T-Mobile US, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of T-Mobile US, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of T-Mobile US, Inc. 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). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. 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. 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 The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 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 53 Index for Notes to the Consolidated Financial Statements 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters 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 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 Seattle, Washington February 11, 2022 We have served as the Company’s auditor since 2001. 54 Index for Notes to the Consolidated Financial Statements T-Mobile US, Inc. Consolidated Balance Sheets (in millions, except share and per share amounts) December 31, 2021 December 31, 2020 Assets Current assets Cash and cash equivalents $ 6,631 $ 10,385 Accounts receivable, net of allowance for credit losses of $ 146 and $ 194 4,167 4,254 Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $ 494 and $ 478 4,748 3,577 Accounts receivable from affiliates 27 22 Inventory 2,567 2,527 Prepaid expenses 746 624 Other current assets 2,005 2,496 Total current assets 20,891 23,885 Property and equipment, net 39,803 41,175 Operating lease right-of-use assets 26,959 28,021 Financing lease right-of-use assets 3,322 3,028 Goodwill 12,188 11,117 Spectrum licenses 92,606 82,828 Other intangible assets, net 4,733 5,298 Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $ 136 and $ 127 2,829 2,031 Other assets 3,232 2,779 Total assets $ 206,563 $ 200,162 Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued liabilities $ 11,405 $ 10,196 Payables to affiliates 103 157 Short-term debt 3,378 4,579 Short-term debt to affiliates 2,245 — Deferred revenue 856 1,030 Short-term operating lease liabilities 3,425 3,868 Short-term financing lease liabilities 1,120 1,063 Other current liabilities 967 810 Total current liabilities 23,499 21,703 Long-term debt 67,076 61,830 Long-term debt to affiliates 1,494 4,716 Tower obligations 2,806 3,028 Deferred tax liabilities 10,216 9,966 Operating lease liabilities 25,818 26,719 Financing lease liabilities 1,455 1,444 Other long-term liabilities 5,097 5,412 Total long-term liabilities 113,962 113,115 Commitments and contingencies (Note 17) Stockholders' equity Common Stock, par value $ 0.00001 per share, 2,000,000,000 shares authorized; 1,250,751,148 and 1,243,345,584 shares issued, 1,249,213,681 and 1,241,805,706 shares outstanding — — Additional paid-in capital 73,292 72,772 Treasury stock, at cost, 1,537,468 and 1,539,878 shares issued ( 13 ) ( 11 ) Accumulated other comprehensive loss ( 1,365 ) ( 1,581 ) Accumulated deficit ( 2,812 ) ( 5,836 ) Total stockholders' equity 69,102 65,344 Total liabilities and stockholders' equity $ 206,563 $ 200,162 The accompanying notes are an integral part of these consolidated financial statements. 55 Index for Notes to the Consolidated Financial Statements T-Mobile US, Inc. Consolidated Statements of Comprehensive Income Year Ended December 31, (in millions, except share and per share amounts) 2021 2020 2019 Revenues Postpaid revenues $ 42,562 $ 36,306 $ 22,673 Prepaid revenues 9,733 9,421 9,543 Wholesale revenues 3,751 2,590 1,279 Other service revenues 2,323 2,078 1,005 Total service revenues 58,369 50,395 34,500 Equipment revenues 20,727 17,312 9,840 Other revenues 1,022 690 658 Total revenues 80,118 68,397 44,998 Operating expenses Cost of services, exclusive of depreciation and amortization shown separately below 13,934 11,878 6,622 Cost of equipment sales, exclusive of depreciation and amortization shown separately below 22,671 16,388 11,899 Selling, general and administrative 20,238 18,926 14,139 Impairment expense — 418 — Depreciation and amortization 16,383 14,151 6,616 Total operating expenses 73,226 61,761 39,276 Operating income 6,892 6,636 5,722 Other income (expense) Interest expense ( 3,189 ) ( 2,483 ) ( 727 ) Interest expense to affiliates ( 173 ) ( 247 ) ( 408 ) Interest income 20 29 24 Other expense, net ( 199 ) ( 405 ) ( 8 ) Total other expense, net ( 3,541 ) ( 3,106 ) ( 1,119 ) Income from continuing operations before income taxes 3,351 3,530 4,603 Income tax expense ( 327 ) ( 786 ) ( 1,135 ) Income from continuing operations 3,024 2,744 3,468 Income from discontinued operations, net of tax — 320 — Net income $ 3,024 $ 3,064 $ 3,468 Net income $ 3,024 $ 3,064 $ 3,468 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 (loss) gain on foreign currency translation adjustment, net of tax effect of $ 0 , $ 1 and $ 0 ( 4 ) 4 — Net unrecognized gain on pension and other postretirement benefits, net of tax effect of $ 28 , $ 2 and $ 0 80 6 — Other comprehensive income (loss) 216 ( 713 ) ( 536 ) Total comprehensive income $ 3,240 $ 2,351 $ 2,932 Earnings per share Basic earnings per share: Continuing operations $ 2.42 $ 2.40 $ 4.06 Discontinued operations — 0.28 — Basic $ 2.42 $ 2.68 $ 4.06 Diluted earnings per share: Continuing operations $ 2.41 $ 2.37 $ 4.02 Discontinued operations — 0.28 — Diluted $ 2.41 $ 2.65 $ 4.02 Weighted-average shares outstanding Basic 1,247,154,988 1,144,206,326 854,143,751 Diluted 1,254,769,926 1,154,749,428 863,433,511 The accompanying notes are an integral part of these consolidated financial statements. 56 Index for Notes to the Consolidated Financial Statements T-Mobile US, Inc. Consolidated Statements of Cash Flows Year Ended December 31, (in millions) 2021 2020 2019 Operating activities Net income $ 3,024 $ 3,064 $ 3,468 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 16,383 14,151 6,616 Stock-based compensation expense 540 694 495 Deferred income tax expense 197 822 1,091 Bad debt expense 452 602 307 Losses from sales of receivables 15 36 130 Losses on redemption of debt 184 371 19 Impairment expense — 418 — Changes in operating assets and liabilities Accounts receivable ( 3,225 ) ( 3,273 ) ( 3,709 ) Equipment installment plan receivables ( 3,141 ) ( 1,453 ) ( 1,015 ) Inventories 201 ( 2,222 ) ( 617 ) Operating lease right-of-use assets 4,964 3,465 1,896 Other current and long-term assets ( 573 ) ( 402 ) ( 144 ) Accounts payable and accrued liabilities 549 ( 2,123 ) 17 Short- and long-term operating lease liabilities ( 5,358 ) ( 3,699 ) ( 2,131 ) Other current and long-term liabilities ( 531 ) ( 2,178 ) 144 Other, net 236 367 257 Net cash provided by operating activities 13,917 8,640 6,824 Investing activities Purchases of property and equipment, including capitalized interest of ($ 210 ), ($ 440 ) and ($ 473 ) ( 12,326 ) ( 11,034 ) ( 6,391 ) Purchases of spectrum licenses and other intangible assets, including deposits ( 9,366 ) ( 1,333 ) ( 967 ) Proceeds from sales of tower sites 40 — 38 Proceeds related to beneficial interests in securitization transactions 4,131 3,134 3,876 Net cash related to derivative contracts under collateral exchange arrangements — 632 ( 632 ) Acquisition of companies, net of cash and restricted cash acquired ( 1,916 ) ( 5,000 ) ( 31 ) Proceeds from the divestiture of prepaid business — 1,224 — Other, net 51 ( 338 ) ( 18 ) Net cash used in investing activities ( 19,386 ) ( 12,715 ) ( 4,125 ) Financing activities Proceeds from issuance of long-term debt 14,727 35,337 — Payments of consent fees related to long-term debt — ( 109 ) — Proceeds from borrowing on revolving credit facility — — 2,340 Repayments of revolving credit facility — — ( 2,340 ) Repayments of financing lease obligations ( 1,111 ) ( 1,021 ) ( 798 ) Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities ( 184 ) ( 481 ) ( 775 ) Repayments of long-term debt ( 11,100 ) ( 20,416 ) ( 600 ) Issuance of common stock — 19,840 — Repurchases of common stock — ( 19,536 ) — Proceeds from issuance of short-term debt — 18,743 — Repayments of short-term debt — ( 18,929 ) — Tax withholdings on share-based awards ( 316 ) ( 439 ) ( 156 ) Cash payments for debt prepayment or debt extinguishment costs ( 116 ) ( 82 ) ( 28 ) Other, net ( 191 ) 103 ( 17 ) Net cash provided by (used in) financing activities 1,709 13,010 ( 2,374 ) Change in cash and cash equivalents, including restricted cash ( 3,760 ) 8,935 325 Cash and cash equivalents, including restricted cash Beginning of period 10,463 1,528 1,203 End of period $ 6,703 $ 10,463 $ 1,528 The accompanying notes are an integral part of these consolidated financial statements. 