−Removed: Other than the updated risk factors below, there have been no material changes in the risk factors previously disclosed in Part II, Item IA of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which amended and restated the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
+Added: Other than the updated risk factors below, there have been no material changes in the risk factors previously disclosed in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which amended and restated the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, as further amended by the risk factors previously disclosed in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
These risk factors should be considered carefully in evaluating T-Mobile.
2 unchanged sentences
Risks Related to Our Business and the Wireless Industry
−Removed: The COVID-19 pandemic has adversely affected, and will continue to adversely affect, our business, liquidity, financial condition, and operating results.
−Removed: The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide.
−Removed: It has impacted, and will continue to impact, the demand for our products and services, the ways in which our customers use them, and our suppliers’ ability to provide products to us.
−Removed: As a result, our business, liquidity, financial condition, and operating results have been, and will continue to be, adversely impacted by the COVID-19 pandemic.
−Removed: For example, the COVID-19 pandemic has caused a widespread increase in unemployment and is expected to result in reduced consumer spending and has resulted in a recession beginning in February 2020.
−Removed: In addition, public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing, the adoption of work-from-home initiatives, government forbearance programs and online learning by companies and institutions, could affect our operations, consumer and business spending, and the amount and ways our customers use our networks and our other products and services.
−Removed: In addition, COVID-19 may affect the ability of our suppliers and vendors to provide products and services to us and our customers’ ability to timely pay for services.
−Removed: Further, the continued spread of COVID-19 has led to extreme disruption and volatility in the global capital markets and may lead to a significant economic recession, which could have a further adverse impact on our business, financial condition and operating results, including potentially decreased access to capital markets or a reduced ability to issue debt on terms acceptable to us.
−Removed: Additionally, there may be a potential impairment of goodwill, spectrum licenses or long-lived assets if the adverse impact on operating results and cash flows continues for a prolonged period of time.
−Removed: During the quarter, while the impact of the COVID-19 pandemic peaked and subsequently subsided in some jurisdictions, leading to phased re-openings, other areas have seen resurgences of COVID-19 cases and continuing or renewed containment measures.
−Removed: Before the Merger, in mid-March, approximately 80% of T-Mobile and 70% of Sprint company-owned store locations, as well as many third-party retailer locations that sell our T-Mobile, Metro by T-Mobile and Sprint brands, were closed.
−Removed: In compliance with the regulations of various states, we have since reopened a number of our previously closed stores.
−Removed: We continue to monitor conditions and will re-open and re-close stores as needed to ensure the safety of both customers and employees.
−Removed: Our plans to potentially re-open and re-close additional stores depend on safe and healthy operating environments and compliance with local and state mandates and orders.
−Removed: In addition, in an effort to assist customers impacted by the COVID-19 pandemic, on March 13, 2020, we pledged our support for the Pledge ensuring residential and small business customers with financial impacts resulting from the pandemic do not lose service.
−Removed: We extended the Pledge until June 30 and, despite the Pledge ending, expect to continue to work with our customers to help them maintain service and become current on their accounts, which may impact our financial results.
−Removed: In addition, these initiatives may continue to divert our resources from network buildout and put additional strain on our network, potentially leading to slower speeds impacting our customer experience.
−Removed: The extent to which the COVID-19 pandemic impacts our liquidity, financial condition and operating results will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the COVID-19 pandemic, government, social, business and other actions that have been and will be taken in response to the COVID-19 pandemic, and its effect on short-term and long-term economic conditions.
−Removed: Any material weaknesses we identify while we work to integrate and align policies, principles and practices of the two companies following the Merger, or any other failure by us to maintain effective internal controls, could result in a loss of investor confidence regarding our financial statements.
−Removed: Additionally, the trading price of our stock and our access to capital could be negatively impacted, and we could be subject to significant costs and reputational damage that could have an adverse impact on our business, financial condition or operating results.
−Removed: Under Section 404 of the Sarbanes-Oxley Act, we, along with our independent registered public accounting firm, will be required to report on the effectiveness of our internal control over financial reporting.
−Removed: This requirement is subject to an exemption for business combinations during the most recent fiscal year, which we plan to utilize due to the Merger.
