What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-04 · 338 added, 185 removed, 476 unchanged (52% of the section changed)

5 unchanged sentences

Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements.

The following important factors, along with the Risk Factors included in Part I, Item 1A of this Form 10-Q, could affect future results and cause those results to differ materially from those expressed in the forward-looking statements:

The following important factors, along with the Risk Factors included in Part II, Item 1A of this Form 10-Q, could affect future results and cause those results to differ materially from those expressed in the forward-looking statements:

• natural disasters, public health crises, including the COVID-19 pandemic (the “Pandemic”), terrorist attacks or similar incidents;

26 unchanged sentences

• the volatility of our stock price and our lack of plan to pay cash dividends in the foreseeable future;

• failure to realize the expected benefits and synergies of the merger (the “Merger”) with Sprint, pursuant to the Business Combination Agreement with Sprint and the other parties named therein (as amended, the “Business Combination Agreement”) and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”) in the expected timeframes or in the amounts anticipated;

• any delay and costs of, or difficulties in, integrating our business and Sprint’s business and operations, and unexpected additional operating costs, customer loss and business disruption, including maintaining relationships with employees, customers, suppliers or vendors;

• any delay and costs of, or difficulties in, integrating our business and Sprint’s business and operations, and unexpected additional operating costs, customer loss and business disruptions, including challenges in maintaining relationships with employees, customers, suppliers or vendors;

• unanticipated difficulties, disruption, or significant delays in our long-term strategy to migrate Sprint’s legacy customers onto T-Mobile’s existing billing platforms;

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In this Form 10-Q, unless the context indicates otherwise, references to “T-Mobile,” “our Company,” “the Company,” “we,” “our,” and “us” refer to T-Mobile US, Inc.

as a standalone company prior to April 1, 2020, the date we completed the Merger with Sprint, and on and after April 1, 2020, refer to the combined company as a result of the Merger.

as a stand-alone company prior to April 1, 2020, the date we completed the Merger with Sprint, and on and after April 1, 2020, refer to the combined company as a result of the Merger.

Investors and others should note that we announce material financial and operational information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts.

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We expect the trends and results of operations of the combined company to be materially different than those of the standalone entities.

Our MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements for the three months ended March 31, 2021, included in Part I, Item 1 of this Form 10-Q and audited consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.

Our MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021, included in Part I, Item 1 of this Form 10-Q and audited consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.

Except as expressly stated, the financial condition and results of operations discussed throughout our MD&A are those of T-Mobile US, Inc.

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We expect the trends and results of operations of the combined company to be materially different than those of the standalone entities.

As a combined company, we expect to be able to enhance the breadth and depth of our nationwide 5G network, accelerate innovation, increase competition in the U.S.

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

For more information regarding the Merger, see Note 2 – Business Combination of the Notes to the Condensed Consolidated Financial Statements.

As a combined company, we have been able to enhance the breadth and depth of our 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.

For more information regarding the Merger, see Note 2 – Business Combinations of the Notes to the Condensed Consolidated Financial Statements.

Merger-Related Costs

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• Transaction costs, including legal and professional services related to the completion of the Merger and acquisitions of affiliates.

Transaction and restructuring costs are disclosed in Note 2 – Business Combination and Note 1 2 - Restructuring Costs , respectively.

Transaction and restructuring costs are disclosed in Note 2 – Business Combinations and Note 12 - Restructuring Costs , respectively.

Merger-related costs have been excluded from our calculations of Adjusted EBITDA and Core Adjusted EBITDA, which are non-GAAP financial measures, as we do not consider these costs to be reflective of our ongoing operating performance.

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Cash payments for Merger-related costs, including payments related to our restructuring plan, are included in Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows.

Merger-related costs during the three months ended March 31, 2021 and 2020 are presented below:

(in millions) Three Months Ended March 31, Change

Merger-related costs during the three and six months ended June 30, 2021 and 2020, are presented below:

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

June 30, Change

2021 2020 $ % 2021 2020 $ %

Merger-related costs

Cost of services, exclusive of depreciation and amortization $ 136 $ — $ 136 NM

Cost of equipment sales 17 — 17 NM

Cost of services, exclusive of depreciation and amortization $ 273 $ 40 $ 233 583 % $ 409 $ 40 $ 369 923 %

Cost of equipment sales 87 — 87 NM 104 — 104 NM

Selling, general and administrative 251 758 (507) (67) % 396 901 (505) (56) %

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Merger-related costs will be impacted by restructuring and integration activities expected to occur over the next three years as we implement initiatives to realize cost efficiencies from the Merger.

Transaction costs, including legal and professional service fees related to the completion of the Merger and acquisitions of affiliates, are expected to decrease in periods subsequent to the close of the Merger.

Transaction costs, including legal and professional service

fees related to the completion of the Merger and acquisitions of affiliates, are expected to continue to decrease in periods subsequent to the close of the Merger.

Restructuring

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We expect these activities to result in a reduction of expenses within Cost of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.

For more information regarding our restructuring activities, see Note 1 2 – Restructuring Costs of the Notes to the Condensed Consolidated Financial Statements.

COVID-19 Pandemic

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In addition, the Pandemic has resulted in economic uncertainty and a significant increase in unemployment in the United States, which could affect our customers’ purchasing decisions and ability to make timely payments.

Throughout this past year, the Pandemic has peaked, subsided and seen a resurgence, leading to phased re-openings, as well as continuing or renewed containment measures.

The introduction and expanding availability of vaccines, as well as our continued social distancing measures and incremental cleaning efforts, have facilitated the continued operation of our retail stores.

Beginning in the first quarter of 2020, the Pandemic has peaked, subsided and seen a resurgence, leading to phased re-openings, as well as continuing or renewed containment measures.

The availability of vaccines, as well as our continued social distancing measures and incremental cleaning efforts, have facilitated the continued operation of our retail stores, after certain closures during 2020.

We will continue to monitor the Pandemic and its impacts and may adjust our actions as needed to continue to provide our products and services to our communities and employees.

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Set forth below is a summary of our consolidated financial results:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in millions) 2021 2020 $ % 2021 2020 $ %

2 unchanged sentences

Wholesale revenues 935 408 527 129 % 1,832 733 1,099 150 %

Roaming and other service revenues 641 261 380 146 %

Other service revenues 638 552 86 16 % 1,279 813 466 57 %

Total service revenues 14,492 13,230 1,262 10 % 28,684 22,076 6,608 30 %

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Selling, general and administrative 4,823 5,604 (781) (14) % 9,628 9,292 336 4 %

Impairment expense — 418 (418) (100) % — 418 (418) (100) %

Depreciation and amortization 4,077 4,064 13 — % 8,366 5,782 2,584 45 %

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Interest income 2 6 (4) (67) % 5 18 (13) (72) %

Other expense, net (125) (10) (115) NM

Other expense, net (1) (195) 194 (99) % (126) (205) 79 (39) %

Total other expense, net (851) (1,028) 177 (17) % (1,811) (1,310) (501) 38 %

Income before income taxes 1,179 1,257 (78) (6) %

Income tax expense (246) (306) 60 (20) %

Income (loss) from continuing operations before income taxes 1,255 (208) 1,463 (703) % 2,434 1,049 1,385 132 %

Income tax expense (277) (2) (275) NM (523) (308) (215) 70 %

Income (loss) from continuing operations 978 (210) 1,188 (566) % 1,911 741 1,170 158 %

Income from discontinued operations, net of tax — 320 (320) (100) % — 320 (320) (100) %

Net income $ 978 $ 110 $ 868 789 % $ 1,911 $ 1,061 $ 850 80 %

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Net cash used in investing activities (2,083) (6,356) 4,273 (67) % (13,322) (7,936) (5,386) 68 %

Net cash provided by (used in) financing activities 3,874 (453) 4,327 NM

Net cash (used in) provided by financing activities (577) 15,628 (16,205) (104) % 3,297 15,175 (11,878) (78) %

Non-GAAP Financial Measures

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Core Adjusted EBITDA 5,992 5,596 396 7 % 11,856 9,096 2,760 30 %

Free Cash Flow 1,304 732 572 78 %

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps 1,671 1,441 230 16 % 2,975 2,173 802 37 %

NM - Not Meaningful

The following discussion and analysis is for the three months ended March 31, 2021, compared to the same period in 2020 unless otherwise stated.

