What changed in this filing

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Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 272 added, 177 removed, 869 unchanged (34% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

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

2021 December 31,

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Condensed Consolidated Statements of Comprehensive Income

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

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

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

21 unchanged sentences

Total other expense, net ( 896 ) ( 905 ) ( 2,707 ) ( 2,215 )

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 continuing operations before income taxes 688 1,660 3,122 2,709

Income tax benefit (expense) 3 ( 407 ) ( 520 ) ( 715 )

Income from continuing operations 691 1,253 2,602 1,994

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

4 unchanged sentences

35 33 103 ( 757 )

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

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

Other comprehensive income (loss) 32 37 103 ( 753 )

Total comprehensive income $ 723 $ 1,290 $ 2,705 $ 1,561

Earnings (loss) per share

Basic earnings (loss) per share:

Earnings per share

Basic earnings per share:

Continuing operations $ 0.55 $ 1.01 $ 2.09 $ 1.79

1 unchanged sentence

Basic $ 0.55 $ 1.01 $ 2.09 $ 2.08

Diluted earnings (loss) per share:

Diluted earnings per share:

Continuing operations $ 0.55 $ 1.00 $ 2.07 $ 1.78

8 unchanged sentences

Condensed Consolidated Statements of Cash Flows

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

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

(in millions) 2021 2020 2021 2020

4 unchanged sentences

Stock-based compensation expense 131 161 403 558

Deferred income tax expense 226 98 437 408

Deferred income tax (benefit) expense ( 27 ) 335 410 743

Bad debt expense 105 143 259 489

(Gains) losses from sales of receivables ( 12 ) 30 ( 30 ) 55

Losses (gains) from sales of receivables 4 ( 18 ) ( 26 ) 37

Losses on redemption of debt 55 108 184 271

14 unchanged sentences

( 2,944 ) ( 3,217 ) ( 9,397 ) ( 7,227 )

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

(Purchases) refunds of spectrum licenses and other intangible assets, including deposits ( 407 ) 17 ( 9,337 ) ( 827 )

Proceeds from sales of tower sites — — 31 —

2 unchanged sentences

Acquisition of companies, net of cash and restricted cash acquired ( 1,886 ) — ( 1,916 ) ( 5,000 )

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

Other, net 14 ( 25 ) 46 ( 209 )

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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

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

Net income — — — — 691 691

2 unchanged sentences

Exercise of stock options 14,578 — 1 — — 1

Stock issued for employee stock purchase plan 917,444 — 100 — — 100

Issuance of vested restricted stock units 256,605 — — — — —

1 unchanged sentence

Transfers with NQDC plan 18,894 1 ( 1 ) — — —

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

Balance as of September 30, 2021 1,249,035,065 $ ( 13 ) $ 73,152 $ ( 1,478 ) $ ( 3,234 ) $ 68,427

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

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Transfers with NQDC plan 951 ( 2 ) 2 — — —

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

Balance as of September 30, 2021 1,249,035,065 $ ( 13 ) $ 73,152 $ ( 1,478 ) $ ( 3,234 ) $ 68,427

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

3 unchanged sentences

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

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

Net income — — — — 1,253 1,253

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Shares issued in secondary offering (1)

24,750,000 — 2,550 — — 2,550

Shares repurchased from SoftBank (2)

( 24,750,000 ) — ( 2,546 ) — — ( 2,546 )

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

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

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Shares issued in secondary offering (1)

198,314,426 — 19,766 — — 19,766

Shares repurchased from SoftBank (1)

2 unchanged sentences

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

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

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

(1) Shares issued includes 5.0 million shares of our common stock purchased by Marcelo Claure, one of our directors.

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

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Additional Financial Information

Subsequent Events

Index for Notes to the Condensed Consolidated Financial Statements

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The preparation of financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires our management to make estimates and assumptions that affect the financial statements and accompanying notes.

Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances, including but not limited to, the valuation of assets acquired and liabilities assumed through the merger (the “Merger”) with Sprint Corporation (“Sprint”).

These estimates are inherently subject to judgment and actual results could differ from those estimates.

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The application of these expedients is not expected to have a material impact on our 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 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 U.S.

Securities and Exchange Commission did not have, or are not expected to have, a significant impact on our present or future consolidated financial statements.