−Removed: Any identified material weakness in internal control over financial reporting will still be reported, as obligated.
−Removed: While we work to integrate and align policies, principles and practices of the two companies following the Merger, as a result of the differences in control environments and cultures, we could potentially identify material weaknesses that could result in materially inaccurate financial statements, materially inaccurate disclosures, or failure to prevent error or fraud for the combined company.
−Removed: There can be no assurance that remediation of any material weaknesses identified during integration of the two companies, will be completed in a timely manner or that the remedial measures will prevent other control deficiencies or material weaknesses.
−Removed: Subsequent testing of the operational effectiveness of the financial reporting systems and internal controls will be necessary to conclude that any material weaknesses identified have been fully remediated.
−Removed: If we are unable to remediate material weaknesses in internal control over financial reporting, then our ability to analyze, record and report financial information free of material misstatements, to prepare financial statements within the time periods specified by the rules and forms of the SEC and otherwise to comply with the requirements of Section 404 of the Sarbanes-Oxley Act will be adversely affected.
−Removed: The occurrence of, or failure to remediate, any future material weaknesses in internal control over financial reporting may result in material misstatements of our financial statements.
−Removed: The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including judgments used in decision-making, the nature and complexity of the transactions we undertake, assumptions about the likelihood of future events, the soundness of our systems, cost limitations, and other factors.
−Removed: If we or our independent registered public accounting firm is unable to conclude that we have effective internal control over financial reporting, or if material weaknesses in our internal controls are discovered, such as through the identification of any material weaknesses as we complete our assessment of Sprint’s legacy control environment, or occur in the future or we otherwise must restate our financial statements, it could materially and adversely affect our business, financial condition or operating results, restrict our ability to access the capital markets, require the expenditure of significant resources to correct the weaknesses or deficiencies, subject us to fines, penalties, investigations or judgments, harm our reputation, or otherwise cause a decline in investor confidence.
−Removed: In connection with the Merger, we are evaluating the long-term billing system architecture strategy for our customers.
−Removed: Our long-term strategy is to facilitate the migration of Sprint’s legacy customers onto T-Mobile’s existing billing platforms.
−Removed: The combined company will operate and maintain multiple billing systems until such migration is completed.
−Removed: Any unanticipated difficulties, disruption, or significant delays could have adverse operational, financial, and reputational effects on our business.
−Removed: Following the closing of the Merger, the combined company is operating and maintaining multiple billing systems.
−Removed: We expect to continue to do so until successful migration of Sprint’s legacy customers to T-Mobile’s existing billing platforms.
−Removed: We may encounter unanticipated difficulties or experience delays in the ongoing integration efforts with respect to billing, causing major system or business disruptions.
−Removed: In addition, we or the supporting vendors may experience errors, cyber-attacks, or other operational disruptions that could negatively impact us and over which we may have limited control.
−Removed: Interruptions and/or failure of these billing systems could disrupt our operations and impact our ability to provide or bill for our services, retain customers, attract new customers, or negatively impact overall customer experience.
−Removed: Any occurrence of the foregoing could cause material adverse effects on our operations and financial condition, material weaknesses in our internal control over financial reporting, and reputational damage.
−Removed: Risks Related to Ownership of our Common Stock
−Removed: Each of DT, which controls a majority of the voting power of our common stock, and SoftBank, a significant stockholder of T-Mobile, may have interests that differ from the interests of our other stockholders.
−Removed: Upon the completion of the Transactions, DT and SoftBank entered into the SoftBank Proxy Agreement, and on June 22, 2020, DT, CM LLC, and Marcelo Claure entered into the Claure Proxy Agreement.
−Removed: Pursuant to the Proxy Agreements, at any meeting of our stockholders, the shares of our common stock beneficially owned by SoftBank or CM LLC will be voted in the manner as directed by DT.
−Removed: Accordingly, DT controls a majority of the voting power of our common stock and therefore we are a “controlled company,” as defined in The NASDAQ Stock Market LLC (“NASDAQ”) listing rules, and are not subject to NASDAQ requirements that would otherwise require us to have a majority of independent directors, a nominating committee composed solely of independent directors or a compensation committee composed solely of independent directors.
