What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-11 compared with 2021-02-23 · 345 added, 406 removed, 475 unchanged (61% of the section changed)

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• A narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results;

• Context to the financial statements;

• Context to the consolidated financial statements;

• Information that allows assessment of the likelihood that past performance is indicative of future performance.

Our MD&A is performed on a consolidated basis and is inclusive of the results and operations of Sprint prospectively from the close of our Merger on April 1, 2020.

The Merger enhanced our spectrum portfolio, increased our customer base, altered our product mix by increasing the portion of customers who finance their devices with leasing programs and created opportunity for synergies in our operations.

Our MD&A is performed on a consolidated basis and is inclusive of the results and operations of Sprint prospectively from the close of the Merger on April 1, 2020.

The Merger enhanced our spectrum portfolio, increased our customer base, altered our product mix and created opportunities for synergies in our operations.

We anticipate an initial increase in our combined operating costs, which we expect to decrease as we realize synergies.

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and its consolidated subsidiaries.

Beginning with the second quarter of 2020, we have discontinued the use of “Branded” to describe the results and metrics associated with our flagship brands including T-Mobile and Metro by T-Mobile.

Sprint Merger

Transaction Overview

On April 1, 2020, we completed our Merger with Sprint, a communications company offering a comprehensive range of wireless and wireline communications products and services.

On April 1, 2020, we completed the Merger with Sprint, a communications company offering a comprehensive range of wireless and wireline communications products and services.

As a result, Sprint and its subsidiaries became wholly-owned consolidated subsidiaries of T-Mobile.

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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 Consolidated Financial Statements.

On June 22, 2020, we entered into a Master Framework Agreement and related transactions with SoftBank to facilitate the SoftBank Monetization as described in Note 14 - SoftBank Equity Transaction of the Notes to the Consolidated Financial Statements.

Brand and Retail Unification

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

We combined our retail operations and rebranded thousands of Sprint stores to T-Mobile stores while implementing the tools and systems across our distribution footprint to serve all customers in all stores.

Sale of Boost Mobile and Sprint Prepaid Brands

In connection with obtaining regulatory approval for the Merger, on July 1, 2020, DISH acquired the prepaid wireless business operated under the Boost Mobile and Sprint prepaid brands (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shentel and Swiftel Communications, Inc.), including customer accounts, inventory, contracts, intellectual property and certain other specified assets (the “Prepaid Business”), and assumed certain related liabilities (the “Prepaid Transaction”).

For more information, see Note 12 - Discontinued Operations of the Notes to the Consolidated Financial Statements.

Upon the closing of the Prepaid Transaction, we entered into a Master Network Services Agreement (the “MVNO Agreement”) providing for the provisioning of network services to customers of the Prepaid Business for a period of up to seven years following the closing of the Prepaid Transaction.

The revenue generated through this agreement is presented within Wholesale revenues in our Consolidated Statements of Comprehensive Income following the close of the Prepaid Transaction on July 1, 2020.

We included the pre-tax results of our discontinued operations in our determination of Adjusted EBITDA, a Non-GAAP measure, to reflect contributions of the Prepaid Business that was replaced by the MVNO Agreement beginning on July 1, 2020.

See “Adjusted EBITDA” in the “ Performance Measures ” section of this MD&A.

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 Consolidated Financial Statements.

Shentel Wireless Assets Acquisition

On July 1, 2021, we completed the acquisition of Shentel’s wireless telecommunications assets (the “Wireless Assets”) used to provide Sprint PCS’s wireless mobility communications network products in certain parts of Maryland, North Carolina, Virginia, West Virginia, Kentucky, Ohio and Pennsylvania.

As a result, T-Mobile become the legal owner of the Wireless Assets.

This transaction represented an opportunity to reacquire the exclusive rights to deliver Sprint’s wireless network services in Shentel’s former affiliate territory and simplify our operations.

The acquisition of the Wireless Assets has altered the composition of certain assets and liabilities on our balance sheet, including Goodwill and Other intangible assets.

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

Merger-Related Costs

Merger-related costs generally include:

• Integration costs to achieve efficiencies in network, retail, information technology and back office operations;

Merger-related costs associated with the Merger and acquisitions of affiliates generally include:

• Integration costs to achieve efficiencies in network, retail, information technology and back office operations, migrate customers to the T-Mobile network and the impact of legal matters assumed as part of the Merger;

• Restructuring costs, including severance, store rationalization and network decommissioning;

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

Transaction and restructuring costs are disclosed in Note 2 – Business Combination and Note 1 9 - Restructuring Costs , respectively.

Merger-related costs have been excluded from our calculation of Adjusted EBITDA, a non-GAAP financial measure, as we do not consider these costs to be reflective of our ongoing operating performance.

See “Adjusted EBITDA” in the “ Performance Measures ” section of this MD&A.

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

Merger-related costs during the years ended December 31, 2020, 2019 and 2018 are presented below:

• Transaction costs, including legal and professional services related to the completion of the transactions.

Transaction and restructuring costs are disclosed in Note 2 – Business Combinations and Note 1 8 – Restructuring Costs , respectively, of the Notes to the Consolidated Financial Statements.

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.

See “Adjusted EBITDA and Core Adjusted EBITDA” in the “ Performance Measures ” section of this MD&A.

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

Merger-related costs are presented below:

(in millions) Year Ended December 31, 2021 Versus 2020 2020 Versus 2019

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Merger-related costs

Cost of services, exclusive of depreciation and amortization $ 646 $ — $ — $ 646 NM $ — NM

Cost of services, exclusive of depreciation and amortization $ 1,015 $ 646 $ — $ 369 57 % $ 646 NM

Cost of equipment sales 1,018 6 — 1,012 NM 6 NM

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NM - Not Meaningful

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, are expected to decrease in periods subsequent to the close of the Merger.

Merger-related costs will be impacted by restructuring and integration activities expected to occur through the end of fiscal year 2023, as we implement initiatives to realize cost efficiencies from the Merger and our acquisitions of affiliates.

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.

Restructuring

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Anticipated Impacts

Our restructuring activities are expected to occur over the next three years with substantially all costs incurred by the end of fiscal year 2023.

We expect to incur a total of $12.0 billion of Merger-related costs, excluding capital expenditures, of which $6.5 billion has been incurred since the beginning of 2018, including $700 million of costs incurred by Sprint prior to the Merger.

Our remaining integration and restructuring activities are expected to occur over the next two years with substantially all costs incurred by the end of fiscal year 2023.

We expect to incur total Merger-related costs, excluding capital expenditures, of $5.5 billion to complete our remaining integration and restructuring activities, $4.5 billion to $5.0 billion of which is expected to be incurred in fiscal year 2022.

We are evaluating additional restructuring initiatives which are dependent on consultations and negotiation with certain counterparties and the expected impact on our business operations, which could affect the amount or timing of the restructuring costs and related payments.

We expect our principal sources of funding to be sufficient to meet our liquidity requirements and anticipated payments associated with the restructuring initiatives.

We expect our principal sources of funding to be sufficient to meet our

liquidity requirements and anticipated payments associated with the restructuring initiatives.

As a result of our ongoing restructuring activities, we expect to realize cost efficiencies by eliminating redundancies within our combined network as well as other business processes and operations.

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

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

For more information regarding our restructuring activities, see Note 1 8 – Restructuring Costs of the Notes to the Consolidated Financial Statements.

As we previously reported, we were subject to a criminal cyberattack involving unauthorized access to T-Mobile’s systems.

We became aware of a potential issue on August 12, 2021.

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

As we previously reported, we promptly located and closed the unauthorized access to our systems.

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

Based on the initial investigation findings, we moved to quickly identify current, former and prospective customers whose information was impacted and notify them, consistent with state and federal requirements.

Simultaneously, we undertook a number of other measures to demonstrate our continued support and commitment to data privacy and protection and continued to work with our cybersecurity experts to finish our forensic investigation, with the goal to ensure we had a complete understanding of the scope and impact of the unauthorized access.

We also coordinated our efforts with law enforcement.

Also as previously reported, our forensic investigation took time and was completed in October 2021, although our overall investigation into the incident is ongoing.

As a result of our forensic investigation, we believe we have a full view of the data compromised.

We have no evidence that individual financial account numbers, such as full credit or debit card numbers, were accessed or taken in relation to the August 2021 cyberattack.

Throughout our forensic investigation of the August 2021 cyberattack, our top priority was to support those individuals impacted by the cyberattack.

We sent notifications to our customers and customer accounts whose names, dates of birth, Social Security numbers (“SSNs”)/Tax Identifiers (“Tax IDs”) and driver’s license/identification numbers (“ID Numbers”) were taken, consistent with state and federal requirements, including to approximately 7.8 million current customer accounts and approximately 40.0 million former and prospective customers.

We also notified an additional 1.9 million former and prospective customers who had their names, dates of birth and ID Numbers (but not valid SSNs/Tax IDs) taken.

Out of an abundance of caution during the earliest days of our investigation and to help alleviate consumer concerns and confusion, we rapidly sent notifications to approximately 5.3 million customer accounts who had their names, dates of birth and addresses taken.

These accounts did not have SSNs/Tax IDs or ID Numbers taken.

Later in our investigation, we identified approximately 790,000 additional former and prospective customers who had similar information — names, dates of birth and, in many cases, addresses, but not SSNs/Tax IDs or ID Numbers — taken and sent them notifications consistent with state and federal requirements.

Our investigation also identified approximately 26.0 million additional individuals with the same types of information taken, but for whom individual notifications were not required under state and federal law in light of the types of information taken.

By that point, since our original notifications, we had already launched a broad-reaching communications outreach program through which we kept our customers and the public informed and made information available and accessible on our website to provide support for any individuals who may have been impacted, including information on how they could take steps to protect themselves.

We also took actions to proactively reset the personal identification numbers (“PINs”) for approximately 870,000 current customer accounts whose names and PINs may have been taken.

We previously reported that further data files including phone numbers, International Mobile Equipment Identity (“IMEI”) numbers and International Mobile Subscriber Identity (“IMSI”) numbers were taken;

a significant portion of this data was related to inactive devices.