Note 2 – Business Combinations

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

As of September 30, 2021, DT and SoftBank held, directly or indirectly, approximately 46.8 % and 4.9 %, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.3 % of the outstanding T-Mobile common stock held by other stockholders.

Pursuant to the Proxy, Lock-up and ROFR Agreement, dated as of April 1, 2020, by and between DT and SoftBank and the Proxy, Lock-up and ROFR Agreement, dated as of June 22, 2020 by and among DT, Marcelo Claure and Claure Mobile LLC, a Delaware limited liability company wholly owned by Mr.

Claure, as of September 30, 2021, DT has voting control over approximately 52.0 % of the outstanding T-Mobile common stock.

Consideration Transferred

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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 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.

The fair value is based on 373,396,310 shares of T-Mobile common stock issued at an

Index for Notes to the Condensed Consolidated Financial Statements

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.

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Fair Value Measurement.

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

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

The maximum amount of contingent consideration that could be issued to SoftBank has an estimated value of $ 7.3 billion, based on SoftBank Specified Shares Amount of 48,751,557 multiplied by the defined volume-weighted average price per share of $ 150.00 .

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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

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.

We recognized transaction costs of $ 15 million and $ 8 million for the three months ended September 30, 2021 and 2020, respectively, and $ 28 million and $ 192 million for the nine months ended September 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.

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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 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 results for the three and nine months ended September 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 June 30, 2020 Six Months Ended June 30, 2020

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

Total revenues $ 19,269 $ 54,342

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

Income from continuing operations 1,359 2,461

Income from discontinued operations, net of tax — 677

2 unchanged sentences

Significant nonrecurring pro forma adjustments include:

• 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;

• Transaction costs of $ 9 million and $ 211 million that were incurred during the three and nine months ended September 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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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.

Closing of Shentel Wireless Assets Acquisition

On July 1, 2021, upon the completion of certain customary conditions, including the receipt of certain regulatory approvals, 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.

Through this transaction, we reacquired the exclusive rights to deliver Sprint’s wireless network services in Shentel’s former affiliate territory and simplified our operations.

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

Accordingly, these separate transactions are not included in the calculation of the consideration transferred in exchange for the Wireless Assets, and the settlement of pre-existing arrangements between T-Mobile and Shentel did not result in material gains or losses.

Index for Notes to the Condensed Consolidated Financial Statements

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.

Prior to the acquisition of the Wireless Assets, revenues generated from our affiliate relationship with Shentel were presented as Other service revenues.

Upon the close of the transaction, revenues generated from postpaid customers within the reacquired territory are presented as Postpaid revenues within our Condensed Consolidated Statements of Comprehensive Income.

The financial results of the Wireless Assets since the closing through September 30, 2021, were not material to our Condensed Consolidated Statements of Comprehensive Income, nor were they material to our prior period consolidated results on a pro forma basis.

Fair Value of Assets Acquired and Liabilities Assumed

We have accounted for the acquisition of the Wireless Assets as a business combination.

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

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

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

The following table summarizes the preliminary fair values for each major class of assets acquired and liabilities assumed at the acquisition date.

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

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

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

(in millions) July 1, 2021

Inventory $ 2

Property and equipment 136

Operating lease right-of-use assets 308

Goodwill 1,035

Other intangible assets 770

Other assets 7

Total assets acquired 2,258

Short-term operating lease liabilities 73

Operating lease liabilities 264

Other long-term liabilities 35

Total liabilities assumed 372

Total consideration transferred $ 1,886

Intangible Assets and Liabilities

Goodwill with a provisionally assigned value of $ 1.0 billion, substantially all of which is deductible for tax purposes, represents the anticipated cost savings from the operations of the combined company resulting from the planned integration of network infrastructure and facilities, the assembled workforce hired concurrently with the acquisition of Wireless Assets, and the intangible assets that do not qualify for separate recognition.

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

Other intangible assets include $ 770 million of reacquired rights to provide services in Shentel’s former affiliate territory which is being amortized on a straight-line basis over a useful life of approximately nine years in line with the remaining term of the Management Agreement upon the acquisition of the Wireless Assets, which represents the period of expected economic benefits associated with the re-acquisition of such rights.

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

The key assumptions in applying the income approach include forecasted subscriber growth rates, revenue over an estimated period of time, the discount rate, estimated capital expenditures, estimated income taxes and the long-term growth rate, as well as forecasted earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins.