−Removed: Accordingly, our stockholders will not be afforded the same protections generally as stockholders of other NASDAQ-listed companies with respect to corporate governance for so long as we rely on these exemptions from the corporate governance requirements.
−Removed: In addition, pursuant to our certificate of incorporation and the Amended and Restated Stockholders’ Agreement as long as DT beneficially owns 30% or more of our outstanding common stock, we are restricted from taking certain actions without DT’s prior written consent, including (a) incurring indebtedness above certain levels based on a specified debt to cash flow ratio, (b) taking any action that would cause a default under any instrument evidencing indebtedness involving DT or its affiliates, (c) acquiring or disposing of assets or entering into mergers or similar acquisitions in excess of $1.0 billion, (d) changing the size of our board of directors, (e) subject to certain exceptions, issuing equity of 10% or more of the then-outstanding shares of our common stock, or issuing equity to redeem debt held by DT, (f) repurchasing or redeeming equity securities or making any extraordinary or in-kind dividend other than on a pro rata basis, or (g) making certain changes involving our CEO.
−Removed: We are also restricted from amending our certificate of incorporation and bylaws in any manner that could adversely affect DT’s rights under the Amended and Restated Stockholders’ Agreement for as long as DT beneficially owns 5% or more of our outstanding common stock.
−Removed: These restrictions could prevent us from taking actions that our board of directors may otherwise determine are in the best interests of the Company and our stockholders or that may be in the best interests of our other stockholders.
−Removed: DT effectively has control over all matters submitted to our stockholders for approval, including the election or removal of directors, changes to our certificate of incorporation, a sale or merger of our Company and other transactions requiring stockholder approval under Delaware law.
−Removed: DT’s controlling interest may have the effect of making it more difficult for a third party to acquire, or discouraging a third party from seeking to acquire, the Company.
−Removed: DT and SoftBank as significant stockholders may have strategic, financial, or other interests different from our other stockholders, including as the holder of a substantial amount of our indebtedness and as the counterparty in a number of commercial arrangements, and may make decisions adverse to the interests of our other stockholders.
−Removed: In addition, we license certain trademarks from DT, including the right to use the trademark “T-Mobile” as a name for the Company and our flagship brand, under a trademark license agreement, as amended, with DT.
−Removed: As described in more detail in our Proxy Statement on Schedule 14A filed with the SEC on April 21, 2020 under the heading “Transactions with Related Persons and Approval,” we are obligated to pay DT a royalty in an amount equal to 0.25% (the “royalty rate”) of the net revenue (as defined in the trademark license) generated by products and services sold by the Company under the licensed trademarks subject to a cap of $80.0 million per calendar year through December 31, 2028.
−Removed: We and DT are obligated to negotiate a new trademark license when (i) DT has 50% or less of the voting power of the outstanding shares of capital stock of the Company or (ii) any third party owns or controls, directly or indirectly, 50% or more of the voting power of the outstanding shares of capital stock of the Company, or otherwise has the power to direct or cause the direction of the management and policies of the Company.
−Removed: If we and DT fail to agree on a new trademark license, either we or DT may terminate the trademark license and such termination shall be effective, in the case of clause (i) above, on the third anniversary after notice of termination and, in the case of clause (ii) above, on the second anniversary after notice of termination.
−Removed: A further increase in the royalty rate or termination of the trademark license could have a material adverse effect on our business, financial condition and operating results.
−Removed: Risks Related to Integration
−Removed: Our business and Sprint’s businesses may not be integrated successfully or such integration may be more difficult, time consuming or costly than expected.
−Removed: Operating costs, customer loss and business disruption, including difficulties in satisfying all of the Government Commitments and maintaining relationships with employees, customers, suppliers or vendors, may be greater than expected.
−Removed: The combination of two independent businesses is complex, costly and time-consuming, and may divert significant management attention and resources to combining our and Sprint’s business practices and operations.
−Removed: This process, as well as the Government Commitments, may disrupt our business or otherwise impact our ability to compete.
−Removed: The failure to meet the challenges involved in combining our and Sprint’s businesses, and to realize the anticipated benefits of the Transactions could cause an interruption of, or a loss of momentum in, our activities and could adversely affect our results of operations.