For a number of additional current Metro customers, these files included names but no other personally identifiable information.

As described above, supporting individuals impacted by the August 2021 cyberattack was a top priority.

As previously reported, this support included:

• Offering two years of free identity protection services with McAfee’s ID Theft Protection Service to any person who believes they may be affected;

• Recommending that all eligible customers sign up for free scam-blocking protection through Scam Shield;

• Supporting individuals impacted by the August 2021 cyberattack with additional best practices and practical security steps such as resetting PINs and passwords;

• Publishing a customer support webpage that includes information and access to these tools at https://www.t-mobile.com/brand/data-breach-2021 1 .

As described above, we take data protection and the protection of our customers very seriously, and we have worked diligently to further enhance security across our platforms throughout this process.

As part of those efforts, and as we have previously reported, we have entered into long-term partnerships with the industry-leading cybersecurity experts at Mandiant, and with consulting firm KPMG LLP, as part of our efforts to ensure that the Company has cybersecurity practices that are among the best in our industry.

We have also created a Cyber Transformation Office reporting directly to our Chief Executive Officer that will be responsible for managing our efforts.

We have incurred certain cyberattack-related expenses that were not material and expect to continue to incur additional expenses in future periods, including costs to remediate the attack, provide additional customer support and enhance customer protection, only some of which may be covered and reimbursable by insurance.

We also intend to commit substantial additional resources towards cybersecurity initiatives over the next several years.

It is not possible to precisely measure the amount of lost revenue, if any, directly attributable to the August 2021 cyberattack.

We are unable to predict the full impact of the August 2021 cyberattack on customer behavior in the future, including whether a change in our customers’ behavior could negatively impact our results of operations on an ongoing basis.

Accordingly, we are not able to predict with any certainty any possible future impact to our revenues or expenses attributable to the August 2021 cyberattack, which could have a material adverse effect on our future results.

As a result of the attack, we are subject to numerous arbitration demands and lawsuits, including class action lawsuits, and regulatory inquiries as described in Note 1 7 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements and Part I , Item 3 .

Legal Proceedings , and we could be subject to additional lawsuits and inquiries.

We are cooperating fully with regulators in connection with the inquiries, though we cannot predict the timing or outcome of any of these 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 Annual 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.

Losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries, including ongoing costs related thereto, could be material to our business, reputation, financial condition, cash flows and operating results in future periods.

COVID-19 Pandemic

The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in the U.S.

The Pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, and has caused significant volatility in the U.S.

and international debt and equity markets.

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These restrictions have impacted, and will continue to impact, our business, including the demand for our products and services and the ways in which our customers purchase and use them.

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

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

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.

Additionally, we have implemented testing policies for our on-site employees to help reduce transmission.

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.

As a critical communications infrastructure provider as designated by the government, our focus has been on providing crucial connectivity to our customers and impacted communities while ensuring the safety and well-being of our employees.

We have taken a variety of steps to help mitigate the impact of the Pandemic on our customers and to protect the health and well-being of our workforce and communities:

To Protect and Support Our Employees and Communities

• Before the Merger, in mid-March, approximately 80% of T-Mobile and 70% of Sprint company-owned store locations, as well as many third-party retailer locations that sell our T-Mobile, Metro by T-Mobile and Sprint brands were temporarily closed.

In compliance with the regulations of various states, we have since reopened substantially all of our previously closed stores.

• At the onset of the Pandemic, we supplemented pay for certain of our employees and commissions for third-party dealers and provided access to incremental paid time off for employees experiencing symptoms, taking care of children who were home due to school closures or caring for individuals impacted by the Pandemic.

• We implemented remote working arrangements for many employees with a significant portion of our internal and global care employees transitioned to a work-from-home environment.

We also encouraged our corporate and administrative employees to work remotely, if possible.

• We also continue to encourage healthy practices such as social distancing and hand washing and have increased cleaning and sanitation in all our facilities and stores.

To Keep Our Customers Connected

• In March, we committed to the FCC’s Keep Americans Connected pledge, and at the FCC’s request, later extended our commitment to June 30, 2020.

During this period, we pledged to:

• Not terminate service to any residential or small business customers because of their inability to pay their bills due to disruptions caused by the Pandemic;

• Waive any late fees that any residential or small business customers incurred because of their economic circumstances related to the Pandemic.

• After the Pledge extension ended, we continued to work with our customers to help them maintain service and become current on their accounts, while avoiding financial hardship.

• We also took additional temporary steps in March to ensure that all current T-Mobile customers with smartphone data plans were provided connectivity to learn and work remotely through June 30, 2020, including:

• Providing unlimited high-speed smartphone data to current customers as of March 13, 2020 who had legacy plans without unlimited high-speed data (excluding roaming);

• Giving T-Mobile postpaid and Metro by T-Mobile customers on smartphone plans with mobile hotspot data the ability to add 10GB of Smartphone Mobile HotSpot each month (20GB total);

• Working with our Lifeline partners to provide customers up to 5GB per month of free data;

• Increasing the data allowance, at no extra charge, to schools and students using our EmpowerED digital learning program to ensure each participant had access to at least 20GB of data per month;

• Providing free international calling to landlines (and, in many cases, mobile numbers) to countries that were significantly impacted by the Pandemic through May 13, 2020.

• In addition:

• We are offering our customers creative, new COVID-safe solutions such as virtual selling and curbside pickup;

• We partnered with multiple spectrum holders and the FCC to successfully deploy additional 600 MHz spectrum on a temporary basis (through June 30, 2020), effectively doubling total 600 MHz LTE capacity across the nation to help ensure customers can stay connected during this critical time;

• We are working to keep our network fully operational as an essential service to first responders, 911 communications and our customers and continue to expand our 5G network, while adhering to governmental guidelines.

We 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.

Impact on Results of Operations and Performance Measures for the Year Ended December 31, 2020

For the year ended December 31, 2020, we incurred $458 million, before taxes, in supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs, which are included in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income.

These costs have been excluded from the calculation of Adjusted EBITDA, a non-GAAP financial measure, as they represent direct, incremental costs as a result of our response to the Pandemic.

See “Adjusted EBITDA” in the “ Performance Measures ” section of this MD&A.

Expected Continued Impact on Results of Operations and Performance Measures

We continue to monitor developments regarding the Pandemic and evaluate the appropriate steps needed to align with guidelines from state, local and federal government agencies and do what is best for our employees and customers.

The extent to which the Pandemic impacts our business, operations and financial results will depend on numerous future developments that we are not able to predict at this time, including the duration and scope of the Pandemic, the success of governmental, business

and individual actions that have been and continue to be taken in response to the Pandemic, and the impact on economic activity from the Pandemic and actions taken in response.

Such impacts may include:

• Lower net customer additions due to lower switching activity in the industry from reduced store traffic due to temporary retail store closures and reduced consumer spending caused by widespread unemployment and other adverse economic effects, partially offset by lower churn;

• Lower Equipment revenues and lower Cost of equipment sales from lower device sales due to lower switching activity in the industry from reduced store traffic due to temporary retail store closures, which may impact our ability to sell devices;

• Higher bad debt expense on our service and EIP receivable portfolios due to adverse macro-economic conditions.

Should these adverse conditions worsen, our operating and financial results could be negatively impacted;

• Continued costs to protect and support our employees and customers;

• Potential disruptions in our supply chains.

In addition, we have reevaluated, and continue to assess, our spending, including for marketing purposes like advertising, capital projects like build-out of our stores, travel, third-party services and certain operating expenses.

We have taken actions to adjust our spending given the significant uncertainty around the magnitude and duration of any recessionary impacts arising from the Pandemic.

For additional risks to our business and industry, see Item 1A.

Risk Factors .

1 The reference to this website is intended to be an inactive textual reference and information on or accessible from such website is not included or incorporated in this report.

Results of Operations

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Wholesale revenues 3,751 2,590 1,279 1,161 45 % 1,311 103 %

Roaming and other service revenues 2,078 1,005 798 1,073 107 % 207 26 %

Other service revenues 2,323 2,078 1,005 245 12 % 1,073 107 %

Total service revenues 58,369 50,395 34,500 7,974 16 % 15,895 46 %

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Selling, general and administrative 20,238 18,926 14,139 1,312 7 % 4,787 34 %

Impairment expense 418 — — 418 NM — NM

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

Depreciation and amortization 16,383 14,151 6,616 2,232 16 % 7,535 114 %

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Income from continuing operations 3,024 2,744 3,468 280 10 % (724) (21) %

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

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

Net income $ 3,024 $ 3,064 $ 3,468 $ (40) (1) % $ (404) (12) %

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Adjusted EBITDA 26,924 24,557 13,383 2,367 10 % 11,174 83 %

Core Adjusted EBITDA 23,576 20,376 12,784 3,200 16 % 7,592 59 %

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps 5,646 3,001 4,319 2,645 88 % (1,318) (31) %

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

For a discussion and analysis of the year ended December 31, 2019, compared to the same period in

2018, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 6, 2020.

For a discussion and analysis of the year ended December 31, 2020, compared to the same period in 2019, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 23, 2021.

On April 1, 2020, we closed our Merger with Sprint.

The Merger was accounted for as business combination and our results are inclusive of the acquired Sprint operations prospectively from the Merger close date.

Our results of operations described below are impacted by a full year of Sprint results included in fiscal year 2021 compared to nine months of Sprint results included in fiscal year 2020.

Total revenues increased $11.7 billion, or 17%.

The components of this change are discussed below.

The components of these changes are discussed below.

Postpaid revenues increased $6.3 billion, or 17%, 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;

• Higher average postpaid other customers, primarily from customers acquired in the Merger and growth in other connected devices (tablets and wearable products) and growth in 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.

• Higher average postpaid accounts;

• Higher postpaid ARPA.

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

Prepaid revenues increased $312 million, or 3%, primarily from:

• Higher prepaid ARPU.

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

• Higher average prepaid customers.