57 Index for Notes to the Consolidated Financial Statements T-Mobile US, Inc. Consolidated Statement of Stockholders’ Equity (in millions, except shares) Common Stock Outstanding Treasury Shares at Cost Par Value and Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity Balance as of December 31, 2018 850,180,317 $ ( 6 ) $ 38,010 $ ( 332 ) $ ( 12,954 ) $ 24,718 Net income — — — — 3,468 3,468 Other comprehensive loss — — — ( 536 ) — ( 536 ) Stock-based compensation — — 517 — — 517 Exercise of stock options 85,083 — 1 — — 1 Stock issued for employee stock purchase plan 2,091,650 — 124 — — 124 Issuance of vested restricted stock units 6,685,950 — — — — — Issuance of restricted stock awards ( 24,682 ) — — — — — Shares withheld related to net share settlement of stock awards and stock options ( 2,094,555 ) — ( 156 ) — — ( 156 ) Transfers with NQDC plan ( 18,363 ) ( 2 ) 2 — — — Prior year Retained Earnings (1) — — — — 653 653 Balance as of December 31, 2019 856,905,400 ( 8 ) 38,498 ( 868 ) ( 8,833 ) 28,789 Net income — — — — 3,064 3,064 Other comprehensive loss — — — ( 713 ) — ( 713 ) Executive put option ( 342,000 ) — 1 — — 1 Stock-based compensation — — 750 — — 750 Exercise of stock options 906,295 — 48 — — 48 Stock issued for employee stock purchase plan 2,144,036 — 148 — — 148 Issuance of vested restricted stock units 13,263,434 — — — — — Shares withheld related to net share settlement of stock awards and stock options ( 4,441,107 ) — ( 439 ) — — ( 439 ) 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) — — — — ( 67 ) ( 67 ) Balance as of December 31, 2020 1,241,805,706 ( 11 ) 72,772 ( 1,581 ) ( 5,836 ) 65,344 Net income — — — — 3,024 3,024 Other comprehensive income — — — 216 — 216 Stock-based compensation — — 606 — — 606 Exercise of stock options 218,495 — 10 — — 10 Stock issued for employee stock purchase plan 2,189,542 — 225 — — 225 Issuance of vested restricted stock units 7,509,039 — — — — — Shares withheld related to net share settlement of stock awards and stock options ( 2,511,512 ) — ( 316 ) — — ( 316 ) 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. (2) Shares issued includes 5.0 million shares purchased by Marcelo Claure. (3) In connection with the SoftBank Monetization (as defined below), we received a payment of $ 304 million from SoftBank (as defined below). This amount, net of tax, was treated as a reduction of the purchase price of the shares acquired from SoftBank and was recorded as Additional Paid-in Capital. The accompanying notes are an integral part of these consolidated financial statements 58 Index for Notes to the Consolidated Financial Statements T-Mobile US, Inc. Index for Notes to the Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies 60 Note 2 Business Combinations 72 Note 3 Receivables and Related Allowance for Credit Losses 78 Note 4 Sales of Certain Receivables 81 Note 5 Property and Equipment 83 Note 6 Goodwill, Spectrum License Transactions and Other Intangible Assets 84 Note 7 Fair Value Measurements 87 Note 8 Debt 89 Note 9 Tower Obligations 94 Note 10 Revenue from Contracts with Customers 96 Note 11 Employee Compensation and Benefit Plans 97 Note 12 Discontinued Operations 101 Note 13 Income Taxes 102 Note 14 SoftBank Equity Transaction 104 Note 1 5 Earnings Per Share 107 Note 1 6 Leases 107 Note 1 7 Commitments and Contingencies 109 Note 1 8 Restructuring Costs 112 Not e 19 Additional Financial Information 113 Note 20 Subsequent Events 114 59 Index for Notes to the Consolidated Financial Statements T-Mobile US, Inc. Notes to the Consolidated Financial Statements Note 1 – Summary of Significant Accounting Policies Description of Business T-Mobile US, Inc. (“T-Mobile,” “we,” “our,” “us” or the “Company”), together with its consolidated subsidiaries, is a leading provider of mobile communications services, including voice, messaging and data, under its flagship brands, T-Mobile and Metro™ by T-Mobile ("Metro by T-Mobile"), in the United States, Puerto Rico and the U.S. Virgin Islands. Substantially all of our revenues were earned in, and substantially all of our long-lived assets are located in, the U.S., Puerto Rico and the U.S. Virgin Islands. We provide mobile communications services primarily using our 4G Long Term Evolution (“LTE”) network and our 5G technology network. We also offer a wide selection of wireless devices, including handsets, tablets and other mobile communication devices, and accessories for sale, as well as financing through equipment installment plans (“EIP”) and leasing through JUMP! On Demand™. Additionally, we provide reinsurance for device insurance policies and extended warranty contracts offered to our mobile communications customers. Basis of Presentation 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. 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 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. 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 future revenues and expenses associated with an asset or liability. 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 Cash equivalents consist of highly liquid money market funds and U.S. Treasury securities with remaining maturities of three months or less at the date of purchase. Receivables and Related Allowance for Credit Losses Accounts Receivable 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 60 Index for Notes to the Consolidated Financial Statements financial assets. Equipment Installment Plan Receivables 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 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. 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 on our Consolidated Balance Sheets. 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 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. We consider a receivable past due and delinquent when a customer has not paid us by the contractually specified payment due date. Account balances are written off against the allowance for credit losses if collection efforts are unsuccessful and the receivable balance is deemed uncollectible (customer default), based on factors such as customer credit ratings as well as the length of time the amounts are past due. If there is a deterioration of our customers’ financial condition or if future actual default rates on receivables in general 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. Inventories Inventories consist primarily of wireless devices and accessories, which are valued at the lower of cost or net realizable value. Cost is determined using standard cost, which approximates average cost. Shipping and handling costs paid to wireless device and accessories vendors as well as costs to refurbish used devices are included in the standard cost of inventory. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of disposal and transportation. We record inventory write-downs to net realizable value for obsolete and slow-moving items based on inventory turnover trends and historical experience. Deferred Purchase Price Assets In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets measured at fair value that are based on a discounted cash flow model using unobservable Level 3 inputs, including estimated customer default rates and credit worthiness. See Note 4 – Sales of Certain Receivables for further information. 61 Index for Notes to the Consolidated Financial Statements Long-Lived 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. Virgin Islands. We assess potential impairments to our long-lived assets when events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. 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 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 Property and equipment consists of buildings and equipment, wireless communications systems, leasehold improvements, capitalized software, leased wireless devices and construction in progress. Buildings and equipment include certain network server equipment. 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. Property and equipment are recorded at cost less accumulated depreciation and impairments, if any, in Property and equipment, net on our Consolidated Balance Sheets. We generally depreciate property and equipment over the period the property and equipment provide economic benefit using the straight-line method. Depreciable life studies are performed periodically to confirm the appropriateness of depreciable lives for certain categories of property and equipment. These studies take into account actual usage, physical wear and tear, replacement history and assumptions about technology evolution. When these factors indicate the useful life of an asset is different from the previous assessment, the remaining book value is depreciated prospectively over the adjusted remaining estimated useful life. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the related lease term. Costs of major replacements and improvements are capitalized. Repair and maintenance expenditures which do not enhance or extend the asset’s useful life are charged to operating expenses as incurred. Construction costs, labor and overhead incurred in the expansion or enhancement of our wireless network are capitalized. Capitalization commences with pre-construction period administrative and technical activities, which include obtaining zoning approvals and building permits, and ceases at the point at which the asset is ready for its intended use. We capitalize interest associated with the acquisition or construction of certain property and equipment. Capitalized interest is reported as a reduction in interest expense and depreciated over the useful life of the related assets. We record an asset retirement obligation for the estimated fair value of legal obligations associated with the retirement of tangible long-lived assets and a corresponding increase in the carrying amount of the related asset in the period in which the obligation is incurred. In periods subsequent to initial measurement, we recognize changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate. 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 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 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. Device Leases Through the Merger, we acquired device lease contracts in which Sprint is the lessor (the “Sprint Flex Lease Program”), substantially all of which are classified as operating leases, as well as the associated fixed assets (i.e., the leased devices). 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. 62 Index for Notes to the Consolidated Financial Statements Our leasing programs (“Leasing Programs”), which include JUMP! 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. The estimated useful life reflects the period for which we estimate the group of leased devices will provide utility to us, which may be longer than the initial lease term based on customer options in the Sprint Flex Lease program to renew the lease on a month-to-month basis after the initial lease term concludes. In determining the estimated useful life, we consider the lease term (e.g., 18 months and month-to-month renewal options for the Sprint Flex Lease Program), trade-in activity and write-offs for lost and stolen devices. Lost and stolen devices are incorporated into the estimates of depreciation expense and recognized as an adjustment to accumulated depreciation when the loss event occurs. Our policy of using the group method of depreciation has been applied to acquired leased devices as well as leases originated subsequent to the Merger. Acquired leased devices are grouped based on the age of the device. 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! On Demand lease program must return or purchase their device, and customers in the Sprint Flex Lease Program have the option to return or purchase their device or to renew their lease on a month-to-month basis. The purchase price of the device is established at lease commencement and is based on the type of device leased and any down payment made. 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 on our Consolidated Statements of Comprehensive Income. Other Intangible Assets Intangible assets that do not have indefinite useful lives are amortized over their estimated useful lives. 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 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: wireless. Spectrum Licenses Spectrum licenses are carried at costs incurred to acquire the spectrum licenses and the costs to prepare the spectrum licenses for their intended use, such as costs to clear acquired spectrum licenses. 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. 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. At times, we enter into agreements to sell or exchange spectrum licenses. 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 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 63 Index for Notes to the Consolidated Financial Statements 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. If the transaction lacks commercial substance or the fair value is not measurable, the acquired spectrum licenses are recorded at our carrying value of the spectrum assets transferred or exchanged. Spectrum Leases 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. A majority of the Agreements include a right of first refusal to acquire, lease or otherwise use the license at the end of the automatic renewal periods. Leased FCC spectrum licenses are recorded as executory contracts whereby, as a result of business combination accounting, an intangible asset or liability is recorded reflecting the extent to which contractual terms are favorable or unfavorable to current market rates. 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 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. This enhanced value from combining owned and leased spectrum licenses is referred to as an aggregation premium. 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. Impairment 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. We may elect to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an intangible asset is less than its carrying value. If we do not perform the qualitative assessment, or if the qualitative assessment indicates it is more likely than not that the fair value of the intangible asset is less than its carrying amount, we calculate the estimated fair value of the intangible asset. If the estimated fair value of the spectrum licenses is lower than their carrying amount, an impairment loss is recognized for the difference. We estimate fair value using the Greenfield methodology, which is an income approach based on discounted cash flows associated with the intangible asset, to estimate the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under current market conditions. Restricted Cash 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 in Other assets on our Consolidated Balance Sheets. 64 Index for Notes to the Consolidated Financial Statements Fair Value Measurements We carry certain assets and liabilities at fair value. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs based on the observability as of the measurement date, is as follows: Level 1 Quoted prices in active markets for identical assets or liabilities; Level 2 Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and Level 3 Unobservable inputs for which there is little or no market data, which require us to develop assumptions of what market participants would use in pricing the asset or liability. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 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 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. With the exception of certain long-term fixed-rate debt, there were no financial instruments with a carrying value materially different from their fair value. See Note 7 – Fair Value Measurements for a comparison of the carrying values and fair values of our short-term and long-term debt. Derivative Financial Instruments Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value. 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. 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 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. Significant Judgments The most significant judgments affecting the amount and timing of revenue from contracts with our customers include the following items: • 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. • The identification of distinct performance obligations within our service plans may require significant judgment. • Revenue is recorded net of costs paid to another party for performance obligations where we arrange for the other party to transfer goods or services to the customer (i.e., when we are acting as an agent). For example, performance obligations relating to services provided by third-party content providers where we neither control a right to the content provider’s service nor control the underlying service itself are presented net because we are acting as an agent. 