−Removed: The overall combination of our and Sprint’s businesses, and compliance with the Government Commitments may also result in material unanticipated problems, expenses, liabilities, competitive responses and impacts, and loss of customer and other business relationships.
−Removed: The difficulties of combining the operations of the companies, and satisfying all of the Government Commitments include, among others:
−Removed: • diversion of management attention to integration matters;
−Removed: • difficulties in integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure, supplier and vendor arrangements and financial reporting and internal control systems;
−Removed: • challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;
−Removed: • differences in control environments and cultures, and the potential identification of material weaknesses while we work to integrate and align policies, principles and practices;
−Removed: • alignment of key performance measurements may result in a greater need to communicate and manage clear expectations while we work to integrate and align policies and practices;
−Removed: • difficulties in integrating employees and attracting and retaining key personnel;
−Removed: • the transition of management to the combined company management team, and the need to address possible differences in corporate cultures and management philosophies;
−Removed: • challenges in retaining existing customers and obtaining new customers;
−Removed: • difficulties in achieving anticipated cost savings, synergies, accretion targets, business opportunities, financing plans and growth prospects from the combination;
−Removed: • difficulties in managing the expanded operations of a significantly larger and more complex company;
−Removed: • the impact of the additional debt financing incurred in connection with the Transactions;
−Removed: • the possible unfavorable outcomes in connection with the relationship between Sprint PCS and Shentel, including disadvantageous pricing pursuant to the contractual appraisal process for purchasing (or selling) wireless telecommunications assets in the region, costly and lengthy proceedings related to disputes, and delays and other adverse effects on operations and business in the Shentel service area;
−Removed: • known or potential unknown liabilities of Sprint that are larger than expected;
−Removed: • the limitations to the indemnifications provided by SoftBank against certain losses following the closing of the Transactions and the uncertainties over SoftBank’s ability to fulfill such obligations;
−Removed: • other potential adverse consequences and unforeseen increased expenses or liabilities associated with the Transactions and the Government Commitments.
−Removed: Additionally, uncertainties over the integration process could cause customers, suppliers, distributors, dealers, retailers and others to seek to change or cancel our existing business relationships or to refuse to renew existing relationships.
−Removed: Suppliers, distributors and content and application providers may also delay or cease developing new products for us that are necessary for the operations of our business due to uncertainties.
−Removed: Competitors may also target our existing customers by highlighting potential uncertainties and integration difficulties.
−Removed: Some of these factors are outside our control, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact our business, financial condition and results of operations.
−Removed: In addition, even if the integration is successful, the full benefits of the Transactions including, among others, the synergies, cost savings or sales or growth opportunities may not be realized, as a result of the Divestiture Transaction, the Government Commitments and/or the other actions and conditions we have agreed to in connection with the Transactions, or otherwise.
−Removed: Further, we have incurred, and expect to continue to incur, significant costs, expenses and fees for professional services and
−Removed: other transaction costs in connection with the Transactions.
−Removed: Additional unanticipated costs may be incurred in the integration process and in connection with the Divestiture Transaction and the Government Commitments, including potential penalties that could arise if we fail to fulfill our obligations thereunder.
−Removed: As a result, it cannot be assured that we will realize the full benefits expected from the Transactions within the anticipated time frames or at all.
−Removed: Our business may be adversely impacted if we are not able to successfully manage the ongoing commercial and transition services arrangements entered into in connection with the Divestiture Transaction and known or unknown liabilities arising in connection therewith.
−Removed: On July 1, 2020, we completed the Divestiture Transaction.
−Removed: In connection with the closing of the Divestiture Transaction, we and DISH entered into certain commercial and transition services arrangements, including a Master Network Services Agreement (the “MNSA”) and a Spectrum Purchase Agreement (the “Spectrum Purchase Agreement”).
−Removed: Pursuant to the MNSA, DISH will receive network services from the Company for a period of seven years.
−Removed: As set forth in the MNSA, the Company will provide to DISH, among other things, (a) legacy network services for certain Boost Mobile prepaid end users on the Sprint network, (b) T-Mobile network services for certain end users that have been migrated to the T-Mobile network or provisioned on the T-Mobile network by or on behalf of DISH and (c) infrastructure mobile network operator services to assist in the access and integration of the DISH network.