Total revenues increased $8.6 billion, or 78%.

The components of this change are discussed below.

Postpaid revenues increased $4.4 billion, or 75%, primarily from:

• Higher average postpaid phone customers, primarily from customers acquired in the Merger and the success of new customer segments and rate plans, as well as continued growth in existing and new markets, along with promotional activities;

• Higher average postpaid other customers, primarily from customers acquired in the Merger and growth in other connected devices, primarily related to public and educational sector customers;

• Higher postpaid phone ARPU, primarily as a result of customers acquired in the Merger.

See “Postpaid Phone ARPU” in the “ Performance Measures ” section of this MD&A.

Prepaid revenues were essentially flat.

Wholesale revenues increased $572 million, or 176%, primarily from:

• Our Master Network Service Agreement with DISH, which went into effect on July 1, 2020;

• Customers acquired in the Merger.

Roaming and other service revenues increased $380 million, or 146%, primarily from:

The following discussion and analysis is for the three and six months ended June 30, 2021, compared to the same period in 2020 unless otherwise stated.

Total revenues increased $2.3 billion, or 13%, for the three months ended and increased $10.9 billion, or 38%, for the six months ended June 30, 2021.

The components of these changes are discussed below.

Postpaid revenues increased $533 million, or 5%, for the three months ended and increased $4.9 billion, or 31%, for the six months ended June 30, 2021.

The increase for the three and six months ended June 30, 2021, was primarily from:

• Higher average postpaid accounts;

• Higher postpaid ARPA.

See “Postpaid ARPA” in the “ Performance Measures ” section of this MD&A.

Prepaid revenues increased $116 million, or 5%, for the three months ended and increased $94 million, or 2%, for the six months ended June 30, 2021, primarily from:

• Higher average prepaid customers;

• Higher prepaid ARPU.

See “Prepaid ARPU” in the “ Performance Measures ” section of this MD&A.

Wholesale revenues increased $527 million, or 129%, for the three months ended and increased $1.1 billion, or 150%, for the six months ended June 30, 2021, primarily from our Master Network Service Agreement with DISH, which went into effect on July 1, 2020, and the success of our other MVNO relationships.

Other service revenues increased $86 million, or 16%, for the three months ended and increased $466 million, or 57%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from higher advertising, roaming and Lifeline revenues.

The increase for the six months ended June 30, 2021, was primarily from:

• Inclusion of wireline operations acquired in the Merger;

• Higher Lifeline, advertising and affiliate revenues, primarily due to operations acquired in the Merger;

• Higher Lifeline revenues, primarily due to operations acquired in the Merger;

• Higher advertising revenues.

Equipment revenues increased $946 million, or 22%, for the three months ended and increased $4.2 billion, or 65%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from:

• An increase of $1.2 billion in device sales revenue, excluding purchased leased devices, primarily from:

• An increase in the number of devices sold due to increased retail store traffic due to closures arising from the Pandemic in the prior period;

• Higher average revenue per device sold due to an increase in the high-end device mix;

• An increase of $150 million in sales of accessories, due to increased retail store traffic due to closures arising from the Pandemic in the prior period;

• An increase of $97 million in liquidation revenues primarily due to a higher volume of returned devices;

partially offset by

• Lower domestic roaming due to revenue generated from Sprint customers roaming on the T-Mobile network in periods before the Merger.

Equipment revenues increased $3.2 billion, or 153%, primarily from:

• A decrease of $507 million in lease revenues due to a lower number of customer devices under lease due to the continued planned shift in device financing from leasing to EIP.

The increase for the six months ended June 30, 2021, was primarily from:

• An increase of $2.9 billion in device sales revenue, excluding purchased leased devices, primarily from:

• An increase in the number of devices sold, excluding purchased leased devices, due to an increase in our customer base primarily due to the Merger;

• Higher average revenue per device sold, excluding purchased leased devices, due to an increase in the high-end device mix primarily driven by a larger postpaid customer base as a result of the Merger;

• An increase in the number of devices sold due to increased retail store traffic due to closures arising from the Pandemic in the prior period and a larger customer base as a result of the Merger;

• Higher average revenue per device sold due to an increase in the high-end device mix;

• An increase of $369 million in lease revenues due to a higher number of customer devices under lease, primarily from leases acquired in the Merger;

• An increase of $325 million in liquidation revenues primarily due to a higher volume of returned devices;

• An increase of $291 million in sales of accessories, due to increased retail store traffic due to closures arising from the Pandemic in the prior period and a larger customer base as a result of the Merger;

• An increase of $227 million in sales of leased devices, primarily due to a larger base of leased devices as a result of the Merger.

• An increase of $227 million in revenues primarily related to the liquidation of a higher volume of returned devices primarily as a result of the Merger.

Other revenues increased $71 million, or 47%, primarily from higher interest income on our EIP receivables.

Operating expenses increased $8.0 billion, or 84%.

Other revenues increased $71 million, or 41%, for the three months ended and increased $142 million, or 44%, for the six months ended June 30, 2021, primarily from:

• Higher interest income on our EIP receivables;

• Higher revenue from our device recovery program.

Operating expenses increased $993 million, or 6%, for the three months ended and increased $9.0 billion, or 34%, for the six months ended June 30, 2021.

The components of this change are discussed below.

Cost of services , exclusive of depreciation and amortization, increased $1.7 billion, or 106%, primarily from:

• An increase in expenses associated with leases, backhaul agreements and other network expenses acquired in the

Merger and the continued build-out of our nationwide 5G network;

Cost of services , exclusive of depreciation and amortization, increased $393 million, or 13%, for the three months ended and increased $2.1 billion, or 45%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from:

• An increase of $233 million in Merger-related costs including incremental costs associated with network decommissioning and integration;

• An increase in site costs related to network integration and the continued build-out of our nationwide 5G network.

The increase for the six months ended June 30, 2021, was primarily from:

• An increase in expenses associated with leases and backhaul agreements acquired in the Merger and the continued build-out of our nationwide 5G network;

• An increase of $369 million in Merger-related costs including incremental costs associated with network decommissioning and integration;

• Higher employee-related and benefit-related costs primarily due to increased headcount as a result of the Merger.

• An increase of $136 million for the three months ended March 31, 2021, in Merger-related costs including incremental costs associated with network decommissioning and integration;

• An increase in repair and maintenance costs, primarily due to the Merger and severe weather occurring during the three months ended March 31, 2021.

Cost of equipment sales , exclusive of depreciation and amortization, increased $2.6 billion, or 103%, primarily from:

Cost of equipment sales , exclusive of depreciation and amortization, increased $1.8 billion, or 49%, for the three months ended and increased $4.4 billion, or 71%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from:

• An increase of $1.7 billion in device cost of equipment sales, excluding purchased leased devices, primarily from:

• An increase in the number of devices sold, excluding purchased leased devices, due to an increase in our customer base primarily due to the Merger;

• Higher average costs per device sold, excluding purchased leased devices, due to an increase in the high-end device mix primarily driven by a larger postpaid customer base as a result of the Merger;

• An increase in the number of devices sold due to increased retail store traffic due to closures arising from the Pandemic in the prior period;

• Higher average costs per device sold due to an increase in the high-end device mix;

• An increase in cost of accessories, due to increased retail store traffic due to closures arising from the Pandemic in the prior period.