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. 65 Index for Notes to the Consolidated Financial Statements • 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. Device return levels are estimated based on the expected value method as there are a large number of contracts with similar characteristics and the outcome of each contract is independent of the others. Historical return rate experience is a significant input to our expected value methodology. • Sales of equipment to indirect dealers who have been identified as our customer (referred to as the sell-in model) often include credits subsequently paid to the dealer as a reimbursement for any discount promotions offered to the end consumer. These credits (payments to a customer, the dealer) are accounted for as variable consideration when estimating the amount of revenue to recognize from the sales of equipment to indirect dealers and are estimated based on historical experience and other factors, such as expected promotional activity. • The determination of the standalone selling price for contracts that involve more than one performance obligation may require significant judgment, such as when the selling price of a good or service is not readily observable. Wireless Services Revenue We generate our wireless services revenues from providing access to, and usage of, our wireless communications network. Service revenues also include revenues earned for providing premium services to customers, such as device insurance services. Service contracts are billed monthly either in advance or arrears, or are prepaid. 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. For usage-based and prepaid wireless services, we satisfy our performance obligations when services are rendered. Consideration payable to a customer is treated as a reduction of the total transaction price, unless the payment is in exchange for a distinct good or service, such as certain commissions paid to dealers, in which case the payment is treated as a purchase of that distinct good or service. 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 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. We have made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer (e.g., sales, use, value added, and some excise taxes). Wireline Revenue 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 We generate equipment revenues from the sale or lease of mobile communication devices and accessories. For performance obligations related to equipment contracts, we typically transfer control at a point in time when the device or accessory is delivered to, and accepted by, the customer or dealer. We have elected to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. We estimate variable consideration (e.g., device returns or certain payments to indirect dealers) primarily based on historical experience. Equipment sales not probable of collection are generally recorded as payments are received. Our assessment of collectibility considers contract terms such as down payments that reduce our exposure to credit risk. We offer certain customers the option to pay for devices and accessories in installments using an EIP. Generally, we recognize as a reduction of the total transaction price the effects of a financing component in contracts where customers purchase their devices and accessories on an EIP with a term of more than one year, including those financing components that are not considered to be significant to the contract. 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. 66 Index for Notes to the Consolidated Financial Statements 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. Lease revenues are recorded as equipment revenues and recognized as earned on a straight-line basis over the lease term. Lease revenues on contracts not probable of collection are limited to the amount of payments received. See “Property and Equipment” above for further information. Imputed Interest on EIP Receivables 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. For transactions where we recognize a significant financing component, judgment is required to determine the discount rate. For EIP sales, the discount rate used to adjust the transaction price primarily reflects current market interest rates and the estimated credit risk of the customer. Customer credit behavior is inherently uncertain. See “Receivables and Allowance for Credit Losses” above, for additional discussion on how we assess credit risk. 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 Generally, our devices and service plans are available at standard prices, which are maintained on price lists and published on our website and/or within our retail stores. For contracts that involve more than one product or service that are identified as separate performance obligations, the transaction price is allocated to the performance obligations based on their relative standalone selling prices. The standalone selling price is the price at which we would sell the good or service separately to a customer and is most commonly evidenced by the price at which we sell that good or service separately in similar circumstances and to similar customers. A contract asset is recorded when revenue is recognized in advance of our right to receive consideration (i.e., we must perform additional services in order to receive consideration). Amounts are recorded as receivables when our right to consideration is unconditional. When consideration is received, or we have an unconditional right to consideration in advance of delivery of goods or services, a contract liability is recorded. 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 on our Consolidated Balance Sheets. See N ote 10 – Revenue from Contracts with Customers for further information. Contract Modifications Our service contracts allow customers to frequently modify their contracts without incurring penalties, in many cases. Each time a contract is modified, we evaluate the change in scope or price of the contract to determine if the modification should be treated as a separate contract, as if there is a termination of the existing contract and creation of a new contract, or if the modification should be considered a change associated with the existing contract. We typically do not have significant impacts from contract modifications. 67 Index for Notes to the Consolidated Financial Statements Contract Costs We incur certain incremental costs to obtain a contract that we expect to recover, such as sales commissions. We record an asset when these incremental costs to obtain a contract are incurred and amortize them on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. We capitalize postpaid sales commissions for service activation as costs to acquire a contract and amortize them over the estimated period of benefit, currently 24 months. For capitalized contract costs, determining the amortization period over which such costs are recognized as well as assessing the indicators of impairment may require significant judgment. Prepaid commissions are expensed as incurred as their estimated period of benefit does not extend beyond 12 months. 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. Our policies for the capitalization and amortization of costs to acquire a contract are applied to the Sprint, Boost (up to the sale of the Prepaid Business to Dish on July 1, 2020) and Assurance Wireless brands subsequent to the Merger close. 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 We had arrangements with Brightstar US, Inc. (“Brightstar”), a subsidiary of SoftBank, whereby Brightstar provided supply chain and inventory management services to us in our indirect channels. T-Mobile sold devices through Brightstar to T-Mobile indirect channels who then sold the device to an end customer. The supply chain and inventory management arrangement included, among other things, that Brightstar may purchase inventory from the original equipment manufacturers to sell through to our indirect channels. As compensation for these services, we remitted per unit fees to Brightstar for each device sold to these indirect dealers. Devices sold from T-Mobile to Brightstar do not meet the criteria for a sale. Devices transferred from T-Mobile to Brightstar remain in inventory until control is transferred upon the sale of the device to the end customer, and in some circumstances to the indirect dealer. For customers who choose to lease a device previously sold to the indirect dealer, T-Mobile will repurchase the device from the indirect dealer and originate a lease directly with the end customer. 