What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-11 compared with 2021-02-23 · 710 added, 904 removed, 1440 unchanged (53% of the section changed)

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We have audited the accompanying consolidated balance sheets of T-Mobile US, Inc.

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues in 2018.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded certain elements of the internal control over financial reporting of Sprint from its assessment of the Company’s internal control over financial reporting as of December 31, 2020 because it was acquired by the Company in a purchase business combination during 2020.

Subsequent to the acquisition, the Company integrated certain elements of Sprint’s internal control over financial reporting and related processes into the Company’s existing systems, internal control over financial reporting and related processes.

The Sprint controls that were not integrated have been excluded from management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2020.

We have also excluded these elements of the internal

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control over financial reporting of Sprint from our audit of the Company’s internal control over financial reporting.

The excluded elements of Sprint represent controls over approximately 14% of consolidated assets and approximately 30% of the consolidated total revenues as of and for the year ended December 31, 2020.

Definition and Limitations of Internal Control over Financial Reporting

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit

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preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of Sprint Corporation - Accounting and Valuation of the Acquired Spectrum License Portfolio

As described in Notes 1 and 2 to the consolidated financial statements, the Company completed its acquisition of Sprint Corporation for a total consideration of $40.8 billion on April 1, 2020.

The Company measured the identifiable assets acquired and liabilities assumed at fair value, which resulted in the recognition of $45.4 billion of Federal Communications Commission (“FCC”) spectrum licenses, a portion of which relates to lease agreements (the “Agreements”) with various educational and non-profit institutions that provide the Company with the right to use FCC spectrum licenses (Educational Broadband Services or “EBS spectrum”) in the 2.5 GHz band.

Management applied judgment in determining the Agreements enhance the overall value of the Company's owned spectrum licenses as the collective value is higher than the value of individual bands of spectrum within a specific geography.

This enhanced value from combining owned and leased spectrum licenses is referred to as an aggregation premium, which is a component of the overall fair value of FCC spectrum licenses, which are recognized as indefinite-lived intangible assets.

Management also applied judgment in estimating the overall value of the Spectrum License portfolio using the income approach, specifically a Greenfield model, which involved the use of key assumptions with respect to the discount rate, market share, estimated capital and operating expenditures, forecasted service revenue and long-term growth rate for a hypothetical market participant that enters the wireless industry and builds a nationwide wireless network.

The principal considerations for our determination that performing procedures relating to the accounting and valuation of the acquired Spectrum License portfolio in the acquisition of Sprint Corporation is a critical audit matter are (i) the significant judgment by management in determining the accounting for the leased EBS spectrum arrangements, as well as estimating the fair value of the acquired Spectrum License portfolio;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s accounting for the leased EBS spectrum portion of the portfolio as well as evaluating management’s significant assumptions related to the discount rate, market share, estimated capital and operating expenditures, forecasted service revenue and long-term growth rate used in estimating the fair value of the acquired Spectrum License portfolio;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the accounting for the leased EBS spectrum arrangements and estimating the fair value of the acquired Spectrum License portfolio.

These procedures also included, among others, (i) reading the purchase agreement and Spectrum License lease agreements;

(ii) evaluating management’s assessment related to the accounting for the leased EBS spectrum arrangements;

and (iii) testing

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management’s process for estimating the fair value of the acquired Spectrum License portfolio.

Testing management’s process included evaluating the appropriateness of the valuation methodology, and evaluating the reasonableness of management’s significant assumptions related to the discount rate, market share, estimated capital and operating expenditures, forecasted service revenue and long-term growth rate.

Evaluating the significant assumptions included considering (i) the cost of capital of comparable businesses and consistency with other valuations for the discount rate;

(ii) industry factors and historical results for market share;

(iii) historical results, and industry data for the estimated capital and operating expenditures and forecasted service revenue assumptions;

and (iv) industry and market factors for the long-term growth rate.

Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the discount rate and long-term growth rate assumptions.

Acquisition of Sprint Corporation - Accounting for the Acquired Lease-out and Leaseback Arrangement with Crown Castle International Corp.

As described in Notes 2 and 9 to the consolidated financial statements, in the acquisition of Sprint Corporation, the Company measured the identifiable assets acquired and liabilities assumed at fair value, which resulted in the recognition of property and equipment with a fair value of $2.8 billion and tower obligations related to amounts owed to Crown Castle International Corp.

(“CCI”) under the leaseback of $1.1 billion.

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

Prior to the Merger, Sprint entered into a lease-out and leaseback arrangement with Global Signal Inc., a third party that was subsequently acquired by CCI, that conveyed to CCI the exclusive right to manage and operate approximately 6,400 tower sites via prepaid master lease.

These agreements were assumed upon the close of the Merger, at which point the remaining term of the lease-out was approximately 17 years with no renewal options.

CCI has a fixed-price purchase option for all (but not less than all) of the leased or subleased sites for approximately $2.3 billion, exercisable one year prior to the expiration of the agreement and ending 120 days prior to the expiration of the agreement.

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

The principal considerations for our determination that performing procedures relating to accounting for the acquired lease-out and leaseback arrangement with CCI in the acquisition of Sprint Corporation is a critical audit matter are (i) the significant judgment by management in determining the accounting to reflect the acquisition of the tower lease arrangement;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s accounting for and presentation of the owned leased asset and related liabilities and identification of each unit of account within the transaction;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Equipment revenues

As described in Note 1 to the consolidated financial statements, the Company’s revenue includes equipment revenues of $20,727 million for the year ended December 31, 2021, which are generated from the sale or lease of mobile communication devices and accessories.

For performance obligations related to equipment contracts, the Company typically transfers control at a point in time when the device or accessory is delivered to, and accepted by, the customer or dealer.

Management estimates variable consideration (e.g., device returns or certain payments to indirect dealers) primarily based on historical experience.

Promotional equipment installment plan bill credits offered to a customer on an equipment sale that are paid over time and are contingent on the customer maintaining a service contract may result in an extended service contract based on whether a substantive penalty is deemed to exist.

Lease revenues are recorded as equipment revenues and recognized as earned on a straight-line basis over the lease term.

The principal considerations for our determination that performing procedures relating to revenue recognition of equipment revenues is a critical audit matter are the significant auditor effort in performing procedures and evaluating audit evidence related to the accuracy and existence of equipment revenues recognized.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the accounting for acquired lease-out and leaseback arrangement with CCI.

These procedures also included, among others, (i) reading the purchase agreement and Global Signal Inc.

lease agreements;

(ii) evaluating management’s accounting for and presentation of the owned leased asset and related liabilities;

and (iii) evaluating management’s identification of each unit of account within the transaction.

Professionals with specialized skill and knowledge were used to assist in evaluating management’s accounting assessment of the acquired lease-out and leaseback arrangement with CCI.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the accuracy and existence of equipment revenues recognized.

These procedures also included, among others, testing the accuracy and existence of revenue recognized on a test basis by (i) obtaining and inspecting, where applicable, invoices, customer contracts, shipping documents, and cash receipts from customers, and (ii) evaluating reductions to revenues and accruals for promotional bill credits based upon the terms and conditions of the arrangements.

/s/ PricewaterhouseCoopers LLP

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Short-term debt 3,378 4,579

Short-term debt to affiliates 2,245 —

Deferred revenue 856 1,030

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Treasury stock, at cost, 1,537,468 and 1,539,878 shares issued

( 13 ) ( 11 )

Accumulated other comprehensive loss ( 1,365 ) ( 1,581 )

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Wholesale revenues 3,751 2,590 1,279

Roaming and other service revenues 2,078 1,005 798

Other service revenues 2,323 2,078 1,005

Total service revenues 58,369 50,395 34,500

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Net income $ 3,024 $ 3,064 $ 3,468

Other comprehensive loss, net of tax

Unrealized loss on cash flow hedges, net of tax effect of $( 250 ), $( 187 ), and $( 115 )

Other comprehensive income (loss), net of tax

Unrealized gain (loss) on cash flow hedges, net of tax effect of $ 49 , $( 250 ) and $( 187 )

140 ( 723 ) ( 536 )

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

Net unrecognized gain (loss) on pension and other postretirement benefits, net of tax effect of $ 2 , $ 0 and $ 0

Other comprehensive loss ( 713 ) ( 536 ) ( 332 )

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

Net unrecognized gain on pension and other postretirement benefits, net of tax effect of $ 28 , $ 2 and $ 0

Other comprehensive income (loss) 216 ( 713 ) ( 536 )

Total comprehensive income $ 3,240 $ 2,351 $ 2,932

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Losses from sales of receivables 15 36 130

Deferred rent expense — — 26

Losses on redemption of debt 184 371 19

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Shares withheld related to net share settlement of stock awards and stock options ( 2,094,555 ) — ( 156 ) — — ( 156 )

Repurchases of common stock ( 16,738,758 ) — ( 1,054 ) — — ( 1,054 )

Transfer RSU to NQDC plan ( 39,455 ) ( 2 ) 2 — — —

Transfers with NQDC plan ( 18,363 ) ( 2 ) 2 — — —

Prior year Retained Earnings (1)

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Other comprehensive loss — — — ( 713 ) — ( 713 )

Executive put option ( 342,000 ) — 1 — — 1

Stock-based compensation — — 750 — — 750

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Issuance of vested restricted stock units 13,263,434 — — — — —

Issuance of restricted stock awards ( 24,682 ) — — — — —

Shares withheld related to net share settlement of stock awards and stock options ( 4,441,107 ) — ( 439 ) — — ( 439 )

Transfer RSU from NQDC plan ( 18,363 ) ( 2 ) 2 — — —

Transfers with NQDC plan ( 26,662 ) ( 3 ) 3 — — —

Shares issued in secondary offering (2)

198,314,426 — 19,766 — — 19,766

Shares repurchased from SoftBank (3)

( 198,314,426 ) — ( 19,536 ) — — ( 19,536 )

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

Prior year Retained Earnings (1)

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Net income — — — — 3,024 3,024

Other comprehensive loss — — — ( 713 ) — ( 713 )

Executive put option ( 342,000 ) — 1 — — 1

Other comprehensive income — — — 216 — 216

Stock-based compensation — — 606 — — 606

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Shares withheld related to net share settlement of stock awards and stock options ( 2,511,512 ) — ( 316 ) — — ( 316 )

Transfer RSU from NQDC plan ( 26,662 ) ( 3 ) 3 — — —

Shares issued in secondary offering (2)

198,314,426 — 19,766 — — 19,766

Shares repurchased from SoftBank (3)

( 198,314,426 ) — ( 19,536 ) — — ( 19,536 )

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

Prior year Retained Earnings (1)

— — — — ( 67 ) ( 67 )

Remeasurement of uncertain tax positions — — ( 7 ) — — ( 7 )

Transfers with NQDC plan 2,411 ( 2 ) 2 — — —

Balance as of December 31, 2021 1,249,213,681 $ ( 13 ) $ 73,292 $ ( 1,365 ) $ ( 2,812 ) $ 69,102

(1) Prior year Retained Earnings represents the impact of the adoption of new accounting standards on beginning Accumulated Deficit and Accumulated Other Comprehensive Loss.

See Note 1 – Summary of Significant Accounting Policies for further information.

(2) Shares issued includes 5.0 million shares purchased by Marcelo Claure.

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Summary of Significant Accounting Policies

Business Combination

Receivables and Expected Credit Losses

Business Combinations

Receivables and Related Allowance for Credit Losses

Sales of Certain Receivables

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SoftBank Equity Transaction

Repurchases of Common Stock

Earnings Per Share

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Basis of Presentation

The consolidated financial statements include the balances and results of operations of T-Mobile and our consolidated subsidiaries.

We consolidate majority-owned subsidiaries over which we exercise control, as well as variable interest entities (“VIE”) where we are deemed to be the primary beneficiary and VIEs, which cannot be deconsolidated, such as those related to Tower obligations.

The accompanying consolidated financial statements include the balances and results of operations of T-Mobile and our consolidated subsidiaries.

We consolidate majority-owned subsidiaries over which we exercise control, as well as variable interest entities (“VIEs”) where we are deemed to be the primary beneficiary and VIEs, which cannot be deconsolidated, such as those related to Tower obligations.

Intercompany transactions and balances have been eliminated in consolidation.

We operate as a single operating segment.

On April 29, 2018, we entered into a Business Combination Agreement (the “Business Combination Agreement”) to merge with Sprint Corporation (“Sprint”) in an all-stock transaction at a fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or 9.75 shares of Sprint common stock for each share of T-Mobile common stock (the “Merger”).

On April 1, 2020, we completed the Merger and acquired Sprint (see Note 2 - Business Combination ).

On July 26, 2019, pursuant to the requirement as set forth in the U.S.

Department of Justice’s (the “DOJ”) complaint and proposed final judgement (the “Consent Decree”), T-Mobile entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Sprint and DISH Network Corporation (“DISH”).

Pursuant to the Asset Purchase Agreement and upon the terms and subject to the conditions thereof, 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 Shenandoah Telecommunications Company 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”).

Upon closing of the Prepaid Transaction, we received $ 1.4 billion from DISH, subject to a working capital adjustment.

The revenues and expenses of the Prepaid Business are presented as discontinued operations for the year ended December 31, 2020.

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”) requires our management to make estimates and assumptions which affect the financial statements and accompanying notes.

Estimates are based on historical experience, where applicable, and other assumptions which our management believes are reasonable under the circumstances, including but not limited to the valuation of assets acquired and liabilities assumed through the Merger with Sprint and the potential impacts arising from the COVID-19 pandemic (the “Pandemic”).

generally accepted accounting principles (“GAAP”) requires our management to make estimates and assumptions which affect our consolidated financial statements and accompanying notes.

Estimates are based on historical experience, where applicable, and other assumptions which our management believes are reasonable under the circumstances, including, but not limited to, the valuation of assets acquired and liabilities assumed through the Merger with Sprint and through our acquisitions of affiliates and the potential impacts arising from the COVID-19 pandemic (the “Pandemic”).

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

Certain prior year amounts have been reclassified to conform to the current year's presentation.

Business Combination

Business Combinations

Assets acquired and liabilities assumed as part of a business combination are generally recorded at their fair value at the date of acquisition.

The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill.

Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired requires management to make estimates, which are based on all available information and in some cases assumptions with respect to the timing and amount of

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future revenues and expenses associated with an asset or liability.

See N ote 2 – Business Combination for further discussion of the Merger between T-Mobile and Sprint.

See Note 2 – Business Combinatio ns for further discussion of the Merger between T-Mobile and Sprint and the acquisition of the wireless telecommunications assets (the “Wireless Assets”) of Shenandoah Personal Communications Company LLC (“Shentel”) 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.

Cash and Cash Equivalents

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Treasury securities with remaining maturities of three months or less at the date of purchase.

Receivables and Allowance for Credit Losses

Receivables and Related Allowance for Credit Losses

Accounts Receivable

Accounts receivable consists primarily of amounts currently due from customers (e.g., for wireless services and monthly device lease payments), device insurance administrators, wholesale partners, other carriers and third-party retail channels.

Accounts receivable are presented in our Consolidated Balance Sheets at the amortized cost basis (i.e., the receivables’ outstanding principal balance adjusted for any write-offs), net of the allowance for expected credit losses.

We have an arrangement to sell certain of our customer service accounts receivable on a revolving basis, which are treated as sales of financial assets.

Accounts receivable balances are predominantly composed of amounts currently due from customers (e.g., for wireless services and monthly device lease payments), device insurance administrators, wholesale partners, other carriers and third-party retail channels.

Accounts receivable are presented on our Consolidated Balance Sheets at the amortized cost basis (i.e., the receivables’ unpaid principal balance (“UPB”) as adjusted for any write-offs), net of the allowance for credit losses.

We have an arrangement to sell certain of our customer service accounts receivable on a revolving basis, which are treated as sales of

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financial assets.

Equipment Installment Plan Receivables

We offer certain retail customers the option to pay for their devices and other purchases in installments, generally over a period of 24 months using an EIP.

EIP receivables are presented in our Consolidated Balance Sheets at the amortized cost basis (i.e., the receivables’ unpaid principal balance adjusted for any write-offs and unamortized discounts), net of the allowance for expected credit losses.

We offer certain customers the option to pay for their devices and other purchases in installments, generally over a period of 24 months using an EIP.

EIP receivables are presented on our Consolidated Balance Sheets at the amortized cost basis (i.e., the receivables’ UPB as adjusted for any write-offs and unamortized discounts), net of the allowance for credit losses.

At the time of an installment sale, we impute a discount for interest if the term exceeds 12 months as there is no stated rate of interest on the receivables.

The receivables are recorded at their present value, which is determined by discounting expected future cash payments at the imputed interest rate.

This adjustment results in a discount or reduction in transaction price which is allocated to the performance obligations and reduces Service revenues and Equipment revenues in our Consolidated Statements of Comprehensive Income.

The imputed discount rate is the current market interest rate and is predominately comprised of the estimated credit risk underlying the EIP receivable, reflecting the estimated credit worthiness of the customer.

The imputed discount on receivables is amortized over the financed installment term using the effective interest method and recognized as Other revenues in our Consolidated Statements of Comprehensive Income.

The current portion of the EIP receivables is included in Equipment installment plan receivables, net and the long-term portion of the EIP receivables is included in Equipment installment plan receivables due after one year, net in our Consolidated Balance Sheets.

This adjustment results in a discount or reduction in transaction price which is allocated to the performance obligations and reduces Service revenues and Equipment revenues on our Consolidated Statements of Comprehensive Income.

The imputed discount rate reflects a current market interest rate and is predominately comprised of the estimated credit risk underlying the EIP receivable, reflecting the estimated credit worthiness of the customer.

The imputed discount on receivables is amortized over the financed installment term using the effective interest method and recognized as Other revenues on our Consolidated Statements of Comprehensive Income.

We have an arrangement to sell certain EIP receivables on a revolving basis, which are treated as sales of financial assets.

Allowance for Credit Losses

We maintain an allowance for expected credit losses and determine its appropriateness through an established process that assesses the lifetime credit losses that we expect to incur related to our receivable portfolio.

Our process involves procedures to appropriately consider the unique risk characteristics of our accounts receivable and EIP receivable portfolio segments.

For each portfolio segment, losses are estimated collectively for groups of receivables with similar characteristics.

Our allowance levels are influenced by receivable volumes, receivable delinquency status, historical loss experience and other conditions that affect loss expectations, such as changes in credit and collections policies and forecasts of macro-economic conditions.

We maintain an allowance for credit losses by applying an expected credit loss model.

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

Each portfolio segment is composed of pools of receivables that are evaluated collectively based on similar risk characteristics.

Our allowance levels consider estimated credit risk over the contractual life of the receivables and are influenced by receivable volumes, receivable delinquency status, historical loss experience and other conditions that affect loss expectations, such as changes in credit and collections policies and forecasts of macro-economic conditions.

While we attribute portions of the allowance to our respective accounts receivable and EIP portfolio segments, the entire allowance is available to credit losses related to the total receivable portfolio.

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differ from those currently anticipated, we will adjust our allowance for credit losses accordingly, which may materially affect our financial results in the period the adjustments are made.

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Inventories consist primarily of wireless devices and accessories, which are valued at the lower of cost or net realizable value.

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

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Long-Lived Assets

Long-lived assets include assets that do not have indefinite lives, such as property and equipment and other intangible assets.

Long-lived assets include assets that do not have indefinite lives, such as property and equipment and certain intangible assets.

Substantially all of our long-lived assets are located in the U.S., including Puerto Rico and the U.S.

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If any indicators of impairment are present, we test recoverability.

The carrying value of a long-lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated from the use and eventual disposition of the asset or asset group.

If the undiscounted cash flows do not exceed the asset or asset group’s carrying amount, then an impairment loss is recorded, measured as the amount by which the carrying amount of a long-lived asset or asset group exceeds its fair value.

The carrying value of a long-lived asset or asset group is not recoverable if the carrying value exceeds the sum of the estimated undiscounted future cash flows expected to be generated from the use and eventual disposition of the asset or asset group.

If the estimated undiscounted future cash flows do not exceed the asset or asset group’s carrying amount, then an impairment loss is recorded, measured as the amount by which the carrying amount of a long-lived asset or asset group exceeds its fair value.

Property and Equipment

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Buildings and equipment include certain network server equipment.

Wireless communications systems include assets to operate our wireless network and IT data centers, including tower assets and leasehold improvements and assets related to the liability for the retirement of long-lived assets.

Wireless communications systems include assets to operate our wireless network and information technology data centers, including tower assets and leasehold improvements and assets related to the liability for the retirement of long-lived assets.

Leasehold improvements include asset improvements other than those related to the wireless network.

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Over time, the liability is accreted to its present value and the capitalized cost is depreciated over the estimated useful life of the asset.

Our obligations relate primarily

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to certain legal obligations to remediate leased property on which our network infrastructure and administrative assets are located.

Our obligations relate primarily to certain legal obligations to remediate leased property on which our network infrastructure and administrative assets are located.

We capitalize certain costs incurred in connection with developing or acquiring internal use software.

Capitalization of software costs commences once the final selection of the specific software solution has been made and management authorizes and commits to funding the software project and ceases once the project is ready for its intended use.

Capitalized software costs are included in Property and equipment, net in our Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life of the asset.

Capitalized software costs are included in Property and equipment, net on our Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life of the asset.

Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.

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These leased devices were recorded as fixed assets at their acquisition date fair value and presented within Property and equipment, net on our Consolidated Balance Sheets.

Beginning in 2021, we discontinued offering the Sprint Flex lease program and are shifting customer device financing to EIP plans.

Index for Notes to the Consolidated Financial Statements

Our leasing programs (“Leasing Programs”), which include JUMP!

On Demand and the Sprint Flex Lease Program acquired through the Merger, allow customers to lease a device (handset or tablet) over a period of, generally, 18 months and upgrade it for a new device when eligibility requirements are met.

On Demand and the Sprint Flex Lease Program, allow customers to lease a device (handset or tablet) generally over a period of 18 months and upgrade the device with a new device when eligibility requirements are met.

We depreciate leased devices to their estimated residual value, on a group basis, using the straight-line method over the estimated useful life of the device.

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Acquired leased devices are grouped based on the age of the device.

Revenues associated with the leased wireless devices, net of lease incentives, are generally recognized on a straight-line basis over the lease term.

For arrangements in which we are the lessor of wireless devices, we separate lease and non-lease components.

Revenues associated with the leased devices, net of lease incentives, are generally recognized on a straight-line basis over the lease term.

For arrangements in which we are the lessor of devices, we separate lease and non-lease components.

Upon device upgrade or at lease end, customers in the JUMP!

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The Leasing Programs do not contain any residual value guarantees or variable lease payments, and there are no restrictions or covenants imposed by these leases.