The increase for the six months ended June 30, 2021, was primarily from:

• An increase of $3.8 billion in device cost of equipment sales, excluding purchased leased devices, primarily from:

• An increase in the number of devices sold due to increased retail store traffic due to closures arising from the Pandemic in the prior period and a larger customer base as a result of the Merger;

• Higher average costs per device sold due to an increase in the high-end device mix;

• An increase of $196 million in costs related to the liquidation of a higher volume of returned devices primarily driven by a larger customer base as a result of the Merger;

• An increase of $196 million in leased device cost of equipment sales, primarily due to a larger base of leased devices as a result of the Merger;

• An increase of $159 million in costs related to the liquidation of a higher volume of returned devices primarily as a result of the Merger.

Selling, general and administrative expenses increased $1.1 billion, or 30%, primarily from:

• Higher external labor and professional services, advertising and lease expense from the Merger;

• An increase of $129 million in cost of accessories, due to increased retail store traffic due to closures arising from the Pandemic in the prior period and a larger customer base as a result of the Merger.

Selling, general and administrative expenses decreased $781 million, or 14%, for the three months ended and increased $336 million, or 4%, for the six months ended June 30, 2021.

The decrease for the three months ended June 30, 2021, was primarily from:

• Merger-related costs of $251 million primarily related to integration and restructuring, compared to $758 million of Merger-related costs in the three months ended June 30, 2020;

• Lower bad debt expense;

partially offset by

• Higher employee-related costs due to increased staffing and distribution to support growth initiatives.

• Selling, general and administrative expenses for the three months ended June 30, 2020 included $341 million of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs.

There were insignificant COVID-19 costs for the three months ended June 30, 2021.

The increase for the six months ended June 30, 2021, was primarily from:

• Higher advertising, external labor and professional services and lease expense;

• Higher employee-related costs due to an increase in the number of employees primarily from the Merger;

• Higher commission expense, primarily due to higher gross customer additions;

partially offset by

• Lower bad debt expense.

• Selling, general and administrative expenses for the three months ended March 31, 2020 included $117 million of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs.

There were insignificant COVID-19 costs for the three months ended March 31, 2021.

• Merger-related costs of $145 million, including transaction costs associated with legal and professional service and restructuring costs including severance and store rationalization, in the three months ended March 31, 2021, compared to $143 million of Merger-related costs in the three months ended March 31, 2020.

Depreciation and amortization increased $2.6 billion, or 150%, primarily as a result of the Merger, including:

• Higher depreciation expense from assets acquired in the Merger, excluding leased devices, and expansion from the continued build-out of our nationwide 5G network;

• Merger-related costs of $396 million primarily related to integration and restructuring, compared to $901 million of Merger-related costs in the six months ended June 30, 2020.

• Selling, general and administrative expenses for the six months ended June 30, 2020 included $458 million of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs.

There were insignificant COVID-19 costs for the six months ended June 30, 2021.

Depreciation and amortization was essentially flat for the three months ended and increased $2.6 billion, or 45%, for the six months ended June 30, 2021.

Depreciation and amortization was essentially flat for the three months ended June 30, 2021, and was primarily impacted by:

• Higher depreciation expense, excluding leased devices, due to network expansion from the continued build-out of our nationwide 5G network;

mostly offset by

• Lower depreciation expense on leased devices resulting from a lower number of total customer devices under lease;

• Lower amortization of customer relationship intangibles;

• Certain 4G-related network assets becoming fully depreciated.

The increase for the six months ended June 30, 2021, was primarily from:

• Higher depreciation expense, excluding leased devices, due to network expansion from the continued build-out of our

nationwide 5G network;

• Higher depreciation expense on leased devices resulting from a larger base of leased devices as a result of the Merger;

• Higher amortization from intangible assets acquired in the Merger;

Operating income , the components of which are discussed above, increased $600 million, or 39%.

Interest expense increased $607 million, or 328%, primarily from:

• The assumption of debt with a fair value of $31.8 billion in connection with the Merger;

• The issuance of an aggregate principal amount of $31.8 billion of Senior Secured Notes in 2020;

• Amortization of interest rate swap derivatives beginning upon settlement in April 2020;

• The issuance of an aggregate principal amount of $3.0 billion of Senior Notes in January 2021;

partially offset by

• The repayment of an aggregate principal amount of $4.2 billion of Senior Notes in 2020.

Interest expense to affiliates decreased $53 million, or 54%, primarily from the redemption of an aggregate principal amount of $5.25 billion of Senior Notes to affiliates and the repayment of an aggregate principal amount of $4.0 billion in Incremental term loan facility to affiliates in 2020, partially offset by lower capitalized interest.

Other expense, net increased $115 million, primarily from losses on the extinguishment of debt.

Income before income taxes , the components of which are discussed above, decreased $78 million, or 6%.

Income tax expense decreased $60 million, or 20%, primarily from:

• An increase in excess tax benefits related to the vesting of restricted stock awards and lower income before taxes for the three months ended March 31, 2021, compared to the three months ended March 31, 2020.

• The effective tax rate was 20.9% and 24.4% for the three months ended March 31, 2021 and 2020, respectively.

Net income , the components of which are discussed above, decreased $18 million, or 2%, and included the following:

• Merger-related costs, net of tax, of $220 million for the three months ended March 31, 2021, compared to $117 million for the three months ended March 31, 2020.

• The negative impact of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs, net of tax, of $86 million for the three months ended March 31, 2020, compared to no impact for the three months ended March 31, 2021.

• Certain 4G-related network assets becoming fully depreciated.

Operating income , the components of which are discussed above, increased $1.3 billion, or 157%, for the three months ended and increased $1.9 billion, or 80%, for the six months ended June 30, 2021.

Interest expense increased $44 million, or 6%, for the three months ended and increased $651 million, or 68%, for the six months ended June 30, 2021, primarily due to higher average debt outstanding, partially offset by lower interest rates.

Interest expense to affiliates decreased $31 million, or 49%, for the three months ended and decreased $84 million, or 52%, for the six months ended June 30, 2021, primarily from the redemption of an aggregate principal amount of $5.25 billion of Senior Notes to affiliates in 2020.

Other expense, net decreased $194 million, or 99%, for the three months ended and decreased $79 million, or 39%, for the six months ended June 30, 2021, primarily from lower losses on the extinguishment of debt.

Income (loss) from continuing operations before income taxes , the components of which are discussed above, was income of $1.3 billion and a loss of $208 million for the three months ended June 30, 2021 and 2020, respectively, and was income of $2.4 billion and $1.0 billion for the six months ended June 30, 2021 and 2020, respectively.

Income tax expense increased $275 million for the three months ended and increased $215 million, or 70%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from:

• Higher income from continuing operations before income taxes;

partially offset by

• A reduction in expenses that were not deductible for tax purposes including our Layer3 goodwill impairment and certain merger-related costs in the prior year.

The effective tax rate was 22.0% and (0.7)% for the three months ended June 30, 2021 and 2020, respectively.

The increase for the six months ended June 30, 2021, was primarily from:

• Higher income from continuing operations before income taxes;

partially offset by

• A reduction in expenses that were not deductible for tax purposes including our Layer3 goodwill impairment and certain merger-related costs in the prior year and an increase in excess tax benefits on stock compensation in the current year.

The effective tax rate was 21.5% and 29.4% for the six months ended June 30, 2021 and 2020, respectively.