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 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. Leases (effective January 1, 2019) 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, 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. The right-of-use asset for an operating lease is based on the lease liability. 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. We recognize a right-of-use asset and lease liability for financing leases based on the net present value of future minimum lease payments. The right-of-use asset for a finance lease is based on the lease liability. 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 68 Index for Notes to the Consolidated Financial Statements 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 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 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. Certain of our lease agreements include rental payments based on changes in the consumer price index (“CPI”). Lease liabilities are not remeasured as a result of changes in the CPI; instead, changes in the CPI are treated as variable lease payments and are excluded from the measurement of the right-of-use asset and lease liability. These payments are recognized in the period in which the related obligation is incurred. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Generally, we elected the practical expedient to not separate lease and non-lease components in arrangements where we are the lessee. For arrangements in which we are the lessor of wireless devices, we did not elect this practical expedient. We did not elect the short-term lease recognition exemption; as such, leases with terms shorter than 12-months are included as a right-of-use asset and lease liability. Rental revenues and expenses associated with co-location tower sites are presented on a net basis under Topic 842. See Note 1 6 – Leases for further information. Cell Tower Monetization Transactions 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 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. Sprint Retirement Pension Plan Through the Merger, we acquired the assets and assumed the liabilities associated with the Sprint Retirement Pension Plan (the “Pension Plan”), which is a defined benefit pension plan providing postretirement benefits to certain employees. As of December 31, 2005, the Pension Plan was amended to freeze benefit plan accruals for participants. The investments in the Pension Plan are measured at fair value on a recurring basis each quarter using quoted market prices or the net asset value per share as a practical expedient. The projected benefit obligations associated with the Pension Plan are determined based on actuarial models utilizing mortality tables and discount rates applied to the expected benefit term. See Note 11 – Employee Compensation and Benefit Plans for further information on the Pension Plan. Advertising Expense We expense the cost of advertising and other promotional expenditures to market our services and products as incurred. 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. Income Taxes 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 69 Index for Notes to the Consolidated Financial Statements 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 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) Other comprehensive income (loss) consists of adjustments, net of tax, related to unrealized gains (losses) on cash flow hedges, available-for-sale securities, foreign currency translation and pension and other postretirement benefits. This is reported in Accumulated other comprehensive loss as a separate component of stockholders’ equity until realized in earnings. Stock-Based Compensation 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. RSUs are recognized as expense using the straight-line method. PRSUs are recognized as expense following a graded vesting schedule with their performance re-assessed and updated on a quarterly basis, or more frequently as changes in facts and circumstances warrant. Earnings Per Share Basic earnings per share is computed by dividing Net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by giving effect to all potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of outstanding stock options, RSUs and PRSUs, calculated using the treasury stock method. See Note 1 5 – Earnings Per Share for further information. Variable Interest Entities VIEs are entities that lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, have equity investors that do not have the ability to make significant decisions relating to the entity's operations through voting rights, do not have the obligation to absorb the expected losses or do not have the right to receive the residual returns of the entity. The most common type of VIE is a special purpose entity (“SPE”). SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. SPEs are generally structured to insulate investors from claims on the SPEs’ assets by creditors of other entities, including the creditors of the seller of the assets, these SPEs are commonly referred to as being bankruptcy remote. The primary beneficiary is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party which has both the power to direct the activities of an entity that most significantly impact the VIE's economic performance, and through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE which could potentially be significant to the VIE. We consolidate VIEs when we are deemed to be the primary beneficiary or when the VIE cannot be deconsolidated. See Note 4 – Sales of Certain Receivables and Note 9 – Tower Obligations for further information. In assessing which party is the primary beneficiary, all the facts and circumstances are considered, including each party’s role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE (such as asset managers and servicers) or have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of a VIE. Device Purchases Cash Flow Presentation 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 19 – Additional Financial Informatio n for disclosures of Leased 70 Index for Notes to the Consolidated Financial Statements 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 Management’s Discussion and Analysis, Selected Financial Data and Supplementary Information Amendments On January 11, 2021, the SEC adopted amendments to eliminate the requirement for Selected Financial Data, streamline the requirement to disclose Supplementary Financial Information and amend Management’s Discussion & Analysis of Financial Condition and Results of Operations (“MD&A”). 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 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. 71 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 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”). Pursuant to the Letter Agreement, SoftBank agreed to cause its applicable affiliates to surrender to T-Mobile, for no additional consideration, an aggregate of 48,751,557 shares of T-Mobile common stock (such number of shares, the “SoftBank Specified Shares Amount”), effective immediately following the Effective Time (as defined in the Business Combination Agreement), making SoftBank’s exchange ratio 11.31 shares of Sprint common stock for each share of T-Mobile common stock. This resulted in an effective exchange ratio of approximately 11.00 shares of Sprint common stock for each share of T-Mobile common stock immediately following the closing of the Merger, an increase from the originally agreed 9.75 shares. Sprint stockholders, other than SoftBank, received the original fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or the equivalent of approximately 9.75 shares of Sprint common stock for each share of T-Mobile common stock. 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. 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. Closing of Sprint Merger 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 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. After adjustments, including the holdback of the SoftBank Specified Shares Amount and fractional shares, we issued 373,396,310 shares of T-Mobile common stock to Sprint stockholders. 