What changed in this filing

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Item 1. Financial Statements

2021-08-03 compared with 2021-05-04 · 278 added, 145 removed, 768 unchanged (36% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in millions, except share and per share amounts) March 31,

(in millions, except share and per share amounts) June 30,

2021 December 31,

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Short-term debt 4,648 4,579

Short-term debt to affiliates 2,235 —

Deferred revenue 939 1,030

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Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

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

(in millions, except share and per share amounts) 2021 2020 2021 2020

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Wholesale revenues 935 408 1,832 733

Roaming and other service revenues 641 261

Other service revenues 638 552 1,279 813

Total service revenues 14,492 13,230 28,684 22,076

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Selling, general and administrative 4,823 5,604 9,628 9,292

Impairment expense — 418 — 418

Depreciation and amortization 4,077 4,064 8,366 5,782

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Total other expense, net ( 851 ) ( 1,028 ) ( 1,811 ) ( 1,310 )

Income before income taxes 1,179 1,257

Income (loss) from continuing operations before income taxes 1,255 ( 208 ) 2,434 1,049

Income tax expense ( 277 ) ( 2 ) ( 523 ) ( 308 )

Income (loss) from continuing operations 978 ( 210 ) 1,911 741

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

Net income $ 978 $ 110 $ 1,911 $ 1,061

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Unrealized gain (loss) on cash flow hedges, net of tax effect of $ 12 , $ 3 , $ 24 , and $( 273 )

34 2 68 ( 790 )

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

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Total comprehensive income $ 1,013 $ 112 $ 1,982 $ 271

Earnings per share

Earnings (loss) per share

Basic earnings (loss) per share:

Continuing operations $ 0.78 $ ( 0.17 ) $ 1.53 $ 0.71

Discontinued operations — 0.26 — 0.30

Basic $ 0.78 $ 0.09 $ 1.53 $ 1.01

Diluted earnings (loss) per share:

Continuing operations $ 0.78 $ ( 0.17 ) $ 1.52 $ 0.70

Discontinued operations — 0.26 — 0.30

Diluted $ 0.78 $ 0.09 $ 1.52 $ 1.00

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Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

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

(in millions) 2021 2020 2021 2020

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Losses on redemption of debt 28 163 129 163

Impairment expense — 418 — 418

Changes in operating assets and liabilities

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Purchases of spectrum licenses and other intangible assets, including deposits ( 8 ) ( 745 ) ( 8,930 ) ( 844 )

Proceeds from sales of tower sites 31 — 31 —

Proceeds related to beneficial interests in securitization transactions 1,137 602 2,028 1,470

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Proceeds from issuance of long-term debt 3,006 26,694 9,769 26,694

Payments of consent fees related to long-term debt — ( 109 ) — ( 109 )

Repayments of financing lease obligations ( 269 ) ( 236 ) ( 556 ) ( 518 )

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Repayments of long-term debt ( 3,150 ) ( 10,529 ) ( 5,369 ) ( 10,529 )

Issuance of common stock — 17,290 — 17,290

Repurchases of common stock — ( 16,990 ) — ( 16,990 )

Proceeds from issuance of short-term debt — 18,743 — 18,743

Repayments of short-term debt — ( 18,929 ) — ( 18,929 )

Tax withholdings on share-based awards ( 76 ) ( 138 ) ( 294 ) ( 279 )

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Other, net ( 46 ) 7 ( 91 ) 2

Net cash provided by (used in) financing activities 3,874 ( 453 )

Net cash (used in) provided by financing activities ( 577 ) 15,628 3,297 15,175

Change in cash and cash equivalents, including restricted cash 1,119 10,049 ( 2,585 ) 9,633

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(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, 2021 1,246,773,175 $ ( 14 ) $ 72,839 $ ( 1,545 ) $ ( 4,903 ) $ 66,377

Net income — — — — 978 978

Other comprehensive income — — — 35 — 35

Stock-based compensation — — 150 — — 150

Exercise of stock options 100,238 — 6 — — 6

Issuance of vested restricted stock units 1,603,258 — — — — —

Shares withheld related to net share settlement of stock awards and stock options ( 559,630 ) — ( 76 ) — — ( 76 )

Transfers with NQDC plan 3,495 — — — — —

Balance as of June 30, 2021 1,247,920,536 $ ( 14 ) $ 72,919 $ ( 1,510 ) $ ( 3,925 ) $ 67,470

Balance as of December 31, 2020 1,241,805,706 $ ( 11 ) $ 72,772 $ ( 1,581 ) $ ( 5,836 ) $ 65,344

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Shares withheld related to net share settlement of stock awards and stock options ( 2,345,617 ) — ( 294 ) — — ( 294 )

Transfer RSU from NQDC plan ( 21,438 ) ( 3 ) 3 — — —

Transfers with NQDC plan ( 17,943 ) ( 3 ) 3 — — —

Balance as of June 30, 2021 1,247,920,536 $ ( 14 ) $ 72,919 $ ( 1,510 ) $ ( 3,925 ) $ 67,470

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

Index for Notes to the Condensed Consolidated Financial Statements

T-Mobile US, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

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

Net income — — — — 110 110

Other comprehensive income — — — 2 — 2

Stock-based compensation — — 272 — — 272

Exercise of stock options 262,394 — 14 — — 14

Stock issued for employee stock purchase plan ( 13 ) — — — — —

Issuance of vested restricted stock units 4,157,095 — — — — —

Shares withheld related to net share settlement of stock awards and stock options ( 1,564,635 ) — ( 138 ) — — ( 138 )

Transfers with NQDC plan ( 40,263 ) ( 1 ) 1 — — —

Shares issued in secondary offering 173,564,426 — 17,216 — — 17,216

Shares repurchased from SoftBank (1)

( 173,564,426 ) — ( 16,990 ) — — ( 16,990 )

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

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

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Shares withheld related to net share settlement of stock awards and stock options ( 3,055,034 ) — ( 279 ) — — ( 279 )

Distribution from NQDC plan 4,386 ( 3 ) 3 — — —

Transfers with NQDC plan ( 35,877 ) ( 4 ) 4 — — —

Shares issued in secondary offering 173,564,426 — 17,216 — — 17,216

Shares repurchased from SoftBank (1)

( 173,564,426 ) — ( 16,990 ) — — ( 16,990 )

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

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

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

(1) On June 22, 2020, we entered into a Master Framework Agreement and related transactions with SoftBank Group Corp.

(“SoftBank”) to facilitate SoftBank’s monetization of a portion of our common stock held by SoftBank.