Wholesale revenues increased $1.2 billion, or 45%, 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 $1.1 billion, or 107%, primarily from:

• The success of our other MVNO relationships.

Other service revenues increased $245 million, or 12%, primarily from:

• Higher Lifeline revenues, primarily associated with operations acquired in the Merger;

• Inclusion of wireline operations acquired in the Merger;

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

partially offset by

• Lower international roaming due to the impact of the Pandemic, and lower domestic roaming due to revenue generated from Sprint customers roaming on the T-Mobile network in periods before the Merger.

• Lower advertising revenues.

Equipment revenues increased $3.4 billion, or 20%, primarily from:

• An increase of $3.6 billion in lease revenues due to a higher number of customer devices under lease, primarily from leases acquired in the Merger;

• An increase of $3.5 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 due to the Merger;

• An increase of $625 million in sales of leased devices, primarily due to an increase in purchased leased devices as a result of the Merger;

• An increase of $622 million in revenues primarily related to the liquidation of a higher volume of returned devices primarily as a result of the Merger.

• An increase in the number of devices sold due to a larger customer base as a result of the Merger, switching activity returning to more normalized levels compared to the muted conditions from the Pandemic in the prior year, a higher upgrade rate and the planned shift in device financing from leasing to EIP;

• Higher average revenue per device sold driven by an increased mix of phone versus other devices, partially offset by an increase in promotional activities;

• An increase of $373 million in sales of accessories, due to increased retail store traffic, compared to lower retail traffic in the prior period due to closures arising from the Pandemic, and a larger customer base as a result of the Merger;

• An increase of $221 million in liquidation revenues, primarily due to a higher volume of returned devices and an increase in the high-end device mix;

partially offset by

• A decrease of $833 million in lease revenues due to a lower number of customer devices under lease as a result of the planned shift in device financing from leasing to EIP.

Other revenues increased $332 million, or 48%, primarily from:

• Higher revenues from our device recovery program;

• Higher interest income on our EIP receivables from the planned shift in device financing from leasing to EIP.

Operating expenses increased $11.5 billion, or 19%.

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Cost of services , exclusive of depreciation and amortization, increased $2.1 billion, or 17%, primarily from:

• An increase in expenses associated with leases, backhaul agreements and other network expenses, such as roaming,

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

• An increase of $646 million for the year ended December 31, 2020, in Merger-related costs including incremental costs associated with accelerating amortization of right-of-use assets for terminated cell sites leases and the decommissioning of certain small cell sites and distributed antenna systems;

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

• An increase in repair and maintenance costs, primarily due to the Merger;

• An increase in regulatory and roaming costs primarily due to the Merger.

• An increase in expenses associated with leases and utilities primarily due to the Merger and the continued build-out of our nationwide 5G network, including a new tower master lease agreement in 2020;

• 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 average headcount as a result of the Merger;

partially offset by

• Higher realized Merger synergies, including a decrease in expenses associated with backhaul due to the termination of certain agreements acquired in the Merger.

Cost of equipment sales , exclusive of depreciation and amortization, increased $6.3 billion, or 38%, primarily from:

• An increase of $5.9 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 due to the Merger;

• An increase of $759 million in leased device cost of equipment sales, primarily due to an increase in purchased leased devices as a result of the Merger;

• An increase of $511 million in costs related to the liquidation of a higher volume of returned devices primarily as a result of the Merger.

• An increase in the number of devices sold due to a larger customer base as a result of the Merger, switching activity returning to more normalized levels relative to the muted conditions from the Pandemic in the prior year, a higher upgrade rate and the planned shift in device financing from leasing to EIP;

• Higher average costs per device sold due to an increased mix of phone versus other devices;

• An increase of $212 million in cost of accessories, due to increased retail store traffic, compared to lower retail traffic in the prior period due to closures arising from the Pandemic, and a larger customer base as result of the Merger.

• Merger-related costs, primarily related to moving Sprint customers to devices that are compatible with the T-Mobile network, were $1.0 billion for the year ended December 31, 2021, compared to $6 million for the year ended December 31, 2020.

Selling, general and administrative expenses increased $1.3 billion, or 7%, primarily from:

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

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

• $1.3 billion of Merger-related costs, including transaction costs associated with legal and professional services and restructuring costs including severance and store rationalization, compared to $620 million of Merger-related costs in the year ended December 31, 2019;

• Higher commission expense, primarily due to:

• Higher gross customer additions primarily due to the increased size of the company as a result of the Merger, partially offset by lower switching activity in the industry from reduced store traffic due to retail store closures arising from the Pandemic;

• Higher advertising expense relative to the muted Pandemic-driven conditions in the prior period;

• Higher external labor and professional services primarily from the Merger;

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

• Higher commissions primarily due to compensation structure changes and higher customer addition volumes;

partially offset by

• Lower commissions expense due to lower prepaid gross additions and compensation structure changes;

• Higher bad debt expense, primarily due to customers acquired as a result of the Merger and the recording of estimated losses associated with the new credit loss standard, including incremental bad debt for the estimated macro-economic impacts of the Pandemic;

• Higher legal-related expenses from recording an estimated accrual associated with the FCC Notice of Apparent Liability and commitments associated with the Merger.

• Higher realized Merger synergies;

• Lower bad debt expense primarily due to the release of estimated bad debt reserves established in the prior year associated with macro-economic impact of the Pandemic.

• Selling, general and administrative expenses for the year ended December 31, 2020, included $458 million of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs.

Impairment expense was $418 million and consisted of the following:

• A $218 million impairment on the goodwill in the Layer3 reporting unit;

• A $200 million impairment on the capitalized software development costs related to our postpaid billing system.

There were insignificant COVID-19 costs for the year ended December 31, 2021.

• Selling, general and administrative expenses for the year ended December 31, 2021, included $1.1 billion of Merger-related costs primarily related to integration, restructuring and legal-related expenses, compared to $1.3 billion of Merger-related costs for the year ended December 31, 2020.

Impairment expense decreased $418 million, or 100%, primarily from:

• A $218 million impairment on the goodwill in the Layer3 reporting unit in 2020;

• A $200 million impairment on the capitalized software development costs related to our postpaid billing system replacement in 2020.

• There was no impairment expense for the year ended December 31, 2021.

For more information regarding the impairments above, see Note 5 – Property and Equipmen t and Note 6 – Goodwill, Spectrum License Transactions and Oth er Intangible Assets of the Notes to the Consolidated Financial Statements.

Depreciation and amortization increased $7.5 billion, or 114%, primarily as a result of the Merger, including:

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

• Higher depreciation expense on leased devices resulting from a higher total number of customer devices under lease, primarily from customers acquired in the Merger;

• Higher amortization from intangible assets acquired in the Merger.

Depreciation and amortization increased $2.2 billion, or 16%, primarily from:

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

• Accelerated depreciation expense on certain assets due to our Merger integration;

• Higher amortization from intangible assets, primarily due to a full year of amortization of intangible assets acquired in the Merger.

Operating income , the components of which are discussed above, increased $256 million, or 4%.

Interest expense increased $1.8 billion, or 242%, primarily from:

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

• The issuance of an aggregate of $19.0 billion in Senior Secured Notes and the entry into a $4.0 billion secured term loan in April 2020 in connection with the Merger;

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

• The issuance of an aggregate of $8.75 billion in Senior Secured Notes in October 2020.

Interest expense to affiliates decreased $161 million, or 39%, primarily from the redemption of an aggregate of $5.25 billion in Senior Notes to affiliates and the repayment of an aggregate of $4.0 billion in Incremental term loan facility to affiliates in 2020, partially offset by lower capitalized interest.

Other expense, net increased $397 million, primarily from losses on the extinguishment of debt.

Interest expense increased $706 million, or 28%, primarily from:

• Higher average debt outstanding due to debt assumed in the Merger and the issuance of debt;

• Lower capitalized interest;

partially offset by

• A lower average effective interest rate due to refinancing of existing debt at lower rates.

Interest expense to affiliates decreased $74 million, or 30%, primarily from:

• Lower average debt outstanding due to the redemption of debt;

partially offset by

• Lower capitalized interest.

Other expense, net decreased $206 million, or 51%, primarily from lower losses on the extinguishment of debt.

Income from continuing operations before income taxes , the components of which are discussed above, was $3.4 billion and $3.5 billion for the years ended December 31, 2021 and 2020, respectively.

Income tax expense decreased $459 million, or 58%, primarily from:

• Lower income before income taxes;

• A lower effective tax rate, primarily due to changes in state income taxes and excess tax benefits, partially offset by an increase in non-deductible expenses, including certain Merger-related costs.

The effective tax rate was 22.3% and 24.7% for the years ended December 31, 2020 and 2019, respectively.

Income from continuing operations decreased $724 million, or 21%, primarily from:

• Higher Interest expense;

• Higher Other expense, net;

partially offset by

• Higher operating income;

• Lower Income tax expense.

Income from discontinued operations, net of tax was $320 million for the year ended December 31, 2020, and consists of the results of the Prepaid Business that was divested on July 1, 2020.

• 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;

• Lower Income from continuing operations before income taxes;

• Increased benefits from tax credits.

Our effective tax rate was 9.8% and 22.3% for the years ended December 31, 2021 and 2020, respectively.

Income from continuing operations was $3.0 billion and $2.7 billion for the years ended December 31, 2021 and 2020, respectively.

The change in Income from continuing operations was primarily due to the items discussed above.

Income from discontinued operations, net of tax was $320 million for the year ended December 31, 2020 and consisted of the results of the Prepaid Business that was divested on July 1, 2020.

There were no discontinued operations for the year ended December 31, 2021.

For more information regarding the Prepaid Transaction, see Note 12 – Discontinued Operations of the Notes to the Consolidated Financial Statements.

Net income , the components of which are discussed above, decreased $40 million, or 1%, and included the following:

• Merger-related costs, net of tax, of $1.5 billion for the year ended December 31, 2020, compared to $501 million for the year ended December 31, 2019.

• The negative impact of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs, net of tax, of $339 million for the year ended December 31, 2020, compared to no impact for the year ended December 31, 2019.