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 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. 72 Index for Notes to the Consolidated Financial Statements Consideration Transferred The acquisition-date fair value of consideration transferred in the Merger totaled $ 40.8 billion, comprised of the following: (in millions) April 1, 2020 Fair value of T-Mobile common stock issued to Sprint stockholders (1) $ 31,328 Fair value of T-Mobile replacement equity awards attributable to pre-combination service (2) 323 Repayment of Sprint’s debt (including accrued interest and prepayment penalties) (3) 7,396 Fair value of contingent consideration (4) 1,882 Payment received from selling stockholder (5) ( 102 ) Total consideration exchanged $ 40,827 (1) Represents the fair value of T-Mobile common stock issued to Sprint stockholders pursuant to the Business Combination Agreement, less shares surrendered by SoftBank pursuant to the Letter Agreement. The fair value is based on 373,396,310 shares of T-Mobile common stock issued at an exchange ratio of 0.10256 shares of T-Mobile common stock per share of Sprint common stock, less 48,751,557 T-Mobile shares surrendered by SoftBank which are treated as contingent consideration, and the closing price per share of T-Mobile common stock on NASDAQ on March 31, 2020, of $ 83.90 , as shares were transferred to Sprint stockholders prior to the opening of markets on April 1, 2020. (2) Equity-based awards held by Sprint employees prior to the acquisition date have been replaced with T-Mobile equity-based awards. The portion of the equity-based awards that relates to services performed by the employee prior to the acquisition date is included within consideration transferred, and includes stock options, restricted stock units and performance-based restricted stock units. (3) Represents the cash consideration paid concurrent with the close of the Merger to retire certain Sprint debt, as required by change in control provisions of the debt, plus interest and prepayment penalties. (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 reimbursed Merger expenses. The SoftBank Specified Shares Amount was determined to be contingent consideration with an acquisition-date fair value of $ 1.9 billion. We estimated the fair value using the income approach, a probability-weighted discounted cash flow model, whereby a Monte Carlo simulation method estimated the probability of different outcomes as the likelihood of achieving the 45-day volume-weighted average price threshold is not easily predicted. This fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement as defined in ASC 820: 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. 73 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 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) April 1, 2020 Cash and cash equivalents $ 2,084 Accounts receivable 1,775 Equipment installment plan receivables 1,088 Inventory 658 Prepaid expenses 140 Assets held for sale 1,908 Other current assets 637 Property and equipment 18,435 Operating lease right-of-use assets 6,583 Financing lease right-of-use assets 291 Goodwill 9,423 Spectrum licenses 45,400 Other intangible assets 6,280 Equipment installment plan receivables due after one year, net 247 Other assets (1) 540 Total assets acquired 95,489 Accounts payable and accrued liabilities 5,015 Short-term debt 2,760 Deferred revenue 508 Short-term operating lease liabilities 1,818 Short-term financing lease liabilities 8 Liabilities held for sale 475 Other current liabilities 681 Long-term debt 29,037 Tower obligations 950 Deferred tax liabilities 3,478 Operating lease liabilities 5,615 Financing lease liabilities 12 Other long-term liabilities 4,305 Total liabilities assumed 54,662 Total consideration transferred $ 40,827 (1) Included in Other assets acquired is $ 80 million in restricted cash. 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 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. 74 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 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: 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 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 Pursuant to Amendment No 2. to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses. 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 on our Consolidated Statements of Comprehensive Income. 75 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: 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 significant nonrecurring pro forma adjustments to previously reported operating results. The pro forma adjustments are based on historically reported transactions by the respective companies. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisition. Year Ended December 31, (in millions) 2020 2019 Total revenues $ 74,681 $ 70,607 Income from continuing operations 3,302 185 Income from discontinued operations, net of tax 677 1,594 Net income 3,979 1,792 Significant nonrecurring pro forma adjustments include: • 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 January 1, 2019 and are depreciated or amortized over their estimated useful lives; and • 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 on our Consolidated Statements of Comprehensive Income. Financing In connection with the entry into the Business Combination Agreement, T-Mobile USA, Inc. (“T-Mobile USA”) entered into a commitment letter, dated as of April 29, 2018 (as amended and restated on May 15, 2018 and on September 6, 2019, the “Commitment Letter”). 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 (each as defined below). 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. 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. 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 76 Index for Notes to the Consolidated Financial Statements the Merger. On April 1, 2020, in connection with the closing of the Merger, we made a payment for requisite consents to DT of $ 13 million. 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. Regulatory Matters The Transactions were the subject of various legal and regulatory proceedings involving a number of state and federal agencies. In connection with those proceedings and the approval of the Transactions, we have certain commitments and other obligations to various state and federal agencies and certain nongovernmental organizations. See Note 1 7 – Commitments and Contingencies for further information. Prepaid Transaction On July 26, 2019, we entered into the Asset Purchase Agreement with Sprint and DISH, pursuant to which, following the consummation of the Merger, DISH would acquire the Prepaid Business. On June 17, 2020, T-Mobile, Sprint and DISH entered into the First Amendment to the Asset Purchase Agreement. Pursuant to the First Amendment of the Asset Purchase Agreement, T-Mobile, Sprint and DISH agreed to proceed with the closing of the Prepaid Transaction in accordance with the Asset Purchase Agreement on July 1, 2020, subject to the terms and conditions of the Asset Purchase Agreement and the terms and conditions of the Consent Decree. On July 1, 2020, pursuant to the Asset Purchase Agreement, we completed the Prepaid Transaction. Upon closing of the Prepaid Transaction, we received $ 1.4 billion from DISH for the Prepaid Business, subject to working capital adjustments. See Note 12 – Discontinued Operations for further information. Shenandoah Personal Communications Company Affiliate Relationship 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. 77 Index for Notes to the Consolidated Financial Statements 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: accounts receivable and EIP receivables. Accounts Receivable Portfolio Segment 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. 78 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. gross domestic product and forecasts of consumer credit behavior for comparable credit exposures. We also periodically evaluate other economic indicators such as unemployment rates to assess their level of correlation with our historical credit loss statistics. EIP Receivables Portfolio Segment 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 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. 