Note 3 – Receivables and Expected Credit Losses

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

Index for Notes to the Condensed Consolidated Financial Statements

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

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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.

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) June 30,

(in millions) September 30,

2021 December 31,

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EIP receivables, net of allowance for credit losses and imputed discount $ 6,586 $ 5,608

Index for Notes to the Condensed Consolidated Financial Statements

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 June 30, 2021:

The following table presents the amortized cost of our EIP receivables by delinquency status, customer credit class and year of origination as of September 30, 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 6.3 % 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 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

EIP receivables had a combined weighted average effective interest rate of 6.1 % and 6.7 % as of September 30, 2021 and December 31, 2020, respectively.

Activity for the nine months ended September 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:

September 30, 2021 September 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 June 30, 2021.

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

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

Index for Notes to the Condensed Consolidated Financial Statements

Note 4 – Sales of Certain Receivables

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The scheduled expiration date of the EIP sale arrangement is November 18, 2021.

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 June 30, 2021 and December 31, 2020, the EIP sale arrangement provided funding of $ 1.3 billion.

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

Index for Notes to the Condensed Consolidated Financial Statements

Variable Interest Entity

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

(in millions) June 30,

(in millions) September 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 June 30, 2021 and December 31, 2020, the service receivable sale arrangement provided funding of $ 775 million and $ 772 million, respectively.

As of September 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 March 2021, we amended the sale arrangement to conform its structure to the EIP sale arrangement (the “March 2021 Amendment”).

This involved, among other things, removal of an unaffiliated special purpose entity that we did not consolidate under the original structure and changes in contractual counterparties.

This involved, among other things, removal of an unaffiliated special purpose entity that we did not consolidate under the original structure and changes in

Index for Notes to the Condensed Consolidated Financial Statements

contractual counterparties.

While the amendment simplified the structure of the arrangement making it more efficient, it did not impact the maximum funding commitment under, or the level of funding provided by, the facility.

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

Index for Notes to the Condensed Consolidated Financial Statements

(in millions) June 30,

(in millions) September 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 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.

As of September 30, 2021 and December 31, 2020, our deferred purchase price related to the sales of service receivables and EIP receivables was $ 764 million and $ 884 million, respectively.

Index for Notes to the Condensed Consolidated Financial Statements

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

(in millions) June 30,

(in millions) September 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 $ 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

We recognized a loss from sales of receivables, including adjustments to the receivables’ fair values and changes in fair value of the deferred purchase price, of $ 4 million and a gain of $ 18 million, respectively, for the three months ended September 30, 2021 and 2020, respectively, and a gain of $ 26 million and a loss of $ 37 million for the nine months ended September 30, 2021 and 2020, respectively, in Selling, general and administrative expense in our Condensed Consolidated Statements of Comprehensive Income.

Continuing Involvement

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

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:

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

(in millions) Goodwill

Historical goodwill, net of accumulated impairment losses of $ 10,766

Balance as of December 31, 2019, net of accumulated impairment losses of $ 10,766

Goodwill from acquisitions in 2020 9,405

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Goodwill from acquisitions in 2021 1,049

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.

Balance as of September 30, 2021 $ 12,188

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

On April 1, 2020, we completed the Merger, 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 Combinations for further information.

Index for Notes to the Condensed Consolidated Financial Statements

On July 1, 2021, we completed our acquisition of the Wireless Assets from Shentel, which was accounted for as a business combination resulting in $ 1.0 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 Combinations for further information.

Intangible Assets

Identifiable Intangible Assets Acquired

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

Identifiable Intangible Assets Acquired in the Sprint Merger

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

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

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The fair value of spectrum licenses includes the value associated with aggregating a nationwide portfolio of owned and leased spectrum.

Index for Notes to the Condensed Consolidated Financial Statements

Favorable spectrum leases represent a contract where the market rate is higher than the future contractual lease payments.

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Other intangible assets are amortized over the remaining period that the asset is expected to provide benefit to us.

Identifiable Intangible Assets Acquired in the Shentel Acquisition

We reacquired certain rights under the Management Agreement in connection with the acquisition of the Wireless Assets that provided us the ability to fully do business in Shentel’s former affiliate territories.

We recognized an intangible asset for these reacquired rights at its preliminary fair value of $ 770 million as of July 1, 2021.