Income (loss) from continuing operations was income of $978 million and a loss of $210 million for the three months ended June 30, 2021 and 2020, respectively, and was income of $1.9 billion and income of $741 million for the six months ended June 30, 2021 and 2020, respectively.

The increase for the three months ended June 30, 2021, was primarily from:

• Higher Operating income;

• Lower Other expense, net;

partially offset by

• Higher Income tax expense.

The increase for the six months ended June 30, 2021, was primarily from:

• Higher Operating income;

• Lower Other expense, net;

partially offset by

• Higher Interest expense;

• Higher Income tax expense.

Income from discontinued operations, net of tax, was $320 million for the three and six months ended June 30, 2020, and consisted of the results of the Prepaid Business that was divested on July 1, 2020.

There were no discontinued operations for the three and six months ended June 30, 2021.

Net income , the components of which are discussed above, increased $868 million, or 789%, for the three months ended and increased $850 million, or 80%, for the six months ended June 30, 2021.

Net income for the three months ended June 30, 2021, included the following:

• Merger-related costs, net of tax, of $453 million for the three months ended June 30, 2021, compared to $635 million for the three months ended June 30, 2020.

• Impairment expense of $366 million, net of tax, for the three months ended June 30, 2020, compared to no impairment expense for the three months ended June 30, 2021.

• The negative impact of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs, net of tax, of $253 million for the three months ended June 30, 2020, compared to no impact for the three months ended June 30, 2021.

Net income for the six months ended June 30, 2021, included the following:

• Merger-related costs, net of tax, of $673 million for the six months ended June 30, 2021, compared to $752 million for the six months ended June 30, 2020.

• Impairment expense of $366 million, net of tax, for the six months ended June 30, 2020, compared to no impairment expense for the six months ended June 30, 2021.

• The negative impact of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs, net of tax, of $339 million for the six months ended June 30, 2020, compared to no impact for the six months ended June 30, 2021.

Guarantor Financial Information

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The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

The indentures, supplemental indentures and credit agreements governing the long-term debt contain covenants that, among other things, limit the ability of the Issuers or borrowers and the Guarantor Subsidiaries to incur more debt, pay dividends and make distributions, make certain investments, repurchase stock, create liens or other encumbrances, enter into transactions with affiliates, enter into transactions that restrict dividends or distributions from subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets.

debt, pay dividends and make distributions, make certain investments, repurchase stock, create liens or other encumbrances, enter into transactions with affiliates, enter into transactions that restrict dividends or distributions from subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets.

Certain provisions of each of the credit agreements, indentures and supplemental indentures relating to the long-term debt restrict the ability of the Issuers or borrowers to loan funds or make payments to Parent.

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is presented in the table below:

(in millions) March 31, 2021 December 31, 2020

(in millions) June 30, 2021 December 31, 2020

Current assets $ 19,176 $ 22,638

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is presented in the table below:

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Year Ended December 31, 2020

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is presented in the table below:

(in millions) March 31, 2021 December 31, 2020

(in millions) June 30, 2021 December 31, 2020

Current assets $ 652 $ 2,646

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The summarized results of operations information for the consolidated obligor group of debt issued by Sprint and Sprint Communications, Inc., since the acquisition of Sprint on April 1, 2020, is presented in the table below:

Three Months Ended March 31, 2021 Nine Months Ended December 31, 2020

Six Months Ended June 30, 2021 Nine Months Ended December 31, 2020

(in millions)

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The summarized balance sheet information for the consolidated obligor group of debt issued by Sprint Capital Corporation is presented in the table below:

(in millions) March 31, 2021 December 31, 2020

(in millions) June 30, 2021 December 31, 2020

Current assets $ 652 $ 2,646

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The summarized results of operations information for the consolidated obligor group of debt issued by Sprint Capital Corporation, since the acquisition of Sprint on April 1, 2020, is presented in the table below:

Three Months Ended March 31, 2021 Nine Months Ended December 31, 2020

Six Months Ended June 30, 2021 Nine Months Ended December 31, 2020

(in millions)

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The performance measures presented below include the impact of the Merger on a prospective basis from the close date of April 1, 2020.

Historical results were not restated.

Historical results prior to April 1, 2020 have not been retroactively adjusted.

A customer is generally defined as a SIM number with a unique T-Mobile identifier which is associated with an account that generates revenue.

1 unchanged sentence

The following table sets forth the number of ending customers:

As of March 31, 2021 Change

As of June 30, Change

(in thousands) 2021 2020 # %

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Acquired customers, net of base adjustments (2)

12 29,228 (29,216) NM

NM - Not Meaningful

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Total customers increased 6,462,000, or 7%, primarily from:

• Higher postpaid phone customers, primarily due to customers acquired in the Merger and the success of new customer segments and rate plans and continued growth in existing and new markets, along with ongoing promotional activities;

• Higher postpaid other customers, primarily due to customers acquired in the Merger and growth in other connected devices, primarily related to public and educational sector customers and wearable products;

• Higher prepaid customers, primarily due to the continued success of our prepaid business due to ongoing promotional activities and rate plan offers, partially offset by customer base adjustments made to align the customer reporting policies of T-Mobile and Sprint.

• Higher postpaid other customers, primarily due to growth in other connected devices, primarily related to public and educational sector customers and wearable products;

• Higher postpaid phone customers, primarily due to the success of new customer segments and rate plans and continued growth in existing and new markets, along with promotional activity and increased retail store traffic due to closures arising from the Pandemic in the prior period;

• Higher prepaid customers, primarily due to the continued success of our prepaid business due to promotional activity and rate plan offers.

Customer Base Adjustments

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(7) Miscellaneous insignificant adjustments to align with T-Mobile policy.

Net Customer Additions (Losses)

The following table sets forth the number of net customer additions (losses):

Three Months Ended March 31, Change

Net Customer Additions

The following table sets forth the number of net customer additions:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2021 2020 # % 2021 2020 # %

5 unchanged sentences

Total customers 1,352 1,245 107 9 % 2,713 1,894 819 43 %

Acquired customers, net of base adjustments — 29,228 (29,228) (100) % 12 29,228 (29,216) (100) %

NM - Not Meaningful

Total net customer additions increased 712,000, or 110%, primarily from:

• Higher postpaid phone net customer additions, primarily due to expanded retail presence as a result of the Merger and increased retail store traffic due to closures arising from the Pandemic in the prior period, as well as increased growth from T-Mobile for Business, partially offset by higher churn from customers acquired in the Merger;

Total net customer additions increased 107,000, or 9%, for the three months ended and increased 819,000, or 43%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from:

• Higher postpaid phone net customer additions, primarily due to increased retail store traffic due to closures arising from the Pandemic in the prior period, as well as increased growth from T-Mobile for Business, partially offset by higher churn;

partially offset by

• Lower postpaid other net customer additions, primarily due to elevated gross additions in the prior period related to the public and educational sector resulting from the Pandemic;

• Lower prepaid net customer additions, primarily driven by higher migrations to postpaid plans, partially offset by lower churn.

The increase for the six months ended June 30, 2021, was primarily from:

• Higher postpaid phone net customer additions, primarily due to increased retail store traffic due to closures arising from the Pandemic in the prior period, partially offset by higher churn;

• Higher prepaid net customer additions, primarily due to lower churn;

• Higher postpaid other net customer additions, primarily due to expanded retail presence as a result of the Merger, higher gross additions from connected devices, and increased retail store traffic due to closures arising from the Pandemic in the prior period and lower churn.

partially offset by

• Lower postpaid other net customer additions, primarily due to higher disconnect volumes from an increased customer base.

Churn represents the number of customers whose service was disconnected as a percentage of the average number of customers during the specified period further divided by the number of months in the period.