Returned devices, including those received upon device upgrade, are transferred from Property and equipment, net to Inventory on our Consolidated Balance Sheets and are valued at the lower of cost or net realizable value, with any write-down recognized as Cost of equipment sales in our Consolidated Statements of Comprehensive Income.

Returned devices, including those received upon device upgrade, are transferred from Property and equipment, net to Inventory on our Consolidated Balance Sheets and are valued at the lower of cost or net realizable value, with any write-down recognized as Cost of equipment sales on our Consolidated Statements of Comprehensive Income.

Other Intangible Assets

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Customer lists and the Sprint trade name are amortized using the sum-of-the-years digits method over the period in which the asset is expected to contribute to future cash flows.

Reacquired rights are amortized on a straight-line basis over the remaining term of the Management Agreement (as defined in Note 2), which represents the period of expected economic benefit.

The remaining finite-lived intangible assets are amortized using the straight-line method.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination.

Goodwill is allocated to our two reporting units, wireless and Layer3.

Index for Notes to the Consolidated Financial Statements

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination and is assigned to our one reporting unit:

Spectrum Licenses

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The Federal Communications Commission (“FCC”) issues spectrum licenses which provide us with the exclusive right to utilize designated radio frequency spectrum within specific geographic service areas to provide wireless communications services.

While spectrum licenses are issued for a fixed period of time, typically for up to 15 years, the FCC has granted license renewals routinely and at a nominal cost.

The spectrum licenses held by us expire at various dates.

We believe we will be able to meet all requirements necessary to secure renewal of our spectrum licenses at nominal costs.

Moreover, we determined there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our spectrum licenses.

Spectrum licenses are issued for a fixed period of time, typically up to 15 years;

however, the FCC has granted license renewals routinely and at a nominal cost.

The spectrum licenses acquired expire at various dates and we believe we will be able to meet all requirements necessary to secure renewal of our spectrum licenses at a nominal cost.

Moreover, we determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our spectrum licenses.

Therefore, we determined the spectrum licenses should be treated as indefinite-lived intangible assets.

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Upon entering into the arrangement, if the transaction has been deemed to have commercial substance, spectrum licenses are reviewed for impairment.

The licenses are transferred at their carrying value, as adjusted for any impairment recognized, to assets held for sale, which is included in Other current assets in our Consolidated Balance Sheets until approval and completion of the exchange or sale.

Upon closing of the transaction, spectrum licenses acquired as part of an exchange of nonmonetary assets are recorded at fair value and the difference between the fair value of the spectrum licenses obtained, carrying value of the spectrum licenses transferred and cash paid, if any, is recognized as a Gain (loss) on disposal of spectrum licenses included in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income.

The licenses are transferred at their carrying value, as adjusted for any impairment recognized, to assets held for sale, which is included in Other current assets on our Consolidated Balance Sheets until approval and completion of the exchange or sale.

Upon closing of the transaction, spectrum licenses acquired as part of an exchange of nonmonetary assets are recorded at fair value and the difference between the fair value of the spectrum licenses obtained, carrying value of the spectrum licenses transferred and cash paid, if any, is recognized as a gain or loss on disposal of spectrum licenses included in Selling, general and administrative expenses on our

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Consolidated Statements of Comprehensive Income.

Our fair value estimates of spectrum licenses are based on information for which there is little or no observable market data.

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Spectrum Leases

Through the Merger, the Company acquired lease agreements (the “Agreements”) with various educational and non-profit institutions that provide us with the right to use FCC spectrum licenses (Educational Broadband Services or “EBS spectrum”) in the 2.5 GHz band.

In addition to the Agreements with educational institutions and private owners who hold the licenses, the Company also acquired direct ownership of spectrum licenses previously acquired by Sprint through government auctions or other acquisitions.

Through the Merger, we acquired lease agreements (the “Agreements”) with various educational and non-profit institutions that provide us with the right to use FCC spectrum licenses (Educational Broadband Services or “EBS spectrum”) in the 2.5 GHz band.

In addition to the Agreements with educational institutions and private owners who hold the licenses, we also acquired direct ownership of spectrum licenses previously acquired by Sprint through government auctions or other acquisitions.

The Agreements with educational and certain non-profit institutions are typically for five to 10 years with automatic renewal provisions, bringing the total term of the agreement up to 30 years.

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These intangible assets or liabilities are amortized over the estimated remaining useful life of the lease agreements.

Contractual lease payments are recognized on a straight-line basis over the remaining term of the arrangement, including renewals, and are presented in Costs of services within our Consolidated Statements of Comprehensive Income.

The Agreements enhance the overall value of the Company’s owned spectrum licenses as the collective value is higher than the value of individual bands of spectrum within a specific geography.

Contractual lease payments are recognized on a straight-line basis over the remaining term of the arrangement, including renewals, and are presented in Costs of services on our Consolidated Statements of Comprehensive Income.

The Agreements enhance the overall value of our spectrum licenses as the collective value is higher than the value of individual bands of spectrum within a specific geography.

This value is derived from the ability to provide wireless service to customers across large geographic areas and maintain the same or similar wireless connectivity quality.

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The aggregation premium is a component of the overall fair value of our owned FCC spectrum licenses, which are recorded as indefinite-lived intangible assets.

We assess the carrying value of our goodwill and other indefinite-lived intangible assets, such as our spectrum licenses, for potential impairment annually as of December 31, or more frequently if events or changes in circumstances indicate such assets might be impaired.

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.

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 the two reporting units, wireless and Layer3, is less than its carrying amount, we perform a quantitative test.

We recognize an impairment charge for the amount by which the carrying

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amount exceeds the reporting unit’s fair value;

however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

We assess the carrying value of our goodwill and other indefinite-lived intangible assets, such as our spectrum license portfolio, for potential impairment annually as of December 31 or more frequently, if events or changes in circumstances indicate such assets might be impaired.

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.

We recognize an impairment charge for the amount by which the carrying amount exceeds the wireless reporting unit’s fair value;

however, the loss recognized would not exceed the total amount of goodwill recognized in the reporting unit.

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

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Certain provisions of our debt agreements require us to maintain specified cash collateral balances.

Amounts associated with these balances are considered to be restricted cash and are included within Other assets in our Consolidated Balance Sheets.

Guarantee Liabilities

We offer a device trade-in program, Just Upgrade My Phone (“JUMP!”), which provides eligible customers a specified-price trade-in right to upgrade their device.

Upon enrollment, participating customers must finance the purchase of a device on an EIP and have a qualifying T-Mobile monthly wireless service plan.

Upon a qualifying JUMP!

program upgrade, the customer’s remaining EIP balance is settled provided they trade-in their eligible used device in good working condition and purchase a new device from us on a new EIP.

For customers who enroll in JUMP!, we recognize a liability and reduce revenue for the portion of revenue which represents the estimated fair value of the specified-price trade-in right guarantee.

The guarantee liability is valued based on various economic and customer behavioral assumptions, which requires judgment, including estimating the customer's remaining EIP balance at trade-in, the expected fair value of the used device at trade-in, and the probability and timing of trade-in.

When customers upgrade their device, the difference between the EIP balance credit to the customer and the fair value of the returned device is recorded against the guarantee liabilities.

All assumptions are reviewed periodically.

Amounts associated with these balances are considered to be restricted cash and are included in Other assets on our Consolidated Balance Sheets.

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Fair Value Measurements

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Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities being measured within the fair value hierarchy.

The carrying values of Cash and cash equivalents, Accounts receivable, Accounts receivable from affiliates, Accounts payable and accrued liabilities and borrowings under our vendor financing arrangements approximate fair value due to the short-term maturities of these instruments.

The carrying values of Cash and cash equivalents, Accounts receivable, Accounts receivable from affiliates and Accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments.

The carrying values of EIP receivables approximate fair value as the receivables are recorded at their present value using an imputed interest rate.

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See Note 7 – Fair Value Measurements for a comparison of the carrying values and fair values of our short-term and long-term debt.

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Derivative Financial Instruments

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We do not use derivatives for trading or speculative purposes.

For derivative instruments designated as cash flow hedges associated with forecasted debt issuances, changes in fair value are reported as a component of Accumulated other comprehensive loss until reclassified into Interest expense in the same period the hedged transaction affects earnings, generally over the life of the related debt.

Unrealized gains on derivatives designated in qualifying cash flow hedge relationships are recorded at fair value as assets, and unrealized losses are recorded at fair value as liabilities.

Revenue Recognition (Effective January 1, 2018)

We primarily generate our revenue from providing wireless services to customers and selling or leasing devices and accessories.

Revenue Recognition

We primarily generate our revenue from providing wireless services and selling or leasing devices and accessories to customers.

Our contracts with customers may involve multiple performance obligations, which include wireless services, wireless devices or a combination thereof, and we allocate the transaction price between each performance obligation based on its relative standalone selling price.

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The most significant judgments affecting the amount and timing of revenue from contracts with our customers include the following items:

• Revenue for service contracts that we assess are not probable of collection is not recognized until the contract is completed or terminated and cash is received.

Collectibility is re-assessed when there is a significant change in facts or circumstances.

Our assessment of collectibility considers whether we may limit our exposure to credit risk through our right to stop transferring additional service in the event the customer is delinquent as well as certain contract terms such as down payments that reduce our exposure to credit risk.

Customer credit behavior is inherently uncertain.

See “Receivables and Allowance for Credit Losses” above, for additional discussion on how we assess credit risk.

• Promotional EIP bill credits offered to a customer on an equipment sale that are paid over time and are contingent on the customer maintaining a service contract may result in an extended service contract based on whether a substantive penalty is deemed to exist.

Determining whether contingent EIP bill credits result in a substantive termination penalty may require significant judgment.

• The identification of distinct performance obligations within our service plans may require significant judgment.

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The determination of whether we control the underlying service or right to the service prior to our transfer to the customer requires, at times, significant judgment.

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• Our products are generally sold with a right of return, which is accounted for as variable consideration when estimating the amount of revenue to recognize.

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Service contracts are billed monthly either in advance or arrears, or are prepaid.

Generally, service revenue is recognized as we

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satisfy our performance obligation to transfer service to our customers.

Generally, service revenue is recognized as we satisfy our performance obligation to transfer service to our customers.

We typically satisfy our stand-ready performance obligations, including unlimited wireless services, evenly over the contract term.

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Federal Universal Service Fund (“USF”) and other fees are assessed by various governmental authorities in connection with the services we provide to our customers and are included in Cost of services.

When we separately bill and collect these regulatory fees from customers, they are recorded gross in Total service revenues in our Consolidated Statements of Comprehensive Income.

When we separately bill and collect these regulatory fees from customers, they are recorded gross in Total service revenues on our Consolidated Statements of Comprehensive Income.

For the years ended December 31, 2021, 2020 and 2019, we recorded approximately $ 216 million, $ 267 million and $ 93 million, respectively, of USF fees on a gross basis.

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Wireline Revenue

Performance obligations related to our Wireline customers include the provision of domestic and international data communications services, generally to complement business wireless customers.

Wireline revenues are included within Roaming and other service revenues in our Consolidated Statements of Comprehensive Income.

Performance obligations related to our Wireline customers include the provision of domestic and international data communications services, generally to complement wireless services.

Wireline revenues are included in Other service revenues on our Consolidated Statements of Comprehensive Income.

Equipment Revenues

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However, we have elected the practical expedient to not recognize the effects of a significant financing component for contracts where we expect, at contract inception, that the period between the transfer of a performance obligation to a customer and the customer’s payment for that performance obligation will be one year or less.

In addition, for customers who enroll in our JUMP!

program, we recognize a liability based on the estimated fair value of the specified-price trade-in right guarantee.

The fair value of the guarantee is deducted from the transaction price and the remaining transaction price is allocated to other elements of the contract, including service and equipment performance obligations.

See “Guarantee Liabilities” above for further information.

On Demand allows customers to lease a device over a period of up to 18 months and upgrade it for a new device up to one time per month.

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Our Leasing Programs allow customers to lease a device over a period of up to 18 months and upgrade the device with a new device when eligibility requirements are met.

To date, substantially all of our leased wireless devices are accounted for as operating leases and estimated contract consideration is allocated between lease and non-lease elements (such as service and equipment performance obligations) based on the relative standalone selling price of each performance obligation in the contract.

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See “Property and Equipment” above for further information.

Advertising and Search Revenues

Effective April 1, 2020, certain of our advertising and search revenues are now presented within Roaming and other service revenues, resulting in a reclassification of $ 506 million and $ 449 million for the years ended December 31, 2019 and 2018,

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respectively.

These revenues were previously presented within Other revenues in our Consolidated Statements of Comprehensive Income.

Prior periods have been reclassified to conform to current period presentation.

Imputed Interest on EIP Receivables

We record the effects of financing on all EIP loans regardless of whether or not the financing is considered to be significant.

For EIP greater than 12 months, we record the effects of financing on all EIP receivables regardless of whether or not the financing is considered to be significant.

The imputation of interest results in a discount of the EIP receivable, thereby adjusting the transaction price of the contract with the customer, which is then allocated to the performance obligations of the arrangement.

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See “Receivables and Allowance for Credit Losses” above, for additional discussion on how we assess credit risk.

For indirect channel loans to the end service customer in which the sale of the device was to the dealer (sell-in basis), the effect of imputing interest is recognized as a reduction to service revenue, the only performance obligation with the service customer as the device sale was recognized when transferred to the dealer, over the service contract period.

Our policies for imputed interest on EIP receivables are applied to loans originated for Sprint and Boost (up to the sale of the Prepaid Business to DISH on July 1, 2020) customers subsequent to Merger close.

For receivables associated with an end service customer in which the sale of the device was not directly to the end customer (sell-in model or devices sourced directly from OEM), the effect of imputing interest is recognized as a reduction to service revenue over the service contract period.

In these transactions, the provision of wireless services is the only performance obligation as the device sale was recognized when transferred to the dealer.

Our policies for imputed interest on EIP receivables are applied to receivables originated for Sprint and Boost (up to the sale of the Prepaid Business to DISH on July 1, 2020) customers subsequent to Merger close.

Contract Balances

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The transaction price can include non-refundable upfront fees, which are allocated to the identifiable performance obligations.

Contract assets are included in Other current assets and Other assets and contract liabilities are included in Deferred revenue in our Consolidated Balance Sheets.

Contract assets are included in Other current assets and Other assets and contract liabilities are included in Deferred revenue on our Consolidated Balance Sheets.

See N ote 10 – Revenue from Contracts with Customers for further information.

Contract Modifications

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We typically do not have significant impacts from contract modifications.

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Contract Costs

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Prepaid commissions are expensed as incurred as their estimated period of benefit does not extend beyond 12 months.

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paid upon device upgrade are not capitalized if the remaining customer contract is less than one year.

Commissions paid upon device upgrade are not capitalized if the remaining customer contract is less than one year.

Commissions paid when the customer has a lease are treated as initial direct costs and recognized over the lease term.

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Incremental costs to obtain equipment contracts (e.g., commissions paid on device and accessory sales) are recognized when the equipment is transferred to the customer.

See Note 10 – Revenue from Contracts with Customers for further information.

Brightstar Distribution

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Repurchase activity from the indirect dealer is estimated and treated as a right of return, reducing equipment revenue at the time of sale to the indirect dealer.

Upon lease to the end customer, T-Mobile recognizes lease revenue over the associated lease term within Equipment revenues in our Consolidated Statements of Comprehensive Income.

Upon lease to the end customer, T-Mobile recognizes lease revenue over the associated lease term in Equipment revenues on our Consolidated Statements of Comprehensive Income.

By December 31, 2020, we had terminated or restructured most of our arrangements with Brightstar, except for reverse logistics and trade-in services.

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Cell Site, Retail Store and Office Facility Leases

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

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

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

Some of these leases have escalating rentals during the initial lease term and during subsequent optional renewal periods.

We are a lessee for non-cancelable operating and financing leases for cell sites, switch sites, retail stores, network equipment, office facilities and dark fiber.

We recognize a right-of-use asset and lease liability for operating leases based on the net present value of future minimum lease payments.

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Lease expense is recognized on a straight-line basis over the non-cancelable lease term and renewal periods that are considered reasonably certain.

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

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

In addition, we have financing leases for certain network equipment.

We recognize a right-of-use asset and lease liability for financing leases based on the net present value of future minimum lease payments.

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Lease expense for our financing leases is comprised of the amortization of the right-of-use asset and interest expense recognized based on the effective interest method.

We consider several factors in assessing whether renewal periods are reasonably certain of being exercised, including the continued maturation of our nationwide network, technological advances within the telecommunications industry and the availability of alternative sites.

We have concluded it is not reasonably certain that we would exercise the options to extend or terminate our leases.

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availability of alternative sites.

We have concluded we are not reasonably certain to exercise the options to extend or terminate our leases.

Therefore, as of the lease commencement date, our lease terms generally do not include these options.

We include options to extend or terminate a lease when it is reasonably certain that we will exercise that option.

We include options to extend or terminate a lease when we are reasonably certain that we will exercise that option.

In determining the discount rate used to measure the right-of-use asset and lease liability, we use rates implicit in the lease, or if not readily available, we use our incremental borrowing rate.

Our incremental borrowing rate is based on an estimated secured

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rate comprised of a risk-free LIBOR rate plus a credit spread as secured by our assets.

Our incremental borrowing rate is based on an estimated secured rate comprised of a risk-free rate plus a credit spread as secured by our assets.

Determining a credit spread as secured by our assets may require significant judgment.

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Rental revenues and expenses associated with co-location tower sites are presented on a net basis under Topic 842.

These revenues and expenses were presented on a gross basis under Topic 840.

See Note 1 6 – Leases for further information.

See Note 1 - Summary of Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended December 31, 201 8 , for additional discussion regarding the accounting policies that governed leases prior to January 1, 2019.

Cell Tower Monetization Transactions

In 2012, we entered into a prepaid master lease in which we as the lessor provided the rights to utilize tower sites and we leased back space on certain of those towers.

Prior to the Merger, Sprint entered into a similar lease-out and leaseback arrangement which we assumed in the Merger.

In 2012, we entered into a prepaid master lease arrangement in which we as the lessor provided the rights to utilize tower sites and we leased back space on certain of those towers.

Prior to the Merger, Sprint entered into a similar lease-out and leaseback arrangement that we assumed in the Merger.

These arrangements are treated as failed sale leasebacks in which the proceeds received are reported as a financing obligation.

The principal payments on the tower obligations are included in Other, net within Net cash provided by (used in) financing activities in our Consolidated Statements of Cash Flows.

Our historical tower site asset costs are reported in Property and equipment, net in our Consolidated Balance Sheets and are depreciated.

The principal payments on the tower obligations are included in Other, net within Net cash provided by (used in) financing activities on our Consolidated Statements of Cash Flows.

Our historical tower site asset costs are reported in Property and equipment, net on our Consolidated Balance Sheets and are depreciated.

See Note 9 – Tower Obligations for further information.

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We expense the cost of advertising and other promotional expenditures to market our services and products as incurred.

For the years ended December 31, 2020, 2019 and 2018, advertising expenses included in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income were $ 1.8 billion, $ 1.6 billion and $ 1.7 billion, respectively.

Deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect when these differences are realized.

A valuation allowance is recorded when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The ultimate realization of a deferred tax asset depends on the ability to generate sufficient taxable income of the appropriate character and in the appropriate taxing jurisdictions within the carryforward periods available.

We account for uncertainty in income taxes recognized in the financial statements in accordance with the accounting guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

For the years ended December 31, 2021, 2020 and 2019, advertising expenses included in Selling, general and administrative expenses on our Consolidated Statements of Comprehensive Income were $ 2.2 billion, $ 1.8 billion and $ 1.6 billion, respectively.

Deferred tax assets and liabilities are recognized based on temporary differences between the consolidated financial statements and tax bases of assets and liabilities using enacted tax rates expected to be in effect when these differences are realized.

A valuation allowance is recorded when it is more likely than not that some portion or all of a deferred tax asset will not be

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assess whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position and adjust the unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law.

We account for uncertainty in income taxes recognized on our consolidated financial statements in accordance with the accounting guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

We assess whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position and adjust the unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law.

Other Comprehensive Income (Loss)

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Stock-Based Compensation

Stock-based compensation cost for stock awards, which include restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”), is measured at fair value on the grant date and recognized as expense, net of expected forfeitures, over the related service period.

Stock-based compensation expense for stock awards, which include restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”), is measured at fair value on the grant date and recognized as expense, net of expected forfeitures, over the related service period.

The fair value of stock awards is based on the closing price of our common stock on the date of grant.

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We classify all device purchases, whether acquired for sale or lease, as operating cash outflows as our predominant strategy is to sell devices to customers rather than lease them.

See Note 20 – Additional Financial Information for disclosures of Leased devices transferred from inventory to property and equipment and Returned leased devices transferred from property and equipment to inventory.

See Note 19 – Additional Financial Informatio n for disclosures of Leased

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devices transferred from inventory to property and equipment and Returned leased devices transferred from property and equipment to inventory.

Accounting Pronouncements Adopted During the Current Year

Receivables and Expected Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” and has since modified the standard with several ASUs (collectively, the “new credit loss standard”).

The new credit loss standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectibility of the reported amount.

The new credit loss standard became effective for us, and we adopted the standard, on January 1, 2020.

The new credit loss standard required a cumulative-effect adjustment to Accumulated deficit at the date of initial application, and as a result, we did not restate prior periods presented in the consolidated financial statements.

Under the new credit loss standard, we recognize lifetime expected credit losses at the inception of our credit risk exposures, whereas we previously recognized credit losses only when it was probable that they had been incurred.

We also recognize expected credit losses on our EIP receivables, which are inclusive of all installment receivables acquired in the Merger or issued thereafter, separately from, and in addition to, any unamortized discount on those receivables.

Prior to the adoption of the new credit loss standard, we had offset our estimate of probable losses on our EIP receivables by the amount of the related unamortized discounts on those receivables.

We have developed an expected credit loss model incorporating forward-looking loss indicators.

The cumulative effect of initially applying the new credit loss standard on our receivables portfolio on January 1, 2020 was an increase to our allowance for credit losses of $ 91 million, a decrease to our net deferred tax liabilities of $ 24 million and an increase to our Accumulated deficit of $ 67 million.

For EIP receivables acquired in the Merger, we also recognize expected credit losses separately from, and in addition to, the acquisition date fair value of the acquired EIP receivables.

Cloud Computing Arrangements

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Topic 350):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The standard also requires the presentation of the amortization of the capitalized implementation costs in the same line item in the Consolidated Statements of Comprehensive Income as the fees associated with the hosting arrangement.

The standard became effective for us, and we adopted the standard, on January 1, 2020.

We adopted the standard on a prospective basis applying it to implementation costs incurred subsequent to January 1, 2020 and, as a result, did not restate the prior periods presented in the consolidated financial statements.