The reacquired rights intangible asset is being amortized on a straight-line basis over a useful life of approximately nine years in line with the remaining term of the Management Agreement upon the acquisition of the Wireless Assets.

Spectrum Licenses

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

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

(in millions) 2021

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Spectrum license acquisitions 9,515

Spectrum licenses transferred to held for sale ( 15 )

Costs to clear spectrum 261

Spectrum licenses, end of period $ 92,589

Index for Notes to the Condensed Consolidated Financial Statements

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.

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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.

On July 23, 2021, the FCC issued to us the licenses won in Auction 107.

The licenses are included in Spectrum licenses in our Condensed Consolidated Balance Sheets as of September 30, 2021.

Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in (Purchases) refunds of spectrum licenses and other intangible assets, including deposits in our Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2021.

We expect to incur an additional $ 1.0 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 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.

As of September 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.

Other Intangible Assets

The components of Other intangible assets were as follows:

Useful Lives June 30, 2021 December 31, 2020

Useful Lives September 30, 2021 December 31, 2020

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

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$ 4,903 $ ( 1,643 ) $ 3,260 $ 4,900 $ ( 865 ) $ 4,035

Reacquired rights Up to 9 years

770 ( 23 ) 747 — — —

Tradenames and patents Up to 19 years

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Other intangible assets $ 7,391 $ ( 2,344 ) $ 5,047 $ 6,665 $ ( 1,367 ) $ 5,298

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

Amortization expense for intangible assets subject to amortization was $ 316 million and $ 383 million for the three months ended September 30, 2021 and 2020, respectively, and $ 977 million and $ 794 million for the nine months ended September 30, 2021 and 2020, respectively.

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

(in millions) Estimated Future Amortization

Twelve Months Ending June 30,

Twelve Months Ending September 30,

Thereafter 1,043

Total $ 5,047

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

Substantially all of the estimated future amortization expense is associated with intangible assets acquired in the Merger and through our acquisitions of affiliates.

Note 6 – Fair Value Measurements

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We do not use derivatives for trading or speculative purposes.

Index for Notes to the Condensed Consolidated Financial Statements

Interest Rate Lock Derivatives

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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 $ 1.5 billion and $ 1.6 billion are presented in Accumulated other comprehensive loss as of June 30, 2021 and December 31, 2020, respectively.

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 on our Condensed Consolidated Balance Sheets as of September 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.

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.

For the three and nine months ended September 30, 2021, $ 47 million and $ 140 million, respectively, was amortized from Accumulated other comprehensive loss into Interest expense in the Condensed Consolidated Statements of Comprehensive Income.

For the three and nine months ended September 30, 2020, $ 44 million and $ 83 million, respectively, was amortized from Accumulated other comprehensive loss into Interest expense.

We expect to amortize $ 200 million of the Accumulated other comprehensive loss associated with the derivatives into Interest expense over the next 12 months.

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

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 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 $ 764 million and $ 884 million at September 30, 2021 and December 31, 2020, respectively.

Fair value was equal to carrying amount at September 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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Accordingly, our Senior Notes to affiliates were classified as Level 2 within the fair value hierarchy.

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

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

Index for Notes to the Condensed Consolidated Financial Statements

Notes to affiliates.

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

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

(in millions) Carrying Amount (1)

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Senior Secured Notes to third parties 1 37,264 39,802 36,204 40,519

(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.

(1) Excludes $ 69 million and $ 240 million as of September 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 six months ended, June 30, 2021 :

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

(in millions) December 31,

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Repayments Reclassifications (1)

September 30,

Short-term debt $ 4,579 $ — $ ( 2,250 ) $ ( 1,063 ) $ 920 $ ( 90 ) $ 2,096

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(2) Other includes the amortization of 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.