We received a payment of $ 300 million from SoftBank.

This amount, net of tax, was treated as a reduction of the purchase price of the shares acquired from SoftBank and was recorded as Additional paid-in capital.

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

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Summary of Significant Accounting Policies

Business Combination

Business Combinations

Receivables and Expected Credit Losses

Sales of Certain Receivables

Goodwill, S pectrum License Transactions and Other Intangible Assets

Goodwill, Spectrum License Transactions and Other Intangible Assets

Fair Value Measurements

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Additional Financial Information

Subsequent Events

Index for Notes to the Condensed Consolidated Financial Statements

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Reference Rate Reform

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The standard provides temporary optional expedients and allows for certain exceptions to applying existing GAAP for contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform.

The standard is available for adoption through December 31, 2022.

We are currently evaluating the impact this standard will have, including optional expedients, on our condensed consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not have, or are not expected to have, a significant impact on our present or future condensed consolidated financial statements.

Note 2 – Business Combination

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” and has since modified the standard with ASU 2021-01, “Reference Rate Reform (Topic 848):

Scope” (together, the “reference rate reform standard”).

The reference rate reform standard provides temporary optional expedients and allows for certain exceptions to applying existing GAAP for contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform.

The reference rate reform standard is available for adoption through December 31, 2022, and the optional expedients for contract modifications must be elected for all arrangements within a given Accounting Standards Codification (“ASC”) Topic or Industry Subtopic.

We expect to elect the optional expedients for eligible contract modifications accounted for under a given ASC Topic as they occur through December 31, 2022.

The application of these expedients is not expected to have a material impact on our consolidated financial statements.

Note 2 – Business Combinations

Business Combination Agreement and Amendments

On April 29, 2018, we entered into a Business Combination Agreement with Sprint and the other parties named therein (as amended, the “Business Combination Agreement”) for the Merger.

(“SoftBank”) would indemnify us against certain specified matters and the loss of value arising out of, or resulting from, cessation of access to spectrum under certain circumstances and subject to certain limitations and qualifications.

The Business Combination Agreement was subsequently amended to provide that, following the closing of the Merger and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”), SoftBank would indemnify us against certain specified matters and the loss of value arising out of, or resulting from, cessation of access to spectrum under certain circumstances and subject to certain limitations and qualifications.

On February 20, 2020, T-Mobile, SoftBank and Deutsche Telekom AG (“DT”) entered into a letter agreement (the “Letter Agreement”).

Pursuant to the Letter Agreement, SoftBank agreed to cause its applicable affiliates to surrender to T-Mobile, for no additional consideration, an aggregate of 48,751,557 shares of T-Mobile common stock (such number of shares, the “SoftBank Specified Shares Amount”), effective immediately following the Effective Time (as defined in the Business Combination Agreement), making SoftBank’s exchange ratio 11.31 shares of Sprint common stock for each share of T-Mobile common stock.

This resulted in an effective exchange ratio of approximately 11.00 shares of Sprint common stock for each share of T-Mobile common stock immediately following the closing of the Merger, an increase from the originally agreed 9.75

Pursuant to the Letter Agreement, SoftBank agreed to cause its applicable affiliates to surrender to T-Mobile, for

Index for Notes to the Condensed Consolidated Financial Statements

no additional consideration, an aggregate of 48,751,557 shares of T-Mobile common stock (such number of shares, the “SoftBank Specified Shares Amount”), effective immediately following the Effective Time (as defined in the Business Combination Agreement), making SoftBank’s exchange ratio 11.31 shares of Sprint common stock for each share of T-Mobile common stock.

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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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.

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

wireless 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.

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

Value of contingent consideration (4)

Fair value of contingent consideration (4)

Payment received from selling stockholder (5)

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(1) Represents the fair value of T-Mobile common stock issued to Sprint stockholders pursuant to the Business Combination Agreement, less shares surrendered by SoftBank pursuant to the Letter Agreement.

The fair value is based on 373,396,310 shares of Sprint common stock issued and outstanding as of March 31, 2020, an exchange ratio of 0.10256 shares of T-Mobile common stock per share of Sprint common stock, less 48,751,557 T-Mobile shares surrendered by SoftBank which are treated as contingent consideration, and the closing price per share of T-Mobile common stock on NASDAQ on March 31, 2020, of $ 83.90 , as shares were transferred to Sprint stockholders prior to the opening of markets on April 1, 2020.

The fair value is based on 373,396,310 shares of T-Mobile common stock issued at an exchange ratio of 0.10256 shares of T-Mobile common stock per share of Sprint common stock, less 48,751,557 T-Mobile shares surrendered by SoftBank which are treated as contingent consideration, and the closing price per share of T-Mobile common stock on NASDAQ on March 31, 2020, of $ 83.90 , as shares were transferred to Sprint stockholders prior to the opening of markets on April 1, 2020.

(2) Equity-based awards held by Sprint employees prior to the acquisition date have been replaced with T-Mobile equity-based awards.

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(3) Represents the cash consideration paid concurrent with the close of the Merger to retire certain Sprint debt, as required by change in control provisions of the debt, plus interest and prepayment penalties.

Index for Notes to the Condensed Consolidated Financial Statements

(4) Represents the fair value of the SoftBank Specified Shares Amount contingent consideration that may be issued as set forth in the Letter Agreement.

(5) Represents receipt of a cash payment from SoftBank for certain expenses associated with the Merger.

(5) Represents receipt of a cash payment from SoftBank for certain reimbursed Merger expenses.

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

We estimated the fair value using the income approach, a probability-weighted discounted cash flow model,

Index for Notes to the Condensed Consolidated Financial Statements

whereby a Monte Carlo simulation method estimated the probability of different outcomes as the likelihood of achieving the 45-day volume-weighted average price threshold is not easily predicted.

We estimated the fair value using the income approach, a probability-weighted discounted cash flow model, whereby a Monte Carlo simulation method estimated the probability of different outcomes as the likelihood of achieving the 45-day volume-weighted average price threshold is not easily predicted.

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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We retained the services of certified valuation specialists to assist with assigning values to certain acquired assets and assumed liabilities.

Index for Notes to the Condensed Consolidated Financial Statements

(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 adjusted based on additional information arising subsequent to the initial valuation.

The measurement period adjustments we recognized during the three months ended March 31, 2021 did not have a significant impact on our Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021.

Amounts initially disclosed for the estimated values of certain acquired assets and liabilities assumed were adjusted through March 31, 2021 (the close of the measurement period) based on information arising after the initial valuation.