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

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

Simplifying the Accounting for Income Taxes.” The standard removes 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.

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

Guarantor Financial Information

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

The amendments revise Rules 3-10 and 3-16 of Regulation S-X, and relocate part of Rule 3-10 and all of Rule 3-16 to the new Article 13 in Regulation S-X, which is comprised of new Rules 13-01 and 13-02.

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.

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Regulation S-K Modernization Amendments

On August 26, 2020, the SEC adopted amendments to modernize the description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K.

The amendments are intended to elicit improved disclosures for investors and add efficiencies to the compliance efforts of registrants.

The amendments are also intended to improve the readability of disclosure documents, as well as discourage repetition and reduce the disclosure of unnecessary information.

The amendments became effective for us, and we adopted the amendments on November 9, 2020, which included making certain updates to our description of business and risk factor disclosures within our Form 10-K for the year ended December 31, 2020.

Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

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

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

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

Management’s Discussion and Analysis, Selected Financial Data and Supplementary Information Amendments

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These amendments are intended to eliminate duplicative disclosures and modernize and enhance MD&A for the benefit of investors, while simplifying compliance efforts for registrants.

The amendments became effective on February 10, 2021.

We are currently evaluating the impact these amendments will have on our consolidated financial statements.

We will apply the amendments, as applicable, to relevant filings made with the SEC subsequent to this Form 10-K.

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

Note 2 – Business Combination

The amendments became effective for us, and we adopted the amendments in February 2021, which included making certain updates to our Management’s Discussion and Analysis and removing Selected Financial Data and Supplementary Information within our Form 10-K for the year ended December 31, 2021.

Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

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

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

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

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

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

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

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

Contract Assets and Contract Liabilities Acquired in a Business Combination

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The standard amends ASC 805 such that contract assets and contract liabilities acquired in a business combination are added to the list of exceptions to the recognition and measurement principles such that they are recognized and measured in accordance with ASC 606.

The standard will become effective for us beginning January 1, 2023 and should be applied prospectively to all business combinations occurring after the date of adoption.

Early adoption is permitted for us at any time.

We are currently evaluating the impact this guidance will have on our Consolidated Financial Statements and the timing of adoption.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the U.S.

Securities and Exchange Commission did not have, or are not expected to have, a significant impact on our present or future Consolidated Financial Statements.

Index for Notes to the Consolidated Financial Statements

Note 2 – Business Combinations

Business Combination Agreement and Amendments

On April 29, 2018, we entered into a Business Combination Agreement for the Merger.

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

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

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

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

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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.

Index for Notes to the Consolidated Financial Statements

issuance of these shares is contingent on the trailing 45-day volume-weighted average price per share of T-Mobile common stock on the NASDAQ Global Select Market being equal to or greater than $ 150.00 , at any time during the period commencing on April 1, 2022 and ending on December 31, 2025.

The issuance of these shares is contingent on the trailing 45-day volume-weighted average price per share of T-Mobile common stock on the NASDAQ Global Select Market being equal to or greater than $ 150.00 , at any time during the period commencing on April 1, 2022 and ending on December 31, 2025.

If the threshold price is not met, then none of the SoftBank Specified Shares Amount will be issued.

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On April 1, 2020, we completed the Merger, and as a result, Sprint and its subsidiaries became wholly-owned consolidated subsidiaries of T-Mobile.

Sprint was the fourth-largest telecommunications company in the U.S.

offering a comprehensive range of wireless and wireline communication products and services.

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

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.

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

Sprint was the fourth-largest telecommunications company in the U.S., offering a comprehensive range of wireless and wireline communication products and services.

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

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

Upon completion of the Merger, each share of Sprint common stock was exchanged for 0.10256 shares of T-Mobile common stock, or 9.75 shares of Sprint common stock for each share of T-Mobile common stock.

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The fair value of the T-Mobile common stock provided in exchange for Sprint common stock was approximately $ 31.3 billion.

Additional components of consideration included the repayment of certain of Sprint’s debt, replacement equity awards attributable to pre-combination services, contingent consideration and a cash payment received for certain reimbursed Merger expenses.

Additional components of consideration included the repayment of certain of Sprint’s debt, replacement of equity awards attributable to pre-combination services, contingent consideration and a cash payment received from SoftBank for certain reimbursed Merger expenses.

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

See Note 14 – S o ftBank Equity Tra nsaction for ownership details as of December 31, 2021.

Index for Notes to the Consolidated Financial Statements

Consideration Transferred

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

Value of contingent consideration (4)

Fair value of contingent consideration (4)

Payment received from selling stockholder (5)

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

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

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

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

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

(5) Represents receipt of a cash payment from SoftBank for certain expenses associated with the Merger and is presented in Cash paid for acquisition of companies, net of cash acquired within our Consolidated Statements of Cash Flows.

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

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

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

Index for Notes to the Consolidated Financial Statements

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

Fair Value Measurement.

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

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

The contingent consideration that could be delivered to SoftBank is classified within equity and is not subject to remeasurement.

Index for Notes to the Consolidated Financial Statements

Fair Value of Assets Acquired and Liabilities Assumed

We accounted for the Merger as a business combination.

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

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

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

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

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

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

As of December 31, 2020, the valuation of assets acquired and liabilities assumed is substantially complete except for the finalization of certain aspects of spectrum valuation, the valuation of certain income tax matters and loss contingencies.

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

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

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

(in millions) April 1, 2020

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(1) Included in Other assets acquired is $ 80 million in restricted cash.

Index for Notes to the Consolidated Financial Statements

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

Significant Measurement Period Adjustments

During the year ended December 31, 2020, we recognized measurement period adjustments to reflect facts and circumstances in existence as of the date of the Merger.

These adjustments included:

• An increase of $ 1.2 billion in Property and equipment related to the finalization of valuations related to certain tower assets and an increase of $ 1.7 billion in Other long-term liabilities associated with contract terms that are unfavorable to market terms.

See Note 9 – Tower Obligations for further information;

• A decrease of $ 690 million in Deferred tax liabilities resulting from a $ 357 million reclassification from deferred tax liabilities to current liabilities and the continued assessment of valuation allowance necessary as of the date of the Merger along with tax effecting measurement period adjustments.

See Note 13 - Income Taxes for further information.

The measurement period adjustments did not have a significant impact on our Consolidated Statement of Comprehensive Income for the year ended December 31, 2020.

The net impact of the measurement period adjustments resulted in a net increase to goodwill.

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

Intangible Assets and Liabilities

Goodwill with a provisionally assigned value of $ 9.4 billion represents the excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed.

The preliminary goodwill recognized includes synergies expected to be achieved from the operations of the combined company, the assembled workforce of Sprint and intangible assets that do not qualify for separate recognition.

Expected synergies include the cost savings from the planned integration of network infrastructure, facilities, personnel and systems.

Goodwill with an assigned value of $ 9.4 billion represents the excess of the consideration transferred over the fair values of assets acquired and liabilities assumed.

The goodwill recognized includes synergies expected to be achieved from the operations of the combined company, the assembled workforce of Sprint and intangible assets that do not qualify for separate recognition.

Expected synergies from the Merger include the cost savings from the planned integration of network infrastructure, facilities, personnel and systems.

None of the goodwill resulting from the Merger is deductible for tax purposes.

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

Index for Notes to the Consolidated Financial Statements

Other intangible assets include $ 4.9 billion of customer relationships with a weighted-average useful life of eight years and tradenames of $ 207 million with a useful life of two years .

Leased spectrum arrangements that have favorable (asset) and unfavorable (liability) terms compared to current market rates were assigned preliminary fair values of $ 790 million and $ 197 million, respectively, with 18 year and 19 year weighted average useful lives, respectively.

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

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

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

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

The key assumptions in applying the income approach include the discount rate, market share, estimated capital and operating expenditures, forecasted service revenue and long-term growth rate for a hypothetical market participant that enters the wireless industry and builds a nationwide wireless network.

Fair Value Measurement.

The key assumptions in applying the income approach include the discount rate, estimated market share, estimated capital and operating expenditures, forecasted service revenue and a long-term growth rate for a hypothetical market participant that enters the wireless industry and builds a nationwide wireless network.

Acquired Receivables

The fair value of the assets acquired include Accounts receivable of $ 1.8 billion and EIP receivables of $ 1.3 billion.

The unpaid principal balance under these contracts as of the Merger date was $ 1.8 billion and $ 1.6 billion, respectively.

The difference between the fair value and the unpaid principal balance primarily represents amounts expected to be uncollectible.

The fair value of the assets acquired includes Accounts receivable of $ 1.8 billion and EIP receivables of $ 1.3 billion.

The UPB under these contracts as of April 1, 2020, the date of the Merger, was $ 1.8 billion and $ 1.6 billion, respectively.

The difference between the fair value and the UPB primarily represents amounts expected to be uncollectible.

Indemnification Assets and Contingent Liabilities

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to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses.

As of December 31, 2020, we have recorded a contingent liability and an offsetting indemnification asset for the expected reimbursement by SoftBank for certain Lifeline matters that have not been resolved.

The liability is presented in Accounts payable and accrued liabilities, and the indemnification asset is presented in Other current assets within our Consolidated Balance Sheets.

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

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

Index for Notes to the Consolidated Financial Statements

As of the acquisition date, we recorded a contingent liability and an offsetting indemnification asset for the expected reimbursement by SoftBank for certain Lifeline matters.

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

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

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

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

Deferred Taxes

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

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

Transaction Costs

We recognized transaction costs of $ 28 million, $ 201 million and $ 106 million for the years ended December 31, 2021, 2020 and 2019, respectively.

These costs were associated with legal and professional services and were recognized as Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income.

These costs were associated with legal and professional services and were recognized as Selling, general and administrative expenses on our Consolidated Statements of Comprehensive Income.

Index for Notes to the Consolidated Financial Statements

Pro Forma Information

The following unaudited pro forma financial information gives effect to the Transactions as if they had been completed on January 1, 2019.

The unaudited pro forma information was prepared in accordance with the requirements of ASC 805, which is a different basis than pro forma information prepared under Article 11 of Regulation S-X (“Article 11”).

The unaudited pro forma information was prepared in accordance with the requirements of ASC 805:

Business Combinations, which is a different basis than pro forma information prepared under Article 11 of Regulation S-X (“Article 11”).

As such, they are not directly comparable with historical results for stand-alone T-Mobile prior to April 1, 2020, historical results for T-Mobile from April 1, 2020 that reflect the Transactions and are inclusive of the results and operations of Sprint, nor our previously provided pro forma financials prepared in accordance with Article 11.

The pro forma results for the years ended December 31, 2020 and 2019 include the impact of several adjustments to previously reported operating results.

The pro forma results for the years ended December 31, 2020 and 2019 include the impact of several significant nonrecurring pro forma adjustments to previously reported operating results.

The pro forma adjustments are based on historically reported transactions by the respective companies.

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Year Ended December 31,

(in millions, except per share amounts) 2020 2019

(in millions) 2020 2019

Total revenues $ 74,681 $ 70,607

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Significant nonrecurring pro forma adjustments include:

• Transaction costs of $ 559 million are assumed to have occurred on January 1, 2019, and are recognized as if incurred in the first quarter of 2019;

• Transaction costs of $ 559 million that were incurred during the year ended December 31, 2020 are assumed to have occurred on the pro forma close date of January 1, 2019, and are recognized as if incurred in the first quarter of 2019;

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

• Permanent financing issued and debt redemptions occurring in connection with the closing of the Merger are assumed to have occurred on January 1, 2019, and historical interest expense associated with repaid borrowings is removed;

• Tangible and intangible assets are assumed to be recorded at their estimated fair values as of the pro forma close date of January 1, 2019 and are depreciated or amortized over their estimated useful lives;

• Accounting policies of Sprint are conformed to those of T-Mobile including depreciation for leased devices, Brightstar distribution, amortization of costs to acquire a contract and certain tower lease transactions as described in Note 1 - Summary of Significant Accounting Policies and Note 9 - Tower Obligations .

• Tangible and intangible assets are assumed to be recorded at their estimated fair values as of January 1, 2019 and are depreciated or amortized over their estimated useful lives;

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

The selected unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations would have been had the Transactions actually occurred on January 1, 2019, nor do they purport to project the future consolidated results of operations.

For the periods subsequent to the Merger close date, the acquired Sprint subsidiaries contributed total revenues and operating income of $ 20.5 billion and $ 1.3 billion, respectively, for the year ended December 31, 2020, that were included in our Consolidated Statements of Comprehensive Income.

For the periods subsequent to the Merger close date, the acquired Sprint subsidiaries contributed total revenues and operating income of $ 20.5 billion and $ 1.3 billion, respectively, for the year ended December 31, 2020, that were included on our Consolidated Statements of Comprehensive Income.

In connection with the entry into the Business Combination Agreement, T-Mobile USA, Inc.

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We used the net proceeds from the drawdown of the secured facilities to refinance certain existing debt of us, Sprint and our and Sprint’s respective subsidiaries and for post-closing general corporate purposes of the combined company.

See Note 8 – Debt for further information.

Index for Notes to the Consolidated Financial Statements

In connection with the financing provided for in the Commitment Letter, we incurred certain fees payable to the financial institutions.

On April 1, 2020, in connection with the closing of the Merger, we paid $ 355 million in Commitment Letter fees to certain financial institutions.

See Note 8 – Debt for further information.

In connection with the entry into the Business Combination Agreement, DT and T-Mobile USA entered into a Financing Matters Agreement, dated as of April 29, 2018 (the “Financing Matters Agreement”), pursuant to which DT agreed, among other things, to consent to, subject to certain conditions, amendments to certain existing debt owed to DT, in connection with the Merger.

Index for Notes to the Consolidated Financial Statements

On April 1, 2020, in connection with the closing of the Merger, we made a payment for requisite consents to DT of $ 13 million.

See Note 8 – Debt for further information.

On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement dated as of May 14, 2018 (the “Consent Solicitation Statement”), we obtained consents necessary to effect amendments to certain existing debt of us and our subsidiaries.

On April 1, 2020, in connection with the closing of the Merger, we made payments for requisite consents to third-party note holders of $ 95 million.

See Note 8 – Debt for further information.

Regulatory Matters

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Shenandoah Personal Communications Company Affiliate Relationship

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

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

On August 26, 2020, Sprint, now our direct subsidiary, on behalf of and as the direct or indirect owner of Sprint PCS, exercised its option by delivering a binding notice of exercise to Shentel.

The exercise of this option triggered a requirement for the parties to engage three independent valuation providers (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 telecommunication assets used to provide services pursuant to the Management Agreement to be $ 2.1 billion, and correspondingly, the base purchase price for such wireless telecommunication assets shall be ninety percent ( 90 %) of that Entire Business Value amount ($ 1.9 billion), subject to certain other purchase price adjustments prescribed by the Management Agreement and such additional purchase price adjustments agreed by the parties.

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

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

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

On August 26, 2020, Sprint, now our indirect subsidiary, on behalf of and as the direct or indirect owner of Sprint PCS, exercised its option by delivering a binding notice of exercise to Shentel.

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

Closing of Shentel Wireless Assets Acquisition

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

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

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

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

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

Index for Notes to the Consolidated Financial Statements

Note 3 – Receivables and Expected Credit Losses

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

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

The financial results of the Wireless Assets since the closing through December 31, 2021, were not material to our Consolidated Statements of Comprehensive Income, nor were they material to our prior period consolidated results on a pro forma basis.

Fair Value of Assets Acquired and Liabilities Assumed

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

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

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

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

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

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

(in millions) July 1, 2021

Inventory $ 2

Property and equipment 136

Operating lease right-of-use assets 308

Goodwill 1,035

Other intangible assets 770

Other assets 7

Total assets acquired 2,258

Short-term operating lease liabilities 73

Operating lease liabilities 264

Other long-term liabilities 35

Total liabilities assumed 372

Total consideration transferred $ 1,886

Intangible Assets and Liabilities

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

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

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

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

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

Note 3 – Receivables and Related Allowance for Credit Losses

Our portfolio of receivables is comprised of two portfolio segments:

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Accounts Receivable Portfolio Segment

Our accounts receivable segment primarily consists of amounts currently due from customers, including service and leased device receivables, device insurance administrators, wholesale partners, third-party retail channels and other carriers.

We estimate expected credit losses associated with our accounts receivable portfolio using an aging schedule methodology that utilizes historical information and current conditions to develop expected credit losses by aging bucket, including for receivables that are not past due.

To determine the appropriate credit loss percentages by aging bucket, we consider a number of factors, including our overall historical credit losses, net of recoveries and timely payment experience as well as current collection trends such as write-off frequency and severity, credit quality of the customer base, and other qualitative factors such as macro-economic conditions, including the expected economic impacts of the Pandemic.

We consider the need to adjust our estimate of expected credit losses for reasonable and supportable forecasts of future economic conditions.

Accounts receivable balances are predominately composed of amounts currently due from customers (e.g., for wireless services and monthly device lease payments), device insurance administrators, wholesale partners, other carriers and third-party retail channels.

Index for Notes to the Consolidated Financial Statements

We estimate credit losses associated with our accounts receivable portfolio segment using an expected credit loss model, which utilizes an aging schedule methodology based on historical information and adjusted for asset-specific considerations, current economic conditions and reasonable and supportable forecasts.

Our approach considers a number of factors, including our overall historical credit losses, net of recoveries, timely payment experience as well as current collection trends such as write-off frequency and severity.

We also consider other qualitative factors such as macro-economic conditions, including the expected economic impacts of the Pandemic.

We consider the need to adjust our estimate of credit losses for reasonable and supportable forecasts of future economic conditions.

To do so, we monitor professional forecasts of changes in real U.S.

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Based upon customer credit profiles at the time of customer origination, we classify the EIP receivables segment into two customer classes of “Prime” and “Subprime.” Prime customer receivables are those with lower credit risk and Subprime customer receivables are those with higher credit risk.

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

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

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

Installment loans acquired in the Merger are included in EIP receivables.

Customers may be required to make a down payment on their equipment purchases if their assessed credit risk exceeds established underwriting thresholds.

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

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

Installment receivables acquired in the Merger are included in EIP receivables.

We applied our proprietary credit scoring model to the customers acquired in the Merger with an outstanding EIP receivable balance.

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

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

For EIP receivables acquired in the Merger, the difference between the fair value and UPB of the receivable at the acquisition date is accreted to interest income over the contractual life of the receivable using the effective interest method.

EIP receivables had a combined weighted-average effective interest rate of 5.6 % and 6.7 % as of December 31, 2021 and 2020, respectively.

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

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EIP receivables, gross $ 8,207 $ 6,213

$ 6,213 $ 4,582

Unamortized imputed discount ( 378 ) ( 325 )

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Allowance for credit losses ( 252 ) ( 280 )

( 280 ) ( 100 )

EIP receivables, net of allowance for credit losses and imputed discount $ 7,577 $ 5,608

Classified on the balance sheet as:

Classified on the consolidated balance sheets as:

Equipment installment plan receivables, net of allowance for credit losses and imputed discount $ 4,748 $ 3,577

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EIP receivables, net of allowance for credit losses and imputed discount $ 7,577 $ 5,608

(1) Through the Merger, we acquired EIP receivables with a fair value of $ 1.3 billion as of April 1, 2020.

As they were recorded at fair value, an imputed discount was not recognized on the acquired receivables.

(2) Allowance for credit losses as of December 31, 2020 was impacted by the cumulative effect of initially applying the new credit loss standard on our receivables portfolio on January 1, 2020, which resulted in an increase to our allowance for credit losses of $ 91 million.

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

As a part of the adoption of the new credit loss standard, we now disclose our EIP receivables portfolio disaggregated by origination year.

EIP receivables acquired through the Merger are also presented by origination year.

Many of our loss estimation techniques rely on delinquency-based models;

therefore, delinquency is an important indicator of credit quality in the establishment of our allowance for credit losses for EIP receivables.

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

The following table presents the

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EIP receivables, net of unamortized imputed discount $ 3,933 $ 2,486 $ 892 $ 487 $ 23 $ 8 $ 4,848 $ 2,981 $ 7,829

We estimate expected credit losses on our EIP receivables by using historical data adjusted for current conditions to calculate default probabilities for our outstanding EIP loans.

We consider various risk characteristics when calculating default probabilities, such as how long such loans have been outstanding, customer credit ratings, customer tenure, delinquency status and other correlated variables identified through statistical analyses.

We multiply these estimated default probabilities by our estimated loss given default, which considers recoveries.

As we do for our accounts receivable portfolio segment, we consider the need to adjust our estimate of expected losses on EIP receivables for reasonable and supportable forecasts of economic conditions through monitoring of external professional forecasts and periodic internal statistical analyses, including the expected economic impacts of the Pandemic.

For EIP receivables acquired in the Merger, the difference between the fair value and unpaid principal balance of the loan at the

acquisition date is accreted to interest income over the contractual life of the loan using the effective interest method.

EIP receivables had a combined weighted average effective interest rate of 6.7 % and 8.8 % as of December 31, 2020 and 2019, respectively.

We estimate credit losses on our EIP receivables segment applying an expected credit loss model, which relies on historical loss data adjusted for current conditions to calculate default probabilities or an estimate for the frequency of customer default.

Our assessment of default probabilities includes receivables delinquency status, historical loss experience, how long the receivables have been outstanding, customer credit ratings as well as customer tenure.

We multiply these estimated default probabilities by our estimated loss given default, which is the estimated amount or severity of the default loss after adjusting for estimated recoveries.

As we do for our accounts receivable portfolio segment, we consider the need to adjust our estimate of credit losses on EIP receivables for reasonable and supportable forecasts of economic conditions through monitoring external professional forecasts and periodic internal statistical analyses, including the expected economic impacts of the Pandemic.

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

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We do not have material, unmitigated off-balance-sheet credit exposures as of December 31, 2021.

In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets

Index for Notes to the Consolidated Financial Statements

included in our Consolidated Balance Sheets measured at fair value that are based on a discounted cash flow model using unobservable Level 3 inputs, including customer default rates and credit worthiness, dilutions and recoveries.

In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets included on our Consolidated Balance Sheets measured at fair value that are based on a discounted cash flow model using Level 3 inputs, including customer default rates and credit worthiness, dilutions and recoveries.

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

Index for Notes to the Consolidated Financial Statements

Note 4 – Sales of Certain Receivables

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The transactions, including our continuing involvement with the sold receivables and the respective impacts to our consolidated financial statements, are described below.

In conjunction with the Merger, the total principal amount outstanding under Sprint’s accounts receivable facility of $ 2.3 billion was repaid on April 1, 2020, and the facility was terminated.