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: (in millions) December 31, 2021 December 31, 2020 EIP receivables, gross $ 8,207 $ 6,213 Unamortized imputed discount ( 378 ) ( 325 ) EIP receivables, net of unamortized imputed discount 7,829 5,888 Allowance for credit losses ( 252 ) ( 280 ) EIP receivables, net of allowance for credit losses and imputed discount $ 7,577 $ 5,608 Classified on the consolidated balance sheets as: Equipment installment plan receivables, net of allowance for credit losses and imputed discount $ 4,748 $ 3,577 Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount 2,829 2,031 EIP receivables, net of allowance for credit losses and imputed discount $ 7,577 $ 5,608 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 79 Index for Notes to the Consolidated Financial Statements amortized cost of our EIP receivables by delinquency status, customer credit class and year of origination as of December 31, 2021: Originated in 2021 Originated in 2020 Originated prior to 2020 Total EIP Receivables, net of unamortized imputed discounts (in millions) Prime Subprime Prime Subprime Prime Subprime Prime Subprime Grand total Current - 30 days past due $ 3,894 $ 2,419 $ 878 $ 464 $ 22 $ 6 $ 4,794 $ 2,889 $ 7,683 31 - 60 days past due 24 37 7 10 — — 31 47 78 61 - 90 days past due 8 15 3 5 — — 11 20 31 More than 90 days past due 7 15 4 8 1 2 12 25 37 EIP receivables, net of unamortized imputed discount $ 3,933 $ 2,486 $ 892 $ 487 $ 23 $ 8 $ 4,848 $ 2,981 $ 7,829 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: December 31, 2021 December 31, 2020 December 31, 2019 (in millions) Accounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance Total Allowance for credit losses and imputed discount, beginning of period $ 194 $ 605 $ 799 $ 61 $ 399 $ 460 $ 67 $ 449 $ 516 Beginning balance adjustment due to implementation of the new credit loss standard — — — — 91 91 — — — Bad debt expense 231 221 452 338 264 602 77 230 307 Write-offs, net of recoveries ( 279 ) ( 248 ) ( 527 ) ( 205 ) ( 175 ) ( 380 ) ( 83 ) ( 249 ) ( 332 ) Change in imputed discount on short-term and long-term EIP receivables N/A 187 187 N/A 171 171 N/A 136 136 Impact on the imputed discount from sales of EIP receivables N/A ( 135 ) ( 135 ) N/A ( 145 ) ( 145 ) N/A ( 167 ) ( 167 ) Allowance for credit losses and imputed discount, end of period $ 146 $ 630 $ 776 $ 194 $ 605 $ 799 $ 61 $ 399 $ 460 Off-Balance-Sheet Credit Exposures 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 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. 80 Index for Notes to the Consolidated Financial Statements Note 4 – Sales of Certain Receivables We have entered into transactions to sell certain service accounts receivable and EIP receivables. The transactions, including our continuing involvement with the sold receivables and the respective impacts to our consolidated financial statements, are described below. Sales of EIP Receivables Overview of the Transaction 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. On November 10, 2021, we extended the scheduled expiration date of the EIP sale arrangement to November 18, 2022. As of both December 31, 2021 and 2020, the EIP sale arrangement provided funding of $ 1.3 billion. Sales of EIP receivables occur daily and are settled on a monthly basis. In connection with this EIP sale arrangement, we formed a wholly-owned subsidiary, which qualifies as a bankruptcy remote entity (the “EIP BRE”). Pursuant to the EIP sale arrangement, our wholly-owned subsidiary transfers selected receivables to the EIP BRE. The EIP BRE then sells the receivables to a non-consolidated and unaffiliated third-party entity over which we do not exercise any level of control, nor does the third-party entity qualify as a VIE. Variable Interest Entity We determined that the EIP BRE is a VIE as its equity investment at risk lacks the obligation to absorb a certain portion of its expected losses. We have a variable interest in the EIP BRE and have determined that we are the primary beneficiary based on our ability to direct the activities which most significantly impact the EIP BRE’s economic performance. Those activities include selecting which receivables are transferred into the EIP BRE and sold in the EIP sale arrangement and funding of the EIP BRE. 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 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, 2021 December 31, 2020 Other current assets $ 424 $ 388 Other assets 125 120 Other long-term liabilities — 4 In addition, the EIP BRE is a separate legal entity with its own separate creditors who will be entitled, prior to any liquidation of the EIP BRE, to be satisfied prior to any value in the EIP BRE becoming available to us. 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 81 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. 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 Service BRE: (in millions) December 31, 2021 December 31, 2020 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 The transfers of service receivables and EIP receivables to the non-consolidated entities are accounted for as sales of financial assets. Once identified for sale, the receivable is recorded at the lower of cost or fair value. 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 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 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 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. 82 Index for Notes to the Consolidated Financial Statements 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, 2021 December 31, 2020 Derecognized net service receivables and EIP receivables $ 2,492 $ 2,528 Other current assets 655 766 of which, deferred purchase price 654 764 Other long-term assets 125 120 of which, deferred purchase price 125 120 Other current liabilities 348 357 Other long-term liabilities — 4 Net cash proceeds since inception 1,754 1,715 Of which: Change in net cash proceeds during the year-to-date period 39 ( 229 ) Net cash proceeds funded by reinvested collections 1,715 1,944 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, 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. As the receivables are sold on a revolving basis, the customer payment collections on sold receivables may be reinvested in new receivable sales. 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. Note 5 – Property and Equipment The components of property and equipment were as follows: (in millions) Useful Lives December 31, 2021 December 31, 2020 Land $ 225 $ 236 Buildings and equipment Up to 30 years 4,344 4,006 Wireless communications systems Up to 20 years 57,114 49,453 Leasehold improvements Up to 10 years 2,160 1,879 Capitalized software Up to 10 years 18,243 16,412 Leased wireless devices Up to 19 months 3,832 6,989 Construction in progress N/A 3,703 4,595 Accumulated depreciation and amortization ( 49,818 ) ( 42,395 ) Property and equipment, net $ 39,803 $ 41,175 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 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. 83 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, 2021 Year Ended December 31, 2020 Asset retirement obligations, beginning of year $ 1,817 $ 659 Fair value of liabilities acquired through Merger — 1,110 Liabilities incurred 54 16 Liabilities settled ( 173 ) ( 40 ) Accretion expense 62 55 Changes in estimated cash flows 139 17 Asset retirement obligations, end of period $ 1,899 $ 1,817 Classified on the consolidated balance sheets as: Other current liabilities $ 216 $ 14 Other long-term liabilities 1,683 1,803 The corresponding assets, net of accumulated depreciation, related to asset retirement obligations were $ 613 million and $ 912 million as of December 31, 2021 and 2020, respectively. Postpaid Billing System Impairment In connection with the continuing integration of the businesses following the Merger, we evaluated the long-term billing system architecture strategy for our postpaid customers. 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 $ 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 Goodwill The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020, are as follows: (in millions) Goodwill Historical goodwill, net of accumulated impairment losses of $ 10,766 $ 1,930 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 Balance as of December 31, 2021 $ 12,188 Accumulated impairment losses at December 31, 2021 $ ( 10,984 ) On April 1, 2020, we completed our Merger with Sprint, which was accounted for as a business combination resulting in $ 9.4 billion in goodwill. The acquired goodwill was allocated to the wireless reporting unit and will be tested for impairment at this level. See Note 2 – Business 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. 