Intangible Assets and Liabilities

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Leased spectrum arrangements that have favorable (asset) and unfavorable (liability) terms compared to current market rates were assigned fair values of $ 745 million and $ 125 million, respectively, with 18 -year and 19 -year weighted average useful lives, respectively.

Index for Notes to the Condensed Consolidated Financial Statements

The fair value of Spectrum licenses of $ 45.4 billion was estimated using the income approach, specifically a Greenfield model.

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The liability is presented in Accounts payable and accrued liabilities, and the indemnification asset is presented in Other current assets within our acquired assets and liabilities at the acquisition date.

In November 2020, we entered into a consent decree with the FCC to resolve certain Lifeline matters, which resulted in a payment of $ 200 million by SoftBank.

Final resolution of this matter could require making additional reimbursements and paying additional fines and penalties, which we do not expect to have a significant impact on our financial results.

In November 2020, we entered into a consent decree with the Federal Communications Commission (“FCC”) to resolve certain Lifeline matters, which resulted in a payment of $ 200 million by SoftBank.

Final resolution of these matters could require making additional reimbursements and paying additional fines and penalties, which we do not expect to have a significant impact on our financial results.

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

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

The amount of the valuation allowance reserve and uncertain tax benefit reserves was $ 851 million and $ 660 million, respectively.

As of the date of the Merger, the amount of the valuation allowance reserve and uncertain tax benefit reserves was $ 851 million and $ 660 million, respectively.

We continue to monitor positive and negative evidence related to the utilization of our deferred tax assets subject to a valuation allowance.

It is possible the valuation allowance we deem to be necessary will be reduced within the next 12 months.

Transaction Costs

We recognized transaction costs of $ 13 million and $ 38 million for the three months ended March 31, 2021 and 2020, respectively.

There were no significant transaction costs recognized in the three months ended June 30, 2021.

We recognized transaction costs of $ 145 million for the three months ended June 30, 2020, and $ 13 million and $ 184 million for the six months ended June 30, 2021 and 2020, 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.

Index for Notes to the Condensed Consolidated Financial Statements

Pro Forma Information

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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 months ended March 31, 2020 include the impact of several significant nonrecurring pro forma adjustments to previously reported operating results.

The pro forma results for the three and six months ended June 30, 2020 include the impact of several significant nonrecurring pro forma 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.

(in millions) Three Months Ended March 31, 2020

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

Total revenues $ 17,665 $ 35,073

Income from continuing operations 1,111

(Loss) income from continuing operations ( 9 ) 1,102

Income from discontinued operations, net of tax 320 677

Net income 311 1,779

Index for Notes to the Condensed Consolidated Financial Statements

Significant nonrecurring pro forma adjustments include:

• Transaction costs of $ 57 million that were incurred during the three months ended March 31, 2020 are assumed to have occurred on the pro forma close date of January 1, 2019, and are recognized as if incurred in the first quarter of 2019;

• Transaction costs of $ 145 million and $ 202 million that were incurred during the three and six months ended June 30, 2020, respectively, are assumed to have occurred on the pro forma close date of January 1, 2019, and are recognized as if incurred in the first quarter of 2019;

• The Prepaid Business divested on July 1, 2020, is assumed to have been classified as discontinued operations as of January 1, 2019, and the related activities are presented in Income from discontinued operations, net of tax;

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• Tangible and intangible assets are assumed to be recorded at their estimated fair values as 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 tower lease transactions.

• Accounting policies of Sprint are conformed to those of T-Mobile including depreciation for leased devices, distribution arrangements with Brightstar US, Inc., amortization of costs to acquire a contract and certain tower lease transactions.

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.

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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 LLC (“Shentel”), pursuant to which Shentel is the exclusive provider of Sprint PCS’s wireless mobility communications network products in certain parts of Maryland, North Carolina, Virginia, West Virginia, Kentucky, Ohio and Pennsylvania.

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 used to provide services pursuant to the Management Agreement.

On August 26, 2020, Sprint, now our direct subsidiary, 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 exercise of this option triggered a requirement for the parties to engage three independent valuation providers to calculate the “entire business value” (the “Entire Business Value”) of such wireless telecommunications assets, pursuant to a formula and valuation process prescribed in the Management Agreement.

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

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 (the “Wireless Assets”) used to provide services pursuant to the Management Agreement.

On August 26, 2020, Sprint, now our indirect subsidiary, 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.

On May 28, 2021, T-Mobile USA, Inc., a Delaware corporation and our direct wholly-owned subsidiary, entered into an asset purchase agreement (the “Purchase Agreement”) with Shentel, for the acquisition of the Wireless Assets for an aggregate purchase price of approximately $ 1.9 billion in cash, subject to certain adjustments prescribed by the Management Agreement and such additional adjustments agreed by the parties.

Subsequent to June 30, 2021 and upon the completion of certain customary conditions, including the receipt of certain regulatory approvals, on July 1, 2021, we closed on the acquisition of the Wireless Assets pursuant to the Purchase Agreement and, as a result, T-Mobile became the legal owner of the Wireless Assets.

Concurrently and as agreed to through the Purchase Agreement, T-Mobile and Shentel entered into certain separate transactions, including the effective settlement of the pre-existing arrangements between T-Mobile and Shentel under the Management Agreement.

In exchange, T-Mobile transferred cash of approximately $ 2.0 billion, approximately $ 1.9 billion of which was determined to be consideration transferred for the Wireless Assets and the remainder of which was determined to relate to separate transactions, primarily associated with the effective settlement of pre-existing arrangements between T-Mobile and Shentel.

Accordingly, these separate transactions are not included in the calculation of the consideration transferred in exchange for the Wireless Assets.

We do not currently expect any additional material adjustments to the consideration already transferred.

We have concluded that the acquired set of the Wireless Assets constitutes a business as defined in ASC 805, “Business Combinations,” and we therefore will account for the acquired set of Wireless Assets as a business combination.

The major classes of assets acquired through the acquisition of the Wireless Assets include fixed assets and network equipment, operating lease right-of-use assets, reacquired rights and other intangible assets.

The major classes of liabilities assumed include operating

Index for Notes to the Condensed Consolidated Financial Statements

On February 1, 2021, in accordance with the Management Agreement and other agreed-upon terms, the Entire Business Value of Shentel’s wireless telecommunication assets used to provide services pursuant to the Management Agreement was determined to be $ 2.1 billion, and correspondingly, the base purchase price for such wireless telecommunication assets shall be ninety percent ( 90 %) of that Entire Business Value amount ($ 1.9 billion), subject to certain other purchase price adjustments prescribed by the Management Agreement and such additional purchase price adjustments agreed by the parties.