Sales of Service Accounts Receivable

Overview of the Transaction

In 2014, we entered into an arrangement to sell certain service accounts receivable on a revolving basis (the “service receivable sale arrangement”).

The maximum funding commitment of the service receivable sale arrangement is $ 950 million, and the facility expires in March 2021.

As of December 31, 2020 and 2019, the service receivable sale arrangement provided funding of $ 772 million and $ 924 million, respectively.

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

The receivables consist of service charges currently due from customers and are short-term in nature.

In connection with the service receivable sale arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity, to sell service accounts receivable (the “Service BRE”).

The Service BRE does not qualify as a VIE, and due to the significant level of control we exercise over the entity, it is consolidated.

Pursuant to the service receivable sale arrangement, certain of our wholly owned subsidiaries transfer selected receivables to the Service BRE.

The Service BRE then sells the receivables to an unaffiliated entity (the “Service VIE”), which was established to facilitate the sale of beneficial ownership interests in the receivables to certain third parties.

Variable Interest Entity

We determined that the Service VIE qualifies as a VIE as it lacks sufficient equity to finance its activities.

We have a variable interest in the Service VIE but are not the primary beneficiary as we lack the power to direct the activities that most significantly impact the Service VIE’s economic performance.

Those activities include committing the Service VIE to legal agreements to purchase or sell assets, selecting which receivables are purchased in the service receivable sale arrangement, determining whether the Service VIE will sell interests in the purchased service receivables to other parties, funding of the entity and servicing of receivables.

We do not hold the power to direct the key decisions underlying these activities.

For example, while we act as the servicer of the sold receivables, which is considered a significant activity of the Service VIE, we are acting as an agent in our capacity as the servicer, and the counterparty to the service receivable sale arrangement has the ability to remove us as the servicing agent of the receivables at will with no recourse available to us.

As we have determined we are not the primary beneficiary, the balances and results of the Service VIE are not included in our consolidated financial statements.

The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, and liabilities included in our Consolidated Balance Sheets that relate to our variable interest in the Service VIE:

(in millions) December 31,

2020 December 31,

Other current assets $ 378 $ 350

Accounts payable and accrued liabilities — 25

Other current liabilities 357 342

Sales of EIP Receivables

Overview of the Transaction

In 2015, we entered into an arrangement to sell certain EIP accounts receivable on a revolving basis (the “EIP sale arrangement”).

In 2015, we entered into an arrangement to sell certain EIP receivables on a revolving basis (the “EIP sale arrangement”).

The maximum funding commitment of the sale arrangement is $ 1.3 billion.

In February 2020, we amended the

Index for Notes to the Consolidated Financial Statements

sale arrangement to provide for an alternative advance rate methodology for the EIP accounts receivable sold in the sale arrangement and to make certain other administrative changes.

On November 10, 2021, we extended the scheduled expiration date of the EIP sale arrangement to November 18, 2022.

On April 30, 2020, we agreed with the purchaser banks to update our collection policies to temporarily allow for flexibility for modifications to the accounts receivable sold that are impacted by COVID-19 and exclusion of such accounts receivable from all pool performance triggers.

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

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Additionally, our equity interest in the EIP BRE obligates us to absorb losses and gives us the right to receive benefits from the EIP BRE that could potentially be significant to the EIP BRE.

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

Accordingly, we include the balances and results of operations of the EIP BRE on our consolidated financial statements.

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

(in millions) December 31,

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Accordingly, the assets of the EIP BRE may not be used to settle our general obligations and creditors of the EIP BRE have limited recourse to our general credit.

Sales of Service Accounts Receivable

Overview of the Transaction

In 2014, we entered into an arrangement to sell certain service accounts receivable on a revolving basis (the “service receivable sale arrangement”).

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

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

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

The receivables consist of service charges currently due from customers and are short-term in nature.

In connection with the service receivable sale arrangement, we formed a wholly-owned subsidiary, which qualifies as a bankruptcy remote entity, to sell service accounts receivable (the “Service BRE”).

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

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

Index for Notes to the Consolidated Financial Statements

contractual counterparties.

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

Pursuant to the amended service receivable sale arrangement, our wholly-owned subsidiary transfers selected receivables to the Service BRE.

The Service BRE then sells the receivables to a non-consolidated and unaffiliated third-party entity over which we do not exercise any level of control and which does not qualify as a VIE.

Variable Interest Entity

Prior to the March 2021 Amendment, the Service BRE did not qualify as a VIE, but due to the significant level of control we exercised over the entity, it was consolidated.

The March 2021 Amendment to the service receivable sale arrangement triggered a VIE reassessment, and we determined that the Service BRE now qualifies as a VIE.

We have a variable interest in the Service BRE and have determined that we are the primary beneficiary based on our ability to direct the activities that most significantly impact the Service BRE’s economic performance.

Those activities include selecting which receivables are transferred into the Service BRE and sold in the service receivable sale arrangement and funding the Service BRE.

Additionally, our equity interest in the Service BRE obligates us to absorb losses and gives us the right to receive benefits from the Service BRE that could potentially be significant to the Service BRE.

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

(in millions) December 31,

2021 December 31,

Other current assets $ 231 $ 378

Other current liabilities 348 357

In addition, the Service BRE is a separate legal entity with its own separate creditors who will be entitled, prior to any liquidation of the Service BRE, to be satisfied prior to any value in the Service BRE becoming available to us.

Accordingly, the assets of the Service BRE may not be used to settle our general obligations, and creditors of the Service BRE have limited recourse to our general credit.

Sales of Receivables

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Upon sale, we derecognize the net carrying amount of the receivables.

We recognize the cash proceeds received upon sale in Net cash provided by operating activities in our Consolidated Statements of Cash Flows.

We recognize the cash proceeds received upon sale in Net cash provided by operating activities on our Consolidated Statements of Cash Flows.

We recognize proceeds net of the deferred purchase price, consisting of a receivable from the purchasers that entitles us to certain collections on the receivables.

We recognize the collection of the deferred purchase price in Net cash used in investing activities in our Consolidated Statements of Cash Flows as Proceeds related to beneficial interests in securitization transactions.

We recognize the collection of the deferred purchase price in Net cash used in investing activities on our Consolidated Statements of Cash Flows as Proceeds related to beneficial interests in securitization transactions.

The deferred purchase price represents a financial asset that is primarily tied to the creditworthiness of the customers and which can be settled in such a way that we may not recover substantially all of our recorded investment, due to default by the customers on the underlying receivables.

At inception, we elected to measure the deferred purchase price at fair value with changes in fair value included in Selling, general and administrative expense in our Consolidated Statements of Comprehensive Income.

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

As of December 31, 2020 and 2019, our

At inception, we elected to measure the deferred purchase price at fair value with changes in fair value included in Selling, general and administrative expense on our Consolidated Statements of Comprehensive Income.

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

As of December 31, 2021 and 2020, our deferred purchase price related to the sales of service receivables and EIP receivables was $ 779 million and $ 884 million, respectively.

Index for Notes to the Consolidated Financial Statements

deferred purchase price related to the sales of service receivables and EIP receivables was $ 884 million and $ 781 million, respectively.

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

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

(in millions) December 31,

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of which, deferred purchase price 125 120

Accounts payable and accrued liabilities — 25

Other current liabilities 348 357

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

We recognized losses from sales of receivables, including adjustments to the receivables’ fair values and changes in fair value of the deferred purchase price, of $ 36 million, $ 130 million and $ 157 million for the years ended December 31, 2020, 2019 and 2018, respectively, in Selling, general and administrative expense in our Consolidated Statements of Comprehensive Income.

As of December 31, 2021 and 2020, the total principal balance of outstanding transferred service receivables and EIP receivables were $ 1.0 billion and $ 1.2 billion, respectively.

We recognized losses from sales of receivables, including adjustments to the receivables’ fair values and changes in fair value of the deferred purchase price, of $ 15 million, $ 36 million and $ 130 million for the years ended December 31, 2021 2020 and 2019, respectively, in Selling, general and administrative expense on our Consolidated Statements of Comprehensive Income.

Continuing Involvement

Pursuant to the sale arrangements described above, we have continuing involvement with the service receivables and EIP receivables we sell as we service the receivables and are required to repurchase certain receivables, including ineligible receivables, aged receivables and receivables where write-off is imminent.

Pursuant to the sale arrangements described above, we have continuing involvement with the service receivables and EIP receivables we sell as we service the receivables, are required to repurchase certain receivables, including ineligible receivables, aged receivables and receivables where write-off is imminent, and may be responsible for absorbing credit losses through reduced collections on our deferred purchase price assets.

We continue to service the customers and their related receivables, including facilitating customer payment collection, in exchange for a monthly servicing fee.

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At the direction of the purchasers of the sold receivables, we apply the same policies and procedures while servicing the sold receivables as we apply to our owned receivables, and we continue to maintain normal relationships with our customers.

Pursuant to the EIP sale arrangement, under certain circumstances, we are required to deposit cash or replacement EIP receivables primarily for contracts terminated by customers under our JUMP!

On Demand program.

In addition, we have continuing involvement with the sold receivables as we may be responsible for absorbing additional credit losses pursuant to the sale arrangements.

Our maximum exposure to loss related to the involvement with the service receivables and EIP receivables sold under the sale arrangements was $ 1.2 billion as of December 31, 2020.

The maximum exposure to loss, which is a required disclosure under U.S.

GAAP, represents an estimated loss that would be incurred under severe, hypothetical circumstances whereby we would not receive the deferred purchase price portion of the contractual proceeds withheld by the purchasers and would also be required to repurchase the maximum amount of receivables pursuant to the sale arrangements without consideration for any recovery.

We believe the probability of these circumstances occurring is remote and the maximum exposure to loss is not an indication of our expected loss.

Index for Notes to the Consolidated Financial Statements

Note 5 – Property and Equipment

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Leased wireless devices Up to 19 months

Construction in progress 4,595 2,973

Construction in progress N/A 3,703 4,595

Accumulated depreciation and amortization ( 49,818 ) ( 42,395 )

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Total depreciation expense relating to property and equipment and financing lease right-of-use assets was $ 15.2 billion, $ 13.1 billion and $ 6.5 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

These amounts include depreciation expense related to leased wireless devices of $ 3.1 billion, $ 543 million and $ 940 million for the years ended December 31, 2020, 2019 and 2018, respectively.

These amounts include depreciation expense related to leased wireless devices of $ 3.1 billion for each of the years ended December 31, 2021 and 2020 and $ 543 million for the year ended December 31, 2019.

We capitalize interest associated with the acquisition or construction of certain property and equipment and spectrum intangible assets.

We recognized capitalized interest of $ 210 million, $ 440 million and $ 473 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Index for Notes to the Consolidated Financial Statements

Asset retirement obligations are primarily for certain legal obligations to remediate leased property on which our network infrastructure and administrative assets are located.

Activity in our asset retirement obligations was as follows:

(in millions) Year Ended

December 31, 2020 Year Ended

December 31, 2019

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

Asset retirement obligations, beginning of year $ 1,817 $ 659

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Asset retirement obligations, end of period $ 1,899 $ 1,817

Classified on the balance sheet as:

Classified on the consolidated balance sheets as:

Other current liabilities $ 216 $ 14

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In order to facilitate customer migration from the Sprint legacy billing platform, our postpaid billing system replacement plan and associated development will no longer serve our future needs.

As a result, we recorded a non-cash impairment of $ 200 million related to capitalized software development costs for the year ended December 31, 2020, all of which relates to the impairment recognized during the three months ended June 30, 2020.

The expense is included within Impairment expense in our Consolidated Statements of Comprehensive Income.

There were no impairments recognized for the years ended December 31, 2019 and 2018.

Index for Notes to the Consolidated Financial Statements

As a result, we recorded a non-cash impairment $ 200 million related to capitalized software development costs for the year ended December 31, 2020, all of which relates to the impairment recognized during the three months ended June 30, 2020.

The expense is included in Impairment expense on our Consolidated Statements of Comprehensive Income.

There were no impairments recognized for the years ended 2021 and 2019.

Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets

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Goodwill from acquisition in 2020 9,405

Layer3 goodwill impairment ( 218 )

Balance as of December 31, 2020 11,117

Purchase price adjustment of goodwill from acquisitions in 2020 22

Goodwill from acquisitions in 2021 1,049

Layer3 goodwill impairment ( 218 )

Balance as of December 31, 2021 $ 12,188

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The acquired goodwill was allocated to the wireless reporting unit and will be tested for impairment at this level.

See Note 2 - Business Combination for further information.

See Note 2 – Business Combinatio ns for further information.

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

The acquired goodwill was allocated to the wireless reporting unit and will be tested for impairment at this level.

See Note 2 – Business Combinations for further information.

Index for Notes to the Consolidated Financial Statements

Goodwill Impairment Assessment

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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.

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

As a result of the change in the stand-alone product offering plans and timing, we completed an interim goodwill impairment analysis for the Layer3 reporting unit and recognized a goodwill impairment 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 assigned to the Layer3 reporting unit to zero .

The expense is included within Impairment expense in our Consolidated Statements of Comprehensive Income.

In the year ending December 31, 2020, we recognized a goodwill impairment of $ 218 million for the Layer3 reporting unit.

The impairment was the result of our enhanced in-home broadband opportunity following the Merger, along with the acquisition of certain content rights, which has created a strategic shift in our TVision TM services offering.

The expense is included in Impairment expense on our Consolidated Statements of Comprehensive Income.

There were no goodwill impairments recognized for the years ended December 31, 2021 and 2019.

Application of the goodwill impairment test requires judgment including the determination of the fair value of the reporting unit.

We employed an income approach to assess the fair value of the Layer3 reporting unit based on the present value of estimated future cash flows.

Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our business plans, expected growth rates, cost of capital and tax rates.

We also made certain forecasts about future business strategies and economic conditions, market data, and other assumptions, such as estimates of subscribers for TVision TM services, average revenue and content cost per subscriber.

The discount rate used was based on the weighted average cost of capital adjusted for the risk associated with business-specific characteristics and the uncertainty related to the business’s ability to execute on the projected cash flows.

As of December 31, 2020, Goodwill was only assigned to the wireless reporting unit as the Goodwill assigned to the Layer3 reporting unit was written-off to a zero balance during the year ended December 31, 2020.

Index for Notes to the Consolidated Financial Statements

Intangible Assets

Identifiable Intangible Assets Acquired

Identifiable Intangible Assets Acquired from the Merger

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

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(1) Tradenames include the Sprint brand

Spectrum licenses are issued for a fixed period of time, typically up to 15 years;

however, the FCC has granted license renewals routinely and at a nominal cost.

The spectrum licenses acquired expire at various dates and we believe we will be able to meet all requirements necessary to secure renewal of our spectrum licenses at a nominal cost.

Moreover, we determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our spectrum licenses.

Therefore, we determined the spectrum licenses should be treated as indefinite-lived intangible assets.

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

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

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

We lease this spectrum from third parties who hold the spectrum licenses.

As these contracts pertain to intangible assets, they are excluded from the lease accounting guidance (ASC 842) and are accounted for as service contracts in which the expense is recognized on a straight-line basis over the lease team.

Favorable spectrum leases of $ 745 million were recorded as an intangible asset as a result of purchase accounting and will be amortized on a straight-line basis over the associated remaining lease term.

Additionally, we recognized unfavorable spectrum lease liabilities of $ 197 million, which are also amortized over their respective remaining lease terms and are included in Other liabilities in our Consolidated Balance Sheets.

Additionally, we recognized unfavorable spectrum lease liabilities of $ 125 million, which are also amortized over their respective remaining lease terms and are included in Other liabilities on our Consolidated Balance Sheets.

The customer relationship intangible assets represent the value associated with the acquired Sprint customers.

The customer relationship intangible assets are amortized using the sum-of-the-years digits method over periods of up to eight years .

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

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

Index for Notes to the Consolidated Financial Statements

Identifiable Intangible Assets Acquired in the Shentel Acquisition

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

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

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

Spectrum Licenses

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Spectrum Transactions

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 to the Merger.

Index for Notes to the Consolidated Financial Statements

In November 2020, we executed an agreement with a third party for the exchange of certain AWS spectrum licenses.

Upon the execution of the agreement, the spectrum licenses were classified as assets held for sale, included within Other current assets, and measured at the lower of their carrying amount or fair value less cost to sell, which resulted in the recognition of a non-cash impairment loss of $ 35 million, included in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income.

We received approval for the transaction from the FCC and the transaction closed in the first quarter of 2021.

The licenses are included in Spectrum licenses in our Consolidated Balance Sheets as of December 31, 2020.

Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in Purchases of spectrum licenses and other intangible assets, including deposits, in our Consolidated Statements of Cash Flows for the year ended December 31, 2020.

In April 2020, we acquired FCC licenses in the 800 MHz, 1900 MHz, and 2.5 GHz bands as part of the Merger with Sprint at an estimated fair value of approximately $ 45.4 billion.

See Note 2 - Business Combination for further information.

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.

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

The licenses are included in Spectrum licenses on our Consolidated Balance Sheets as of December 31, 2021.

Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in Purchases of spectrum licenses and other intangible assets, including deposits on our Consolidated Statements of Cash Flows for the year ended December 31, 2021.

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

As of December 31, 2021, the activities that are necessary to get the C-band spectrum ready for its intended use have not begun, as such, capitalization of the interest associated with the costs of acquiring the C-band spectrum has not begun.

Subsequent to December 31, 2021, 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 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.

Impairment Assessment

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$ 4,879 $ ( 1,863 ) $ 3,016 $ 4,900 $ ( 865 ) $ 4,035

Reacquired rights Up to 9 years

770 ( 46 ) 724 — — —

Tradenames and patents Up to 19 years

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Other intangible assets $ 6,925 $ ( 2,192 ) $ 4,733 $ 6,665 $ ( 1,367 ) $ 5,298

Amortization expense for intangible assets subject to amortization was $ 1.2 billion, $ 82 million and $ 124 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Index for Notes to the Consolidated Financial Statements

Amortization expense for intangible assets subject to amortization was $ 1.3 billion, $ 1.2 billion and $ 82 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The gross amount and accumulated amortization of certain customer relationships, tradenames and patents that became fully amortized and retired during the year are excluded from the table above.

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

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Total $ 4,733

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

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

Note 7 – Fair Value Measurements

The carrying values of Cash and cash equivalents, Accounts receivable, Accounts receivable from affiliates, Accounts payable and accrued liabilities and borrowings under vendor financing arrangements with our primary network equipment suppliers approximate fair value due to the short-term maturities of these instruments.

Index for Notes to the Consolidated Financial Statements

Derivative Financial Instruments

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No amounts were transferred to the derivative counterparties subsequent to March 31, 2020.

These collateral transfers are included in Net cash related to derivative contracts under collateral exchange arrangements within Net cash used in investing activities in our Consolidated Statements of Cash Flows.

The net collateral transfers to certain of our derivative counterparties totaled $ 632 million for the three months ended December 31, 2019, and was presented in Other current assets in our Consolidated Balance Sheets.

There was no collateral receivable balance as of December 31, 2020.

We record interest rate lock derivatives on our Consolidated Balance Sheets at fair value that is derived primarily from observable market data, including yield curves.

These collateral transfers are included in Net cash related to derivative contracts under collateral exchange arrangements within Net cash used in investing activities on our Consolidated Statements of Cash Flows.

We recorded interest rate lock derivatives on our Consolidated Balance Sheets at fair value that was derived primarily from observable market data, including yield curves.

Interest rate lock derivatives were classified as Level 2 in the fair value hierarchy.

Cash flows associated with qualifying hedge derivative instruments are presented in the same category on the Consolidated Statements of Cash Flows as the item being hedged.

The fair value of interest rate lock derivatives was a liability of $ 1.2 billion as of December 31, 2019, and was included in Other current liabilities in our Consolidated Balance Sheets.

Aggregate changes in fair value, net of tax, of $ 1.6 billion and $ 868 million are presented in Accumulated other comprehensive loss as of December 31, 2020 and 2019, respectively.

Between April 2 to April 6, 2020, in connection with the issuance of an aggregate of $ 19.0 billion in Senior Secured Notes bearing interest rates ranging from 3.500 % to 4.500 % and maturing in 2025 through 2050, we terminated our interest rate lock derivatives.

See Note 8 - Debt for further information regarding the issuance of Senior Secured Notes.

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.

The cash flows associated with the settlement of interest rate lock derivatives are presented on a gross basis in our Consolidated Statements of Cash Flows, with the total cash payments to settle the swaps of $ 2.3 billion presented in changes in Other current and long-term liabilities within Net cash provided by operating activities and the return of cash collateral of $ 1.2 billion presented as an inflow in Net cash related to derivative contracts under collateral exchange arrangements within Net cash used in investing activities.

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

For the year ended December 31, 2020, $ 128 million was amortized from Accumulated other comprehensive loss into Interest expense in the Consolidated Statements of Comprehensive Income.

No amounts were amortized into Interest expense for the years ended December 31, 2019 and 2018.

We expect to amortize $ 189 million of the Accumulated other comprehensive loss associated with the derivatives into Interest expense over the next 12 months.

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

Between April 2 and April 6, 2020, in connection with the issuance of an aggregate of $ 19.0 billion of Senior Secured Notes bearing interest rates ranging from 3.500 % to 4.500 % and maturing in 2025 through 2050, we terminated our interest rate lock derivatives.

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

The cash flows associated with the settlement of interest rate lock derivatives are presented on a gross basis on our Consolidated Statements of Cash Flows, with the total cash payments to settle the swaps of $ 2.3 billion presented in changes in Other current and long-term liabilities within Net cash provided by operating activities and

Index for Notes to the Consolidated Financial Statements

the return of cash collateral of $ 1.2 billion presented as an inflow in Net cash related to derivative contracts under collateral exchange arrangements within Net cash used in investing activities for the year ended December 31, 2020.

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

For the years ended December 31, 2021 and 2020, $ 189 million and $ 128 million, respectively, were amortized from Accumulated other comprehensive loss into Interest expense in the Consolidated Statements of Comprehensive Income.

No amounts were amortized into Interest expense for the year ended December 31, 2019.

We expect to amortize $ 203 million of the Accumulated other comprehensive loss associated with the derivatives into Interest expense over the 12 months ended December 31, 2022.

Deferred Purchase Price Assets

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

The carrying amounts of our deferred purchase price assets, which are measured at fair value on a recurring basis and are included in our Consolidated Balance Sheets, were $ 884 million and $ 781 million at December 31, 2020 and 2019, respectively.

Fair value was equal to carrying amount at December 31, 2020 and 2019.

The fair value of our Senior Unsecured Notes, Senior Secured Notes, and Secured Term Loan Facility to third parties was determined based on quoted market prices in active markets, and therefore were classified as Level 1 within the fair value hierarchy.