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The following table sets forth the churn:

Three Months Ended March 31, Change

Postpaid phone churn 0.98 % 0.86 % 12 bps

Prepaid churn 2.78 % 3.52 % -74 bps

Postpaid phone churn increased 12 basis points, primarily due to the inclusion of the customer base acquired in the Merger with higher churn.

Prepaid churn decreased 74 basis points, primarily due to lower switching activity and improved quality of recently acquired customers.

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

2021 2020 2021 2020

Postpaid phone churn 0.87 % 0.80 % 7 bps 0.92 % 0.82 % 10 bps

Prepaid churn 2.62 % 2.81 % -19 bps 2.70 % 3.17 % -47 bps

Postpaid phone churn increased 7 basis points for the three months ended and increased 10 basis points for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from:

• More normal switching activity relative to the muted Pandemic-driven conditions a year ago;

partially offset by

• Better customer payment performance.

The increase for the six months ended June 30, 2021, was primarily from:

• More normal switching activity relative to the muted Pandemic-driven conditions a year ago;

• Higher churn from customers acquired in the Merger;

partially offset by

• Better customer payment performance.

Prepaid churn decreased 19 basis points for the three months ended and decreased 47 basis points for the six months ended June 30, 2021.

The decrease for the three months ended June 30, 2021, was primarily from:

• Improved quality of recently acquired customers;

• Continued network improvement.

The decrease for the six months ended June 30, 2021, was primarily from:

• The impact of stimulus programs and accelerated tax refund timing;

• Improved quality of recently acquired customers;

• Promotional activity.

Total Postpaid Accounts

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Postpaid accounts are generally comprised of customers that are qualified for postpaid service utilizing phones, home internet, wearables, DIGITS or other connected devices which include tablets and SyncUp products, where they generally pay after receiving service.

As of March 31, 2021 Change

As of June 30, 2021 Change

(in thousands) 2021 2020 # %

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See Account Base Adjustments table below.

Total postpaid customer accounts increased 10,770,000, or 71%, primarily due to 10,150,000 accounts acquired in the Merger, the success of new customer segments and rate plans, continued growth in existing and new markets, including our home internet product, along with ongoing promotional activities.

Total postpaid customer accounts increased 877,000, or 3%, primarily due to the success of new customer segments and rate plans, continued growth in existing and new markets, including our home internet product, along with promotional activity and increased retail store traffic due to closures arising from the Pandemic in the prior period.

Account Base Adjustments

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The following table illustrates the calculation of our operating measure ARPU and reconciles this measure to the related service revenues:

(in millions, except average number of customers and ARPU) Three Months Ended March 31, Change

(in millions, except average number of customers and ARPU) Three Months Ended June 30, Change Six Months Ended

June 30, Change

2021 2020 $ % 2021 2020 $ %

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Postpaid Phone ARPU

Postpaid phone ARPU increased $1.50, or 3%, primarily due to:

Postpaid phone ARPU decreased $0.38, or 1%, for the three months ended and increased $0.30, or 1%, for the six months ended June 30, 2021.

The decrease for the three months ended June 30, 2021, was primarily from:

• Promotional activity, including an increase in customers per account;

• The impact of Sprint rate plan migrations;

partially offset by

• Higher premium services, including Magenta MAX.

The increase for the six months ended June 30, 2021, was primarily from:

• The net impact of customers acquired in the Merger, which have higher ARPU (net of changes arising from the reduction in base due to policy adjustments and reclassification of certain ARPU components from the acquired customers being moved to other revenue lines);

• Higher premium service revenues;

• Higher premium services, including Magenta MAX;

partially offset by

• Ongoing promotional activity.

Prepaid ARPU decreased $0.30, or 1%, primarily due to ongoing promotional activity.

• Promotional activity, including an increase in customers per account.

Prepaid ARPU increased $0.73, or 2%, for the three months ended and increased $0.22, or 1%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from:

• Higher revenues due to improved rate plan mix;

• Higher premium services;

partially offset by

• A reduction in certain non-recurring charges.

The increase for the six months ended June 30, 2021, was primarily from:

• The impacts of certain adjustments to our customer base in April 2020;

• Higher premium services;

partially offset by

• A reduction in certain non-recurring charges.

Average Revenue Per Account

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The following table illustrates the calculation of our operating measure ARPA and reconciles this measure to the related service revenues:

(in millions, except average number of accounts, ARPA) Three Months Ended March 31, Change

(in millions, except average number of accounts, ARPA) Three Months Ended June 30, Change Six Months Ended

June 30, Change

2021 2020 $ % 2021 2020 $ %

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Postpaid ARPA

Postpaid ARPA increased $3.44, or 3%, primarily due to:

• An increase in customers per account, including further penetration in connected devices;

• Higher premium service revenues;

• The net impact of customers acquired in the Merger;

Postpaid ARPA increased $2.98, or 2%, for the three months ended and increased $3.07, or 2%, for the six months ended June 30, 2021, primarily due to:

• An increase in customers per account;

• Higher premium services, including Magenta MAX;

partially offset by

• Ongoing promotional activity.

• Promotional activity.

Adjusted EBITDA and Core Adjusted EBITDA

Beginning in the first quarter of 2021, we are disclosing Core Adjusted EBITDA as a financial measure to improve comparability as we de-emphasize device leasing programs as part of our value proposition.

Beginning in the first quarter of 2021, we began disclosing Core Adjusted EBITDA as a financial measure to improve comparability as we de-emphasize device leasing programs as part of our value proposition.

Adjusted EBITDA represents earnings before Interest expense, net of Interest income, Income tax expense, Depreciation and amortization, stock-based compensation and certain income and expenses not reflective of our ongoing operating performance.

Core Adjusted EBITDA represents Adjusted EBITDA less device lease revenues.

Net income margin represents Net income divided by Service revenues.

Adjusted EBITDA margin represents Adjusted EBITDA divided by Service revenues.

Core Adjusted EBITDA margin represents Core Adjusted EBITDA divided by Service revenues.

Adjusted EBITDA and Core Adjusted EBITDA are non-GAAP financial measures utilized by our management to monitor the financial performance of our operations.

Adjusted EBITDA, Adjusted EBITDA margin, Core Adjusted EBITDA and Core Adjusted EBITDA margin are non-GAAP financial measures utilized by our management to monitor the financial performance of our operations.

We use Adjusted EBITDA internally as a measure to evaluate and compensate our personnel and management for their performance.

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Management believes analysts and investors use Core Adjusted EBITDA because it normalizes for the transition in the Company’s device financing strategy, by excluding the impact of device lease revenues from Adjusted EBITDA, to align with the exclusion of the related depreciation expense on leased devices from Adjusted EBITDA.

Adjusted EBITDA and Core Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as substitutes for income from operations, net income or any other measure of financial performance reported in accordance with U.S.

Adjusted EBITDA, Adjusted EBITDA margin, Core Adjusted EBITDA and Core Adjusted EBITDA margin have limitations as analytical tools and should not be considered in isolation or as substitutes for income from operations, net income or any other measure of financial performance reported in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”).