• Merger-related costs, net of tax, of $2.3 billion for the year ended December 31, 2021, compared to $1.5 billion for the year ended December 31, 2020;

• Impairment expense of $366 million, net of tax, for the year ended December 31, 2020, compared to no impairment expense for the year ended December 31, 2021;

Guarantor Financial Information

On March 2, 2020, the SEC adopted amendments to the financial disclosure requirements for guarantors and issuers of guaranteed securities, as well for affiliates whose securities collateralize a registrant’s securities.

We early adopted the requirements of the amendments on January 1, 2020, which included replacing guarantor condensed consolidating financial information with summarized financial information for the consolidated obligor group (Parent, Issuer, and Guarantor Subsidiaries) and no longer requiring guarantor cash flow information, financial information for non-guarantor subsidiaries, or a reconciliation to the consolidated results.

On April 1, 2020, in connection with the closing of the Merger, we assumed certain registered debt to third parties issued by Sprint, Sprint Communications, Inc.

and Sprint Capital Corporation (collectively, the “Sprint Issuers”).

In connection with our Merger with Sprint, we assumed certain registered debt to third parties issued by Sprint, Sprint Communications LLC, formerly known as Sprint Communications, Inc.

(“Sprint Communications”) and Sprint Capital Corporation (collectively, the “Sprint Issuers”).

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

These revisions to the estimated values did not have a significant impact on our summarized financial information for the consolidated obligor group.

Pursuant to the applicable indentures and supplemental indentures, the long-term debt to affiliates and third parties issued by T-Mobile USA, Inc.

and the Sprint Issuers (collectively, the “Issuers”) is fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by T-Mobile (“Parent”) and certain of Parent’s 100% owned subsidiaries (“Guarantor Subsidiaries”).

Pursuant to the applicable indentures and supplemental indentures, the Senior Notes to affiliates and third parties issued by T-Mobile USA, Inc.

and the Sprint Issuers (collectively, the “Issuers”) are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by T-Mobile (“Parent”) and certain of Parent’s 100% owned subsidiaries (“Guarantor Subsidiaries”).

Pursuant to the applicable indentures and supplemental indentures, the Senior Secured Notes to third parties issued by T-Mobile USA, Inc.

are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Parent and the Guarantor Subsidiaries, except for the Guarantees of Sprint, Sprint Communications and Sprint Capital Corporation, which are provided on a senior unsecured basis.

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

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However, the Issuers or borrowers and Guarantor Subsidiaries are allowed to make certain permitted payments to Parent under the terms of the indentures, supplemental indentures and credit agreements.

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

Simplifying the Accounting for Income Taxes.” The standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

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

Upon the adoption of the standard, deferred tax assets of non-guarantor entities in aggregate of $163 million were reclassified and netted with the deferred tax liabilities of the guarantor obligor group of the debt issued by T-Mobile USA, Inc.

The adoption of this standard did not have a material impact on our consolidated financial statements for the year ended December 31, 2020.

In March 2020, certain Guarantor Subsidiaries became non-Guarantor Subsidiaries.

Certain prior period amounts have been reclassified to conform to the current period’s presentation.

In connection with the preparation of our guarantor financial information for the year ended December 31, 2020, we determined that the summarized balance sheet information and summarized results of operations for the consolidated obligor group of debt issued by T-Mobile USA, Inc., as presented in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020, June 30, 2020, and September 30, 2020, should be adjusted to exclude investments in non-guarantor subsidiaries and the related equity method income from non-guarantor subsidiaries as of and for the year-to-date periods ending December 31, 2019, March 31, 2020, June 30, 2020 and September 30, 2020.

We also determined the summarized balance sheet information

and summarized results of operations for the consolidated obligor groups of debt issued by Sprint, Sprint Communications, Inc.

and Sprint Capital Corporation, as presented in our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2020, and September 30, 2020, should be adjusted as well to exclude investments in their respective non-guarantor subsidiaries for the year-to-date periods ending June 30, 2020 and September 30, 2020.

Therefore, we have updated the historical summarized financial information for these periods and obligor groups as set forth below.

This adjustment does not impact the Consolidated Financial Statements for any quarterly or annual periods and does not impact guarantor financial information filed prior to our adoption of the new disclosure requirements for guarantors and issuers of guaranteed securities on January 1, 2020.

Basis of Presentation

The following tables include summarized financial information of the obligor groups of debt issued by T-Mobile USA, Inc., Sprint, Sprint Communications, Inc., and Sprint Capital Corporation.

The following tables include summarized financial information of the obligor groups of debt issued by T-Mobile USA, Inc., Sprint, Sprint Communications and Sprint Capital Corporation.

The summarized financial information of each obligor group is presented on a combined basis with balances and transactions within the obligor group eliminated.

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is presented in the table below:

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

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

Current assets $ 19,522 $ 22,638

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Due to non-guarantors 8,208 7,433

Due from non-guarantors 358 — — — 346

Due to related parties 3,842 4,873

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is presented in the table below:

Three Months Ended

March 31, 2020 Six Months Ended

June 30, 2020 Nine Months Ended

September 30, 2020 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2021

Year Ended December 31, 2020

(in millions)

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Other expense to non-guarantors (148) (114)

The summarized balance sheet information for the consolidated obligor group of debt issued by Sprint and Sprint Communications, Inc.

is presented in the table below:

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

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

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

Current assets $ 11,969 $ 2,646

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Due from related parties 27 —

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

June 30, 2020 Six Months Ended

September 30, 2020 Nine Months Ended December 31, 2020

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

Year Ended December 31, 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) June 30, 2020 September 30, 2020 December 31, 2020

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

Current assets $ 11,969 $ 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

June 30, 2020 Six Months Ended

September 30, 2020 Nine Months Ended December 31, 2020

Year Ended December 31, 2021 Nine Months Ended December 31, 2020

(in millions)

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Other income, net, from non-guarantors 2,076 1,085

Affiliates Whose Securities Collateralize the Senior Secured Notes

For a description of the collateral arrangements relating to securities of affiliates that collateralize the Senior Secured Notes, please refer to the section entitled “Affiliates Whose Securities Collateralize the Notes and the Guarantees” in the Company’s Registration Statement on Form S-4/A filed with the SEC on April 21, 2021, which section is incorporated herein by reference.

The assets, liabilities and results of operations of the combined affiliates whose securities are pledged as Collateral are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company.

Performance Measures

In managing our business and assessing financial performance, we supplement the information provided by our financial statements with other operating or statistical data and non-GAAP financial measures.

In managing our business and assessing financial performance, we supplement the information provided by our consolidated financial statements with other operating or statistical data and non-GAAP financial measures.

These operating and financial measures are utilized by our management to evaluate our operating performance and, in certain cases, our ability to meet liquidity requirements.

Although companies in the wireless industry may not define each of these measures in precisely the same way, we believe that these measures facilitate comparisons with other companies in the wireless industry on key operating and financial measures.

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.

The performance measures presented below include the impact of the Merger on a prospective basis from the close date of April 1, 2020 and the impact of the acquisition of the Wireless Assets from Shentel on a prospective basis from the close date of July 1, 2021.

Historical results prior to the respective close dates 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.

Customers are qualified either for postpaid service utilizing phones, wearables, DIGITS or other connected devices, which include tablets and SyncUp products, where they generally pay after receiving service, or prepaid service, where they generally pay in advance of receiving service.

Our postpaid customers include customers of T-Mobile.

Our prepaid customers include customers of T-Mobile and Metro by T-Mobile.

Customers are qualified either for postpaid service utilizing phones, High Speed Internet, wearables, DIGITS or other connected devices, which include tablets and SyncUp products, where they generally pay after receiving service, or prepaid service, where they generally pay in advance of receiving service.

The following table sets forth the number of ending customers:

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Total customers 108,719 102,064 67,894 6,655 7 % 34,170 50 %

Adjustment to prepaid customers (2)

Acquired customers, net of base adjustments (1)(2)

818 29,228 (616) (28,410) (97) % 29,844 NM

NM - Not Meaningful

(1) Includes customers acquired in connection with the Merger and certain customer base adjustments.

See Customer Base Adjustments and Net Customer Additions tables below.

(2) On July 18, 2019, we entered into an agreement whereby certain T-Mobile prepaid products will now be offered and distributed by a current MVNO partner.

As a result, we included a base adjustment in the third quarter of 2019 to reduce prepaid customers by 616,000.

(2) In the first quarter of 2021, we acquired 11,000 postpaid phone customers and 1,000 postpaid other customers through our acquisition of an affiliate.

In the third quarter of 2021, we acquired 716,000 postpaid phone customers and 90,000 postpaid other customers through our acquisition of the Wireless Assets from Shentel.

NM - Not Meaningful

Total customers increased 6,655,000, 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 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;

partially offset by

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

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

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

• 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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Postpaid other customers 2,578 3,268 1,394 (690) (21) % 1,874 134 %

Total postpaid customers 5,486 4,515 4,459 971 22 % 56 1 %

Total postpaid customers 5,495 5,486 4,515 9 NM 971 22 %

Prepaid customers 342 145 339 197 136 % (194) (57) %

145 339 460 (194) (57) % (121) (26) %

Total customers 5,837 5,631 4,854 206 4 % 777 16 %

Acquired customers, net of base adjustments 29,228 — — 29,228 NM — NM

Acquired customers, net of base adjustments 818 29,228 (616) (28,410) (97) % 29,844 NM

NM - Not Meaningful

(1) On July 18, 2019, we entered into an agreement whereby certain T-Mobile prepaid products will now be offered and distributed by a current MVNO partner.

As a result, we included a base adjustment in the third quarter of 2019 to reduce prepaid customers by 616,000.