The fair values of our Senior Notes to affiliates and Incremental Term Loan Facility to affiliates were determined

Index for Notes to the Consolidated Financial Statements

based on a discounted cash flow approach using market interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk.

Accordingly, our Senior Notes to affiliates and Incremental Term Loan Facility to affiliates were classified as Level 2 within the fair value hierarchy.

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

The carrying amounts of our deferred purchase price assets, which are measured at fair value on a recurring basis and are included on our Consolidated Balance Sheets, were $ 779 million and $ 884 million as of December 31, 2021 and 2020, respectively.

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

The fair value of our Senior Notes and Senior Secured Notes to third parties was determined based on quoted market prices in active markets, and therefore were classified as Level 1 within the fair value hierarchy.

The fair value of our Senior Notes to affiliates was determined based on a discounted cash flow approach using market interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk.

Accordingly, our Senior Notes to affiliates were classified as Level 2 within the fair value hierarchy.

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

As such, our estimates are not necessarily indicative of the amount we could realize in a current market exchange.

The carrying amounts and fair values of our short-term and long-term debt included in our Consolidated Balance Sheets were as follows:

The carrying amounts and fair values of our short-term and long-term debt included on our Consolidated Balance Sheets were as follows:

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

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Fair Value (1)

Senior Unsecured Notes to third parties 1 $ 29,966 $ 32,450 $ 10,958 $ 11,479

Senior Notes to third parties 1 $ 30,309 $ 32,093 $ 29,966 $ 32,450

Senior Notes to affiliates 2 3,739 3,844 4,716 4,991

Senior Secured Notes to third parties 1 40,098 42,393 36,204 40,519

Incremental Term Loan Facility to affiliates 2 — — 4,000 4,000

(1) Excludes $ 47 million and $ 240 million as of December 31, 2021 and 2020, respectively, in vendor financing arrangements and other debt as the carrying values approximate fair value primarily due to the short-term maturities of these instruments.

Guarantee Liabilities

We offer device trade-in programs that provide eligible customers a specified-price trade-in right to upgrade their device.

For customers who enroll in these programs, we recognize a liability and reduce revenue for the portion of revenue which represents the estimated fair value of the specified-price trade-in right guarantee, incorporating the expected probability and timing of handset upgrade and the estimated fair value of the handset which is returned.

Accordingly, our guarantee liabilities were classified as Level 3 within the fair value hierarchy.

When customers upgrade their devices, the difference between the EIP balance credit to the customer and the fair value of the returned device is recorded against the guarantee liabilities.

Guarantee liabilities are included in Other current liabilities in our Consolidated Balance Sheets.

The carrying amounts of our guarantee liabilities measured at fair value on a non-recurring basis included in our Consolidated Balance Sheets were $ 50 million and $ 62 million as of December 31, 2020 and 2019, respectively.

The total estimated remaining gross EIP receivable balances of all enrolled handset upgrade program customers, which are the remaining EIP amounts underlying the trade-in right guarantee, including EIP receivables that have been sold, was $ 3.4 billion as of December 31, 2020.

This is not an indication of our expected loss exposure as it does not consider the expected fair value of the used handset or the probability and timing of the trade-in.

Index for Notes to the Consolidated Financial Statements

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

5.300 % Senior Notes to affiliates due 2021

7.250 % Senior Notes due 2021

2 unchanged sentences

4.000 % Senior Notes due 2022

6.000 % Senior Notes due 2022

Incremental term loan facility to affiliates due 2022 — 2,000

5.375 % Senior Notes to affiliates due 2022

6.000 % Senior Notes due 2022

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7.875 % Senior Notes due 2023

6.000 % Senior Notes to affiliates due 2024

6.000 % Senior Notes due 2024

7.125 % Senior Notes due 2024

Incremental term loan facility to affiliates due 2024 — 2,000

3.500 % Senior Secured Notes due 2025

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

5.125 % Senior Notes to affiliates due 2025 (1)

5.125 % Senior Notes due 2025

7.625 % Senior Notes due 2025

1.500 % Senior Secured Notes due 2026

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2.625 % Senior Notes due 2026

6.500 % Senior Notes due 2026

4.500 % Senior Notes due 2026

4.500 % Senior Notes to affiliates due 2026

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5.375 % Senior Notes due 2027

5.375 % Senior Notes to affiliates due 2027 (1)

2.050 % Senior Secured Notes due 2028

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2.400 % Senior Secured Notes due 2029

2.625 % Senior Notes due 2029

3.375 % Senior Notes due 2029

3.875 % Senior Secured Notes due 2030

2.250 % Senior Secured Notes due 2031

2.550 % Senior Secured Notes due 2031

2.875 % Senior Notes due 2031

3.500 % Senior Notes due 2031

2.700 % Senior Secured Notes due 2032

8.750 % Senior Notes due 2032

4.375 % Senior Secured Notes due 2040

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3.300 % Senior Secured Notes due 2051

3.400 % Senior Secured Notes due 2052

3.600 % Senior Secured Notes due 2060

Other debt 47 240

Unamortized premium on debt to affiliates — 43

Unamortized premium on debt to third parties 1,740 2,197

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Total debt 74,193 71,125

Current portion of Senior Notes to affiliates 2,245 —

Current portion of Senior Notes and other debt to third parties 3,378 4,579

Total long-term debt $ 68,570 $ 66,546

Classified on the balance sheet as:

Classified on the consolidated balance sheets as:

Long-term debt $ 67,076 $ 61,830

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Index for Notes to the Consolidated Financial Statements

(1) On April 1, 2020, in connection with the closing of the Merger, we amended the $ 1.25 billion of 5.125 % Senior Notes to affiliates due 2025 and $ 1.25 billion of 5.375 % Senior Notes to affiliates due 2027, to change the maturity date thereof to April 15, 2021 and April 15, 2022, respectively.

See “Financing Matters Agreement” section below for further information.

Our effective interest rate, excluding the impact of derivatives and capitalized interest, was approximately 4.1 % and 4.6 % for the years ended December 31, 2021 and 2020, respectively, on weighted-average debt outstanding of $ 74.0 billion and $ 58.4 billion for the years ended December 31, 2021 and 2020, respectively.

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Issuances and Borrowings

During the year ended December 31, 2020, we issued the following Senior Secured Notes and entered into the following Secured loan facilities:

During the year ended December 31, 2021, we issued the following Senior Notes and Senior Secured Notes:

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

3.500 % Senior Secured Notes due 2025

$ 3,000 $ 12 $ 2,988 April 9, 2020

3.750 % Senior Secured Notes due 2027

4,000 17 3,983 April 9, 2020

3.875 % Senior Secured Notes due 2030

7,000 78 6,922 April 9, 2020

4.375 % Senior Secured Notes due 2040

2,000 47 1,953 April 9, 2020

4.500 % Senior Secured Notes due 2050

3,000 24 2,976 April 9, 2020

1.500 % Senior Secured Notes due 2026

1,000 5 995 June 24, 2020

2.050 % Senior Secured Notes due 2028

1,250 8 1,242 June 24, 2020

2.550 % Senior Secured Notes due 2031

1,750 12 1,738 June 24, 2020

2.050 % Senior Secured Notes due 2028

500 ( 11 ) 511 October 6, 2020

2.550 % Senior Secured Notes due 2031

750 ( 29 ) 779 October 6, 2020

3.000 % Senior Secured Notes due 2041

1,250 15 1,235 October 6, 2020

2.250 % Senior Notes due 2026

$ 1,000 $ ( 7 ) $ 993 January 14, 2021

2.625 % Senior Notes due 2029

1,000 ( 7 ) 993 January 14, 2021

2.875 % Senior Notes due 2031

1,000 ( 6 ) 994 January 14, 2021

2.625 % Senior Notes due 2026

1,200 ( 7 ) 1,193 March 23, 2021

3.375 % Senior Notes due 2029

1,250 ( 7 ) 1,243 March 23, 2021

3.500 % Senior Notes due 2031

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

2.250 % Senior Notes due 2026

800 ( 2 ) 798 May 13, 2021

3.375 % Senior Notes due 2029

1,100 6 1,106 May 13, 2021

3.500 % Senior Notes due 2031

1,100 6 1,106 May 13, 2021

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

3.400 % Senior Secured Notes due 2052

1,500 16 1,484 October 6, 2020

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

3.600 % Senior Secured Notes due 2060

1,000 5 995 October 28, 2020

700 1 701 August 13, 2021

2.400 % Senior Secured Notes due 2029

1,250 38 1,212 October 28, 2020

500 ( 2 ) 498 December 6, 2021

2.700 % Senior Secured Notes due 2032

1,500 58 1,442 October 28, 2020

1,000 ( 8 ) 992 December 6, 2021

3.400 % Senior Secured Notes due 2052

1,000 11 989 October 28, 2020

1,500 ( 21 ) 1,479 December 6, 2021

Total of Senior Secured Notes issued $ 5,000 $ ( 41 ) $ 4,959

Secured bridge loan facility due 2021

19,000 257 18,743 April 1, 2020

Secured term loan facility due 2027

4,000 107 3,893 April 1, 2020

Total of Secured loan facilities issued 23,000 364 22,636

Total Issuances and Borrowings $ 54,750 $ 670 $ 54,080

Credit Facilities

In connection with the entry into the Business Combination Agreement, T-Mobile USA entered into the Commitment Letter, with certain financial institutions named therein that committed to provide up to $ 27.0 billion in secured debt financing through May 1, 2020, including a $ 4.0 billion secured revolving credit facility, a $ 4.0 billion secured term loan facility, and a $ 19.0 billion secured bridge loan facility.

The funding of the debt facilities provided for in the Commitment Letter was subject to the satisfaction of the conditions set forth therein, including consummation of the Merger.

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 Bridge Loan Credit Agreement with certain financial institutions named therein, providing for a $ 19.0 billion secured bridge loan facility (“New Secured Bridge Loan Facility”).

The New Secured Bridge Loan Facility had an interest rate equal to a per annum rate of LIBOR plus a margin of 1.25 % and had a maturity date of March 31, 2021.

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 (the “New Credit Agreement”) with certain financial institutions named therein, providing for a $ 4.0 billion secured term loan facility (“New Secured Term Loan Facility”) and a $ 4.0 billion revolving credit facility (“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 (the “Incremental Amendment”) to the New Credit Agreement.

The New Secured Term Loan Facility had an interest rate equal to a per annum rate of LIBOR plus a margin of 3.00 % and had a maturity

Index for Notes to the Consolidated Financial Statements

date of April 1, 2027.

The New Revolving Credit Facility bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 1.25 % with the margin subject to a reduction to 1.00 % if T-Mobile’s Total First Lien Net Leverage Ratio (as defined in the New Credit Agreement) is less than or equal to 0.75 to 1.00.

The commitments under the New Revolving Credit Facility mature on April 1, 2025.

The New Credit Agreement contains customary representations, warranties and covenants, including a financial maintenance covenant of 3.3 x with respect to T-Mobile’s Total First Lien Net Leverage Ratio commencing with the period ending September 30, 2020.

On April 1, 2020, in connection with the closing of the Merger, we drew down on our $ 19.0 billion New Secured Bridge Loan Facility and our $ 4.0 billion New Secured Term Loan Facility.

We used the net proceeds of $ 22.6 billion from the drawdown of the secured facilities to repay our $ 4.0 billion Incremental Term Loan Facility with DT and to repurchase 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 to redeem certain debt of Sprint and Sprint’s subsidiaries, including the secured term loans due 2024 with a total principal amount outstanding of $ 5.9 billion, accounts receivable facility with a total amount outstanding of $ 2.3 billion, and Sprint’s 7.250 % Guaranteed Notes due 2028 with a total principal amount outstanding of $ 1.0 billion, and for post-closing general corporate purposes of the combined company.

In connection with the financing provided for in the Commitment Letter, we incurred certain fees payable to the financial institutions, including certain financing fees on the secured term loan commitment and fees for structuring, funding, and providing the commitments.

On April 1, 2020, in connection with the closing of the Merger, we paid $ 355 million in Commitment Letter fees to certain financial institutions.

T-Mobile USA and certain of its affiliates, as guarantors, have a credit agreement (the “Credit Agreement”) with certain financial institutions named therein that provides for, among other things, a $ 5.5 billion revolving credit facility (“Revolving Credit Facility”).

Borrowings under the Revolving Credit Facility will bear interest at a rate equal to a per annum rate of LIBOR plus a margin of 1.25 % with the margin subject to a reduction to 1.00 % if T-Mobile’s Total First Lien Net Leverage Ratio (as defined in the Credit Agreement) is less than or equal to 0.75 to 1.00.

The commitments under the Revolving Credit Facility mature on April 1, 2025.

The Credit Agreement contains customary representations, warranties and covenants, including a financial maintenance covenant of 3.3 x with respect to T-Mobile’s Total First Lien Net Leverage Ratio commencing with the period ending September 30, 2020.

As of December 31, 2021, we did not have an outstanding balance under this 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.

A portion of 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 April 9, 2020, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate of $ 19.0 billion in Senior Secured Notes bearing interest rates ranging from 3.500 % to 4.500 % and maturing in 2025 through 2050, and used the net proceeds of $ 18.8 billion together with cash on hand to repay all of the outstanding amounts under, and terminate, our $ 19.0 billion New Secured Bridge Loan Facility, as described above.

On June 24, 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 1.500 % to 2.550 % and maturing in 2026 through 2031.

The Senior Secured Notes were issued for refinancing callable Senior Notes and, subsequent to the issuance, we redeemed certain Senior Notes as set forth below under “Senior Secured Notes – Redemptions and Repayments” and “Senior Notes to Affiliates.”

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.

The Senior Secured Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States or to, or for the account or benefit of, U.S.

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.

Senior Secured Notes

On August 13, 2021, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate $ 2.0 billion of Senior Secured Notes bearing interest at 3.400 % and 3.600 %, respectively, and maturing in 2052 and 2060, respectively.

We used the net proceeds of $ 2.0 billion, together with cash on hand, to redeem our 4.500 % Senior Notes due 2026 held by DT and our 4.500 % Senior Notes due 2026 held by public investors.

Index for Notes to the Consolidated Financial Statements

On December 6, 2021, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate of $ 3.0 billion of Senior Secured Notes bearing interest rates ranging from 2.400 % to 3.400 % and maturing in 2029 through 2052, and used the net proceeds of such issuances for general corporate purposes, which may include among other things, financing acquisitions of additional spectrum and refinancing existing indebtedness on an ongoing basis.

The Senior Secured Notes issued in 2021 have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States or to, or for the account or benefit of, U.S.

persons except in accordance with an applicable exemption from the registration requirements thereof.

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The Senior Secured Notes are secured by a first priority security interest, subject to permitted liens, in substantially all of our present and future assets, other than certain excluded assets.

They are redeemable at our discretion, in whole or in part, at any

Index for Notes to the Consolidated Financial Statements

They are redeemable at our discretion, in whole or in part, at any time.

If redeemed prior to their contractually specified par call date, the redemption price is subject to a make-whole premium calculated by reference to then-current U.S.

1 unchanged sentence

if redeemed on or after their respective par call date, the make-whole premium does not apply.

The amount of time by which the Par Call Date precedes the maturity date of the respective note varies from one to six months .

We have entered into a Registration Rights Agreement that is in effect through the maturity of the applicable Senior Secured Notes.

The amount of time by which the par call date precedes the maturity date of the respective series of Senior Secured Notes varies from one to six months .

We have entered into Registration Rights Agreements that are in effect through the maturity of the applicable Senior Secured Notes issued in 2021.

These agreements call for us to use commercially reasonable efforts to file a registration statement and have it declared effective within a particular time period and to maintain the effectiveness of the registration statement for a certain period of time.

If a default occurs, we will pay additional interest up to a maximum increase of 0.50 % per annum.

We have not accrued any obligations associated with the Registration Rights Agreements as compliance with the agreements is considered probable.

In 2021, we exchanged the Senior Secured Notes issued in 2020, which were not registered under the Securities Act, for substantially identical Senior Secured Notes that were registered under the Securities Act.

On January 14, 2021, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate of $ 3.0 billion of Senior Notes bearing interest ranging from 2.250 % to 2.875 % and maturing in 2026 through 2031, and used the net proceeds of $ 3.0 billion for general corporate purposes, including among other things, the acquisition of additional spectrum and the refinancing of existing indebtedness subsequent to issuance.

On March 23, 2021, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate of $ 3.8 billion of Senior Notes bearing interest ranging from 2.625 % to 3.500 % and maturing in 2026 through 2031, and used the net proceeds of $ 3.8 billion to acquire spectrum licenses pursuant to the Federal Communications Commission’s C-Band spectrum Auction 107, with the remainder used, together with cash on hand, to redeem T-Mobile USA’s 6.500 % Senior Notes due 2026.

On May 13, 2021, T-Mobile USA and certain of its affiliates, as guarantors, issued an aggregate of $ 3.0 billion of Senior Notes bearing interest ranging from 2.250 % to 3.500 % and maturing in 2026 through 2031, and used the net proceeds of $ 3.0 billion to redeem our 6.000 % Senior Notes due 2023, 6.000 % Senior Notes due 2024, and 5.125 % Senior Notes due 2025 with the remainder used to refinance existing indebtedness subsequent to issuance.

The Senior Notes issued in May 2021 have not been registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, U.S.

persons except in accordance with an applicable exception from the registration requirements thereof.

Accordingly, the Senior Notes issued in May 2021 were offered and sold only (1) to persons reasonably believed to be “qualified institutional buyers” under Rule 144A under the Securities Act and (2) outside the United States to non-U.S.

persons in reliance upon Regulation S under the Securities Act.

The Senior Notes are guaranteed on a senior unsecured basis by the Company and certain of our consolidated subsidiaries.

They are redeemable at our discretion, in whole or in part, at any time.

If redeemed prior to their contractually specified applicable premium end date, the redemption price is subject to a premium calculated by reference to then-current U.S.

Treasury rates plus a fixed spread;

if redeemed on or after their respective applicable premium end date, they are redeemable at a contractually specified fixed premium that steps down gradually as the Senior Notes approach their par call date, on or after which they are redeemable at par.

The amount of time by which the par call date precedes the maturity date of the respective series of Senior Notes varies from one to three years .

Index for Notes to the Consolidated Financial Statements

We have entered into a Registration Rights Agreement that is in effect through the maturity of the Senior Notes issued in May 2021.

This agreement calls for us to use commercially reasonable efforts to file a registration statement and have it declared effective within a particular time period and to maintain the effectiveness of the registration statement for a certain period of time.

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We have not accrued any obligations associated with the Registration Rights Agreement as compliance with the agreements is considered probable.

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.

In connection with the Merger, we assumed the following indebtedness of Sprint:

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3.360 % Senior Secured Series 2016-1 A-1 Notes due 2021 (1)

1,310 656 656

4.738 % Senior Secured Series 2018-1 A-1 Notes due 2025 (1)

4 unchanged sentences

11.500 % Senior Notes due 2021

1,105 1,000 1,057

6.000 % Senior Notes due 2022

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Index for Notes to the Consolidated Financial Statements

Redemptions and Repayments

During the year ended December 31, 2020, we repaid the following loan facilities and redeemed the following Senior Notes held by third parties and Senior Notes held by affiliates:

(in millions) Principal Amount Write-off of Premiums, Discounts and Issuance Costs (1)

Redemption or Repayment Date Redemption Price

Note Redemptions and Repayments

During the year ended December 31, 2021, we made the following note redemptions and repayments:

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

Redemption Premium (2)

Redemption Date Redemption Price

6.500 % Senior Notes due 2026

$ 1,000 $ 12 $ 22 July 4, 2020 102.167 %

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

6.000 % Senior Notes due 2023

1,500 — — August 15, 2020 N/A

1,300 10 — May 23, 2021 100.000 %

6.000 % Senior Notes due 2024

1,700 24 36 September 1, 2020 102.125 %

1,000 9 — May 23, 2021 100.000 %

5.125 % Senior Notes due 2025

500 3 6 May 23, 2021 101.281 %

4.500 % Senior Notes due 2026

1,000 5 23 August 23, 2021 102.250 %

7.250 % Senior Notes due 2021

2,250 — — September 15, 2021 N/A

11.500 % Senior Notes due 2021

1,000 — — November 15, 2021 N/A

Total Senior Notes to third parties redeemed $ 9,050 $ 63 $ 94

4.500 % Senior Notes to affiliates due 2026

2,000 — — April 1, 2020 100.000 %

6.000 % Senior Notes to affiliates due 2024 (3)

1,350 ( 26 ) — April 1, 2020 100.000 %

6.000 % Senior Notes to affiliates due 2024 (3)

650 ( 15 ) — April 1, 2020 100.000 %

5.125 % Senior Secured Notes to affiliates due 2025

1,250 15 — July 4, 2020 100.000 %

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

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

Total Redemptions $ 9,450 $ 10 $ 58

Incremental term loan facility to affiliates due 2022 $ 2,000 $ — $ — April 1, 2020 100.000 %

Incremental term loan facility to affiliates due 2024 2,000 — — April 1, 2020 100.000 %

Accounts receivable facility 2,310 — — April 1, 2020 100.000 %

Secured bridge loan facility due 2021 19,000 251 ( 47 ) April 9, 2020 100.128 %

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

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

$ 656 $ — $ — August 20, 2021 N/A

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

394 — — Various N/A

Secured term loan facility due 2027

4,000 100 — October 9, 2020 100.000 %

Other debt 184 — — Various N/A

Total Repayments $ 30,447 $ 351 $ ( 47 )

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

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

(2) Primarily represents a reimbursement of a portion of the commitment letter fees that were paid to financial institutions when we drew down on the Secured Bridge Loan Facility on April 1, 2020 and is included in Other expense, net in our Consolidated Statements of Comprehensive Income.

(3) Pursuant to the Financing Matters Agreement, the Senior Notes were effectively redeemed through a repurchase and were cancelled and retired in full on April 1, 2020.

On April 9, 2020, we repaid all of the outstanding amounts under, and terminated, our $ 19.0 billion New Secured Bridge Loan Facility.

Additionally, in connection with the repayment of our New Secured Bridge Loan Facility, we received a reimbursement of $ 71 million, which represents a portion of the Commitment Letter fees that were paid to certain financial institutions when we drew down on the New Secured Bridge Loan Facility on April 1, 2020.

The reimbursement is presented in Other expense, net in our Consolidated Statements of Comprehensive Income.

On July 4, 2020, we redeemed $ 1.0 billion aggregate principal amount of our 6.500 % Senior Notes due 2024.

The notes were redeemed at a redemption price equal to 102.167 % of the principal amount of the notes (plus accrued and unpaid interest thereon), and were paid on July 6, 2020.

The redemption premium was approximately $ 22 million and the write off of issuance costs and consent fees was approximately $ 12 million, which were included in Other expense, net in our Consolidated Statements of Comprehensive Income and Losses on redemption of debt in our Consolidated Statements of Cash Flows.