Our effective interest rate, excluding the impact of derivatives and capitalized interest, was approximately 4.0 % and 4.5 % for the three months ended September 30, 2021 and 2020, respectively, and 4.1 % and 4.7 % for the nine months ended September 30, 2021 and 2020, respectively, on weighted average debt outstanding of $ 74.5 billion and $ 69.6 billion for the three months ended September 30, 2021 and 2020, respectively, and $ 74.4 billion and $ 54.5 billion for the nine months ended September 30, 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

Issuances and Borrowings

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

During the nine months ended September 30, 2021, we issued the following Senior Notes and Senior Secured Notes:

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

2.250 % Senior Notes due 2026

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

3.400 % Senior Secured Notes due 2052

$ 1,300 $ ( 11 ) $ 1,289 August 13, 2021

3.600 % Senior Secured Notes due 2060

700 1 701 August 13, 2021

Total of Senior Secured Notes issued $ 2,000 $ ( 10 ) $ 1,990

Credit Facilities

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The senior secured term loan commitment was terminated upon the issuance of the $ 3.8 billion of Senior Notes.

On January 14, 2021, we issued $ 1.0 billion of 2.250 % Senior Notes due 2026, $ 1.0 billion of 2.625 % Senior Notes due 2029, and $ 1.0 billion of 2.875 % Senior Notes due 2031.

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.

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:

During the nine months ended September 30, 2021, we made the following note redemptions and repayments:

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

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500 3 6 May 23, 2021 101.281 %

4.500 % Senior Notes due 2026

1,000 5 23 August 23, 2021 102.250 %

7.250 % Senior Notes due 2021

2,250 — — September 15, 2021 N/A

Total Senior Notes to third parties redeemed $ 8,050 $ 63 $ 94

4.500 % Senior Notes to affiliates due 2026

$ 1,000 $ 4 $ 22 August 23, 2021 102.250 %

Total Senior Notes to affiliates redeemed $ 1,000 $ 4 $ 22

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

$ 438 $ — $ — Various N/A

$ 656 $ — $ — August 20, 2021 N/A

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

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(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.

The notes were redeemed at a redemption price equal to 103.250 % of the principal amount of the notes (plus accrued and unpaid interest thereon), and were paid on March 26, 2021.

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.

Redemption premiums are included within Other expense, net in our Condensed Consolidated Statements of Comprehensive Income and within Net cash used in financing activities in our Condensed Consolidated Statements of Cash Flows.

Index for Notes to the Condensed Consolidated Financial Statements

Restricted Cash

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In 2012, we conveyed to Crown Castle International Corp.

(“CCI”) the exclusive right to manage and operate approximately 6,200 tower sites (“CCI Lease Sites”) via a master prepaid lease with site lease terms ranging from 23 to 37 years (the “2012 Tower Transaction”).

(“CCI”) the exclusive right to manage and operate approximately 6,200 tower sites (“CCI Lease Sites”) via a master prepaid lease with site lease terms ranging from 23 to 37 years.

CCI has fixed-price purchase options for the CCI Lease Sites totaling approximately $ 2.0 billion, exercisable at the end of the lease term.

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

Index for Notes to the Condensed Consolidated Financial Statements

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 towers, 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) June 30,

(in millions) September 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 $ 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

Future minimum payments related to the tower obligations are approximately $ 404 million for the year ending September 30, 2022, $ 638 million in total for the years ending September 30, 2023 and 2024, $ 605 million in total for the years ending September 30, 2025 and 2026, and $ 397 million in total for the years thereafter.

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

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

Under the 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 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 premium 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 and customer-based, third-party 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 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 were $ 179 million and $ 563 million for the three and nine months ended September 30, 2021, respectively, and were $ 213 million and $ 424 million for the three and nine months ended September 30, 2020, respectively.

Wireline service revenues are presented in Other service revenues in our Condensed Consolidated Statements of Comprehensive Income.

Index for Notes to the Condensed Consolidated Financial Statements

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

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

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

(in millions) 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 June 30, 2021, were as follows:

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

(in millions) Contract Assets Contract Liabilities

Balance as of December 31, 2020 $ 278 $ 824

Balance as of June 30, 2021 267 789

Balance as of September 30, 2021 262 792

Change $ ( 16 ) $ ( 32 )

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.

Index for Notes to the Condensed Consolidated Financial Statements

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.

The current portion of our Contract assets of approximately $ 201 million and $ 204 million as of September 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 and six months ended June 30, 2021 and 2020 include the following:

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

Revenues for the three and nine months ended September 30, 2021 and 2020 include the following:

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

(in millions) 2021 2020 2021 2020

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Remaining Performance Obligations

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.

As of September 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 $ 1.0 billion.

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

As of September 30, 2021, the aggregate amount of transaction price allocated to remaining service and lease performance obligations associated with operating leases was $ 286 million and $ 173 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.