Total net customer additions increased 206,000, or 4%, primarily from:

• Higher postpaid other net customer additions, primarily due to higher gross additions from connected devices, primarily due to public and educational sector additions and lower churn, partially offset by lower switching activity in the industry from reduced store traffic due to retail store closures arising from the Pandemic;

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

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

partially offset by

• Lower postpaid phone net customer additions, primarily due to higher churn from customers acquired in the Merger and lower switching activity in the industry from reduced store traffic due to retail store closures arising from the Pandemic;

• Lower prepaid gross customer additions, partially offset by lower churn, both primarily due to lower switching activity in the industry from reduced store traffic due to retail store closures arising from the Pandemic.

Churn represents the number of customers whose service was disconnected as a percentage of the average number of customers during the specified period.

• 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 and higher disconnects from an increased customer base, partially offset by growth in High Speed Internet.

High Speed Internet net customer additions were 546,000 and 87,000 for the years ended December 31, 2021 and 2020, respectively.

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.

The number of customers whose service was disconnected is presented net of customers that subsequently have their service restored within a certain period of time.

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Prepaid churn 2.83 % 3.03 % 3.82 % -20 bps -79 bps

Postpaid phone churn was essentially flat, primarily due to the inclusion of the customer base acquired in the Merger with higher churn, offset by lower switching activity in the industry due to reduced store traffic due to temporary retail store closures arising from the Pandemic.

Prepaid churn decreased 79 basis points, primarily due to lower switching activity in the industry due to reduced store traffic due to temporary retail store closures arising from the Pandemic and the continued success of our prepaid products due to promotional activities and rate plan offers.

Postpaid phone churn increased 8 basis points, primarily from:

• Higher churn from customers acquired in the Merger;

• More normalized switching activity relative to the muted Pandemic-driven conditions a year ago.

Prepaid churn decreased 20 basis points, primarily from:

• Promotional activity;

• Improved quality of recently acquired customers.

Total Postpaid Accounts

A postpaid account is generally defined as a billing account number that generates revenue.

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

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

As of December 31, 2021 Versus 2020 2020 Versus 2019

(in thousands) 2021 2020 2019 # Change % Change # Change % Change

Accounts, end of period

Total postpaid customer accounts (1)(2)

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See Account Base Adjustments table below.

Total postpaid customer accounts increased 10,707,000, 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, along with promotional activities, improvements in network quality and industry-leading customer service, partially offset by lower switching activity in the industry from reduced store traffic due to retail store closures resulting from the Pandemic.

(2) In the first quarter of 2021, we acquired 4,000 postpaid accounts through our acquisition of an affiliate.

In the third quarter of 2021, we acquired 270,000 postpaid accounts through our acquisition of the Wireless Assets of Shentel.

Total postpaid customer accounts increased 1,462,000, or 6%, primarily due to the continued success of new customer segments and rate plans, continued growth in existing and new markets, including our High Speed Internet product, along with targeted promotional activity and increased retail store traffic compared to the prior period due to closures arising from the Pandemic.

Account Base Adjustments

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(2) Prepaid accounts with a customer with a device installment billing plan historically included as Sprint postpaid accounts have been reclassified to prepaid accounts to align with T-Mobile policy.

(3) Accounts with customers who have rate plans with monthly recurring charges which are considered insignificant have been excluded from our reported accounts.

(3) Accounts with customers who have rate plans with monthly recurring charges that are considered insignificant have been excluded from our reported accounts.

(4) Certain Sprint accounts subject to collection activity for an extended period of time have been excluded from our reported accounts to align with T-Mobile policy.

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

Postpaid Net Account Additions

The following table sets forth the number of postpaid net account additions:

As of December 31, 2021 Versus 2020 2020 Versus 2019

(in thousands) 2021 2020 2019 # Change % Change # Change % Change

Postpaid net account additions 1,188 566 1,018 622 110 % (452) (44) %

Postpaid net account additions increased 622,000, or 110%, primarily due to the continued success of new customer segments

and rate plans, continued growth in existing and new markets, including our High Speed Internet product, along with targeted promotional activity and increased retail store traffic compared to the prior period due to closures arising from the Pandemic.

Average Revenue Per User

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We believe ARPU provides management, investors and analysts with useful information to assess and evaluate our service revenue per customer and assist in forecasting our future service revenues generated from our customer base.

Postpaid phone ARPU excludes postpaid other customers and related revenues, which include wearables, DIGITS and other connected devices such as tablets and SyncUp products.

Postpaid phone ARPU excludes postpaid other customers and related revenues, which include High Speed Internet, wearables, DIGITS and other connected devices such as tablets and SyncUp products.

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

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Average number of postpaid phone customers (in thousands) and number of months in period 68,327 59,249 38,602 9,078 15 % 20,647 53 %

Postpaid phone ARPU $ 47.74 $ 46.04 $ 46.40 $ 1.70 4 % $ (0.36) (1) %

Postpaid phone ARPU $ 47.75 $ 47.74 $ 46.04 $ 0.01 NM $ 1.70 4 %

Calculation of Prepaid ARPU

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Prepaid ARPU $ 38.79 $ 38.12 $ 37.95 $ 0.67 2 % $ 0.17 — %

NM - Not Meaningful

Postpaid Phone ARPU

Postpaid phone ARPU increased $1.70, or 4%, primarily due to:

Postpaid phone ARPU was essentially flat and was primarily impacted by:

• Higher premium services, including Magenta Max;

• 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;

• Promotional activity;

• The impact of the transition of Sprint customers to tax-inclusive rate plans.

Prepaid ARPU increased $0.67, or 2%, primarily due to:

• Higher premium services;

• Higher revenues due to improved rate plan mix;

partially offset by

• An increase in our promotional activities.

Prepaid ARPU was essentially flat and was primarily impacted by:

• The impacts of certain adjustments to our customer base, including the removal of certain prepaid customers associated with products now offered and distributed by a current MVNO partner as those customers had lower ARPU;

• Dilution from promotional rate plans;

• A reduction in certain non-recurring charges.

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We believe postpaid ARPA provides management, investors and analysts with useful information to assess and evaluate our postpaid service revenue realization and assist in forecasting our future postpaid service revenues on a per account basis.

We consider postpaid ARPA to be indicative of our revenue growth potential given the increase in the average number of postpaid phone customers per account and increases in postpaid other customers, including wearables, DIGITS or other connected devices, which include tablets and SyncUp products.

We consider postpaid ARPA to be indicative of our revenue growth potential given the increase in the average number of postpaid phone customers per account and increases in postpaid other customers, including High Speed Internet, wearables, DIGITS or other connected devices, which include tablets and SyncUp products.

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

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Postpaid ARPA $ 134.03 $ 131.78 $ 130.43 $ 2.25 2 % $ 1.35 1 %

Postpaid ARPA

Postpaid ARPA increased $1.35, or 1%, primarily due to:

• An increase in customers per account, including further penetration in connected devices, and the success of new customer segments and rate plans;

• Higher premium service revenues;

• The net impact of customers acquired in the Merger;

Postpaid ARPA increased $2.25, or 2%, primarily from:

• An increase in customers per account;

• Higher premium services, including Magenta Max;

partially offset by

• An increase in our promotional activities;

• A reduction in certain non-recurring charges, including from the impact of the Pandemic.

Adjusted EBITDA

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

Net income margin represents Net income divided by Service revenues.

• Promotional activity.

Adjusted EBITDA and Core Adjusted EBITDA

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.

Adjusted EBITDA margin represents Adjusted EBITDA divided by Service revenues.

Adjusted EBITDA is a non-GAAP financial measure 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, and as a benchmark to evaluate our operating performance in comparison to our competitors.

Management believes analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate overall operating performance and facilitate comparisons with other wireless communications services companies because it is indicative of our ongoing operating performance and trends by excluding the impact of interest expense from financing, non-cash depreciation and amortization from capital investments, non-cash stock-based compensation, Merger-related costs including network decommissioning costs, incremental costs directly attributable to COVID-19 and impairment expense, as they are not indicative of our ongoing operating performance, as well as certain other nonrecurring income and expenses.

Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for income from operations, net income or any other measure of financial performance reported in accordance with U.S.

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

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.

We use Adjusted EBITDA and Core Adjusted EBITDA as benchmarks to evaluate our operating performance in comparison to our competitors.

Management believes analysts and investors use Adjusted EBITDA and Core Adjusted EBITDA as supplemental measures to evaluate overall operating performance and facilitate comparisons with other wireless communications services companies because they are indicative of our ongoing operating performance and trends by excluding the impact of interest expense from financing, non-cash depreciation and amortization from capital investments, stock-based compensation, Merger-related costs including network decommissioning costs and incremental costs directly attributable to the Pandemic, as they are not indicative of our ongoing operating performance, as well as certain other nonrecurring income and expenses.

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, 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 reconciles Adjusted EBITDA to Net income, which we consider to be the most directly comparable GAAP financial measure:

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:

Year Ended December 31, 2021 Versus 2020 2020 Versus 2019

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Net income $ 3,024 $ 3,064 $ 3,468 $ (40) (1) % $ (404) (12) %

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

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

Income from continuing operations 3,024 2,744 3,468 280 10 % (724) (21) %

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Operating income from discontinued operations (1)

432 — — 432 NM — NM

— 432 — (432) (100) % 432 NM

Stock-based compensation (2)

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Merger-related costs 3,107 1,915 620 1,192 62 % 1,295 209 %

COVID-19-related costs 458 — — 458 NM — NM

Impairment expense 418 — — 418 NM — NM

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

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

Other, net (3)

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Adjusted EBITDA 26,924 24,557 13,383 2,367 10 % 11,174 83 %

Lease revenues (3,348) (4,181) (599) 833 (20) % (3,582) 598 %

Core Adjusted EBITDA

$ 23,576 $ 20,376 $ 12,784 $ 3,200 16 % $ 7,592 59 %

Net income margin (Net income divided by Service revenues) 5 % 6 % 10 % -100 bps -400 bps

Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues) 46 % 49 % 39 % -300 bps 1000 bps

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

40 % 40 % 37 % — bps 300 bps

NM - Not Meaningful

(1) Following the Prepaid Transaction starting on July 1, 2020, we provide MVNO services to DISH.