The parties are negotiating the remaining outstanding terms of a definitive agreement to govern the purchase of Shentel’s wireless telecommunication assets and expect the transaction to close in the third quarter of 2021 after satisfying customary conditions to closing.

lease liabilities.

Due to the limited time since the acquisition date and the complexity of the acquisition, the accounting for the business combination and separate transactions as agreed to through the Purchase Agreement are not yet complete.

We are not able to provide the allocation of consideration paid to the assets acquired or liabilities assumed, nor are we able to provide additional details on the accounting for the concurrent transactions agreed to through the Purchase Agreement.

The financial results of the Wireless Assets are not expected to be material to our Condensed Consolidated Statements of Comprehensive Income.

Note 3 – Receivables and Expected Credit Losses

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Customers may be required to make a down payment on their equipment purchases.

In addition, certain customers within the Subprime category are required to pay a deposit.

In addition, certain customers within the Subprime category may be required to pay a deposit.

To determine a customer’s credit profile, we use a proprietary credit scoring model that measures the credit quality of a customer using several factors, such as credit bureau information, consumer credit risk scores and service and device plan characteristics.

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Based on tenure, consumer credit risk score and credit profile, these acquired customers were classified into our customer classes of Prime or Subprime.

Our proprietary credit scoring model is applied to all EIP arrangements originated after the Merger close date.

Index for Notes to the Condensed Consolidated Financial Statements

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

(in millions) March 31,

(in millions) June 30,

2021 December 31,

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

The following table presents the amortized cost of our EIP receivables by delinquency status, customer credit class, and year of origination as of March 31, 2021:

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, 2021:

Originated in 2021 Originated in 2020 Originated prior to 2020 Total EIP Receivables, net of

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For EIP receivables acquired in the Merger, the difference between the fair value and unpaid principal balance of the loan at the 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 6.7 % as of both March 31, 2021 and December 31, 2020.

EIP receivables had a combined weighted average effective interest rate of 6.3 % and 6.7 % as of June 30, 2021 and December 31, 2020, respectively.

Index for Notes to the Condensed Consolidated Financial Statements

Activity for the three months ended March 31, 2021 and 2020, in the allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivables segments were as follows:

March 31, 2021 March 31, 2020

Activity for the six months ended June 30, 2021 and 2020, in the allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivables segments were as follows:

June 30, 2021 June 30, 2020

(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 March 31, 2021.

We do not have material, unmitigated off-balance-sheet credit exposures as of June 30, 2021.

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 Level 3 inputs, including customer default rates and credit worthiness, dilutions and recoveries.

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

As of both March 31, 2021 and December 31, 2020, the EIP sale arrangement provided funding of $ 1.3 billion.

As of both June 30, 2021 and December 31, 2020, 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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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 with respect to the EIP BRE:

(in millions) March 31,

(in millions) June 30,

2021 December 31,

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The maximum funding commitment of the service receivable sale arrangement is $ 950 million, and the facility expires in March 2022.

As of March 31, 2021 and December 31, 2020, the service receivable sale arrangement provided funding of $ 775 million and $ 772 million, respectively.

As of June 30, 2021 and December 31, 2020, the service receivable sale arrangement provided funding of $ 775 million and $ 772 million, respectively.

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

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(in millions) March 31,

(in millions) June 30,

2021 December 31,

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

As of March 31, 2021 and December 31, 2020, our deferred purchase price related to the sales of service receivables and EIP receivables was $ 769 million and $ 884 million, respectively.

As of June 30, 2021 and December 31, 2020, our deferred purchase price related to the sales of service receivables and EIP receivables was $ 770 million and $ 884 million, respectively.

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

(in millions) March 31,

(in millions) June 30,

2021 December 31,

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Net cash proceeds funded by reinvested collections 1,715 1,944

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 $ 25 million for the three months ended March 31, 2021 and 2020, respectively, in Selling, general and administrative expense in our Condensed Consolidated Statements of Comprehensive Income.

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 $ 12 million and a loss from sales of receivables of $ 30 million for the three months ended June 30, 2021 and 2020, respectively, and a gain of $ 30 million and a loss of $ 55 million for the six months ended June 30, 2021 and 2020, respectively, in Selling, general and administrative expense in our Condensed Consolidated Statements of Comprehensive Income.

Index for Notes to the Condensed Consolidated Financial Statements

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Note 5 – Goodwill, Spectrum License Transactions and Other Intangible Assets

The changes in the carrying amount of goodwill for the three months ended March 31, 2021 and year ended December 31, 2020, are as follows:

The changes in the carrying amount of goodwill for the six months ended June 30, 2021 and year ended December 31, 2020, are as follows:

(in millions) Goodwill

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Goodwill from acquisitions in 2021 13

Balance as of March 31, 2021 $ 11,158

Accumulated impairment losses at March 31, 2021 $ ( 10,984 )

Balance as of June 30, 2021 $ 11,152

Accumulated impairment losses at June 30, 2021 $ ( 10,984 )

On April 1, 2020, we completed our Merger with Sprint, which was accounted for as a business combination resulting in $ 9.4 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.

See Note 2 - Business Combinations for further information.

Intangible Assets

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Spectrum Licenses

The following table summarizes our spectrum license activity for the three months ended March 31, 2021:

The following table summarizes our spectrum license activity for the six months ended June 30, 2021:

(in millions) 2021

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Spectrum licenses, end of period $ 82,917

In March 2021, the Federal Communications Commission (“FCC”), announced that we were the winning bidder of 142 licenses in Auction 107 (C-band spectrum) for an aggregate purchase price of $ 9.3 billion, excluding relocation costs.

In March 2021, the FCC announced that we were the winning bidder of 142 licenses in Auction 107 (C-band spectrum) for an aggregate purchase price of $ 9.3 billion, excluding relocation costs.

At the inception of Auction 107 in October 2020, we deposited $ 438 million.

Upon conclusion of Auction 107 in March 2021, we paid the FCC the remaining $ 8.9 billion for the licenses won in the auction.

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, 2021.

We expect to incur an additional $ 1.2 billion in relocation costs which will be paid through 2024.

The aggregate cash payments made to the FCC are included in Other assets as of March 31, 2021 in our Condensed Consolidated Balance Sheets, and will remain there until the corresponding licenses are received.

The timing of when the licenses will be issued will be determined by the FCC after all post-auction procedures have been completed.