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

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 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.

As of September 30, 2021, the aggregate amount of the contractual minimum consideration for wholesale, roaming and service contracts is $ 386 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 June 30, 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 $ 1.3 billion and $ 1.1 billion as of September 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 $ 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 and six months ended June 30, 2021 and 2020.

The amortization period is

Index for Notes to the Condensed Consolidated Financial Statements

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 $ 277 million and $ 221 million for the three months ended September 30, 2021 and 2020, respectively, and $ 789 million and $ 631 million for the nine months ended September 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 and nine months ended September 30, 2021 and 2020.

Note 10 – Income Taxes

Within our Condensed Consolidated Statements of Comprehensive Income, we recorded an Income tax benefit on continuing operations of $ 3 million and Income tax expense of $ 407 million for the three months ended September 30, 2021 and 2020, respectively, and Income tax expense of $ 520 million and $ 715 million for the nine months ended September 30, 2021 and 2020, respectively.

The change for the three months ended September 30, 2021 was primarily from tax benefits associated with legal entity reorganization related to historical Sprint entities, including a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions and lower income before income taxes.

The change for the nine months ended September 30, 2021 was primarily from tax benefits associated with legal entity reorganization related to historical Sprint entities, including a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions, and a reduction in expenses that were not deductible for income tax purposes, partially offset by higher income before income taxes.

The effective tax rate from continuing operations was ( 0.3 )% and 24.5 % for the three months ended September 30, 2021 and 2020, respectively, and 16.7 % and 26.4 % for the nine months ended September 30, 2021 and 2020, 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.

Note 11 – Earnings Per Share

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

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

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

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

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

Income from continuing operations $ 691 $ 1,253 $ 2,602 $ 1,994

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

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Weighted average shares outstanding - diluted 1,253,661,245 1,249,798,740 1,254,391,787 1,122,040,528

Basic earnings (loss) per share:

Basic earnings per share:

Continuing operations $ 0.55 $ 1.01 $ 2.09 $ 1.79

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Earnings per share - basic $ 0.55 $ 1.01 $ 2.09 $ 2.08

Diluted earnings (loss) per share:

Diluted earnings per share:

Continuing operations $ 0.55 $ 1.00 $ 2.07 $ 1.78

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(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.

Index for Notes to the Condensed Consolidated Financial Statements

As of September 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 September 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 12 – Leases

We are a lessee for non-cancelable operating and financing leases for cell sites, switch sites, retail stores, network equipment and office facilities with contractual terms that generally extend through 2035.

Additionally, we lease dark fiber through non-cancelable operating leases with contractual terms that generally extend through 2041.

The majority of cell site leases have a non-cancelable term of five to 15 years with several renewal options that can extend the lease term from five to 35 years.

In addition, we have financing leases for network equipment that generally have a non-cancelable lease term of two to five years .

The financing leases do not have renewal options and contain a bargain purchase option at the end of the lease.

On September 15, 2021, we modified the terms of one of our master lease agreements, which resulted in a $ 1.0 billion advance rent payment.

Our operating lease liabilities were reduced as a result of this prepayment.

Maturities of lease liabilities as of September 30, 2021, were as follows:

(in millions) Operating Leases Finance Leases

Twelve Months Ending September 30,

2022 $ 3,655 $ 1,196

2023 4,282 846

2024 3,892 555

2025 3,401 150

2026 2,949 48

Thereafter 17,817 37

Total lease payments 35,996 2,832

imputed interest 6,640 91

Total $ 29,356 $ 2,741

Interest payments for financing leases were $ 15 million and $ 19 million for the three months ended September 30, 2021 and 2020, respectively, and $ 51 million and $ 59 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, we have additional operating leases for cell sites and commercial properties that have not yet commenced with future lease payments of approximately $ 227 million.

As of September 30, 2021, we were contingently liable for future ground lease payments related to certain tower obligations.

These contingent obligations are not included in the above table as the amounts owed are contractually owed by Crown Castle International Corp.

based on the subleasing arrangement.

See Note 8 - Tower Obligations and Note 9 - Tower Obligations in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020, for further information.

Note 13 – 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 2045.

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.