We have included the operating income from discontinued operations from April 1, 2020 through June 30, 2020, in our determination of Adjusted EBITDA to reflect contributions of the Prepaid Business that were replaced by the MVNO Agreement beginning on July 1, 2020 in order to enable management, analysts and investors to better assess ongoing operating performance and trends.

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

We have included the operating income from April 1, 2020 through June 30, 2020, in our determination of Adjusted EBITDA to reflect contributions of the Prepaid Business that were replaced by the MVNO Agreement beginning on July 1, 2020 in order to enable management, analysts and investors to better assess ongoing operating performance and trends.

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

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

(3) Other, net may not agree to the 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.

Adjusted EBITDA increased $11.2 billion, or 83%.

The components comprising Adjusted EBITDA are discussed further above.

(3) Other, net may not agree with the 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 $3.2 billion, or 16%, for the year ended December 31, 2021.

The components comprising Core Adjusted EBITDA are discussed further above.

The increase was primarily due to:

• Higher Total service revenues;

• Higher Equipment revenues;

• Higher Equipment revenues, excluding Lease revenues;

partially offset by

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

• Higher Cost of equipment sales;

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

• Higher Cost of services, 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.

Adjusted EBITDA increased $2.4 billion, or 10%, for the year ended December 31, 2021.

The change was primarily due to the increase in Core Adjusted EBITDA, discussed above, partially offset by a decrease of Lease revenues of $833 million for the year ended December 31, 2021.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents and cash generated from operations, proceeds from issuance of long-term debt and common stock, financing leases, the sale of certain receivables, financing arrangements of vendor payables which effectively extend payment terms and the New Revolving Credit Facility (as defined below).

In connection with the closing of the Merger on April 1, 2020, we incurred a substantial amount of additional third-party indebtedness which increased our future financial commitments, including aggregate interest payments.

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.

See “Risk Factors - Risks Related to Our Indebtedness.”

The following is a condensed schedule of our cash flows for the years ended December 31, 2020, 2019 and 2018:

Our principal sources of liquidity are our cash and cash equivalents and cash generated from operations, proceeds from issuance of debt and common stock, financing leases, the sale of certain receivables, financing arrangements of vendor payables which effectively extend payment terms and the Revolving Credit Facility (as defined below).

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:

Year Ended December 31, 2021 Versus 2020 2020 Versus 2019

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Net cash provided by operating activities increased $5.3 billion, or 61%, primarily from:

• Higher Net income, excluding non-cash income and expenses;

partially offset by

• A $6.3 billion increase 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 year ended December 31, 2020, included in the use of cash from Other current and long-term liabilities, as well as higher use of cash from Accounts payable and accrued liabilities and Inventories.

• Net cash provided by operating activities includes $1.5 billion and $442 million in payments for Merger-related costs for the years ended December 31, 2020 and 2019, respectively.

• Net cash provided by operating activities includes $458 million in payments for supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs for the year ended December 31, 2020.

• A $4.8 billion decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Accounts payable and accrued liabilities and Inventories, the one-time impact of $2.3 billion in gross payments for the settlement of interest rate swaps related to Merger financing for the year ended December 31, 2020, included in the use of cash from Other current and long-term liabilities, as well as lower use of cash from Operating lease right-of-use assets, partially offset by higher use of cash from Equipment installment plan receivables and Short- and long-term operating lease liabilities, including a $1.0 billion advance rent payment related to the modification of one of our master lease agreements;

• A $506 million increase in Net income, adjusted for non-cash income and expense.

• Net cash provided by operating activities includes $2.2 billion and $1.5 billion in payments for Merger-related costs for the years ended December 31, 2021 and 2020, respectively.

Investing Activities

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• $12.3 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;

• $5.0 billion in cash paid for the acquisition of Sprint, net of cash and restricted cash acquired;

• $1.3 billion in Purchases of spectrum licenses and other intangible assets, including deposits;

• $9.4 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;

• $1.9 billion in Acquisitions of companies, primarily due to our acquisition of the Wireless Assets from Shentel;

partially offset by

• $4.1 billion in Proceeds related to beneficial interests in securitization transactions.

• $1.2 billion in Proceeds from the divestiture of prepaid business;

• $632 million related to derivative contracts under collateral exchange arrangements, for more information regarding these contracts, see Note 7 - Fair Value Measurements of the Notes to the Consolidated Financial Statements.

Financing Activities

Net cash provided by (used in) financing activities increased $15.4 billion.

Net cash provided by financing activities decreased $11.3 billion, or 87%.

The source of cash was primarily from:

• $35.3 billion in Proceeds from the issuance of long-term debt, net of discounts and issuance costs, driven primarily by the issuance of $31.8 billion in Senior Secured Notes and a draw of $4.0 billion on the New Secured Term Loan Facility;

• $18.7 billion in Proceeds from the issuance of short-term debt, net of discounts and issuance costs, driven by a $19.0 billion draw on the New Secured Bridge Loan Facility in connection with the closing of the Merger;

• $304 million in net proceeds from the SoftBank Equity transaction, see Note 14 - SoftBank Equity Transaction of the Notes to the Consolidated Financial Statements;

• $14.7 billion in Proceeds from issuance of long-term debt, net of issuance costs;

partially offset by

• $20.4 billion in Repayments of long-term debt driven by the repayment of $5.3 billion aggregate principal amount of Senior Notes held by DT, our $4.0 billion Incremental Term Loan Facility with DT, our $4.0 billion New Secured Term Loan Facility, $2.3 billion of outstanding principal for the termination of the accounts receivable facility assumed in the Merger, $4.2 billion aggregate principal amount of Senior Notes held by third parties and $656 million

aggregate principal amount of our 3.360% Senior Secured Series 2016-1 A-1 Notes due 2021;

• $18.9 billion in Repayments of short-term debt, net of refunds for issuance costs, for the repayment of the $19.0 billion draw on the New Secured Bridge Loan Facility;

• $11.1 billion in Repayments of long-term debt;

• $1.1 billion in Repayments of financing lease obligations;

• $316 million in Tax withholdings on share-based awards.

Cash and Cash Equivalents

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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.

The table below provides reconciliations of 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.

In 2021 and 2019, we sold tower sites for proceeds of $40 million and $38 million, respectively, which are included in Proceeds from sales of tower sites within Net cash used in investing activities on our 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.

Year Ended December 31, 2021 Versus 2020 2020 Versus 2019

(in millions) 2020 2019 2018 $ % $ Change % Change

(in millions) 2021 2020 2019 $ Change % Change $ Change % Change

Net cash provided by operating activities $ 13,917 $ 8,640 $ 6,824 $ 5,277 61 % $ 1,816 27 %

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Free Cash Flow 5,646 658 4,319 4,988 758 % (3,661) (85) %

Gross cash paid for the settlement of interest rate swaps 2,343 — — 2,343 NM — NM

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

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps $ 5,646 $ 3,001 $ 4,319 $ 2,645 88 % $ (1,318) (31) %

NM - Not Meaningful

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps related to Merger financing, decreased $1.3 billion, or 31%.

The decrease was primarily impacted by the following:

• Higher Cash purchases of property and equipment, including capitalized interest of $440 million and $473 million for the years ended December 31, 2020 and 2019, respectively, from network integration related to the Merger and the continued build-out of our nationwide 5G network;

• Lower Proceeds related to our deferred purchase price from securitization transactions;

partially offset by

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, increased $2.6 billion, or 88%.

The increase was primarily impacted by the following:

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

Net cash provided by operating activities was impacted by the following:

• $1.5 billion and $442 million in payments for Merger-related costs for the years ended December 31, 2020 and 2019, respectively.

• $458 million in payments for supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs for the year ended December 31, 2020.

• 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.

• Higher Proceeds related to beneficial interests in securitization transactions;

partially offset by

• Higher Cash purchases of property and equipment, including capitalized interest.

• Free Cash Flow, excluding gross payments for settlement of interest rate swaps, includes $2.2 billion and $1.5 billion in payments for Merger-related costs for the years ended December 31, 2021 and 2020, respectively.

Borrowing Capacity

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

Additionally, we assumed financial liabilities with certain vendors in connection with the closing of the Merger and incurred additional financial liabilities with DISH at the closing of the Prepaid Transaction.

During the year ended December 31, 2020, we repaid $481 million associated with the vendor financing arrangements and other financial liabilities, of which $342 million was associated with financial liabilities assumed in connection with the closing of the Merger.

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

As of December 31, 2020 and 2019, the outstanding balance under the vendor financing arrangements and other financial liabilities was $240 million and $25 million, respectively.

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

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

On October 9, 2020, we repaid at par all of the outstanding amounts under, and terminated, our New Secured Term Loan Facility.

As of December 31, 2020, there was no outstanding balance under the New Revolving Credit Facility.

During the year ended December 31, 2021, we repaid $184 million, 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, on our Consolidated Statements of Cash Flows.

As of December 31, 2021 and December 31, 2020, the outstanding balance under the vendor financing arrangements and other financial liabilities was $47 million and $240 million, respectively, of which $0 and $122 million, respectively, was assumed in connection with the closing of the Merger.

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

As of December 31, 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.

Subsequent to December 31, 2020, on January 14, 2021, we issued an aggregate of $3.0 billion in Senior Notes.

On January 14, 2021, we issued an aggregate of $3.0 billion of Senior Notes.

The senior secured term loan commitment was reduced by an amount equal to the aggregate gross proceeds of the Senior Notes, which reduced the commitment to $2.0 billion.

Up to $2.0 billion of loans under the commitment may be drawn at any time (subject to customary conditions precedent) through June 30, 2021.

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

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

On March 23, 2021, we issued an aggregate of $3.8 billion of Senior Notes.

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

Debt Financing

As of December 31, 2021, our total debt and financing lease liabilities were $76.8 billion, excluding our tower obligations, of which $68.6 billion was classified as long-term debt and $1.5 billion was classified as long-term financing lease liabilities.

During the year ended December 31, 2020, we issued short- and long-term debt for net proceeds of $54.2 billion and redeemed and repaid short- and long-term debt with an aggregate principal amount of $39.9 billion.