The aggregate cash payments made to the FCC are included in Other assets as of June 30, 2021, in our Condensed Consolidated Balance Sheets, as the licenses had not yet been issued.

As of June 30, 2021, the activities that are necessary to get the C-band spectrum ready for its intended use have not begun, as such, capitalization of the interest associated with the costs of acquiring the C-band spectrum has not begun.

Subsequent to June 30, 2021, on July 23, 2021, the FCC issued to us the licenses won in the Auction.

Other Intangible Assets

The components of Other intangible assets were as follows:

Useful Lives March 31, 2021 December 31, 2020

Useful Lives June 30, 2021 December 31, 2020

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

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Other intangible assets $ 6,627 $ ( 2,027 ) $ 4,600 $ 6,665 $ ( 1,367 ) $ 5,298

Amortization expense for intangible assets subject to amortization was $ 366 million and $ 25 million for the three months ended March 31, 2021 and 2020, respectively.

Amortization expense for intangible assets subject to amortization was $ 295 million and $ 387 million for the three months ended June 30, 2021 and 2020, respectively, and $ 661 million and $ 411 million for the six months ended June 30, 2021 and 2020, respectively.

Index for Notes to the Condensed Consolidated Financial Statements

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(in millions) Estimated Future Amortization

Twelve Months Ending March 31,

Twelve Months Ending June 30,

Thereafter 840

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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.

Aggregate changes in the fair value of the interest rate lock derivatives, net of tax and amortization, of $ 1.6 billion are presented in Accumulated other comprehensive loss as of both March 31, 2021 and December 31, 2020.

Aggregate changes in the fair value of the interest rate lock derivatives, net of tax and amortization, of $ 1.5 billion and $ 1.6 billion are presented in Accumulated other comprehensive loss as of June 30, 2021 and December 31, 2020, respectively.

Between April 2 and April 6, 2020, in connection with the issuance of an aggregate of $ 19.0 billion of 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.

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 months ended March 31, 2021, $ 46 million was amortized from Accumulated other comprehensive loss into Interest expense in the Condensed Consolidated Statements of Comprehensive Income.

No amounts were amortized into Interest expense for the three months ended March 31, 2020.

We expect to amortize $ 192 million of the Accumulated other comprehensive loss associated with the derivatives into Interest expense over the next 12 months.

At the time of termination in the second quarter of 2020, the interest rate lock derivatives were a liability of $ 2.3 billion, of which $ 1.2 billion was cash-collateralized.

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 for the three and six months ended June 30, 2020.

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

For the three and six months ended June 30, 2021, $ 47 million and $ 93 million, respectively, was amortized from Accumulated other comprehensive loss into Interest expense in the Condensed Consolidated Statements of

Index for Notes to the Condensed Consolidated Financial Statements

Comprehensive Income.

For both the three and six months ended June 30, 2020, $ 39 million was amortized from Accumulated other comprehensive loss into Interest expense.

We expect to amortize $ 196 million of the Accumulated other comprehensive loss associated with the derivatives into Interest expense over the next 12 months.

Deferred Purchase Price Assets

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

The carrying amounts of our deferred purchase price assets, which are measured at fair value on a recurring basis and are included in our Condensed Consolidated Balance Sheets, were $ 769 million and $ 884 million at March 31, 2021 and December 31, 2020, respectively.

Fair value was equal to carrying amount at March 31, 2021 and December 31, 2020.

The carrying amounts of our deferred purchase price assets, which are measured at fair value on a recurring basis and are included in our Condensed Consolidated Balance Sheets, were $ 770 million and $ 884 million at June 30, 2021 and December 31, 2020, respectively.

Fair value was equal to carrying amount at June 30, 2021 and December 31, 2020.

The fair value of our Senior Unsecured Notes and Senior Secured Notes 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.

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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.

The fair value estimates were based on information available as of March 31, 2021 and December 31, 2020.

The fair value estimates were based on information available as of June 30, 2021 and December 31, 2020.

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 March 31, 2021 December 31, 2020

Level within the Fair Value Hierarchy June 30, 2021 December 31, 2020

(in millions) Carrying Amount (1)

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Senior Secured Notes to third parties 1 35,629 38,612 36,204 40,519

(1) Excludes $ 186 million and $ 240 million as of March 31, 2021 and December 31, 2020, 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.

(1) Excludes $ 148 million and $ 240 million as of June 30, 2021 and December 31, 2020, 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.

Note 7 – Debt

The following table sets forth the debt balances and activity as of, and for the three months ended, March 31, 2021 :

The following table sets forth the debt balances and activity as of, and for the six months ended, June 30, 2021 :

(in millions) December 31,

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Total debt to third parties 66,409 9,768 ( 4,742 ) ( 660 ) — ( 230 ) 70,545

Short-term debt to affiliates — — — — 2,231 4 2,235

Long-term debt to affiliates 4,716 — — — ( 2,231 ) 5 2,490

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

Our effective interest rate, excluding the impact of derivatives and capitalized interest, was approximately 4.3 % and 5.2 % for the three months ended March 31, 2021 and 2020, respectively, on weighted average debt outstanding of $ 73.7 billion and $ 25.0 billion for the three months ended March 31, 2021 and 2020, respectively.

The weighted average debt outstanding was calculated by applying an average of the monthly ending balances of total short-term and long-term debt and short-term and long-term debt to affiliates, net of unamortized premiums, discounts, debt issuance costs and consent fees.

Index for Notes to the Condensed Consolidated Financial Statements

Our effective interest rate, excluding the impact of derivatives and capitalized interest, was approximately 4.1 % and 4.9 % for the three months ended June 30, 2021 and 2020, respectively, and 4.2 % and 4.7 % for the six months ended June 30, 2021 and 2020, respectively, on weighted average debt outstanding of $ 75.5 billion and $ 66.1 billion for the three months ended June 30, 2021 and 2020, respectively, and $ 74.5 billion and $ 48.5 billion for the six months ended June 30, 2021 and 2020, respectively.

Issuances and Borrowings

During the three months ended March 31, 2021, we issued the following Senior Notes:

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

During the six months ended June 30, 2021, we issued the following Senior Notes:

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

2.250 % Senior Notes due 2026

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1,350 ( 8 ) 1,342 March 23, 2021

2.250 % Senior Notes due 2026

800 ( 2 ) 798 May 13, 2021

3.375 % Senior Notes due 2029

1,100 6 1,106 May 13, 2021

3.500 % Senior Notes due 2031

1,100 6 1,106 May 13, 2021

Total of Senior Notes issued $ 9,800 $ ( 32 ) $ 9,768

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On March 23, 2021, we issued $ 1.2 billion of 2.625 % Senior Notes due 2026, $ 1.25 billion of 3.375 % Senior Notes due 2029, and $ 1.35 billion of 3.500 % Senior Notes due 2031.