−Removed: Pursuant to the Spectrum Purchase Agreement, DISH is expected to purchase all of Sprint’s 800 MHz spectrum (approximately 13.5 MHz of nationwide spectrum) for a total of approximately $3.6 billion.
−Removed: The covered spectrum sale will not occur before the third anniversary of the Merger (i.e., not before April 1, 2023) but must be divested within the later of three years after the closing of the Divestiture Transaction and five days after receipt of the approval from the FCC for the transfer, following an application for FCC approval to be filed by the third anniversary of the closing of the Merger.
−Removed: T-Mobile may exercise an option to lease back 4 MHz (2 MHz downlink + 2 MHz uplink) of the spectrum for two years following the closing of the 800 MHz spectrum sale at the same per person rate used to calculate the purchase price paid by DISH to T-Mobile – a rate of approximately $68 million per year.
−Removed: Failure to successfully manage these ongoing commercial and transition services arrangements entered into in connection with the Divestiture Transaction and liabilities arising in connection therewith may result in material unanticipated problems, including diversion of management time and energy, significant expenses and liabilities.
−Removed: There may also be other potential adverse consequences and unforeseen increased expenses or liabilities associated with the Divestiture Transaction, the occurrence of which could materially impact our business, financial condition, liquidity and results of operations.
−Removed: In addition, there may be an increase in competition from DISH and other third parties that DISH may enter into commercial agreements with, who are significantly larger and with greater resources and scale advantages as compared to us.
−Removed: Such increased competition may result in our loss of customers and other business relationships.
+Added: Competition, industry consolidation, and changes in the market for wireless services could negatively affect our ability to attract and retain customers and adversely affect our business, financial condition, and operating results.
+Added: We have multiple wireless competitors, some of which have greater resources than we have and compete for customers based principally on service/device offerings, price, network coverage, speed and quality and customer service.
+Added: We expect market saturation to continue to cause the wireless industry’s customer growth rate to be moderate in comparison with historical growth rates, leading to ongoing competition for customers.
+Added: We also expect that our customers’ appetite for data services will place increasing demands on our network capacity.
+Added: This competition and our capacity will continue to put pressure on pricing and margins as companies compete for potential customers.
+Added: Our ability to compete will depend upon, among other things, continued absolute and relative improvement in network quality and customer service, effective marketing and selling of products and services, innovation, and attractive pricing, all of which will involve significant expenses.
+Added: We face intense and increasing competition from other service providers as industry sectors converge, such as cable, telecom services and content, satellite, and other service providers.
+Added: Companies like Altice, Charter and DISH are diversifying outside cable, voice and broadband services to also offer wireless services.
+Added: Competitors like Comcast and AT&T now provide original content services in addition to wireless, cable, voice and broadband services, and consumers are increasingly accessing video content from Internet-based providers and applications, all of which create increased competition in this area.
+Added: These factors, together with the effects of the increasing aggregate penetration of wireless services in all metropolitan areas and the ability of our larger competitors to use resources to build out their networks and to quickly deploy advanced technologies, such as 5G, could make it more difficult for us to continue to attract and retain customers, and may adversely affect our competitive position and ability to grow, which would have a material adverse effect on our business, financial condition and operating results.
+Added: Joint ventures, mergers, acquisitions and strategic alliances in the wireless sector have resulted in, and are expected to result in, larger competitors competing for a limited number of customers.
+Added: Further consolidation, including the pending acquisition of TracFone Wireless by Verizon, could negatively impact our businesses, including wholesale.
+Added: We will experience declining revenues from our wholesale business if Verizon migrates legacy TracFone customers off the T-Mobile network and DISH migrates Boost customers to their standalone network.
+Added: The other national wireless communications services providers may be able to enter into exclusive handset, device, or content arrangements, execute pervasive advertising and marketing campaigns, or otherwise improve their cost position relative to ours.
+Added: In addition, refusal of our large competitors to provide critical access to resources and inputs, such as roaming services, on reasonable terms could improve their position within the wireless broadband mobile services industry.
+Added: Unregistered Sales of Equity Securities and Use of Proceeds
+Added: Defaults Upon Senior Securities
+Added: Mine Safety Disclosures
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.