The following table illustrates the calculation of Adjusted EBITDA and Core Adjusted EBITDA and reconciles Adjusted EBITDA and Core Adjusted EBITDA to Net income, which we consider to be the most directly comparable GAAP financial measure:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in millions) 2021 2020 $ % 2021 2020 $ %

Net income $ 978 $ 110 $ 868 789 % $ 1,911 $ 1,061 $ 850 80 %

Income from discontinued operations, net of tax — (320) 320 (100) % — (320) 320 (100) %

Income from continuing operations 978 (210) 1,188 (566) % 1,911 741 1,170 158 %

Interest expense 820 776 44 6 % 1,612 961 651 68 %

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Interest income (2) (6) 4 (67) % (5) (18) 13 (72) %

Other expense, net 125 10 115 NM

Income tax expense 246 306 (60) (20) %

Other expense, net 1 195 (194) (99) % 126 205 (79) (39) %

Income tax expense 277 2 275 NM 523 308 215 70 %

Operating income 2,106 820 1,286 157 % 4,245 2,359 1,886 80 %

Depreciation and amortization 4,077 4,064 13 — % 8,366 5,782 2,584 45 %

Operating income from discontinued operations (1)

— 432 (432) (100) % — 432 (432) (100) %

Stock-based compensation (1)

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COVID-19-related costs — 341 (341) (100) % — 458 (458) (100) %

Impairment expense — 418 (418) (100) % — 418 (418) (100) %

Other, net (2)

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$ 5,992 $ 5,596 $ 396 7 % $ 11,856 $ 9,096 $ 2,760 30 %

Net income margin (Net income divided by Service revenues) 7 % 11 % -400 bps

Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues) 49 % 41 % 800 bps

Net income margin (Net income divided by Service revenues) 7 % 1 % 600 bps 7 % 5 % 200 bps

Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues) 48 % 53 % -500 bps 48 % 48 % — bps

Core Adjusted EBITDA margin (Core Adjusted EBITDA divided by Service revenues)

41 % 40 % 100 bps

41 % 42 % -100 bps 41 % 41 % — bps

NM - Not Meaningful

(1) Stock-based compensation includes payroll tax impacts and may not agree to stock-based compensation expense in the condensed consolidated financial statements.

(1) Stock-based compensation includes payroll tax impacts and may not agree with stock-based compensation expense in the condensed consolidated financial statements.

Additionally, certain stock-based compensation expenses associated with the Transactions have been included in Merger-related costs.

(2) Other, net may not agree to the Condensed Consolidated Statements of Comprehensive Income primarily due to certain non-routine operating activities, such as other special items that would not be expected to reoccur or are not reflective of T-Mobile’s ongoing operating performance, and are therefore excluded in Adjusted EBITDA and Core Adjusted EBITDA.

Adjusted EBITDA increased $3.2 billion or 88%.

The components comprising Adjusted EBITDA are discussed further above.

The increase was primarily due to:

(2) Other, net may not agree with the Condensed Consolidated Statements of Comprehensive Income primarily due to certain non-routine operating activities, such as other special items that would not be expected to reoccur or are not reflective of T-Mobile’s ongoing operating performance, and are therefore excluded from Adjusted EBITDA and Core Adjusted EBITDA.

Core Adjusted EBITDA increased $396 million, or 7%, for the three months ended and increased $2.8 billion, or 30%, for the six months ended June 30, 2021.

The components comprising Core Adjusted EBITDA are discussed further above.

The increase for the three months ended June 30, 2021 was primarily due to:

• Higher Equipment revenues, excluding Lease revenues;

• Higher Total service revenues;

• Higher Equipment revenues, including an increase in lease revenues of $876 million;

• Lower Selling, general and administrative expenses, excluding Merger-related costs and supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs;

partially offset by

• Higher Cost of equipment sales, excluding Merger-related costs;

• Higher Cost of services, excluding Merger-related costs.

The increase for the six months ended June 30, 2021, was primarily due to:

• Higher Total service revenues;

• Higher Equipment revenues, excluding Lease revenues;

partially offset by

• Higher Cost of equipment sales, excluding Merger-related costs;

• Higher Cost of services expenses, excluding Merger-related costs;

• Higher Selling, general and administrative expenses, excluding Merger-related costs and supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs.

Core Adjusted EBITDA increased $2.4 billion or 68%.

The increase was primarily due to an increase in Adjusted EBITDA, as discussed above, excluding lease revenues.

Adjusted EBITDA decreased $111 million, or 2%, for the three months ended and increased $3.1 billion, or 29%, for the six months ended June 30, 2021.

The changes were primarily due to the fluctuations in Core Adjusted EBITDA, discussed above, including changes in Lease revenues.

Lease revenues decreased $507 million for the three months ended and increased $369 million for the six months ended June 30, 2021.

Liquidity and Capital Resources

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Further, the incurrence of additional indebtedness may inhibit our ability to incur new debt under the terms governing our existing and future indebtedness, which may make it more difficult for us to incur new debt in the future to finance our business strategy.

The following is a condensed schedule of our cash flows for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31, Change

The following is a condensed schedule of our cash flows for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in millions) 2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

Net cash used in investing activities (2,083) (6,356) 4,273 (67) % (13,322) (7,936) (5,386) 68 %

Net cash provided by (used in) financing activities 3,874 (453) 4,327 NM

Net cash (used in) provided by financing activities (577) 15,628 (16,205) NM 3,297 15,175 (11,878) (78) %

NM - Not meaningful

Operating Activities

Net cash provided by operating activities increased $2.0 billion, or 126%, primarily from:

Net cash provided by operating activities increased $3.0 billion, or 386%, for the three months ended and increased $5.0 billion, or 211%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was primarily from:

• A $2.9 billion decrease in net cash outflows from changes in working capital, primarily due to the one-time impact of $2.3 billion in gross payments for the settlement of interest rate swaps related to Merger financing for the three months ended June 30, 2020, included in the use of cash from Other current and long-term liabilities, as well as lower use of cash from Accounts payable and accrued liabilities and Inventories, partially offset by higher use of cash from Accounts receivable and Equipment installment plan receivables.

• Net cash provided by operating activities includes $190 million and $370 million in payments for Merger-related costs for the three months ended June 30, 2021 and 2020, respectively.

The increase for the six months ended June 30, 2021, was primarily from:

• A $2.6 billion increase in Net income, adjusted for non-cash income and expense;

partially offset by

• A $436 million increase in net cash outflows from changes in working capital, primarily due to higher use of cash from Accounts payable and accrued liabilities, Equipment installment plan receivables and Other current and long-term liabilities, partially offset by lower use from Accounts receivable and Inventories.

• Net cash provided by operating activities includes $277 million and $161 million in payments for Merger-related costs for the three months ended March 31, 2021 and 2020, respectively.

• A $2.5 billion decrease in net cash outflows from changes in working capital, primarily due to the one-time impact of $2.3 billion in gross payments for the settlement of interest rate swaps related to Merger financing for the six months ended June 30, 2020, included in the use of cash from Other current and long-term liabilities, as well as lower use of cash from Inventories and Accounts payable and accrued liabilities, partially offset by higher use of cash from Equipment installment plan receivables and Accounts receivable.

• Net cash provided by operating activities includes $467 million and $531 million in payments for Merger-related costs for the six months ended June 30, 2021 and 2020, respectively.

Investing Activities

Net cash used in investing activities increased $9.7 billion, or 611%.

The use of cash was primarily from:

Net cash used in investing activities decreased $4.3 billion, or 67%, for the three months ended and increased $5.4 billion, or 68%, for the six months ended June 30, 2021.

The use of cash for the three months ended June 30, 2021, was primarily from:

• $3.3 billion in Purchases of property and equipment, including capitalized interest, from network integration related to the Merger and the continued build-out of our nationwide 5G network;

partially offset by

• $1.1 billion in Proceeds related to beneficial interests in securitization transactions.

The use of cash for the six months ended June 30, 2021, was primarily from:

• $8.9 billion in Purchases of spectrum licenses and other intangible assets, including deposits, primarily due to $8.9 billion paid for spectrum licenses won at the conclusion of Auction 107 in March 2021;

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partially offset by

• $891 million in Proceeds related to beneficial interests in securitization transactions.