Note Redemption

On May 13, 2021, we issued $ 800 million of 2.250 % Senior Notes due 2026, $ 1.1 billion of 3.375 % Senior Notes due 2029, and $ 1.1 billion of 3.500 % Senior Notes due 2031.

Index for Notes to the Condensed Consolidated Financial Statements

Note Redemptions and Repayments

During the six months ended June 30, 2021, we made the following note redemptions and repayments:

(in millions) Principal Amount Write-off of Issuance Cost and Consent Fees (1)

Redemption Premium (2)

Redemption Date Redemption Price

6.500 % Senior Notes due 2026

$ 2,000 $ 36 $ 65 March 27, 2021 103.250 %

6.000 % Senior Notes due 2023

1,300 10 — May 23, 2021 100.000 %

6.000 % Senior Notes due 2024

1,000 9 — May 23, 2021 100.000 %

5.125 % Senior Notes due 2025

500 3 6 May 23, 2021 101.281 %

Total Senior Notes to third parties redeemed $ 4,800 $ 58 $ 71

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

$ 438 $ — $ — Various N/A

4.738 % Secured Series 2018-1 A-1 Notes due 2025

131 — — Various N/A

Other debt 91 — — Various N/A

Total Repayments $ 660 $ — $ —

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

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

(2) The redemption premium is the excess paid over the principal amount.

Redemption premiums are included within Net cash used in financing activities in our Condensed Consolidated Statements of Cash Flows.

On March 27, 2021, we redeemed $ 2.0 billion aggregate principal amount of our 6.500 % Senior Notes due 2026.

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The redemption premium was $ 65 million and the write off of issuance costs and consent fees was approximately $ 36 million, which was included in Other expense, net in our Condensed Consolidated Statements of Comprehensive Income and Losses on redemption of debt in our Condensed Consolidated Statements of Cash Flows.

On May 23, 2021, we redeemed $ 1.3 billion aggregate principal amount of our 6.000 % Senior Notes due 2023, $ 1.0 billion aggregate principal amount of our 6.000 % Senior Notes due 2024 and $ 500 million aggregate principal amount of our 5.125 % Senior Notes due 2025.

The notes were redeemed at a redemption price equal to 100.000 %, 100.000 % and 101.281 % of the principal amount of the notes (plus accrued and unpaid interest thereon), respectively, and were paid on May 21, 2021.

The redemption premium of our 5.125 % Senior Notes due 2025 was $ 6 million, and the write off of issuance costs and consent fees of our 6.000 % Senior Notes due 2023, 6.000 % Senior Notes due 2024 and 5.125 % Senior Notes due 2025 was approximately $ 10 million, $ 9 million and $ 3 million, respectively, which were included in Other expense, net in our Condensed Consolidated Statements of Comprehensive Income and Losses on redemption of debt in our Condensed Consolidated Statements of Cash Flows.

Subsequent to June 30, 2021, on August 2, 2021, we delivered a notice of prepayment on the remaining aggregate principal amount of our 3.360 % Secured Series 2016-1 A-1 Notes due 2021.

The aggregate principal amount, plus accrued and unpaid interest, of approximately $ 220 million is expected to be paid on or around August 20, 2021.

Restricted Cash

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We lease back a portion of the space at certain tower sites for an initial term of 10 years, followed by optional renewals at customary terms.

Index for Notes to the Condensed Consolidated Financial Statements

Assets and liabilities associated with the operation of the tower sites were transferred to special purpose entities (“SPEs”).

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Liabilities included the obligation to pay ground lease rentals, property taxes and other executory costs.

Index for Notes to the Condensed Consolidated Financial Statements

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.

We have a variable interest in the Lease Site SPEs but are not the primary beneficiary as we lack the power to direct the activities that most significantly impact the Lease Site SPEs’ 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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Accordingly, we recorded this arrangement as a financing whereby we recorded debt, a financial obligation, and the Master Lease Sites tower assets remained on our balance sheet.

As of the Merger date, we recognized Property and equipment with a fair value of $ 2.8 billion and tower obligations related to amounts owed to CCI under the leaseback of $ 1.1 billion.

As of the closing date of the Merger, we recognized Property and equipment with a fair value of $ 2.8 billion and tower obligations related to amounts owed to CCI under the leaseback of $ 1.1 billion.

Additionally, we recognized $ 1.7 billion in Other long-term liabilities associated with contract terms that are unfavorable to current market rates, which includes unfavorable terms associated with the fixed-price purchase option in 2037.

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

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 expected useful life of the tower, which is 20 years.

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

(in millions) March 31,

(in millions) June 30,

2021 December 31,

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Other long-term liabilities 1,712 1,712

Future minimum payments related to the tower obligations are approximately $ 399 million for the year ending March 31, 2022, $ 690 million in total for the years ending March 31, 2023 and 2024, $ 601 million in total for years ending March 31, 2025 and 2026, and $ 549 million in total for years thereafter.

Future minimum payments related to the tower obligations are approximately $ 401 million for the year ending June 30, 2022, $ 664 million in total for the years ending June 30, 2023 and 2024, $ 603 million in total for the years ending June 30, 2025 and 2026, and $ 473 million in total for the years thereafter.

Index for Notes to the Condensed Consolidated Financial Statements

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 arrangement, we remain primarily liable for ground lease payments on

Index for Notes to the Condensed Consolidated Financial Statements

approximately 900 sites and have included lease liabilities of $ 282 million in our Operating lease liabilities as of March 31, 2021.

Under the arrangement, we remain primarily liable for ground lease payments on approximately 900 sites and have included lease liabilities of $ 282 million in our Operating lease liabilities as of June 30, 2021.

Note 9 – Revenue from Contracts with Customers

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

Three Months Ended March 31,

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

(in millions) 2021 2020 2021 2020

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The balances presented within each revenue line item in our Condensed Consolidated Statements of Comprehensive Income represent categories of revenue from contracts with customers disaggregated by type of product and service.

Service revenues also include revenues earned for providing value added services to customers, such as device insurance services.

Service revenues also include revenues earned for providing premium services to customers, such as device insurance services.

Revenue generated from the lease of mobile communication devices is included within Equipment revenues in our Condensed Consolidated Statements of Comprehensive Income.