Additionally, in connection with the closing of the Merger, we assumed certain indebtedness of Sprint totaling $31.8 billion.

On October 6, 2020, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate of $4.0 billion in Senior Secured Notes bearing interest rates ranging from 2.050% to 3.300% and maturing in 2028 through 2051.

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

On October 28, 2020, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate of $4.75 billion in Senior Secured Notes bearing interest rates ranging from 2.250% to 3.600% and maturing in 2031 through 2060.

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

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

Subsequent to December 31, 2020, on January 14, 2021, T-Mobile USA 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.

We intend to use the net proceeds of $3.0 billion for general corporate purposes, which may include among other things, financing acquisitions of additional spectrum and refinancing existing indebtedness on an ongoing basis.

A portion of the senior secured term loan commitments were reduced by an amount equal to the aggregate gross proceeds of the Senior Notes, which reduced the commitment to $2.0 billion.

Up to $2.0 billion of loans under the commitment may be drawn at any time (subject to customary conditions precedent) through June 30, 2021.

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

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

During the year ended December 31, 2021, we issued long-term debt for net proceeds of $14.7 billion and redeemed and repaid short- and long-term debt with an aggregate principal amount of $11.3 billion.

For more information regarding our debt financing transactions, see Note 8 – Debt of the Notes to the Consolidated Financial Statements.

Spectrum Auction

In March 2020, the FCC announced that we were the winning bidder of 2,384 licenses in Auction 103 (37/39 GHz and 47 GHz spectrum bands) for an aggregate price of $873 million, net of an incentive payment of $59 million.

At the inception of Auction 103 in October 2019, we deposited $82 million with the FCC.

Upon conclusion of Auction 103 in March 2020, we made a down payment of $93 million for the purchase price of the licenses won in the auction.

On April 8, 2020, we paid the FCC the remaining $698 million of the purchase price for the licenses won in the auction.

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

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

Spectrum Auctions

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

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

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

We expect to incur an additional $1.0 billion in relocation costs which will be paid through 2024.

In January 2022, the FCC announced that we were the winning bidder of 199 licenses in Auction 110 (mid-band spectrum) for an aggregate purchase price of $2.9 billion.

At the inception of Auction 110 in September 2021, we deposited $100 million.

We paid the FCC the remaining $2.8 billion for the licenses won in the auction in the first quarter of 2022.

For more information regarding our spectrum licenses, see Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements.

Interest Rate Lock Derivatives

In April 2020, in connection with the issuance of an aggregate of $19.0 billion in Senior Secured Notes, we terminated our interest rate lock derivative.

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

Consequently, the net cash required to settle the interest rate lock derivatives was an additional $1.1 billion and was paid at termination.

For more information regarding the termination of our interest rate lock derivative, see Note 7 - Fair Value Measurements of the Notes to the Consolidated Financial Statements.

Shentel Wireless Assets Acquisition

On July 1, 2021, we closed on the acquisition of the Wireless Assets 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 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 December 31, 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 Consolidated Financial Statements.

Future Sources and Uses of Liquidity

We may seek additional sources of liquidity, including through the issuance of additional long-term debt in 2021, to continue to opportunistically acquire spectrum licenses or other assets in private party transactions or for the refinancing of existing long-term debt on an opportunistic basis.

We may seek additional sources of liquidity, including through the issuance of additional debt in 2022, to continue to opportunistically acquire spectrum licenses or other assets in private party transactions or for the refinancing of existing long-term debt on an opportunistic basis.

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.

Our intended use of any such funds is for general corporate purposes, including for capital expenditures, spectrum purchases, opportunistic investments and acquisitions, redemption of debt, tower obligations 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.

We regularly review and update these projections for changes in current and projected financial and operating results, general economic conditions, the competitive landscape and other factors.

We have incurred, and will incur, substantial expenses as a result of completing the Transactions, the Divestiture Transaction and compliance with the Government Commitments, and we are also expected to incur substantial restructuring expenses in connection with integrating and coordinating T-Mobile’s and Sprint’s businesses, operations, policies and procedures.

We have incurred, and will incur, substantial expenses to comply with the Government Commitments, and we are also expected to incur substantial restructuring expenses in connection with integrating and coordinating T-Mobile’s and Sprint’s businesses, operations, policies and procedures.

See “Restructuring” of this MD&A.

While we have assumed that a certain level of Merger-related expenses will be incurred, factors beyond our control, including required consultation and negotiation with certain counterparties, could affect the total amount or the timing of these expenses.

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There are a number of additional risks and uncertainties, including those due to the impact of the Pandemic, that could cause our financial and operating results and capital requirements to differ materially from our projections, which could cause future liquidity to differ materially from our assessment.

See “Risk Factors - Risk Related to our

Business and Wireless Industry - The Pandemic has adversely affected, and will continue to adversely affect, our business, liquidity, financial condition, and operating results.”

The indentures, supplemental indentures and credit agreements governing our long-term debt to affiliates and third parties, excluding financing leases, 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 on our common stock, 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.

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

In connection with the closing of the Merger, on April 1, 2020, we assumed Sprint’s liabilities, which include accounts payable and accrued liabilities, short-term debt, operating and financing lease liabilities, net pension plan liabilities, deferred tax liabilities and long-term debt with an aggregate fair value of $31.8 billion.

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

Shentel Wireless Asset Acquisition

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

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

On August 26, 2020, Sprint, now our 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 (the “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.

Subsequent to December 31, 2020, on February 1, 2021, in accordance with the Management Agreement and other agreed-upon terms, the Valuation Providers determined and calculated the Entire Business Value of Shentel’s wireless telecommunications assets used to provide services pursuant to the Management Agreement 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 second quarter of 2021 after satisfying customary conditions to closing.

Financing Lease Facilities

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Our liquidity requirements have been driven primarily by capital expenditures for spectrum licenses, the construction, expansion and upgrading of our network infrastructure and the integration of the networks, spectrum, technology, personnel, customer base and business practices of T-Mobile and Sprint.

Property and equipment capital expenditures primarily relate to the integration of our acquired Sprint 2.5 GHz spectrum licenses and existing 600 MHz spectrum licenses as we build out our

nationwide 5G network.

We expect the majority of our remaining capital expenditures related to these efforts to occur in 2021 and 2022, after which we expect capital expenditure requirements to reduce.

Property and equipment capital expenditures primarily relate to the integration of our network and spectrum licenses, including acquired Sprint PCS and 2.5 GHz spectrum licenses and existing 600 MHz spectrum licenses as we build out our nationwide 5G network.

We expect the majority of our remaining capital expenditures related to these efforts to occur in 2022, after which we currently expect a reduction in capital expenditure requirements.

We expect cash purchases of property and equipment to range from $13.0 billion to $13.5 billion in 2022.

For more information regarding our property and equipment and spectrum licenses, see Note 5 – Property and Equipment and Note 6 - Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements, respectively.

We have never paid or declared any cash dividends on our common stock, and we do not intend to declare or pay any cash dividends on our common stock in the foreseeable future.

Our credit facilities and the indentures and supplemental indentures governing our long-term debt to affiliates and third parties, excluding financing leases, contain covenants that, among other things, restrict our ability to declare or pay dividends on our common stock.

For more information regarding our spectrum licenses, see Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements.

Stockholder Returns

We have never declared or paid any cash dividends on our common stock, and we do not intend to declare or pay any cash dividends on our common stock in the foreseeable future.

We may use excess cash to repurchase shares of our common stock, subject to, among other things, approval by the Board of Directors and our sufficient access to sources liquidity, including potentially debt capital markets.

Contractual Obligations

In connection with the regulatory approvals of the Transactions, we made commitments to various state and federal agencies, including the U.S.

Department of Justice’s (the “DOJ”) and FCC.

Department of Justice (the “DOJ”) and FCC.

For more information regarding these commitments, see Note 1 7 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements.

The contractual commitments and purchase obligations of Sprint were assumed upon the completion of the Merger.

These contractual commitments and purchase obligations are primarily commitments to purchase wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary course of business.

For more information regarding our contractual commitments and purchase obligations, see Note 1 8 - Commitments and Contingencies of the Notes to the Consolidated Financial Statements.

The following table summarizes our contractual obligations and borrowings as of December 31, 2020, and the timing and effect that such commitments are expected to have on our liquidity and capital requirements in future periods:

The following table summarizes our material contractual obligations and borrowings as of December 31, 2021, and the timing and effect that such commitments are expected to have on our liquidity and capital requirements in future periods:

(in millions) Less Than 1 Year 1 - 3 Years 4 - 5 Years More Than 5 Years Total

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Other long-term liabilities have been omitted from the table above due to the uncertainty of the timing of payments, combined with the lack of historical trends to predict future payments.

See Note 20 – Additional Financial Information of the Notes to the Consolidated Financial Statements for further information.

The purchase obligations reflected in the table above are primarily commitments to purchase spectrum licenses, wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary course of business.

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The acquisition of spectrum licenses is subject to regulatory approval and other customary closing conditions.

Subsequent to December 31, 2021, on January 3, 2022, we entered into an agreement (the “Crown Agreement”) with Crown Castle International Corp that will enable us to lease towers from CCI through December 2033, followed by optional renewals.

The Crown Agreement amends the pricing for our non-dedicated transportation lines, which includes lit fiber backhaul and small cell circuits.

We have committed to an annual volume commitment to execute and deliver 35,000 small cell contracts, including upgrades to existing locations, over the next five years.

The minimum commitment for small cells is $1.8 billion through 2039.

Related Party Transactions

On February 20, 2020, T-Mobile, SoftBank and DT entered into a Letter Agreement as described in Note 2 - Business Combination .

The Letter Agreement requires T-Mobile to issue to SoftBank 48,751,557 shares of T-Mobile common stock, subject to the terms and conditions set forth in the Letter Agreement, for no additional consideration, if certain conditions are met.

As of December 31, 2020, DT and SoftBank held, directly or indirectly, approximately 43.4% and 8.6%, respectively, of our outstanding common stock, with the remaining approximately 48.0% of our outstanding common stock held by other stockholders.