Index for Notes to the Condensed Consolidated Financial Statements

Our purchase commitments are approximately $ 4.5 billion for the twelve-month period ending September 30, 2022, $ 5.6 billion in total for the twelve-month periods ending September 30, 2023 and 2024, $ 2.2 billion in total for the twelve-month periods ending September 30, 2025 and 2026, and $ 1.7 billion in total 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.

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.

Our spectrum lease and service credit commitments, including renewal periods, are approximately $ 360 million for the twelve-month period ending September 30, 2022, $ 617 million in total for the twelve-month periods ending September 30, 2023 and 2024, $ 591 million in total for the twelve-month periods ending September 30, 2025 and 2026 and $ 4.8 billion in total 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 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.

The maximum remaining service commitment on September 30, 2021 was $ 87 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

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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 $ 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.

We expect that our monetary commitments associated with these matters are approximately $ 9 million for the twelve-month period ending September 30, 2022, $ 13 million in total for the twelve-month periods ending September 30, 2023 and 2024 and $ 1 million in total for the twelve-month periods ending September 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.

Contingencies and Litigation

Litigation Matters

We are involved in various lawsuits and disputes, claims, government agency investigations and enforcement actions, and other proceedings (“Litigation Matters”) that arise in the ordinary course of business, which include claims of patent infringement (most of which are asserted by non-practicing entities primarily seeking monetary damages), class actions, and proceedings to enforce FCC rules and regulations.

Those Litigation Matters are at various stages, and some of them may proceed to trial, arbitration, hearing, or other adjudication that could result in fines, penalties, or awards of monetary or injunctive relief in the coming 12 months if they are not otherwise resolved.

We have established an accrual with respect to certain of these matters, where appropriate, which is reflected in the condensed consolidated financial statements but that is not considered to be, individually or in the aggregate, material.

Litigation and Regulatory Matters

We are involved in various lawsuits and disputes, claims, government agency investigations and enforcement actions, and other proceedings (“Litigation and Regulatory Matters”) that arise in the ordinary course of business, which include claims of patent infringement (most of which are asserted by non-practicing entities primarily seeking monetary damages), class actions, and proceedings to enforce FCC rules and regulations.

Those Litigation and Regulatory Matters are at various stages, and some of them may proceed to trial, arbitration, hearing, or other adjudication that could result in fines, penalties, or awards of monetary or injunctive relief in the coming 12 months if they are not otherwise resolved.

We have established an accrual with respect to certain of these matters, where appropriate.

The accruals are reflected in the condensed consolidated financial statements but they are not considered to be, individually or in the aggregate, material.

An accrual is established when we believe it is both probable that a loss has been incurred and an amount can be reasonably estimated.

For other matters, where we have not determined that a loss is probable or because the amount of loss cannot be reasonably estimated, we have not recorded an accrual due to various factors typical in contested proceedings, including, but not limited to, uncertainty concerning legal theories and their resolution by courts or regulators, uncertain damage theories and demands, and a less than fully developed factual record.

For Litigation Matters which may result in a contingent gain, we recognize such gains in the condensed consolidated financial statements when the gain is realized or realizable.

We do not expect that the ultimate resolution of these Litigation Matters, individually or in the aggregate, will have a material adverse effect on our financial position, but we note that an unfavorable outcome of some or all of the specific matters identified below could have a material adverse impact on results of operations or cash flows for a particular period.

Index for Notes to the Condensed Consolidated Financial Statements

factual record.

For Litigation and Regulatory Matters that may result in a contingent gain, we recognize such gains in the condensed consolidated financial statements when the gain is realized or realizable.

Except as otherwise specified below, we do not expect that the ultimate resolution of these Litigation and Regulatory Matters, individually or in the aggregate, will have a material adverse effect on our financial position, but we note that an unfavorable outcome of some or all of the specific matters identified below could have a material adverse impact on results of operations or cash flows for a particular period.

This assessment is based on our current understanding of relevant facts and circumstances.

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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 June 30, 2021, which was included in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets.

We maintained the accrual as of September 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

Index for Notes to the Condensed Consolidated Financial Statements

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

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

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We intend to vigorously defend this lawsuit.

On October 2020, we notified MVNOs using the legacy Sprint CDMA network that we planned to sunset that network on December 31, 2021.

In response to that notice, DISH, which has Boost Mobile customers who use the legacy Sprint CDMA network, has made several efforts to prevent us from sunsetting the CDMA network until mid-2023, including by urging the U.S.