We provide wireline communication services to domestic and international customers.

Wireline service revenues of $ 197 million for the three months ended March 31, 2021 are presented in Roaming and other service revenues in our Condensed Consolidated Statements of Comprehensive Income.

Wireline service revenues were $ 187 million and $ 384 million for the three and six months ended June 30, 2021, respectively and were $ 211 million for both the three and six months ended June 30, 2020.

Wireline service revenues are presented in 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 March 31,

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

(in millions) 2021 2020 2021 2020

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Contract Balances

The contract asset and contract liability balances from contracts with customers as of December 31, 2020 and March 31, 2021, were as follows:

The contract asset and contract liability balances from contracts with customers as of December 31, 2020 and June 30, 2021, were as follows:

(in millions) Contract Assets Contract Liabilities

Balance as of December 31, 2020 $ 278 $ 824

Balance as of March 31, 2021 275 775

Balance as of June 30, 2021 267 789

Change $ ( 11 ) $ ( 35 )

Contract assets primarily represent revenue recognized for equipment sales with promotional bill credits offered to customers that are paid over time and are contingent on the customer maintaining a service contract.

The change in the 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

Index for Notes to the Condensed Consolidated Financial Statements

$ 205 million and $ 204 million as of March 31, 2021 and December 31, 2020, respectively, was included in Other current assets in our Condensed Consolidated Balance Sheets.

The change in the 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 $ 206 million and $ 204 million as of June 30, 2021 and December 31, 2020, 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 months ended March 31, 2021 and 2020, include the following:

Three Months Ended March 31,

Revenues for the three and six months ended June 30, 2021 and 2020 include the following:

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

(in millions) 2021 2020 2021 2020

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Remaining Performance Obligations

As of March 31, 2021, 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.

As of March 31, 2021, the aggregate amount of transaction price allocated to remaining service and lease performance obligations associated with operating leases was $ 1.3 billion and $ 766 million, respectively.

As of June 30, 2021, 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 $ 1.2 billion.

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

As of June 30, 2021, the aggregate amount of transaction price allocated to remaining service and lease performance obligations associated with operating leases was $ 668 million and $ 403 million, 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.

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

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

As of March 31, 2021, the aggregate amount of the contractual minimum consideration for wholesale, roaming and other service contracts is $ 1.0 billion, $ 1.2 billion and $ 945 million for 2021, 2022, and 2023 and beyond, respectively.

As of June 30, 2021, the aggregate amount of the contractual minimum consideration for wholesale, roaming and service contracts is $ 805 million, $ 1.4 billion and $ 1.0 billion for 2021, 2022, and 2023 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 $ 1.2 billion and $ 1.1 billion as of March 31, 2021 and December 31, 2020, respectively, and is included in Other assets in our Condensed Consolidated Balance Sheets.

The total balance of deferred incremental costs to obtain contracts was $ 1.2 billion and $ 1.1 billion as of June 30, 2021 and December 31, 2020, respectively, and is included in Other assets in our Condensed Consolidated Balance Sheets.

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 deferred contract costs is included in Selling, general and administrative expenses in our Condensed Consolidated Statements of Comprehensive Income and was $ 248 million and $ 205 million for the three months ended March 31, 2021 and 2020, respectively.

Amortization of deferred contract costs is included in Selling, general and administrative expenses in our Condensed Consolidated Statements of Comprehensive Income and was $ 264 million and $ 205 million for the three months ended June 30, 2021 and 2020, respectively, and $ 512 million and $ 410 million for the six months ended June 30, 2021 and 2020, respectively.

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 months ended March 31, 2021 and 2020.

There were no impairment losses recognized on deferred contract cost assets for the three and six months ended June 30, 2021 and 2020.

Index for Notes to the Condensed Consolidated Financial Statements

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The computation of basic and diluted earnings per share was as follows:

Three Months Ended March 31,

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

(in millions, except shares and per share amounts) 2021 2020 2021 2020

Income (loss) from continuing operations $ 978 $ ( 210 ) $ 1,911 $ 741

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

Net income $ 978 $ 110 $ 1,911 $ 1,061

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Weighted average shares outstanding - diluted 1,253,718,122 1,236,528,444 1,254,264,464 1,057,120,389

Basic earnings (loss) per share:

Continuing operations $ 0.78 $ ( 0.17 ) $ 1.53 $ 0.71

Discontinued operations — 0.26 — 0.30

Earnings per share - basic $ 0.78 $ 0.09 $ 1.53 $ 1.01

Diluted earnings (loss) per share:

Continuing operations $ 0.78 $ ( 0.17 ) $ 1.52 $ 0.70

Discontinued operations — 0.26 — 0.30

Earnings per share - diluted $ 0.78 $ 0.09 $ 1.52 $ 1.00

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SoftBank contingent consideration (1)

(1) Represents the weighted average SoftBank Specified Shares outstanding from January 1, 2021, through March 31, 2021.

No SoftBank Specified Shares were outstanding during the three months ended March 31, 2020.

As of March 31, 2021, 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 March 31, 2021 and 2020.

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 net loss for the period.

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.

48,751,557 48,751,557 48,751,557 24,375,778

(1) Represents the weighted average SoftBank Specified Shares that are contingently issuable from the acquisition date of April 1, 2020.

As of June 30, 2021, 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, 2021 and 2020.

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.

The SoftBank Specified Shares Amount of 48,751,557 shares of T-Mobile common stock was determined to be contingent consideration for the Merger and is not dilutive until the defined volume-weighted average price per share is reached.

Note 11 – Commitments and Contingencies

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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 2043.

Our purchase commitments are approximately $ 3.9 billion for the year ending March 31, 2022, $ 4.3 billion in total for the years ending March 31, 2023 and 2024, $ 2.2 billion in total for the years ending March 31, 2025 and 2026 and $ 1.6 billion in total for the years thereafter.

Our purchase commitments are approximately $ 3.9 billion for the year ending June 30, 2022, $ 4.5 billion in total for the years ending June 30, 2023 and 2024, $ 2.3 billion in total for the years ending June 30, 2025 and 2026 and $ 1.6 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.

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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 $ 340 million for the year ending March 31, 2022, $ 662 million in total for the years ending March 31, 2023 and 2024, $ 579 million in total for the years ending March 31, 2025 and 2026 and $ 5.0 billion in total for the years thereafter.