On July 4, 2020, we also redeemed $ 1.25 billion aggregate principal amount of our 5.125 % Senior Notes to affiliates due 2021, as further described below under “Senior Notes to Affiliates.”

On August 15, 2020, we redeemed at maturity $ 1.5 billion aggregate principal amount of our 7.000 % Senior Notes due 2020 (plus accrued and unpaid interest thereon).

On September 1, 2020, we redeemed $ 1.7 billion aggregate principal amount of our 6.375 % Senior Notes due 2025.

The notes were redeemed at a redemption price equal to 102.125 % of the principal amount of the notes (plus accrued and unpaid interest thereon), and were paid on September 1, 2020.

The redemption premium was approximately $ 36 million and the write off of

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issuance costs and consent fees was approximately $ 24 million, which were included in Other expense, net in our Consolidated Statements of Comprehensive Income.

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

The write off of discounts and issuance costs was approximately $ 100 million, which were included in Other expense, net in our Consolidated Statements of Comprehensive Income.

Financing Matters Agreement

Pursuant to the Financing Matters Agreement, DT agreed, among other things, to consent to the incurrence by T-Mobile USA of secured debt in connection with and after the consummation of the Merger, and to provide a lock up on sales thereby as to certain Senior Notes of T-Mobile USA held thereby.

In connection with receiving the requisite consents, we made upfront payments to DT of $ 7 million during the second quarter of 2018.

These payments were recognized as a reduction to Long-term debt to affiliates in our Consolidated Balance Sheets.

On April 1, 2020, in connection with the closing of the Merger, we:

• Repaid our $ 4.0 billion Incremental Term Loan Facility with DT, consisting of a $ 2.0 billion Incremental Term Loan Facility due 2022 and a $ 2.0 billion Incremental Term Loan Facility due 2024;

• Terminated our revolving credit facility;

• 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;

• Amended the $ 1.25 billion of 5.125 % Senior Notes due 2025 and $ 1.25 billion of 5.375 % Senior Notes due 2027, which represent indebtedness to affiliates, to change the maturity dates thereof to April 15, 2021 and April 15, 2022, respectively (the “2025 and 2027 Amendments”);

• Made an additional payment for requisite consents to DT of $ 13 million.

These payments were recognized as a reduction to Long-term debt to affiliates in our Consolidated Balance Sheets.

In accordance with the consents received from DT, on December 20, 2018, T-Mobile USA, the guarantors and Deutsche Bank Trust Company Americas, as trustee, executed and delivered the 38 th supplemental indenture to the Indenture, pursuant to which, with respect to certain T-Mobile USA Senior Notes held by DT, the Debt Amendments (as defined below under “Consents on Debt to Third Parties”) and the 2025 and 2027 Amendments became effective immediately prior to the consummation of the Merger.

Senior Notes to Affiliates

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

The notes were redeemed at a redemption price equal to 100.00 % of the principal amount of the notes (plus accrued and unpaid interest thereon), and were paid on July 6, 2020.

The write off of discounts was approximately $ 15 million and was included in Other expense, net in our Consolidated Statements of Comprehensive Income and Losses on redemption of debt in our Consolidated Statements of Cash Flows.

Consents on Debt to Third Parties

On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement, we obtained consents necessary to effect certain amendments to our Senior Notes to third parties in connection with the Business Combination Agreement.

Pursuant to the Consent Solicitation Statement, third-party note holders agreed, among other things, to consent to increasing the amount of Secured Indebtedness under credit facilities that can be incurred from the greater of $ 9.0 billion and 150 % of Consolidated Cash Flow to the greater of $ 9.0 billion and an amount that would not cause the Secured Debt to Cash Flow Ratio (calculated net of cash and cash equivalents) to exceed 2.00 x (the “Ratio Secured Debt Amendments”) and in each case as such capitalized term is defined in the Indenture.

In connection with receiving the requisite consents for the Ratio Secured Debt Amendments, we made upfront payments to third-party note holders of $ 17 million during the second quarter of 2018.

These payments were recognized as a reduction to Long-term debt in our Consolidated Balance Sheets.

These upfront payments increased the effective interest rate of the related debt.

In addition, note holders agreed, among other things, to allow certain entities related to Sprint’s existing spectrum securitization notes program (“Existing Sprint Spectrum Program”) to be non-guarantor Restricted Subsidiaries, provided that the principal amount of the spectrum notes issued and outstanding under the Existing Sprint Spectrum Program does not exceed $ 7.0 billion and that the principal amount of such spectrum notes reduces the amount available under the credit facilities ratio basket, and to

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revise the definition of GAAP to mean generally accepted accounting principles in effect from time to time, unless the Company elects to “freeze” GAAP as of any date, and to exclude the effect of the changes in the accounting treatment of lease obligations (the “Existing Sprint Spectrum and GAAP Amendments,” and together with the Ratio Secured Debt Amendments, the “Debt Amendments”).

In connection with receiving the requisite consents for the Existing Sprint Spectrum and GAAP Amendments, we made upfront payments to third-party note holders of $ 14 million during the second quarter of 2018.

These payments were recognized as a reduction to Long-term debt in our Consolidated Balance Sheets.

These upfront payments increased the effective interest rate of the related debt.

In connection with obtaining the requisite consents, on May 20, 2018, T-Mobile USA, the guarantors and Deutsche Bank Trust Company Americas, as trustee, executed and delivered the 37 th supplemental indenture to the Indenture, pursuant to which, with respect to each of our Senior Notes to third parties, all the amendments mentioned above (collectively, the “Debt Amendments”) would become effective immediately prior to the consummation of the Merger.

We paid third-party bank fees associated with obtaining the requisite consents related to the Debt Amendments of $ 6 million during the second quarter of 2018, which we recognized as Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income.

On April 1, 2020, in connection with the closing of the Merger, we made additional payments to third-party note holders for requisite consents related to the Ratio Secured Debt Amendments of $ 54 million and related to the Existing Sprint Spectrum and GAAP Amendments of $ 41 million.

These payments were recognized as a reduction to Long-term debt in our Consolidated Balance Sheets.

These payments increased the effective interest rate of the related debt.

Total spectrum financing and other debt repayments $ 1,234 $ — $ —

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

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

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

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

Our losses on extinguishment of debt were $ 184 million, $ 371 million, and $ 19 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are included in Other expense, net on our Consolidated Statements of Comprehensive Income.

Spectrum Financing

On April 1, 2020, in connection with the closing of the Merger, we assumed Sprint’s spectrum-backed notes, which are collateralized by the acquired directly held and third-party leased Spectrum licenses (collectively, the “Spectrum Portfolio”) transferred to wholly-owned bankruptcy-remote special purpose entities (collectively, the “Spectrum Financing SPEs”).

As of December 31, 2020, the total outstanding obligations under these Notes was $ 4.6 billion.

As of December 31, 2021 and 2020, the total outstanding obligations under these Notes was $ 3.5 billion and $ 4.6 billion, respectively.

In October 2016, certain subsidiaries of Sprint Communications, Inc.

transferred the Spectrum Portfolio to the Spectrum Financing SPEs, which was used as collateral to raise an initial $ 3.5 billion in senior secured notes (the “2016 Spectrum-Backed Notes”) bearing interest at 3.360 % per annum under a $ 7.0 billion securitization program.

The 2016 Spectrum-Backed Notes are repayable over a five-year term, with interest-only payments over the first four quarters and amortizing quarterly principal payments thereafter commencing December 2017 through September 2021.

During the year ended December 31, 2020, we made scheduled principal repayments of $ 656 million, resulting in a total principal amount outstanding related to the 2016 Spectrum-Backed Notes of $ 656 million as of December 31, 2020, which was classified as Short-term debt in the Consolidated Balance Sheets .

The 2016 Spectrum-Backed Notes were repayable over a five-year term, with interest-only payments over the first four quarters and amortizing quarterly principal payments thereafter commencing December 2017 through September 2021.

We fully repaid the 2016 Spectrum-Backed Notes in 2021.

In March 2018, Sprint issued approximately $ 3.9 billion in aggregate principal amount of senior secured notes (the “2018 Spectrum-Backed Notes” and together with the 2016 Spectrum-Backed Notes, the “Spectrum-Backed Notes”) under the existing $ 7.0 billion securitization program, consisting of two series of senior secured notes.

The first series of notes totaled $ 2.1 billion in aggregate principal amount, bears interest at 4.738 % per annum, and has quarterly interest-only payments until June 2021, and amortizing quarterly principal amounts thereafter commencing in June 2021 through March 2025.

As of December 31, 2020, $ 394 million of the aggregate principal amount was classified as Short-term debt in the Consolidated Balance Sheets.

The second series of notes totaled approximately $ 1.8 billion in aggregate principal amount, bears interest at 5.152 % per annum, and has quarterly interest-only payments until June 2023, and amortizing quarterly principal amounts thereafter commencing in June 2023 through March 2028.

As of December 31, 2021, $ 525 million of the aggregate principal amount was classified as Short-term debt on our Consolidated Balance Sheets.

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thereafter commencing in June 2023 through March 2028.

The Spectrum Portfolio, which also serves as collateral for the Spectrum-Backed Notes, remains substantially identical to the original portfolio from October 2016.

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is required to make monthly lease payments to the Spectrum Financing SPEs in an aggregate amount that is market-based relative to the spectrum usage rights as of the closing date and equal to $ 165 million per month.

The lease payments, which are guaranteed by T-Mobile subsidiaries, are sufficient to service all outstanding series of the 2016 Spectrum Backed Notes and the lease also constitutes collateral for the senior secured notes.

Because the Spectrum Financing SPEs are wholly owned T-Mobile subsidiaries, these entities are consolidated and all intercompany activity has been eliminated.

The lease payments, which are guaranteed by T-Mobile subsidiaries subsequent to the Merger, are sufficient to service all outstanding series of the 2016 Spectrum-Backed Notes and the lease also constitutes collateral for the senior secured notes.

Because the Spectrum Financing SPEs are wholly-owned T-Mobile subsidiaries subsequent to the Merger, these entities are consolidated and all intercompany activity has been eliminated.

Each Spectrum Financing SPE is a separate legal entity with its own separate creditors who will be entitled, prior to and upon the liquidation of the respective Spectrum Financing SPE, to be satisfied out of the Spectrum Financing SPE’s assets prior to any assets of such Spectrum Financing SPE becoming available to T-Mobile.

Accordingly, the assets of each Spectrum

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Financing SPE are not available to satisfy the debts and other obligations owed to other creditors of T-Mobile until the obligations of such Spectrum Financing SPE under the spectrum-backed senior secured notes are paid in full.

Accordingly, the assets of each Spectrum Financing SPE are not available to satisfy the debts and other obligations owed to other creditors of T-Mobile until the obligations of such Spectrum Financing SPE under the spectrum-backed senior secured notes are paid in full.

Certain provisions of the Spectrum Financing facility require us to maintain specified cash collateral balances.

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Standby Letters of Credit

For the purposes of securing our obligations to provide device insurance services and for purposes of securing our general purpose obligations, we maintain standby letters of credit with certain financial institutions.

For the purposes of securing our obligations to provide device insurance services and for the purposes of securing our general purpose obligations, we maintain an agreement for standby letters of credit with certain financial institutions.

We assumed certain of Sprint’s standby letters of credit in the Merger.

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In 2012, we conveyed to Crown Castle International Corp.

(“CCI”) the exclusive right to manage and operate approximately 7,100 tower sites (“CCI Lease Sites”) via a master prepaid lease with site lease terms ranging from 23 to 37 years (the “2012 Tower Transaction”).

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

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

CCI has fixed-price purchase options for the CCI Lease Sites totaling approximately $ 2.0 billion, exercisable annually on a per-tranche basis at the end of the lease term during the period from December 31, 2035 through December 31, 2049.

If CCI exercises its purchase option for any tranche, it must purchase all the towers in the tranche.

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

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We determined the SPEs containing the CCI Lease Sites (“Lease Site SPEs”) are VIEs as they lack sufficient equity to finance their activities.

We have a variable interest in the Lease Site VIE but are not the primary beneficiary as we lack the power to direct the activities that most significantly impact the Lease Site VIE’s economic performance.

We have a variable interest in the Lease Site SPEs but are not the primary beneficiary as we lack the power to direct the activities that most significantly impact the Lease Site SPEs’ economic performance.

These activities include managing tenants and underlying ground leases, performing repair and maintenance on the towers, the obligation to absorb expected losses and the right to receive the expected future residual returns from the purchase option to acquire the CCI Lease Sites.

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By assessing whether control had transferred, we concluded that transfer of control criteria, as discussed in the revenue standard, were not met.

Accordingly, we recorded this arrangement as a financing whereby we recorded debt, a financial obligation, and the CCI Lease Sites tower assets remained on our balance sheet.

We recorded long-term financial obligations in the amount of the net proceeds received and recognize interest on the tower obligations at a rate of approximately 8 % using the effective interest method.

Accordingly, we recorded this arrangement as a financing whereby we recorded debt, a financial obligation, and the CCI Lease Sites tower assets remained on our Consolidated Balance Sheets.

We recorded long-

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term financial obligations in the amount of the net proceeds received and recognize interest on the tower obligations at a rate of approximately 8 % using the effective interest method.

The tower obligations are increased by interest expense and amortized through contractual leaseback payments made by us to CCI and through net cash flows generated and retained by CCI from operation of the tower sites.

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These agreements were assumed upon the close of the Merger, at which point the remaining term of the lease-out was approximately 17 years with no renewal options.

CCI has a fixed price purchase option for all (but not less than all) of the leased or subleased sites for approximately $ 2.3 billion, exercisable one year prior to the

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expiration of the agreement and ending 120 days prior to the expiration of the agreement.

CCI has a fixed price purchase option for all (but not less than all) of the leased or subleased sites for approximately $ 2.3 billion, exercisable one year prior to the expiration of the agreement and ending 120 days prior to the expiration of the agreement.

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

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By assessing whether control had transferred, we concluded that transfer of control criteria, as discussed in the revenue standard, were not met.

Accordingly, we recorded this arrangement as a financing whereby we recorded debt, a financial obligation, and the Master Lease Sites tower assets remained on our balance sheet.

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

Accordingly, we recorded this arrangement as a financing whereby we recorded debt, a financial obligation, and the Master Lease Sites tower assets remained on our Consolidated Balance Sheets.

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

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

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

The tower assets are reported in Property and equipment, net in our Consolidated Balance Sheets and are depreciated to their estimated residual values over the expected useful life of the tower, which is 20 years.

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

The tower assets are reported in Property and equipment, net on our Consolidated Balance Sheets and are depreciated to their estimated residual values over the expected useful life of the towers, which is 20 years.

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

(in millions) December 31,

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Other long-term liabilities 1,712 1,712

Future minimum payments related to the tower obligations are approximately $ 397 million for the year ending December 31, 2021, $ 716 million in total for the years ending December 31, 2022 and 2023, $ 598 million in total for years ending December 31, 2024 and 2025, and $ 624 million in total for years thereafter.

Future minimum payments related to the tower obligations are approximately $ 415 million for the year ending December 31, 2022, $ 630 million in total for the years ending December 31, 2023 and 2024, $ 626 million in total for the years ending December 31, 2025 and 2026, and $ 329 million in total for the years thereafter.

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

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Under the arrangement, we remain primarily liable for ground lease payments on approximately 900 sites and have included lease liabilities of $ 282 million in our Operating lease liabilities as of December 31, 2021.

Subsequent to December 31, 2021, on January 3, 2022, we entered into the Crown Agreement with CCI.

The Crown Agreement modifies the leaseback portion of both the Existing CCI Tower Lease Arrangement and Acquired CCI Tower Lease Arrangement detailed above.

As a result of the Crown Agreement, we expect an increase in the financing obligation as of the effective date of the agreement of approximately $ 1.2 billion, with a corresponding decrease to Other long-term liabilities due to a decrease in unfavorable lease terms.

There were no changes made to either of our master prepaid leases with CCI.

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Note 10 – Revenue from Contracts with Customers

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We provide wireless communications services to three primary categories of customers:

• Postpaid customers generally include customers who are qualified to pay after receiving wireless communications services utilizing phones, wearables, DIGITS, or other connected devices which includes tablets and SyncUP products.

Our postpaid customers include customers of T-Mobile;

• Postpaid customers generally include customers who are qualified to pay after receiving wireless communications services utilizing phones, High Speed Internet, wearables, DIGITS or other connected devices which includes tablets and SyncUP products;

• Prepaid customers generally include customers who pay for wireless communications services in advance;

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

• Wholesale customers include Machine-to-Machine and Mobile Virtual Network Operator customers that operate on our network but are managed by wholesale partners.

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Total postpaid service revenues $ 42,562 $ 36,306 $ 22,673

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We operate as a single operating segment.

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

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

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

We provide wireline communication services to domestic and international customers.

Wireline service revenues of $ 626 million for the year ended December 31, 2020, relate to the wireline operations acquired in the Merger and are presented in Roaming and other service revenues in our Consolidated Statements of Comprehensive Income.

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

Service revenues also include revenues earned for providing premium services to customers, such as device insurance services and customer-based, third-party services.

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

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

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Equipment revenues from the lease of mobile communication devices $ 3,348 $ 4,181 $ 599

We provide wireline communication services to domestic and international customers.

Wireline service revenues were $ 739 million and $ 626 million for the years ended December 31, 2021 and 2020, respectively.

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

Contract Balances

The opening and closing balances of our contract asset and contract liability balances from contracts with customers as of December 31, 2019 and December 31, 2020, were as follows:

(in millions) Contract Assets Contract Liabilities

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

(in millions) Contract

Assets Contract Liabilities

Balance as of December 31, 2020 $ 278 $ 824

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

Through the Merger, we acquired contracts assets associated with promotional bill credits and subsidized devices with a value of $ 154 million as of April 1, 2020.

The change in the existing and acquired contract asset balance includes customer activity related to new promotions, offset by billings on existing contracts and impairment which is recognized as bad debt expense.

The current portion of our Contract assets of approximately $ 204 million and $ 50 million as of December 31, 2020 and 2019, respectively, was included in Other current assets in our Consolidated Balance Sheets.

The change in the Contract asset balance includes customer activity related to new promotions, offset by billings on existing contracts and impairment which is recognized as bad debt expense.

The current portion of our Contract assets of approximately $ 219 million and $ 204 million as of December 31, 2021 and 2020, respectively, was included in Other current assets on our Consolidated Balance Sheets.

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Contract liabilities are recorded when fees are collected, or we have an unconditional right to consideration (a receivable) in advance of delivery of goods or services.

Through the Merger, we assumed contract liabilities with a value of $ 336 million as of April 1, 2020.

Additional changes in contract liabilities are primarily related to the volume and rate plans of active prepaid customers.

Contract liabilities are primarily included in Deferred revenue in our Consolidated Balance Sheets.

Changes in contract liabilities are primarily related to the activity of prepaid customers.

Contract liabilities are primarily included in Deferred revenue on our Consolidated Balance Sheets.

Revenues for the years ended December 31, 2021, 2020 and 2019 include the following:

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Remaining Performance Obligations

As of December 31, 2020, the aggregate amount of transaction price allocated to remaining service performance obligations for postpaid contracts with subsidized devices and promotional bill credits that result in an extended service contract is $ 1.5 billion.

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

Transaction price allocated to remaining service performance obligations associated with subsidized devices and promotional bill credits acquired through the Merger at April 1, 2020, was $ 1.0 billion.

Through the Merger, on April 1, 2020, we acquired contracts associated with lease promotional credits with aggregate amount of transaction price allocated to remaining service and lease performance obligations of $ 4.8 billion and $ 2.6 billion, respectively.

As of December 31, 2020, the aggregate amount of transaction price allocated to remaining service and lease

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performance obligations associated with operating leases was $ 2.1 billion and $ 1.2 billion, respectively.

We expect to recognize this revenue as service is provided over the lease contract term of 18 months.

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

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

As of December 31, 2021, the aggregate amount of transaction price allocated to remaining service performance obligations for postpaid contracts with subsidized devices and promotional bill credits that result in an extended service contract is $ 898 million.

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

As of December 31, 2021, the aggregate amount of transaction price allocated to remaining service and lease performance obligations associated with device operating leases was $ 95 million and $ 58 million, respectively.

We expect to recognize this revenue as service is provided over the device lease contract term of 18 months.

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

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

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

As of December 31, 2020, the aggregate amount of the contractual minimum consideration for wholesale, roaming and other service contracts is $ 1.3 billion, $ 1.1 billion and $ 317 million for 2021, 2022, and 2023 and beyond, respectively.

These contracts have a remaining duration ranging from less than one year to nine years .

As of December 31, 2021, the aggregate amount of the contractual minimum consideration for wholesale, roaming and service contracts is $ 1.2 billion, $ 707 million and $ 685 million for 2022, 2023, and 2024 and beyond, respectively.

These contracts have a remaining duration ranging from less than one year to eight years .

Contract Costs

The total balance of deferred incremental costs to obtain contracts was $ 1.1 billion and $ 906 million as of December 31, 2020 and 2019, respectively, and is included in Other assets in our Consolidated Balance Sheets.

The total balance of deferred incremental costs to obtain contracts with customers was $ 1.5 billion and $ 1.1 billion as of December 31, 2021 and December 31, 2020, respectively, and is included in Other assets on our Consolidated Balance Sheets.

Deferred contract costs incurred to obtain postpaid service contracts are amortized over a period of 24 months.

The amortization period is monitored to reflect any significant change in assumptions.

Amortization of deferred contract costs is included in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income and was $ 865 million and $ 604 million for the years ended December 31, 2020 and 2019, respectively.

Immediately preceding the close of the Merger, Sprint had deferred costs to obtain postpaid contracts of approximately $ 1.7 billion.

This balance was adjusted to zero as part of our purchase price allocation.

Contract costs capitalized for new postpaid contracts will accumulate in Other assets in our Consolidated Balance Sheets from the Merger close date.

As a result, there was a net benefit to Operating income in our Consolidated Statements of Comprehensive Income during the year ended December 31, 2020, as capitalization of costs exceed amortization.

As capitalized costs amortize into expense over time, the accretive benefit to Operating income is expected to moderate in 2021 and normalize in 2022.

Amortization of deferred contract costs is included in Selling, general and administrative expenses on our Consolidated Statements of Comprehensive Income and were $ 1.1 billion and $ 865 million for the years ended December 31, 2021 and 2020, respectively.

The deferred contract cost asset is assessed for impairment on a periodic basis.

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Note 11 – Employee Compensation and Benefit Plans

Under our 2013 Omnibus Incentive Plan and the Sprint Corporation Amended and Restated 2015 Omnibus Incentive Plan that T-Mobile assumed in connection with the closing of the Merger, as described below (the “Incentive Plans”), we are authorized to issue up to 101 million shares of our common stock.

