logistics and trade-in services.

Amounts included in our consolidated financial statements associated with these supply chain and inventory management arrangements with Brightstar were not material.

For more information regarding our related party transactions with SoftBank, see Note 2 - Business Combination and Note 14 - SoftBank Equity Transaction of the Notes to the Condensed Consolidated Financial Statements.

Index for Notes to th e Condensed Consolidated Financi al Statements

Supplemental Consolidated Statements of Cash Flows Information

The following table summarizes T-Mobile’s supplemental cash flow information:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2020 2019 2020 2019

11 unchanged sentences

Financing lease right-of-use assets obtained in exchange for lease obligations 219 395 912 943

Index for Notes to the Condensed Consolidated Financial Statements

Note 20 – Subsequent Events

On July 1, 2020, pursuant to the Asset Purchase Agreement, upon the terms and subject to the conditions thereof, we completed the Prepaid Transaction.

Upon closing of the transaction, we received $ 1.4 billion from DISH for the Prepaid Business, subject to a working capital adjustment.

See Note 1 2 - Discontinued Operations for further information.

On July 4, 2020, we redeemed $ 1.0 billion aggregate principal amount of our 6.500 % Senior Notes due 2024 and $ 1.25 billion aggregate principal amount of our 5.125 % Senior Notes to affiliates due 2021.

See Note 8 - Debt for further information.

Upon receipt of the necessary regulatory approvals on July 16, 2020, the sale of 5.0 million shares of our common stock to Marcelo Claure occurred simultaneously with our purchase of an equivalent number of shares of our common stock from SBGC at the same price per share.

See Note 14 - SoftBank Equity Transaction for further information.

On July 27, 2020, the Rights Offering exercise period closed and on August 3, 2020, the Rights Offering closed, resulting in the sale of 19,750,000 shares of our common stock.

The net proceeds used from the Rights Offering were used to purchase shares of our common stock from SBGC.

See Note 14 - SoftBank Equity Transaction for further information.

See Note 8 - Debt for further information.

On October 9, 2020, we used the net proceeds of $ 4.0 billion to repay at par all of the outstanding amounts under, and terminate, the New Secured Term Loan Facility.

We intend to use the net proceeds for general corporate purposes, which may include among other things, acquisitions of additional spectrum and refinancing existing indebtedness on an ongoing basis.

Subsequent to September 30, 2020, on October 30, 2020, we entered into a $ 5.0 billion senior secured term loan commitment with certain financial institutions.

Up to $ 5.0 billion of loans under the commitment may be drawn at any time (subject to customary conditions precedent) through June 30, 2021.

If drawn, the facility matures in 364 days with one six-month extension exercisable at our discretion.

Proceeds may be used for general corporate purposes and will accrue interest at a rate of LIBOR plus a margin of 1.25 % per annum.

Subsequent to September 30, 2020, on November 2, 2020, we extended the scheduled expiration date of our EIP sales arrangement to November 18, 2021.

Subsequent to September 30, 2020, we reached an agreement on certain matters, which will result in a payment of $ 200 million to resolve the FCC’s investigation.

SoftBank has agreed to indemnify us for the settlement amount.

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