Index for Notes to the Condensed Consolidated Financial Statements

Our spectrum lease and service credit commitments, including renewal periods, are approximately $ 339 million for the year ending June 30, 2022, $ 624 million in total for the years ending June 30, 2023 and 2024, $ 582 million in total for the years ending June 30, 2025 and 2026 and $ 4.9 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 service commitment on March 31, 2021 was $ 91 million and is expected to be incurred over the term of the related lease agreements, which generally range from 15 to 30 years.

Index for Notes to the Condensed Consolidated Financial Statements

The maximum remaining service commitment on June 30, 2021 was $ 89 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

5 unchanged sentences

Failure to fulfill our obligations and commitments in a timely manner could result in substantial fines, penalties, or other legal and administrative actions.

We expect that our monetary commitments associated with these matters are approximately $ 24 million for the year ending March 31, 2022, $ 37 million in total for the years ending March 31, 2023 and 2024 and $ 11 million in total for the years ending March 31, 2025 and 2026.

We expect that our monetary commitments associated with these matters are approximately $ 9 million for the year ending June 30, 2022, $ 13 million in total for the years ending June 30, 2023 and 2024 and $ 3 million in total for the years ending June 30, 2025 and 2026.

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 our commitments or settlements.

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In the first quarter of 2020, we recorded an accrual for an estimated payment amount.

We maintained the accrual as of March 31, 2021, which was included in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets.

We maintained the accrual as of June 30, 2021, 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.

Those matters include a wide variety of disputes, claims, government agency investigations and enforcement actions, and other

Index for Notes to the Condensed Consolidated Financial Statements

These matters include, among other things, certain ongoing FCC and state government agency investigations into Sprint’s Lifeline program.

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Sprint has made a number of payments to reimburse the federal government and certain states for excess subsidy payments.

Resolution of these matters could require making additional reimbursements and paying additional fines and penalties.

Index for Notes to the Condensed Consolidated Financial Statements

We note that pursuant to Amendment No.

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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.

See Note 2 - Business Combinations for further information.

On June 4, 2021, a putative shareholder class action and derivative action was filed in the Delaware Court of Chancery, Dinkevich v.

Deutsche Telekom AG, et al.

2021-0479, against DT, SoftBank and certain of our current and former officers and directors, asserting breach of fiduciary duty claims relating to the repricing amendment to the Business Combination Agreement, and to SoftBank’s monetization of its T-Mobile shares.

We are also named as a nominal defendant in the case.

We are unable to predict the potential outcome of these claims.

We intend to vigorously defend this lawsuit.

Note 12 – Restructuring Costs

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 major activities associated with the restructuring initiatives to date include contract termination costs associated with the rationalization of retail stores, distribution channels, duplicative network and backhaul services and other agreements, severance costs associated with the integration of redundant processes and functions and the decommissioning of certain small cell sites and distributed antenna systems to achieve synergies in network costs.

The following table summarizes the expenses incurred in connection with our restructuring initiatives:

(in millions) Three Months Ended March 31, 2021 Plan to Date

(in millions) Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 Incurred to Date

Contract termination costs $ 3 $ 9 $ 187

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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 months ended March 31, 2020.

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 $ 123 million for the three months ended March 31, 2021 and are included within Costs of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.

No restructuring expenses were incurred related to the acceleration or termination of leases for the three months ended March 31, 2020.

Incremental expenses associated with accelerating amortization of the right-of-use assets on lease contracts were $ 261 million and $ 384 million for the three and six months ended June 30, 2021, respectively, and are included within Costs of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.

No restructuring expenses were incurred related to the acceleration or termination of leases for the three and six months ended June 30, 2020.

The changes in the liabilities associated with our restructuring initiatives, including expenses incurred and cash payments, are as follows:

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Total $ 163 $ 82 $ ( 147 ) $ ( 20 ) $ 78

Index for Notes to the Condensed Consolidated Financial Statements

(1) Non-cash items consists of non-cash stock-based compensation included within Severance costs and the write-off of assets within Network decommissioning.

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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.

Index for Notes to the Condensed Consolidated Financial Statements

Note 13 – Additional Financial Information

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Accounts payable and accrued liabilities are summarized as follows:

(in millions) March 31,

(in millions) June 30,

2021 December 31,

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Accounts payable and accrued liabilities $ 8,411 $ 10,196

Book overdrafts included in accounts payable and accrued liabilities were $ 285 million and $ 628 million as of March 31, 2021 and December 31, 2020, respectively.

Book overdrafts included in accounts payable and accrued liabilities were $ 281 million and $ 628 million as of June 30, 2021 and December 31, 2020, respectively.

Supplemental Consolidated Statements of Cash Flows Information

The following table summarizes T-Mobile’s supplemental cash flow information:

Three Months Ended March 31,

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

(in millions) 2021 2020 2021 2020

4 unchanged sentences

Non-cash beneficial interest obtained in exchange for securitized receivables 1,089 1,486 2,470 3,099

Non-cash consideration for the acquisition of Sprint — 33,533 — 33,533

Change in accounts payable and accrued liabilities for purchases of property and equipment ( 367 ) ( 38 ) ( 540 ) ( 339 )

1 unchanged sentence

Returned leased devices transferred from property and equipment to inventory ( 416 ) ( 538 ) ( 861 ) ( 597 )

Short-term debt assumed for financing of property and equipment — 38 — 38

Operating lease right-of-use assets obtained in exchange for lease obligations 1,043 658 1,954 1,213

Financing lease right-of-use assets obtained in exchange for lease obligations 377 515 486 693

Index for Notes to the Condensed Consolidated Financial Statements

Note 14 – Subsequent Events

Subsequent to June 30, 2021, on July 1, 2021, we closed on the acquisition of Shentel’s Wireless Assets pursuant to the Purchase Agreement dated May 28, 2021, and as a result, T-Mobile become the legal owner of the Wireless Assets.

Concurrently and as agreed to through the Purchase Agreement, T-Mobile and Shentel entered into certain separate transactions, including the effective settlement of the pre-existing arrangement between T-Mobile and Shentel under the Management Agreement.

See Note 2 – Business Combinations for further information.

Subsequent to June 30, 2021, on July 23, 2021, the FCC issued to us the licenses won in Auction 107.

See Note 5 – Goodwill, Spectrum License Transactions and Other Intangible Assets for further information.

Subsequent to June 30, 2021, on August 2, 2021, we delivered a notice of prepayment on the remaining aggregate principal amount of our 3.360 % Secured Series 2016-1 A-1 Notes due 2021.

The aggregate principal amount, plus accrued and unpaid interest, of approximately $ 220 million is expected to be paid on or around August 20, 2021.

See Note 7 - Debt for further information.

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