As a result of the Proxy Agreements, DT has voting control as of December 31, 2020, over approximately 52.3% of the outstanding T-Mobile common stock.

In addition, as provided for in the Master Framework Agreement, DT also holds certain call options over approximately 101.5 million shares of our common stock held by SoftBank Group Capital Ltd., a wholly owned subsidiary of SoftBank.

On July 27, 2020, in connection with the SoftBank Monetization, the Rights Offering exercise period closed, and on August 3, 2020, the Rights Offering closed, resulting in the sale of 19,750,000 shares of our common stock.

For more information regarding our related party transactions with SoftBank, see Note 2 - Business Combination and Note 14 - SoftBank Equity Transaction of the Notes to the Consolidated Financial Statements.

Marcelo Claure

On June 22, 2020, we entered into a Master Framework Agreement which provided for the purchase of shares of our common stock by Marcelo Claure, a member of our board of directors, from us at a specified price.

For more information regarding our related party transactions with Marcelo Claure, see Note 14 - SoftBank Equity Transaction of the Notes to the Consolidated Financial Statements.

We had arrangements with Brightstar, a subsidiary of SoftBank, whereby Brightstar provided supply chain and inventory management services to us in our indirect channels.

For more information regarding our related party transactions with Brightstar, see Note 1 - Summary of Significant Accounting Policies and Note 20 - Additional Financial Information of the Notes to the Consolidated Financial Statements.

Deutsche Telekom

We have related party transactions associated with DT or its affiliates in the ordinary course of business, including intercompany servicing and licensing.

For more information regarding these transactions, see Note 20 - Additional Financial Information of the Notes to the Consolidated Financial Statements.

On April 1, 2020, in connection with the closing of the Merger, we repaid our $4.0 billion Incremental Term Loan Facility with DT and repurchased from DT $4.0 billion of indebtedness to affiliates, consisting of $2.0 billion of 5.300% Senior Notes due

2021 and $2.0 billion of 6.000% Senior Notes due 2024 as well as made an additional payment for requisite consents to DT of $13 million.

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

For more information regarding our related party debt transactions, see Note 8 - Debt of the Notes to the Consolidated Financial Statements.

We have related party transactions associated with DT, SoftBank or their affiliates in the ordinary course of business, including intercompany servicing and licensing.

See Note 1 9 – Additional Financial Information of the Notes to the Consolidated Financial Statements for further information.

Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934

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In addition, during the year ended December 31, 2021, DT, through certain of its non-U.S.

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

Department of Treasury’s Office of Foreign Assets Control:

Bank Melli, Bank Sepah, and Europäisch-Iranische Handelsbank.

Bank Melli and Europäisch-Iranische Handelsbank.

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

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

During the nine months from the acquisition of Sprint on April 1, 2020 through December 31, 2020, SoftBank had no gross revenues from such services and no net profit was generated.

During the year ended December 31, 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 nine months from the acquisition of Sprint on April 1, 2020 through December 31, 2020, SoftBank estimates that gross revenues and net profit generated by such services were both under $0.1 million.

During the year ended December 31, 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 nine months from the acquisition of Sprint on April 1, 2020 through December 31, 2020, were both under $0.1 million.

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

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

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 December 31, 2020, 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 Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

Our significant accounting policies are fundamental to understanding our results of operations and financial condition as they require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results.

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Goodwill and other indefinite-lived intangible assets, such as our spectrum licenses, are not amortized but tested for potential impairment annually, as of December 31, or more frequently if events or changes in circumstances indicate such assets might be impaired.

We test goodwill on a reporting unit basis by comparing the estimated fair value of each reporting unit to its book value.

We test goodwill on a reporting unit basis by comparing the estimated fair value of the reporting unit to its book value.

If the fair value exceeds the book value, then no impairment is measured.

We have identified two reporting units for which discrete financial information is available and results are regularly reviewed by management:

wireless and Layer3.

The Layer3 reporting unit consists of the assets and liabilities of Layer3 TV, Inc., which was acquired in January 2018.

The services provided by the Layer3 reporting unit are branded TVision TM .

The wireless reporting unit consists of the remaining assets and liabilities of T-Mobile US, Inc., excluding Layer3 TV, Inc.

We separately evaluate these reporting units for impairment.

When assessing goodwill for impairment we may elect to first perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

As of December 31, 2021, we have identified one reporting unit for which discrete financial information is available and results are regularly reviewed by management:

The wireless reporting unit consists of all the assets and liabilities of T-Mobile US, Inc.

When assessing goodwill for impairment we may elect to first perform a qualitative assessment to determine if the quantitative impairment test is necessary.

If we do not perform a qualitative assessment, or if the qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we perform a quantitative test.

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In the event market capitalization does decline below its book value, we will consider the length, severity and reasons for the decline when assessing whether potential impairment exists, including considering whether a control premium should be added to the market capitalization.

We believe short-term fluctuations in share price may not necessarily reflect the underlying

aggregate fair value.

We believe short-term fluctuations in share price may not necessarily reflect the underlying aggregate fair value.

No events or change in circumstances have occurred that indicate the fair value of the wireless reporting unit may be below its carrying amount at December 31, 2021.

Concurrent with the consummation of the Merger, management also revisited the plans for our TVision TM services offering and the integration of this offering with the Sprint customer base.

Additionally, we expect our significantly enhanced spectrum position following the Merger will allow us to accelerate our in-home broadband internet service strategy.

The enhanced in-home broadband opportunity, along with the acquisition of certain content rights, created a strategic shift in our TVision TM services offering allowing us the ability to develop a video product which will be complementary to the in-home broadband offering.

Based on these events and changes in circumstances, we determined that recoverability of the carrying amount of goodwill for the Layer3 reporting unit should be evaluated for impairment.

We employed a quantitative approach to assess the Layer3 reporting unit.

The fair value of the Layer3 reporting unit was determined using an income approach, which was based on estimated discounted future cash flows.

We made estimates and assumptions regarding future cash flows, discount rates and long-term growth rates to determine the reporting unit’s estimated fair value.

The key assumptions used were as follows:

• Expected cash flows underlying the TVision TM business plan for the periods 2020 through 2025, which took into account assumptions for a delayed launch, estimates of subscribers for TVision TM services, average revenue and content cost per subscriber, operating costs and capital expenditures;

• Cash flows beyond 2025 were projected to grow at a long-term growth rate estimated at 3%.

Estimating a long-term growth rate requires significant judgment about future business strategies as well as micro- and macro-economic environments that are inherently uncertain;

• We used a discount rate of 30% to risk adjust the cash flow projections in determining the estimated fair value.

The carrying value of the Layer3 reporting unit exceeded its estimated fair value as of June 30, 2020.

Accordingly, during the year ended December 31, 2020, we recorded an impairment loss of $218 million, which is included in Impairment expense in our Consolidated Statements of Comprehensive Income.

This impairment reduced the goodwill assigned to the Layer3 reporting unit to zero.

We previously identified Layer3, which consisted of the assets and liabilities of Layer3 TV, Inc.

and provided services branded as TVision TM , as its own reporting unit.

However, we wound down our TVision TM services offering on April 29, 2021 and discrete financial information for Layer3 is no longer available or regularly reviewed by management.

Accordingly, we no longer identify Layer3 as its own reporting unit as of December 31, 2021.

During the year ended December 31, 2020, while Layer3 was still identified as its own reporting unit, we determined that our enhanced in-home broadband opportunity following the Merger, along with the acquisition of certain content rights, created a strategic shift in our TVision TM services offering that indicated that the recoverability of the carrying amount of goodwill assigned to the Layer3 reporting unit should be evaluated for impairment.

As a result, we completed an interim goodwill impairment evaluation and determined the carrying value of the Layer3 reporting unit exceeded its estimated fair value.

Accordingly, we recorded an impairment loss of $218 million for the year ended December 31, 2020, all of which relates to the impairment recognized during the three months ended June 30, 2020.

This impairment reduced the goodwill balance previously assigned to the Layer3 reporting unit to zero.

We test spectrum licenses for impairment on an aggregate basis, consistent with our management of the overall business at a

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assessment indicates it is more likely than not that the fair value of the intangible asset is less than its carrying amount, we calculate the estimated fair value of the intangible asset.

If the estimated fair value of the spectrum licenses is lower than their carrying amount, an impairment loss is recognized.

If the estimated fair value of the spectrum licenses is lower than their

carrying amount, an impairment loss is recognized.

We estimate fair value using the Greenfield methodology, which is an income approach, to estimate the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under current market conditions.

The Greenfield methodology values the spectrum licenses by calculating the cash flow generating potential of a hypothetical start-up company that goes into business with no assets except the asset to be valued (in this case, spectrum licenses) and makes investments required to build an operation comparable to current use.

The Greenfield methodology values the spectrum licenses by calculating the cash flow generating potential of a hypothetical start-up company that goes into business with no assets except for the asset to be valued (in this case, spectrum licenses) and makes investments required to build an operation comparable to current use.

The value of the spectrum licenses can be considered as equal to the present value of the cash flows of this hypothetical start-up company.

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The cash flows are discounted using a weighted-average cost of capital.

No events or change in circumstances have occurred that indicate the fair value of the Spectrum licenses may be below their carrying amount at December 31, 2021.

The valuation approaches utilized to estimate fair value for the purposes of the impairment tests of goodwill and spectrum

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If actual results or future

expectations are not consistent with the assumptions, this may result in the recording of significant impairment charges on

goodwill or spectrum licenses.

The most significant assumptions within the valuation models are the discount rate, revenues,

EBITDA margins, capital expenditures and long-term growth rate.

expectations are not consistent with the assumptions used in our estimate of fair value, it may result in the recording of significant impairment charges on goodwill or spectrum licenses.

The most significant assumptions within the valuation models are the discount rate, revenues, EBITDA margins, capital expenditures and long-term growth rate.

For more information regarding our impairment assessments, see Note 1 – Summary of Significant Accounting Policies and Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements.

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What changed 10-K

Item 7. Management’s Discussion and Analysis