Department of Justice to move for a finding of contempt under the April 1, 2020 Final Judgment entered by the U.S.

District Court for the District of Columbia, and by pursuing a Petition for Modification and related proceedings pursuant to the California Public Utilities Commission’s April 2020 decision concerning the T-Mobile-Sprint merger.

We disagree with the merits of DISH’s positions and have opposed them.

On October 22, 2021, we announced that we would delay the sunset of the legacy Sprint CDMA network for three months, until March 31, 2022, to, among other things, help ensure that DISH and other MVNOs fulfill their contractual responsibilities and transition customers off the legacy Sprint CDMA network before the sunset.

We cannot predict the outcome of the proceedings described above, but we intend to vigorously oppose any efforts to further delay the sunset of the legacy Sprint CDMA network.

On August 12, 2021, we became aware of a potential cybersecurity issue involving unauthorized access to T-Mobile’s systems (the “August 2021 cyberattack”).

We immediately began an investigation and engaged cybersecurity experts to assist with the assessment of the incident and to help determine what data was impacted.

Our investigation uncovered that the perpetrator had illegally gained access to certain areas of our systems on or before March 18, 2021, but only gained access to and took data of current, former, and prospective customers beginning on or about August 3, 2021.

With the assistance of our outside cybersecurity experts, we located and closed the unauthorized access to our systems and identified current, former and prospective customers whose information was impacted and notified them, consistent with state and federal requirements.

We also undertook a number of other measures to demonstrate our continued support and commitment to data privacy and protection.

We also coordinated with law enforcement.

Our forensic investigation is now complete and we believe we now have a full view of the data compromised.

Index for Notes to the Condensed Consolidated Financial Statements

As a result of the cyberattack, we have become subject to numerous lawsuits, including multiple class action lawsuits, that have been filed in numerous jurisdictions seeking unspecified monetary damages, costs and attorneys’ fees arising out of the cyberattack.

A request to consolidate the federal class action lawsuits is pending before the Judicial Panel on Multidistrict Litigation and we anticipate a ruling on that request later this year or in early 2022.

There can be no assurance that the request will be granted, and we are unable to predict at this time the potential timing and outcome of any of these claims (whether consolidated or not) and whether we may be subject to further private litigation.

We intend to vigorously defend all of these lawsuits.

In addition, the Company has received inquiries from various government agencies, law enforcement and other governmental authorities related to the cyberattack.

We are responding to these inquiries and cooperating fully with regulators.

However, we cannot predict the timing or outcome of any of these inquiries, and whether we may be subject to further regulatory inquiries.

In light of the inherent uncertainties involved in such matters and based on the information currently available to us, as of the date of this Quarterly Report, we have not recorded any accruals for losses related to the above proceedings and inquiries, as any such amounts (or ranges of amounts) are not probable or estimable at this time.

We believe it is reasonably possible that we could incur losses associated with these proceedings and inquiries, and the Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.

Ongoing legal and other costs related to these proceedings and inquiries, as well as any potential future proceedings and inquiries, may be substantial, and losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries could be material to our business, reputation, financial condition, cash flows and operating results.

Note 14 – Restructuring Costs

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

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

(in millions) Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Incurred to Date

Contract termination costs $ 5 $ 14 $ 192

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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 $ 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.

Incremental expenses associated with accelerating amortization of the right-of-use assets on lease contracts were $ 265 million and $ 649 million for the three and nine months ended September 30, 2021, respectively, and are included within Costs of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.

Restructuring expenses related to the acceleration or termination of leases were $ 80 million for both the three and nine months ended September 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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2020 Expenses Incurred Cash Payments Adjustments for Non-Cash Items (1)

September 30,

Contract termination costs $ 81 $ 14 $ ( 73 ) $ ( 1 ) $ 21

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Accounts payable and accrued liabilities are summarized as follows:

(in millions) June 30,

(in millions) September 30,

2021 December 31,

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Accounts payable and accrued liabilities $ 8,735 $ 10,196

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.

Book overdrafts included in accounts payable and accrued liabilities were $ 245 million and $ 628 million as of September 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 June 30, Six Months Ended June 30,

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

(in millions) 2021 2020 2021 2020

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Financing lease right-of-use assets obtained in exchange for lease obligations 623 219 1,109 912

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