• $2.0 billion in Proceeds related to beneficial interests in securitization transactions.

Financing Activities

Net cash provided by (used in) financing activities increased $4.3 billion.

The source of cash was primarily from:

• $6.8 billion in Proceeds from issuance of long-term debt, net of issuance costs, from the issuance of $6.8 billion in Senior Notes;

Net cash (used in) provided by financing activities decreased $16.2 billion for the three months ended and decreased $11.9 billion for the six months ended June 30, 2021.

The use of cash for the three months ended June 30, 2021, was primarily from:

• $3.2 billion in Repayments of long-term debt driven by the redemption of $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, and repayments of $219 million aggregate principal amount of our 3.360% Senior Secured Series 2016-1 A-1 Notes due 2021 and $131 million aggregate principal amount of our 4.738% Senior Secured Series 2018-1 A-1 Notes due 2025;

• $269 million in Repayments of financing lease obligations;

partially offset by

• $2.2 billion in Repayments of long-term debt driven by the redemption of $2.0 billion aggregate principal amount of our 6.500% Senior Notes due 2026 and repayments of $219 million aggregate principal amount of our 3.360% Senior Secured Series 2016-1 A-1 Notes due 2021;

• $3.0 billion in Proceeds from issuance of long-term debt, net of issuance costs.

The source of cash for the six months ended June 30, 2021, was primarily from:

• $9.8 billion in Proceeds from issuance of long-term debt, net of issuance costs;

partially offset by

• $5.4 billion in Repayments of long-term debt driven by the redemption of $2.0 billion aggregate principal amount of our 6.500% Senior Notes due 2026, $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, and repayments of $438 million aggregate principal amount of our 3.360% Senior Secured Series 2016-1 A-1 Notes due 2021 and $131 million aggregate principal amount of our 4.738% Senior Secured Series 2018-1 A-1 Notes due 2025;

• $556 million in Repayments of financing lease obligations;

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Cash and Cash Equivalents

As of March 31, 2021, our Cash and cash equivalents were $6.7 billion compared to $10.4 billion at December 31, 2020.

As of June 30, 2021, our Cash and cash equivalents were $7.8 billion compared to $10.4 billion at December 31, 2020.

Free Cash Flow

Free Cash Flow represents Net cash provided by operating activities less cash payments for Purchases of property and equipment, including Proceeds related to beneficial interests in securitization transactions, less Cash payments for debt prepayment or debt extinguishment.

Free Cash Flow is a non-GAAP financial measure utilized by our management, investors and analysts of our financial information to evaluate cash available to pay debt and provide further investment in the business.

The table below provides a reconciliation of Free Cash Flow to Net cash provided by operating activities, which we consider to be the most directly comparable GAAP financial measure.

Three Months Ended March 31, Change

Free Cash Flow represents Net cash provided by operating activities less cash payments for Purchases of property and equipment, including Proceeds from sales of tower sites and Proceeds related to beneficial interests in securitization transactions, less Cash payments for debt prepayment or debt extinguishment.

Free Cash Flow and Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, are non-GAAP financial measures utilized by our management, investors and analysts of our financial information to evaluate cash available to pay debt and provide further investment in the business.

In 2021, we sold tower sites for proceeds of $31 million, which are included in Proceeds from sales of tower sites within Net

cash used in investing activities in our Condensed Consolidated Statements of Cash Flows.

As these proceeds were from the sale of fixed assets and are used by management to assess cash available for capital expenditures during the year, we determined the proceeds are relevant for the calculation of Free Cash Flow and included them in the table below.

Other proceeds from the sale of fixed assets for the periods presented are not significant.

We have presented the impact of the sales in the table below, which reconciles Free Cash Flow and Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, to Net cash provided by operating activities, which we consider to be the most directly comparable GAAP financial measure.

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in millions) 2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

Cash purchases of property and equipment (3,270) (2,257) (1,013) 45 % (6,453) (4,010) (2,443) 61 %

Proceeds from sales of tower sites 31 — 31 NM 31 — 31 NM

Proceeds related to beneficial interests in securitization transactions 1,137 602 535 89 % 2,028 1,470 558 38 %

Cash payments for debt prepayment or debt extinguishment costs (65) — (65) NM

Free Cash Flow $ 1,304 $ 732 $ 572 78 %

Cash payments for debt prepayment or debt extinguishment costs (6) (24) 18 (75) % (71) (24) (47) 196 %

Free Cash Flow 1,671 (902) 2,573 (285) % 2,975 (170) 3,145 NM

Gross cash paid for the settlement of interest rate swaps — 2,343 (2,343) (100) % — 2,343 (2,343) (100) %

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps $ 1,671 $ 1,441 $ 230 16 % $ 2,975 $ 2,173 $ 802 37 %

NM - Not Meaningful

Free Cash Flow increased $572 million, or 78%.

The increase was primarily impacted by the following:

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, increased $230 million, or 16%, for the three months ended and increased $802 million, or 37%, for the six months ended June 30, 2021.

The increase for the three months ended June 30, 2021, was impacted by the following:

• Higher Net cash provided by operating activities, as described above;

• Higher Proceeds related to beneficial interests in securitization transactions;

partially offset by

• Higher Cash purchases of property and equipment, including capitalized interest of $84 million and $112 million for the three months ended March 31, 2021 and 2020, respectively, from network integration related to the Merger and the continued build-out of our nationwide 5G network.

• Free Cash Flow includes $277 million and $161 million in payments for Merger-related costs for the three months ended March 31, 2021 and 2020, respectively.

• Higher Cash purchases of property and equipment, including capitalized interest of $57 million and $119 million for the three months ended June 30, 2021 and 2020, respectively, from network integration related to the Merger and the continued build-out of our nationwide 5G network.

• Free Cash Flow includes $190 million and $370 million in payments for Merger-related costs for the three months ended June 30, 2021 and 2020, respectively.

• The calculation of Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, excludes the one-time impact of gross payments for the settlement of interest rate swaps related to Merger financing of $2.3 billion for the three months ended June 30, 2020.

The increase for the six months ended June 30, 2021, was impacted by the following:

• Higher Net cash provided by operating activities, as described above;

• Higher Proceeds related to beneficial interests in securitization transactions;

partially offset by

• Higher Cash purchases of property and equipment, including capitalized interest of $141 million and $231 million for the six months ended June 30, 2021 and 2020, respectively, from network integration related to the Merger and the continued build-out of our nationwide 5G network.

• Free Cash Flow includes $467 million and $531 million in payments for Merger-related costs for the six months ended June 30, 2021 and 2020, respectively.

Borrowing Capacity

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Under the financing arrangement, we can effectively extend payment terms for invoices payable to certain vendors.

As of March 31, 2021, there were no outstanding balances under such financing arrangement.

As of June 30, 2021, there were no outstanding balances under such financing arrangement.

We also maintain vendor financing arrangements primarily with our main network equipment suppliers.

Under the respective agreements, we can obtain extended financing terms.

During the three months ended March 31, 2021, we repaid $55 million associated with the vendor financing arrangements and other financial liabilities.

During the three and six months ended June 30, 2021, we repaid $36 million and $91 million, respectively, associated with the vendor financing arrangements and other financial liabilities.

These payments are included in Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities, in our Condensed Consolidated Statements of Cash Flows.

As of March 31, 2021, the outstanding balance under the vendor financing arrangements and other financial liabilities was $186 million, of which $96 million was assumed in connection with the closing of the Merger.

As of March 31, 2020, there were no outstanding borrowings under the vendor financing agreements.

As of June 30, 2021 and December 31, 2020, the outstanding balance under the vendor financing arrangements and other financial liabilities was $148 million and $240 million, respectively, of which $77 million and $122 million, respectively, was assumed in connection with the closing of the Merger.