Under our 2013 Omnibus Incentive Plan and the Sprint Corporation Amended and Restated 2015 Omnibus Incentive Plan that T-Mobile assumed in connection with the closing of the Merger (the “Incentive Plans”), we are authorized to issue up to 101 million shares of our common stock.

Under our Incentive Plans, we can grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), and performance awards to eligible employees, consultants, advisors and non-employee directors.

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We grant RSUs to eligible employees, key executives and certain non-employee directors and performance-based restricted stock units (“PRSUs”) to eligible key executives.

RSUs entitle the grantee to receive shares of our common stock upon vesting (with vesting generally occurring annually over a three-year period), subject to continued service through the applicable vesting date.

RSUs entitle the grantee to receive shares of our common stock upon vesting (with vesting generally occurring annually over a three-year service period), subject to continued service through the applicable vesting date.

PRSUs entitle the holder to receive shares of our common stock at the end of a performance period of generally up to three years if the applicable performance goals are achieved and generally subject to continued service through the applicable performance period.

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Fair value of stock awards vested $ 944 $ 1,315 $ 512

On April 1, 2020, we closed the Merger to combine T-Mobile and Sprint pursuant to the Business Combination Agreement.

Pursuant to the Business Combination Agreement, upon the completion of the Merger, T-Mobile assumed Sprint’s stock compensation plans.

In addition, pursuant to the Business Combination Agreement, at the Effective Time, each outstanding option to purchase Sprint common stock (other than under Sprint’s Employee Stock Purchase Plan), each award of time-based RSUs in respect of shares of Sprint common stock and each award of performance-based RSUs in respect of shares of Sprint common stock, in each case, that was outstanding as of immediately prior to the Effective Time was automatically adjusted by the Exchange Ratio (as defined in the Business Combination Agreement) and converted into an equity award of the same type covering shares of T-Mobile common stock, on the same terms and conditions, (including, if applicable, any continuing vesting requirements (but excluding any performance-based vesting conditions)) under the applicable Sprint plan and award agreement in effect immediately prior to the Effective Time (the “Assumed Awards”).

Upon the completion of our Merger with Sprint, T-Mobile assumed Sprint’s stock compensation plans.

In addition, pursuant to the Business Combination Agreement, at the Effective Time, each outstanding option to purchase Sprint common stock (other than under Sprint’s Employee Stock Purchase Plan), each award of time-based RSUs in respect of shares of Sprint common stock and each award of performance-based RSUs in respect of shares of Sprint common stock, in each case, that was outstanding immediately prior to the Effective Time was automatically adjusted by the Exchange Ratio (as defined in the Business Combination Agreement) and converted into an equity award of the same type covering shares of T-Mobile common stock, on the same terms and conditions (including, if applicable, any continuing vesting requirements (but excluding any performance-based vesting conditions)) under the applicable Sprint plan and award agreement in effect immediately prior to the Effective Time (the “Assumed Awards”).

The applicable amount of performance-based RSUs eligible for conversion was based on formulas and approximated 100% of target.

Any accrued but unpaid dividend equivalents with respect to any such award of time-based RSUs or performance-based RSUs were assumed by T-Mobile at the Effective Time and became an obligation with respect to the applicable award of RSUs in respect of shares of T-Mobile common stock.

On April 22, 2020, we filed a Form S-8 to register a total of 25,304,224 shares of common stock, representing those covered by the Sprint Corporation 1997 Long-Term Stock Incentive Program, the Sprint Corporation 2007 Omnibus Incentive Plan and the Sprint Corporation Amended and Restated 2015 Omnibus Incentive Plan (the “2015 Plan”) that T-Mobile assumed in connection with the closing of the Merger.

On April 22, 2020, we filed a Form S-8 to register a total of 25,304,224 shares of common stock, representing those covered by the Sprint Corporation 1997 Long-Term Stock Incentive Program, the Sprint Corporation 2007 Omnibus Incentive Plan (the “Sprint 2007 Plan”) and the Sprint Corporation Amended and Restated 2015 Omnibus Incentive Plan (the “2015 Plan”) that T-Mobile assumed in connection with the closing of the Merger.

This included 7,043,843 shares of T-Mobile common stock issuable upon exercise or settlement of the Assumed Awards held by current directors, officers, employees and consultants of T-Mobile or its subsidiaries who were directors, officers, employees and consultants of Sprint or its subsidiaries immediately prior to the Effective Time, as well as (i) 12,420,945 shares of T-Mobile common stock that remain available for issuance under the 2015 Plan and (ii) 5,839,436 additional shares of T-Mobile common stock subject to awards granted under the 2015 Plan that may become available for issuance under the 2015 Plan if any awards under the 2015 Plan are forfeited, lapse unexercised or are settled in cash.

Index for Notes to the Consolidated Financial Statements

The following activity occurred under the Incentive Plans during the year ended December 31, 2021:

Time-Based Restricted Stock Units and Restricted Stock Awards

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Nonvested, December 31, 2020

Assumed through acquisition 1,852,527 83.90

10,101,222 $ 84.61 0.9 $ 1,362

Granted 4,884,185 121.40

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Nonvested, December 31, 2021

8,893,288 105.96 0.8 1,031

Index for Notes to the Consolidated Financial Statements

Performance-Based Restricted Stock Units and Restricted Stock Awards

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Nonvested, December 31, 2020

Assumed through acquisition 3,535,384 83.90

3,173,101 $ 86.58 1.0 $ 428

Granted 433,116 125.34

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Nonvested, December 31, 2021

PRSUs included in the table above are shown at target.

Share payout can range from 0 % to 200 % based on different performance outcomes.

Weighted average grant date fair value of RSU and PRSU assumed through acquisition is based on the fair value on the date assumed.

1,889,557 108.97 1.0 219

(1) Represents PRSUs granted prior to 2021 for which the performance achievement period was completed in 2021, resulting in incremental unit awards.

These PRSU awards are also included in the amount vested in 2021.

PRSUs included in the table above are shown at target.

Share payout can range from 0 % to 200 % based on different performance outcomes.

Weighted-average grant date fair value of RSU and PRSU awards assumed through acquisition is based on the fair value on the date assumed.

Payment of the underlying shares in connection with the vesting of RSU and PRSU awards generally triggers a tax obligation for the employee, which is required to be remitted to the relevant tax authorities.

We have agreed to withhold shares of common stock otherwise issuable under the RSU and PRSU awards to cover certain of these tax obligations, with the net shares issued to the employee accounted for as outstanding common stock.

We withheld 4,441,107 and 2,094,555 shares of common stock to cover tax obligations associated with the payment of shares upon vesting of stock awards and remitted cash of $ 439 million and $ 156 million to the appropriate tax authorities for the years ended December 31, 2020 and 2019, respectively.

With respect to RSUs and PRSUs settled in shares, we have agreed to withhold shares of common stock otherwise issuable under the RSU and PRSU awards to cover certain of these tax obligations, with the net shares issued to the employee accounted for as outstanding common stock.

We withheld 2,511,512 , 4,441,107 and 2,094,555 shares of common stock to cover tax obligations associated with the payment of shares upon vesting of stock awards and remitted cash of $ 316 million, $ 439 million and $ 156 million to the appropriate tax authorities for the years ended December 31, 2021, 2020 and 2019, respectively.

Employee Stock Purchase Plan

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For fiscal years 2016 through 2019, the Compensation Committee determined that no such increase in shares of our common stock was necessary.

However, an additional 5,000,000 shares of our common stock were automatically added to the ESPP share reserve as of January 1, 2020 and 2021, respectively.

Index for Notes to the Consolidated Financial Statements

However, an additional 5,000,000 shares of our common stock were automatically added to the ESPP share reserve as of each of January 1, 2020 and January 1, 2021.

Stock Options

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2004 Equity Incentive Compensation Plan, the Layer3 TV, Inc.

2013 Stock Plan, and the Sprint 2015 Plan (collectively, the “Stock Option Plans”).

No new awards may be granted under the Stock Option Plans, and no awards were granted during the year ended December 31, 2020.

2013 Stock Plan, the Sprint 2007 Plan and the Sprint 2015 Plan (collectively, the “Stock Option Plans”).

No stock option awards were granted during the year ended December 31, 2021.

Index for Notes to the Consolidated Financial Statements

The following activity occurred under the Stock Option Plans:

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Outstanding at December 31, 2020

Assumed through acquisition 1,635,518 33.37

918,695 $ 51.77 4.0

Exercised ( 218,495 ) 48.02

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Outstanding at December 31, 2021

695,844 53.01 3.3

Exercisable at December 31, 2021

695,844 53.01 3.3

Weighted-average grant date fair value of stock options assumed through acquisition is based on the fair value on the date assumed.

Stock options exercised under the Stock Option Plans generated proceeds of approximately $ 48 million and $ 1 million for the years ended December 31, 2020 and 2019, respectively.

The grant-date fair value of share-based incentive compensation awards attributable to post-combination services, including restricted stock units and stock options, from our Merger with Sprint was approximately $ 163 million.

Pension and Other Post Retirement Benefits Plans

Stock options exercised under the Stock Option Plans generated proceeds of approximately $ 10 million, $ 48 million and $ 1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The grant-date fair value of share-based incentive compensation awards attributable to post-combination services including

restricted stock units and stock options, from the Merger was approximately $ 163 million.

Pension and Other Postretirement Benefits Plans

Upon the completion of our Merger with Sprint, we acquired the assets and assumed the liabilities associated with the Sprint Retirement Pension Plan (the “Pension Plan”) as well as other postretirement employee benefit plans.

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To meet this objective, our investment strategy is governed by an asset allocation policy, whereby a targeted allocation percentage is assigned to each asset class as follows:

17 % to international equities;

41 % to equities;

44 % to fixed income investments;

11 % to real estate investments;

11 % to real estate, infrastructure and private assets;

and 4 % to other investments including hedge funds.

Actual allocations are allowed to deviate from target allocation percentages within a range for each asset class as defined in the investment policy.

The long-term expected rate of return on plan assets was 5 % for the year ended December 31, 2020, while the actual rate of return on plan assets was 21 % during that period.

The long-term expected rate of return on plan assets was 4 % and 5 % for the years ended December 31, 2021 and 2020, respectively, while the actual rate of return on plan assets was 8 % and 21 % for the years ended December 31, 2021 and 2020, respectively.

The long-term expected rate of return on investments for funding purposes is 5 % for the year ended December 31, 2022.

The components of net expense recognized for the Pension Plan were as follows:

(in millions) Year Ended December 31, 2020

Year Ended December 31,

(in millions) 2021 2020

Interest on projected benefit obligations $ 61 $ 52

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Net pension expense $ 5 $ 7

Index for Notes to the Consolidated Financial Statements

The net expense associated with the Pension Plan is included in Other expense, net of our Consolidated Statements of Comprehensive Income.

The net expense associated with the Pension Plan is included in Other expense, net on our Consolidated Statements of Comprehensive Income.

Investments of the Pension Plan are measured at fair value on a recurring basis, which is determined using quoted market prices or estimated fair values.

As of December 31, 2021, 14 % of the investment portfolio was valued at quoted prices in active markets for identical assets, 81 % was valued using quoted prices for similar assets in active or inactive markets, or other observable inputs, and 5 % was valued using unobservable inputs that are supported by little or no market activity, the majority of which used the net asset value per share (or its equivalent) as a practical expedient to measure the fair value.

The fair values of our Pension Plan assets and certain other postretirement benefit plan assets in aggregate were $ 1.2 billion and $ 1.4 billion and our accumulated benefit obligations in aggregate were $ 2.1 billion and $ 2.3 billion as of April 1, 2020 and December 31, 2020, respectively.

As a result, the plans were underfunded by approximately $ 892 million and $ 828 million as of April 1, 2020 and December 31, 2020, respectively, and were recorded in Other long-term liabilities in our Consolidated Balance Sheets.

In determining our pension obligation for the year ended December 31, 2020, we used a weighted-average discount rate of 3 %.

During the year ended December 31, 2020, we made contributions of $ 58 million to the benefit plans.

No contributions were made by T-Mobile in fiscal periods prior to 2020.

As of December 31, 2020, 12 % of the investment portfolio was valued at quoted prices in active markets for identical assets, 85 % was valued using quoted prices for similar assets in active or inactive markets, or other observable inputs, and 3 % was valued using unobservable inputs that are supported by little or no market activity, the majority of which used the net asset value per share (or its equivalent) as a practical expedient to measure the fair value.

The fair values of our Pension Plan assets and certain other postretirement benefit plan assets in aggregate were $ 1.5 billion and $ 1.4 billion and our accumulated benefit obligations in aggregate were $ 2.2 billion and $ 2.3 billion as of December 31, 2021 and 2020, respectively.

As a result, the plans were underfunded by approximately $ 633 million and $ 828 million as of

Index for Notes to the Consolidated Financial Statements

December 31, 2021 and 2020, respectively, and were recorded in Other long-term liabilities on our Consolidated Balance Sheets.

In determining our pension obligation for both the years ended December 31, 2021, and 2020, we used a weighted-average discount rate of 3 %.

During the years ended December 31, 2021 and 2020, we made contributions of $ 83 million and $ 58 million, respectively, to the benefit plans.

We expect to make contributions to the Plan of $ 37 million through the year ending December 31, 2022.

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We sponsor retirement savings plans for the majority of our employees under Section 401(k) of the Internal Revenue Code and similar plans.

The plans allow employees to contribute a portion of their pretax and post-tax income in accordance with specified guidelines.

The plans allow employees to contribute a portion of their pre-tax and post-tax income in accordance with specified guidelines.

The plans provide that we match a percentage of employee contributions up to certain limits.

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Of the total $ 1.4 billion of proceeds received under the Prepaid Transaction, approximately $ 162 million was allocated to the EIP receivables to which we transferred DISH a 100 % participation interest.

We accounted for this portion of the proceeds as a secured borrowing and present it in Other, net, within Net cash provided by (used in) financing activities in our Consolidated Statements of Cash Flows accordingly.

The remaining $ 1.2 billion was allocated to the divested net assets of the Prepaid

Index for Notes to the Consolidated Financial Statements

The net cash received for the Prepaid Business is presented in Proceeds from the divestiture of prepaid business within Net cash used in investing activities in our Consolidated Statements of Cash Flows.

We accounted for this portion of the proceeds as a secured borrowing and present it in Other, net, within Net cash provided by (used in) financing activities on our Consolidated Statements of Cash Flows accordingly.

The remaining $ 1.2 billion was allocated to the divested net assets of the Prepaid Business.

The net cash received for the Prepaid Business is presented in Proceeds from the divestiture of prepaid business within Net cash used in investing activities on our Consolidated Statements of Cash Flows.

The results of the Prepaid Business include revenues and expenses directly attributable to the operations disposed.

Corporate and administrative expenses, including Interest expense, not directly attributable to the operations were not allocated to the Prepaid Business.

The results of the Prepaid Business from April 1, 2020, through December 31, 2020, are presented in Income from discontinued operations, net of tax in our Consolidated Statements of Comprehensive Income.

The results of the Prepaid Business from April 1, 2020, through December 31, 2020, are presented in Income from discontinued operations, net of tax on our Consolidated Statements of Comprehensive Income.

There was no income from discontinued operations for the years ended December 31, 2021 or 2019.

Index for Notes to the Consolidated Financial Statements

The components of discontinued operations from the Merger close date of April 1, 2020, through December 31, 2020, were as follows:

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As the sale of 800 MHz spectrum licenses is not expected to close within one year, the criteria for presentation as an asset held for sale is not met.

Cash flows associated with the Master Network Services Agreement and Transition Services Agreement are included within Net cash provided by operating activities in our Consolidated Statements of Cash Flows.

Index for Notes to the Consolidated Financial Statements

Cash flows associated with the Master Network Services Agreement and Transition Services Agreement are included in Net cash provided by operating activities on our Consolidated Statements of Cash Flows.

Note 13 – Income Taxes

Our sources of Income before income taxes were as follows:

Our sources of Income (loss) before income taxes were as follows:

Year Ended December 31,

(in millions) 2021 2020 2019

$ 3,493 $ 4,557 $ 3,686

Foreign 37 46 231

income $ 3,401 $ 3,493 $ 4,557

Foreign (loss) income ( 50 ) 37 46

Income from continuing operations before income taxes $ 3,351 $ 3,530 $ 4,603

Index for Notes to the Consolidated Financial Statements

Income tax expense is summarized as follows:

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(in millions) 2021 2020 2019

Current tax benefit (expense)

Current tax (expense) benefit

Federal $ ( 22 ) $ 17 $ 24

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Total current tax expense ( 130 ) ( 77 ) ( 44 )

Deferred tax benefit (expense)

Deferred tax (expense) benefit

Federal ( 541 ) ( 676 ) ( 954 )

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Federal statutory income tax rate 21.0 % 21.0 % 21.0 %

State taxes, net of federal benefit 4.5 4.8 5.1

Effect of law and rate changes ( 1.7 ) ( 0.8 ) 0.4

Change in valuation allowance ( 10.7 ) ( 2.6 ) ( 1.8 )

State taxes, net of federal benefit 4.8 5.1 4.8

Foreign taxes, net of federal benefit 0.1 0.3 0.3

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Effective income tax rate 9.8 % 22.3 % 24.7 %

Index for Notes to the Consolidated Financial Statements

Significant components of deferred income tax assets and liabilities, tax effected, are as follows:

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Net deferred tax liabilities $ 10,216 $ 9,966

Classified on the balance sheet as:

Classified on the consolidated balance sheets as:

Deferred tax liabilities $ 10,216 $ 9,966

Index for Notes to the Consolidated Financial Statements

As of December 31, 2021, we have tax effected federal net operating loss (“NOL”) carryforwards of $ 3.5 billion, state NOL carryforwards of $ 1.4 billion and foreign NOL carryforwards of $ 37 million, expiring through 2041.

Federal and certain state NOLs generated in and after 2018 do not expire.

As of December 31, 2020, our tax effected federal, state and foreign NOL carryforwards for financial reporting purposes were approximately $ 176 million, $ 455 million and $ 26 million, respectively, less than our NOL carryforwards for federal, state and foreign income tax purposes, due to unrecognized tax benefits of the same amount.

As of December 31, 2021, our tax effected federal and state NOL carryforwards for financial reporting purposes were approximately $ 221 million and $ 473 million, respectively, less than our NOL carryforwards for federal and state income tax purposes, due to unrecognized tax benefits of the same amount.

There were no differences in our foreign NOL carryforwards for financial reporting purposes and our NOL carryforwards for foreign income tax purposes as of December 31, 2021.

The unrecognized tax benefit amounts exclude offsetting tax effects of $ 132 million in other jurisdictions.

As of December 31, 2021, we have research and development, foreign tax and other general business credit carryforwards with a combined value of $ 581 million for federal income tax purposes, an immaterial amount of which begins to expire in 2023.

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

Due to the size and complexity of the Merger, our estimate of these amounts is preliminary and is subject to finalization and adjustment, which could be material, during the measurement period of up to one year from the Merger close date.

During the measurement period, we will adjust these amounts if new information is obtained about facts or circumstances that existed as of the acquisition date that, if known, would have changed these amounts.

See Note 2 - Business Combination for further information.

As of December 31, 2021, 2020 and 2019, our valuation allowance was $ 435 million, $ 878 million and $ 129 million, respectively.

The change from December 31, 2019, to December 31, 2020, primarily related to $ 848 million of deferred tax assets acquired via the Merger for which a valuation allowance is deemed necessary, partially offset by a reduction in the valuation allowance against deferred tax assets in federal and certain other jurisdictions associated with additional tax attribute utilization and expiration.

The change from December 31, 2018, to December 31, 2019, primarily related to a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions resulting from legal entity reorganizations.

We will continue to monitor positive and negative evidence related to the utilization of the remaining deferred tax assets for which a valuation allowance continues to be provided.

The change from December 31, 2020 to December 31, 2021 primarily related to a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions resulting from legal entity reorganizations of legacy Sprint entities.

The change from December 31, 2019 to December 31, 2020 primarily related to $ 851 million of deferred tax assets acquired via the Merger for which a valuation allowance was deemed necessary, partially offset by a reduction in the valuation allowance against deferred tax assets in federal and certain other jurisdictions associated with additional tax attribute utilization and expiration.

It is possible that our valuation allowance may change within the next 12 months.

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federal jurisdiction and in various state and foreign jurisdictions.

We are currently under examination by various states.

We are currently under examination by the IRS and various states.

Management does not believe the resolution of any of the audits will result in a material change to our financial condition, results of operations or cash flows.

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federal, state and foreign examination for years prior to 2002 are generally closed.

Index for Notes to the Consolidated Financial Statements

A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:

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As of December 31, 2021, 2020 and 2019, we had $ 932 million, $ 857 million and $ 310 million, respectively, in unrecognized tax benefits that, if recognized, would affect our annual effective tax rate.

The balance as of December 31, 2020 includes measurement period adjustments associated with the Merger to reflect facts and circumstances in existence as of the effective time of the Merger.

Our estimate of these unrecognized tax benefits is preliminary and is subject to finalization and adjustment, which could be material, during the measurement period of up to one year from the Merger close date.

Penalties and interest on income tax assessments are included in Selling, general and administrative expenses and Interest expense, respectively, in our Consolidated Statements of Comprehensive Income.

Penalties and interest on income tax assessments are included in Selling, general and administrative and Interest expense, respectively, on our Consolidated Statements of Comprehensive Income.

The accrued interest and penalties associated with unrecognized tax benefits are insignificant.

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Upon the close of the Public Equity Offering (as defined below), we received a payment from SoftBank for $ 304 million for our role in facilitating the SoftBank Monetization.

The payment received from SoftBank, net of tax, of $ 230 million was recorded as Additional paid-in capital in our Consolidated Balance Sheets and is presented as a reduction of Repurchases of common stock within Net cash provided by (used in) financing activities within our Consolidated Statements of Cash Flows .

The payment received from SoftBank, net of tax, of $ 230 million was recorded as Additional paid-in capital on our Consolidated Balance Sheets and is presented as a

Index for Notes to the Consolidated Financial Statements

reduction of Repurchases of common stock in Net cash provided by (used in) financing activities on our Consolidated Statements of Cash Flows .

Under the terms of the Master Framework Agreement and the agreements contemplated thereby, SBGC sold the Released Shares to us, and we participated in the following transactions:

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The trust issued mandatory exchangeable trust securities, which entitle holders to receive quarterly distributions from the trust and a final mandatory exchange price to be settled on June 1, 2023 (“Mandatory Exchangeable Offering”).