As of June 30, 2021, the outstanding borrowings was $77 million under the vendor financing agreements.

We maintain a revolving credit facility (the “Revolving Credit Facility”) with an aggregate commitment amount of $5.5 billion.

As of March 31, 2021, there was no outstanding balance under the Revolving Credit Facility.

As of June 30, 2021, there was no outstanding balance under the Revolving Credit Facility.

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

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Debt Financing

As of March 31, 2021, our total debt and financing lease liabilities were $77.9 billion, excluding our tower obligations, of which $71.1 billion was classified as long-term debt and $1.3 billion was classified as long-term financing lease liabilities.

During the three months ended March 31, 2021, we issued long-term debt for net proceeds of $6.8 billion and redeemed and repaid short- and long-term debt with an aggregate principal amount of $2.3 billion.

As of June 30, 2021, our total debt and financing lease liabilities were $77.7 billion, excluding our tower obligations, of which $68.4 billion was classified as long-term debt and $1.4 billion was classified as long-term financing lease liabilities.

During the six months ended June 30, 2021, we issued long-term debt for net proceeds of $9.8 billion and redeemed and repaid short- and long-term debt with an aggregate principal amount of $5.5 billion.

For more information regarding our debt financing transactions, see Note 7 - Debt of the Notes to the Condensed Consolidated Financial Statements.

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

For more information regarding our spectrum licenses, see Note 5 - Goodwill, Spectrum License Transactions and Other Intangi ble Assets of the Notes to the Condensed Consolidated Financial Statements.

For more information regarding our spectrum licenses, see Note 5 - Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Condensed Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We have arrangements, as amended from time to time, to sell certain EIP accounts receivable and service accounts receivable on a revolving basis as a source of liquidity.

As of March 31, 2021, we derecognized net receivables of $2.5 billion upon sale through these arrangements.

As of June 30, 2021, we derecognized net receivables of $2.5 billion upon sale through these arrangements.

For more information regarding these off-balance sheet arrangements, see Note 4 – Sales of Certain Receivables of the Notes to the Condensed Consolidated Financial Statements.

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Excluding liquidity that could be needed for spectrum acquisitions, or for other assets, we expect our principal sources of funding to be sufficient to meet our anticipated liquidity needs for business operations for the next 12 months as well as our longer-term liquidity needs.

Our intended use of any such funds is for general corporate purposes, including for capital expenditures, spectrum purchases, opportunistic investments and acquisitions, redemption of high yield callable debt and the execution of our integration plan.

We determine future liquidity requirements, for both operations and capital expenditures, based in large part upon projected financial and operating performance, and opportunities to acquire additional spectrum.

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However, the Issuers or borrowers are allowed to make certain permitted payments to Parent under the terms of each of the credit agreements, indentures and supplemental indentures relating to the long-term debt to affiliates and third parties.

We were in compliance with all restrictive debt covenants as of March 31, 2021.

Shentel Wireless Asset Acquisition

Sprint PCS (specifically Sprint Spectrum L.P.) is party to a variety of publicly filed agreements with 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 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.

T-Mobile’s exercise of its 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.

On February 1, 2021, in accordance with the Management Agreement and other agreed-upon terms, the Entire Business Value of Shentel’s wireless telecommunications 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 telecommunications 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.

We were in compliance with all restrictive debt covenants as of June 30, 2021.

Shentel Wireless Assets Acquisition

Subsequent to June 30, 2021, on July 1, 2021, we closed on the acquisition of the Wireless Assets (as defined in Note 2 - Business Combinations of the Notes to the Condensed Consolidated Financial Statements) for a cash purchase price of approximately $1.9 billion.

For more information regarding the acquisition of the Wireless Assets, see Note 2 – Business Combinations of the Notes to the Condensed Consolidated Financial Statements.

Financing Lease Facilities

We have entered into uncommitted financing lease facilities with certain partners that provide us with the ability to enter into financing leases for network equipment and services.

As of March 31, 2021, we have committed to $5.2 billion of financing leases under these financing lease facilities, of which $108 million was executed during the three months ended March 31, 2021.

We expect to enter into up to an additional $1.1 billion in financing lease commitments during the year ending December 31, 2021.

As of June 30, 2021, we have committed to $5.6 billion of financing leases under these financing lease facilities, of which $362 million and $470 million was executed during the three and six

months ended June 30, 2021, respectively.

We expect to enter into up to an additional $730 million in financing lease commitments during the year ending December 31, 2021.

Capital Expenditures

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Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act of 1934, as amended (“Exchange Act”).

Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable,

whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction.

Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction.

Disclosure is required even where the activities, transactions or dealings are conducted outside the U.S.

affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S.

As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the three months ended March 31, 2021, that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below with respect to affiliates that we do not control and that are our affiliates solely due to their common control with either DT or SoftBank.

As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the three months ended June 30, 2021, that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below with respect to affiliates that we do not control and that are our affiliates solely due to their common control with either DT or SoftBank.

We have relied upon DT and SoftBank for information regarding their respective activities, transactions and dealings.

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Irancell Telecommunications Services Company, Telecommunication Kish Company, Mobile Telecommunication Company of Iran, and Telecommunication Infrastructure Company of Iran.

In addition, during the three months ended March 31, 2021, DT, through certain of its non-U.S.

In addition, during the three months ended June 30, 2021, DT, through certain of its non-U.S.

subsidiaries, provided basic telecommunications services to two customers in Germany identified on the Specially Designated Nationals and Blocked Persons List maintained by the U.S.

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These services have been terminated or are in the process of being terminated.

For the three months ended March 31, 2021, gross revenues of all DT affiliates generated by roaming and interconnection traffic and telecommunications services with the Iranian parties identified herein were less than $0.1 million, and the estimated net profits were less than $0.1 million.

For the three months ended June 30, 2021, gross revenues of all DT affiliates generated by roaming and interconnection traffic and telecommunications services with the Iranian parties identified herein were less than $0.1 million, and the estimated net profits were less than $0.1 million.

In addition, DT, through certain of its non-U.S.

subsidiaries that operate a fixed-line network in their respective European home countries (in particular Germany), provides telecommunications services in the ordinary course of business to the Embassy of Iran in those European countries.

Gross revenues and net profits recorded from these activities for the three months ended March 31, 2021 were less than $0.1 million.

Gross revenues and net profits recorded from these activities for the three months ended June 30, 2021 were less than $0.1 million.

We understand that DT intends to continue these activities.

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subsidiaries, provides roaming services in Iran through Irancell Telecommunications Services Company.

During the three months ended March 31, 2021, SoftBank had no gross revenues from such services and no net profit was generated.

During the three months ended June 30, 2021, SoftBank had no gross revenues from such services and no net profit was generated.

We understand that the SoftBank subsidiary intends to continue such services.

This subsidiary also provides telecommunications services in the ordinary course of business to accounts affiliated with the Embassy of Iran in Japan.

During the three months ended March 31, 2021, SoftBank estimates that gross revenues and net profit generated by such services were both under $0.1 million.

During the three months ended June 30, 2021, SoftBank estimates that gross revenues and net profit generated by such services were both under $0.1 million.

We understand that the SoftBank subsidiary is obligated under contract and intends to continue such services.

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indirect subsidiaries, provides office supplies to the Embassy of Iran in Japan.

SoftBank estimates that gross revenue and net profit generated by such services during the three months ended March 31, 2021, were both under $0.1 million.

SoftBank estimates that gross revenue and net profit generated by such services during the three months ended June 30, 2021, were both under $0.1 million.

We understand that the SoftBank subsidiary intends to continue such activities.

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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 2. Management’s Discussion and Analysis