Index for Notes to the Consolidated Financial Statements

The trust was required to use a portion of the net proceeds from the Mandatory Exchangeable Offering to purchase U.S.

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These simultaneous transactions did not result in a net change to our treasury shares or shares of common stock outstanding.

As these transactions occurred with separate counterparties, the exchange of shares and cash are presented on a gross basis in our Consolidated Statement of Stockholders’ Equity and Consolidated Statements of Cash Flows, respectively.

The shares sold are presented in Shares issued in secondary offering and the shares purchased from SBGC are presented in Shares repurchased from SoftBank within our Consolidated Statement of Stockholders’ Equity.

The cash received from the sale of shares is presented in Issuance of common stock and the cash paid to purchase shares from SoftBank are presented in Repurchases of common stock within Net cash provided by (used in) financing activities within our Consolidated Statements of Cash Flows.

As these transactions occurred with separate counterparties, the exchange of shares and cash are recorded on a gross basis on our Consolidated Statement of Stockholders’ Equity and Consolidated Statements of Cash Flows, respectively.

The shares sold are presented in Shares issued in secondary offering and the shares purchased from SBGC are presented in Shares repurchased from SoftBank on our Consolidated Statement of Stockholders’ Equity.

The Company is not affiliated with the trust, will not retain any proceeds from the offering of the trust securities, and will have no ongoing interest, economic or otherwise, in the trust securities.

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The Master Framework Agreement provided for the purchase of 5.0 million shares of our common stock by Marcelo Claure, a member of our board of directors, from us at the same price per share as the common stock sold in the Public Equity Offering of $ 103.00 per share.

Following receipt of the necessary regulatory approvals on July 16, 2020, the sale of shares to Marcelo Claure occurred simultaneously with our purchase of an equivalent number of shares from SBGC at the same price per share pursuant to the Share Repurchase Agreement.

Ownership Following the SoftBank Monetization

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

The SoftBank Proxy Agreement remains in effect with respect to the remaining shares of our common stock held by SoftBank.

In addition, on June 22, 2020, DT, CM LLC, and Marcelo Claure entered into a Proxy, Lock-Up and ROFR Agreement (the “Claure Proxy Agreement,” together with the SoftBank Proxy Agreement, the “Proxy Agreements”), pursuant to which any shares of our common stock acquired after June 22, 2020 by Mr.

Claure or CM LLC, an entity controlled by Mr.

Claure, other than shares acquired as a result of Mr.

Claure’s role as a director or officer of the Company, will be voted in the manner as directed by DT.

Accordingly, 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.

Index for Notes to the Consolidated Financial Statements

DT Call Option

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On October 6, 2020, we assigned our rights under the T-Mobile Fixed-Price Call Option to DT and DT terminated its right to purchase shares from us under the DT Fixed-Price Call Option, resulting in derecognition of the related derivative asset and liability in equal and offsetting amounts of $ 1.0 billion such that there was no net impact to our Consolidated Statements of Comprehensive Income.

Note 15 – Repurchases of Common Stock

2017 Stock Repurchase Program

On December 6, 2017, our Board of Directors authorized a stock repurchase program for up to $ 1.5 billion of our common stock through December 31, 2018 (the “2017 Stock Repurchase Program”).

Repurchased shares are retired.

The 2017 Stock Repurchase Program completed on April 29, 2018.

The following table summarizes information regarding repurchases of our common stock under the 2017 Stock Repurchase Program:

(In millions, except shares and per share price)

Year ended December 31, Number of Shares Repurchased Average Price Paid Per Share Total Purchase Price

2018 16,738,758 $ 62.96 $ 1,054

Stock Purchases by Affiliate

In the first quarter of 2018, DT, our majority stockholder and an affiliated purchaser, purchased 3.3 million additional shares of our common stock at an aggregate market value of $ 200 million in the public market or from other parties, in accordance with the rules of the SEC and other applicable legal requirements.

There were no purchases in 2019 and 2020.

We did not receive proceeds from these purchases.

Ownership Following the SoftBank Monetization

The SoftBank Proxy Agreement remains in effect with respect to the remaining shares of our common stock held by SoftBank.

Claure or CM LLC, an entity controlled by Mr.

Claure, other than shares acquired as a result of Mr.

Claure’s role as a director or officer of the Company, will be voted in the manner as directed by DT.

As of December 31, 2021, DT and SoftBank held, directly or indirectly, approximately 46.7 % and 4.9 %, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.4 % of the outstanding T-Mobile common stock held by other stockholders.

Accordingly, as a result of the Proxy Agreements, DT has voting control as of December 31, 2021 over approximately 52.0 % of the outstanding T-Mobile common stock.

Index for Notes to the Consolidated Financial Statements

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48,751,557 36,630,268 —

(1) Represents the weighted average SoftBank Specified Shares outstanding from April 1, 2020, through December 31, 2020.

On April 1, 2020, in connection with the closing of the Merger, we amended and restated the Company’s certificate of incorporation in the form of the Fifth Amended and Restated Certificate of Incorporation (the “Restated Certificate”).

Pursuant to the Restated Certificate, the authorized capital stock of T-Mobile consists of 2,000,000,000 shares of T-Mobile common stock and 100,000,000 shares of preferred stock, par value $ 0.00001 per share.

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

As of December 31, 2021, we had authorized 100 million shares of preferred stock, with a par value of $ 0.00001 per share.

There was no preferred stock outstanding as of December 31, 2021 and 2020.

Potentially dilutive securities were not included in the computation of diluted earnings per share if to do so would have been anti-dilutive or if there was a loss from continuing operations for the period.

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

Potentially dilutive securities were not included in the computation of diluted earnings per share if to do so would have been anti-dilutive.

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

Note 16 – Leases

Through the Merger, we acquired leases of real property, including cell sites, switch sites, dark fiber, retail stores and office facilities and recorded lease liabilities and associated right-of-use assets based on the discounted lease payments.

Lease terms that are favorable or unfavorable to market terms were recorded as an adjustment to lease right-of-use assets on our Consolidated Balance Sheets.

Favorable and unfavorable leases are amortized on a straight-line basis over the associated remaining lease term.

On September 14, 2020, T-Mobile and American Tower Corporation (“American Tower”) entered into a lease agreement (the “American Tower Lease Agreement”) that will enable us to lease American Tower towers through April 2035.

The American Tower Lease Agreement extended the term and modified the rental payments for approximately 20,729 American Tower towers currently leased by us.

As a result of this modification, we remeasured the associated right-of-use assets and lease liabilities resulting in an increase of $ 11.0 billion to each on the effective date of the modification.

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

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

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

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

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

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

Subsequent to December 31, 2021, on January 3, 2022, we entered into the Crown Agreement with CCI that modified the terms of our leased towers from CCI.

The Crown Agreement modifies the monthly rental payment we will pay for sites currently leased by us, extends the non-cancellable lease term for the majority of our sites through December 2033 and will allow us the flexibility to facilitate our network integration and decommissioning activities through new site builds and termination of duplicate tower locations.

The initial non-cancellable term is through December 31, 2033, followed by optional renewals.

As a result of this modification, we will remeasure the associated right-of use assets and lease liabilities with an expected increase of

Index for Notes to the Consolidated Financial Statements

between $ 4.8 billion to $ 5.4 billion to each on the effective date of the modification, with a corresponding gross increase to both deferred tax liabilities and assets of between $ 1.2 billion to $ 1.4 billion.

The components of lease expense were as follows:

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Year Ended December 31,

2021 2020 2019

Weighted-Average Remaining Lease Term (Years)

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Total $ 29,243 $ 2,575

Interest payments for financing leases were $ 79 million and $ 82 million for the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2020, we have additional operating leases for cell sites and commercial properties that have not yet commenced with future lease payments of approximately $ 227 million.

Interest payments for financing leases were $ 69 million, $ 79 million and $ 82 million for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, we have additional operating leases for commercial properties that have not yet commenced with future lease payments of approximately $ 98 million.

As of December 31, 2021, we were contingently liable for future ground lease payments related to certain tower obligations.

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Index for Notes to the Consolidated Financial Statements

Through the Merger, we acquired leased wireless devices with a fair value of $ 5.8 billion as of April 1, 2020.

The components of leased wireless devices under our Leasing Programs were as follows:

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Twelve Months Ending December 31,

Total $ 1,779

Note 17 – Commitments and Contingencies

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In addition, we have commitments to purchase wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary course of business, with various terms through 2043.

Our purchase commitments, including purchase commitments assumed through the Merger, are approximately $ 5.0 billion for the year ending December 31, 2021, $ 4.5 billion in total for the years ending December 31, 2022 and 2023, $ 2.4 billion in total for the years ending December 31, 2024 and 2025 and $ 1.7 billion in total for the years thereafter.

Our purchase commitments are approximately $ 4.7 billion for the twelve-month period ending December 31, 2022, $ 5.6 billion in total for the twelve-month periods ending December 31, 2023 and 2024, $ 2.1 billion in total for the twelve-month periods ending December 31, 2025 and 2026, and $ 1.6 billion in total thereafter.

These amounts are not reflective of our entire anticipated purchases under the related agreements but are determined based on the non-cancelable quantities or termination amounts to which we are contractually obligated.

Subsequent to December 31, 2021, on January 3, 2022, we entered into the Crown Agreement with CCI 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.

Spectrum Leases

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We expect that all renewal periods in our spectrum leases will be exercised by us.

Our spectrum lease and service credit commitments, including renewal periods, are approximately $ 338 million for the year ending December 31, 2021, $ 675 million in total for the years ending December 31, 2022 and 2023, $ 594 million in total for the years ending December 31, 2024 and 2025 and $ 5.1 billion in total for the years thereafter.

Our spectrum lease and service credit commitments, including renewal periods, are approximately $ 350 million for the twelve-month period ending December 31, 2022, $ 611 million in total for the twelve-month periods ending December 31, 2023 and 2024, $ 591 million in total for the twelve-month periods ending December 31, 2025 and 2026 and $ 4.7 billion in total thereafter.

We accrue a monthly obligation for the services and equipment based on the total estimated available service credits divided by the term of the lease.

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The maximum remaining service commitment on December 31, 2021 was $ 85 million and is expected to be incurred over the term of the related lease agreements, which generally range from 15 to 30 years.

Merger Commitments

In connection with the regulatory proceedings and approvals of the Transactions, we have commitments and other obligations to various state and federal agencies and certain nongovernmental organizations, including pursuant to the Consent Decree agreed to by us, DT, Sprint, SoftBank and DISH and entered by the U.S.

District Court for the District of Columbia, and the

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FCC’s memorandum opinion and order approving our applications for approval of the Merger.

Merger Commitments

District Court for the District of Columbia, and the FCC’s memorandum opinion and order approving our applications for approval of the Merger.

These commitments and obligations include, among other things, extensive 5G network build-out commitments, obligations to deliver high-speed wireless services to the vast majority of Americans, including Americans residing in rural areas, and the marketing of an in-home broadband product where spectrum capacity is available.

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

We expect that our monetary commitments associated with these matters are approximately $ 23 million for the year ended December 31, 2021, $ 37 million in total for the years ended December 31, 2022 and 2023 and $ 13 million in total for the years ended December 31, 2024 and 2025.

We expect that our monetary commitments associated with these matters are approximately $ 11 million for the twelve-month period ending December 31, 2022, $ 12 million in total for the twelve-month periods ending December 31, 2023 and 2024.

We do not expect any amounts after December 31, 2024.

These amounts do not represent our entire anticipated costs to achieve specified network coverage and performance requirements, employment targets or commitments to provide access to affordable rate plans, but represent only those amounts for which we are required to make a specified payment in connection with our commitments or settlements.

Contingencies and Litigation

Litigation Matters

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

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

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

Litigation and Regulatory Matters

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

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

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

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

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

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

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

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

We recognize legal costs expected to be incurred in connection with Litigation and Regulatory Matters as they are incurred.

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

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

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On February 28, 2020, we received a Notice of Apparent Liability for Forfeiture and Admonishment from the FCC, which proposed a penalty against us for allegedly violating section 222 of the Communications Act and the FCC’s regulations governing the privacy of customer information.

We recorded an accrual for an estimated payment amount as of December 31, 2020, which was included in Accounts payable and accrued liabilities in our Consolidated Balance Sheets.

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

We maintained the accrual as of December 31, 2021, and that accrual was included in Accounts payable and accrued liabilities on our Consolidated Balance Sheets.

On April 1, 2020, in connection with the closing of the Merger, we assumed the contingencies and litigation matters of Sprint.

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In September 2019, Sprint notified the FCC that it had claimed monthly subsidies for serving subscribers even though these subscribers may not have met usage requirements under Sprint's usage policy for the Lifeline program, due to an inadvertent coding issue in the system used to identify qualifying subscriber usage that occurred in July 2017 while the system was being updated.

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

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

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

Sprint has made a number of payments to reimburse the federal government and

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certain states for excess subsidy payments.

We note that pursuant to Amendment No.

2 to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses, including those relating to these Lifeline matters.

2 to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses, including those relating to the Lifeline matters described above.

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

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

See Note 2 - Business Combination for further information.

See Note 2 – Business Combinations for further information.

On June 1, 2021, a putative shareholder class action and derivative lawsuit was filed in the Delaware Court of Chancery, Dinkevich v.

Deutsche Telekom AG, et al.

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

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

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

We intend to vigorously defend this lawsuit.

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

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

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

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

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

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

On February 2, 2022, the CPUC Administrative Law Judge presiding over DISH's Petition for Modification released a proposed decision that would deny the Petition for Modification.

That proposed decision may be heard by the CPUC as soon as its March 17, 2022 business meeting.

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

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

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

Our investigation uncovered that the perpetrator had illegally gained access to certain areas of our systems on or 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.

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

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

We also coordinated with law enforcement.

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

As a result of the August 2021 cyberattack, we have become subject to numerous lawsuits, including multiple class action lawsuits, that have been filed in numerous jurisdictions seeking unspecified monetary damages, costs and attorneys’ fees arising out of the August 2021 cyberattack.

In December 2021, the Judicial Panel on Multidistrict Litigation consolidated the federal class action lawsuits in the U.S.

District Court for the Western District of Missouri.

In addition, in November 2021, a purported Company shareholder filed a derivative action in the U.S.

District Court for the Western District of Washington, Litwin v.

Sievert et al., No.

2:21-cv-01599, against our current directors, alleging several claims concerning the Company’s cybersecurity practices.

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

We are unable to predict at this time the potential outcome of any of these claims or whether we may be subject to further private litigation.

We intend to vigorously defend all of these lawsuits.

In addition, the Company has received inquiries from various government agencies, law enforcement and other governmental authorities related to the August 2021 cyberattack, which could result in fines or penalties.

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

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

In light of the inherent uncertainties involved in such matters and based on the information currently available to us, as of the date of this 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

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and the amount of the loss is reasonably estimable.

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

Note 18 – Restructuring Costs

Upon close of the Merger, we began implementing restructuring initiatives to realize cost efficiencies and reduce redundancies.

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

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

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

(in millions) Year Ended

December 31, 2020

December 31, 2020 Year Ended December 31, 2021 Incurred to Date

Contract termination costs $ 178 $ 14 $ 192

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Total restructuring plan expenses $ 1,060 $ 215 $ 1,275

The expenses associated with the restructuring initiatives are included in Costs of services and Selling, general and administrative in our Consolidated Statements of Comprehensive Income.

No expenses were incurred related to our restructuring initiatives for the year ended December 31, 2019.

The expenses associated with the restructuring initiatives are included in Costs of services and Selling, general and administrative on our Consolidated Statements of Comprehensive Income.

Our restructuring initiatives also include the acceleration or termination of certain of our operating and financing leases for cell sites, switch sites, retail stores, network equipment and office facilities.

Incremental expenses associated with accelerating amortization of the right-of-use assets on lease contracts were $ 153 million for the year ended December 31, 2020 and are included within Costs of services and Selling, general and administrative in our Consolidated Statements of Comprehensive Income.

Incremental expenses associated with accelerating amortization of the right-of-use assets on lease contracts were $ 873 million and $ 153 million for the years ended December 31, 2021 and 2020, respectively, and are included in Costs of services and Selling, general and administrative on our Consolidated Statements of Comprehensive Income.

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

(in millions) April 1,

(in millions) December 31,

2020 Expenses Incurred Cash Payments Adjustments for Non-Cash Items (1)

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Total $ 163 $ 215 $ ( 251 ) $ ( 41 ) $ 86

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

The liabilities accrued in connection with our restructuring initiatives are presented in Accounts payable and accrued liabilities in our Consolidated Balance Sheets.

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

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

The liabilities accrued in connection with our restructuring initiatives are presented in Accounts payable and accrued liabilities on our Consolidated Balance Sheets.

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

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.

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Property and other taxes, including payroll 1,830 1,540

Interest 771 227

Accrued interest 710 771

Commissions 348 399

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Related Party Transactions

Deutsche Telekom

We have related party transactions associated with DT or its affiliates in the ordinary course of business, which are included in 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, consisting of a $ 2.0 billion Incremental Term Loan Facility due 2022 and a $ 2.0 billion Incremental Term Loan Facility due 2024;

• Terminated our revolving credit facility with DT;

• 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;

• Made an additional payment for requisite consents to DT of $ 13 million.

These payments were recognized as a reduction to Long-term debt to affiliates in our Consolidated Balance Sheets.

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

Amounts associated with the debt owed to DT are reflected as Short-term debt to affiliates and Long-term debt to affiliates in our Consolidated Balance Sheets.

Interest related to this debt is reflected as Interest expense to affiliates in our Consolidated Statements of Comprehensive Income.

On August 23, 2021, we redeemed $ 1.0 billion aggregate principal amount of our 4.500 % Senior Notes to affiliates due 2026.

See Note 8 – Debt for further information.

The following table summarizes the impact of significant transactions with DT or its affiliates included in Operating expenses in the Consolidated Statements of Comprehensive Income:

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International long distance agreement 37 47 39

We have an agreement with DT in which we receive reimbursement of certain administrative expenses, which was $ 6 million for the year ended December 31, 2020 and $ 11 million for each of the years ended December 31, 2019 and 2018.

We have an agreement with DT in which we receive reimbursement of certain administrative expenses, which was $ 5 million, $ 6 million and $ 11 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Amounts due from and to DT related to these agreements are included in Accounts receivable from affiliates and Payables to affiliates, respectively, in the Consolidated Balance Sheets.

Index for Notes to the Consolidated Financial Statements

from and to DT related to these agreements are included in the Consolidated Balance Sheets as “Accounts Receivables from affiliates” and “Payables to affiliates,” respectively.

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

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.

On August 3, 2020, upon completion of the SoftBank Monetization, DT and SoftBank held, directly or indirectly, approximately 43.4 % and 8.6 %, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.0 % of the outstanding T-Mobile common stock held by other stockholders.

As a result of the Proxy Agreements, DT has voting control as of August 3, 2020 over approximately 52.4 % 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 SBGC.

On October 6, 2020, we assigned our rights under the T-Mobile Fixed-Price Call Option to DT and DT terminated its right to purchase shares from us under the DT Fixed-Price Call Option, resulting in derecognition of the related der ivative asset and liability in equal and offsetting amounts such that there was no net impact to our Consolidated Statements of Comprehensive Income .

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

We have terminated or restructured most of our arrangements with Brightstar, except for reverse logistics and trade-in services.

Revenue resulting from sale of devices distributed by Brightstar is generally recognized when sold to an end customer (commonly referred to as recognized on a sell-through basis).

Amounts included in our consolidated financial statements associated with these supply chain and inventory management arrangements with Brightstar were not material.

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.

Supplemental Consolidated Statements of Cash Flows Information

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Financing lease right-of-use assets obtained in exchange for lease obligations 1,261 1,273 1,041

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Note 20 – Subsequent Events

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

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.

See Note 8 – Debt for further information.

Subsequent to December 31, 2020, on February 1, 2021, the valuation process was complete with respect to Shentel’s wireless telecommunication assets used to provide services pursuant to the Management Agreement, for which we previously exercised an option to purchase.

The base purchase price of the wireless telecommunication assets is $ 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.

See Note 2 – Business Combination for further information.

Supplementary Data

Quarterly Financial Information (Unaudited)

The following table includes the impact of the Merger on a prospective basis from the Merger close date of April 1, 2020.

Historical results have not been restated and reflect standalone T-Mobile.

(in millions, except share and per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Full Year

Total revenues $ 11,113 $ 17,671 $ 19,272 $ 20,341 $ 68,397

Operating income 1,539 820 2,565 1,712 6,636

Income (loss) from continuing operations 951 ( 210 ) 1,253 750 2,744

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

Net income 951 110 1,253 750 3,064

Earnings per share

Basic earnings per share

Continuing operations $ 1.11 $ ( 0.17 ) $ 1.01 $ 0.60 $ 2.40

Discontinued operations — 0.26 — — 0.28

Basic $ 1.11 $ 0.09 $ 1.01 $ 0.60 $ 2.68

Diluted earnings per share

Continuing operations $ 1.10 $ ( 0.17 ) $ 1.00 $ 0.60 $ 2.37

Discontinued operations — 0.26 — — 0.28

Diluted $ 1.10 $ 0.09 $ 1.00 $ 0.60 $ 2.65

Weighted average shares outstanding

Basic 858,148,284 1,236,528,444 1,238,450,665 1,241,578,615 1,144,206,326

Diluted 865,998,532 1,236,528,444 1,249,798,740 1,251,566,899 1,154,749,428

Total revenues $ 11,080 $ 10,979 $ 11,061 $ 11,878 $ 44,998

Operating income 1,476 1,541 1,471 1,234 5,722

Income from continuing operations 908 939 870 751 3,468

Net income 908 939 870 751 3,468

Earnings per share

Basic $ 1.07 $ 1.10 $ 1.02 $ 0.88 $ 4.06

Diluted $ 1.06 $ 1.09 $ 1.01 $ 0.87 $ 4.02

Weighted average shares outstanding

Basic 851,223,498 854,368,443 854,578,241 856,294,467 854,143,751

Diluted 858,643,481 860,135,593 862,690,751 864,158,739 863,433,511

Earnings per share is computed independently for each quarter and the sum of the quarters may not equal earnings per share for the full year.

There were no discontinued operations for the year ended December 31, 2019.

Subsequent to December 31, 2021, on January 3, 2022, we entered into an agreement with CCI to amend terms related to our tower leases, Tower obligations and non-dedicated transportation lines.

See Note 9 - Tower Obligations , Note 16 – Leases and N ote 17 – Commitments an d Contingenci es for further information.

Subsequent to December 31, 2021, on January 6, 2022, the FCC announced that we were the winning bidder of 199 licenses in Auction 110 (mid-band spectrum).

See Note 6 - Goodwill, Spectrum License Transactions and Other Intangible Assets for further information.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data