84 Index for Notes to the Consolidated Financial Statements Goodwill Impairment Assessment Certain non-financial assets, including goodwill and indefinite-lived intangible assets such as Spectrum licenses, are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, these assets are required to be assessed for impairment when events or circumstances indicate that carrying value may not be recoverable, and at least annually for goodwill and indefinite-lived intangible assets. The nonrecurring measurements of the fair value of these assets, for which observable market information may be limited, are classified within Level 3 of the fair value hierarchy. In the event an impairment is required, the asset is adjusted to its estimated fair value using market-based assumptions, to the extent they are available, as well as other assumptions that may require significant judgement. For our assessment of the wireless reporting unit, we employed a qualitative approach. The fair value of the wireless reporting unit is estimated using a market approach, which is based on market capitalization. We recognize market capitalization is subject to volatility and will monitor changes in market capitalization to determine whether declines, if any, necessitate an interim impairment review. In the event market capitalization does decline below its book value, we will consider the length, severity and reasons for the decline when assessing whether potential impairment exists, including considering whether a control premium should be added to the market capitalization. We believe short-term fluctuations in share price may not necessarily reflect the underlying aggregate fair value. 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. 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. Intangible Assets Identifiable Intangible Assets Acquired from the Merger The following table summarizes the fair value of the intangible assets acquired in the Merger: Weighted-Average Useful Life (in years) Fair Value as of April 1, 2020 (in millions) Spectrum licenses Indefinite-lived $ 45,400 Tradenames (1) 2 years 207 Customer relationships 8 years 4,900 Favorable spectrum leases 18 years 745 Other intangible assets 7 years 428 Total intangible assets acquired $ 51,680 (1) Tradenames include the Sprint brand 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 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 term. 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 $ 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 a benefit to us. 85 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 The following table summarizes our spectrum license activity for the years ended December 31, 2021, 2020 and 2019: (in millions) 2021 2020 2019 Spectrum licenses, beginning of year $ 82,828 $ 36,465 $ 35,559 Spectrum license acquisitions 9,545 1,023 857 Spectrum licenses acquired in Merger — 45,400 — Spectrum licenses transferred to held for sale ( 28 ) ( 83 ) — Costs to clear spectrum 261 23 49 Spectrum licenses, end of year $ 92,606 $ 82,828 $ 36,465 Spectrum Transactions 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 For our assessment of Spectrum license impairment, we employed a qualitative approach. No events or change in circumstances have occurred that indicate the fair value of the Spectrum licenses may be below its carrying amount at December 31, 2021. Other Intangible Assets The components of Other intangible assets were as follows: Useful Lives December 31, 2021 December 31, 2020 (in millions) Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount Customer relationships Up to 8 years $ 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 171 ( 91 ) 80 598 ( 412 ) 186 Favorable spectrum leases Up to 27 years 728 ( 74 ) 654 790 ( 35 ) 755 Other Up to 10 years 377 ( 118 ) 259 377 ( 55 ) 322 Other intangible assets $ 6,925 $ ( 2,192 ) $ 4,733 $ 6,665 $ ( 1,367 ) $ 5,298 86 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: (in millions) Estimated Future Amortization Twelve Months Ending December 31, 2022 $ 1,072 2023 917 2024 760 2025 601 2026 440 Thereafter 943 Total $ 4,733 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 and Accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Derivative Financial Instruments Periodically, we use derivatives to manage exposure to market risk, such as interest rate risk. We designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship (cash flow hedge) to help minimize significant, unplanned fluctuations in cash flows caused by interest rate volatility. We do not use derivatives for trading or speculative purposes. Interest Rate Lock Derivatives In October 2018, we entered into interest rate lock derivatives with notional amounts of $ 9.6 billion. In November 2019, we extended the mandatory termination date on our interest rate lock derivatives to June 3, 2020. For the three months ended March 31, 2020, we made net collateral transfers to certain of our derivative counterparties totaling $ 580 million, which included variation margin transfers to (or from) such derivative counterparties based on daily market movements. 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 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. 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 87 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 In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets measured at fair value that are based on a discounted cash flow model using unobservable Level 3 inputs, including customer default rates. 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 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. Debt 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. Although we have determined the estimated fair values using available market information and commonly accepted valuation methodologies, considerable judgment was required in interpreting market data to develop fair value estimates for the Senior Notes to affiliates. The fair value estimates were based on information available as of 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 on our Consolidated Balance Sheets were as follows: Level within the Fair Value Hierarchy December 31, 2021 December 31, 2020 (in millions) Carrying Amount (1) Fair Value (1) Carrying Amount (1) Fair Value (1) Liabilities: 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 (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. 88 Index for Notes to the Consolidated Financial Statements Note 8 – Debt Debt was as follows: (in millions) December 31, 2021 December 31, 2020 3.360 % Series 2016-1 A-1 Notes due 2021 $ — $ 656 7.250 % Senior Notes due 2021 — 2,250 11.500 % Senior Notes due 2021 — 1,000 4.000 % Senior Notes to affiliates due 2022 1,000 1,000 4.000 % Senior Notes due 2022 500 500 5.375 % Senior Notes to affiliates due 2022 1,250 1,250 6.000 % Senior Notes due 2022 2,280 2,280 6.000 % Senior Notes due 2023 — 1,300 7.875 % Senior Notes due 2023 4,250 4,250 6.000 % Senior Notes due 2024 — 1,000 7.125 % Senior Notes due 2024 2,500 2,500 3.500 % Senior Secured Notes due 2025 3,000 3,000 4.738 % Series 2018-1 A-1 Notes due 2025 1,706 2,100 5.125 % Senior Notes due 2025 — 500 7.625 % Senior Notes due 2025 1,500 1,500 1.500 % Senior Secured Notes due 2026 1,000 1,000 2.250 % Senior Notes due 2026 1,800 — 2.625 % Senior Notes due 2026 1,200 — 6.500 % Senior Notes due 2026 — 2,000 4.500 % Senior Notes due 2026 — 1,000 4.500 % Senior Notes to affiliates due 2026 — 1,000 7.625 % Senior Notes due 2026 1,500 1,500 3.750 % Senior Secured Notes due 2027 4,000 4,000 5.375 % Senior Notes due 2027 500 500 2.050 % Senior Secured Notes due 2028 1,750 1,750 4.750 % Senior Notes due 2028 1,500 1,500 4.750 % Senior Notes to affiliates due 2028 1,500 1,500 5.152 % Series 2018-1 A-2 Notes due 2028 1,838 1,838 6.875 % Senior Notes due 2028 2,475 2,475 2.400 % Senior Secured Notes due 2029 500 — 2.625 % Senior Notes due 2029 1,000 — 3.375 % Senior Notes due 2029 2,350 — 3.875 % Senior Secured Notes due 2030 7,000 7,000 2.250 % Senior Secured Notes due 2031 1,000 1,000 2.550 % Senior Secured Notes due 2031 2,500 2,500 2.875 % Senior Notes due 2031 1,000 — 3.500 % Senior Notes due 2031 2,450 — 2.700 % Senior Secured Notes due 2032 1,000 — 8.750 % Senior Notes due 2032 2,000 2,000 4.375 % Senior Secured Notes due 2040 2,000 2,000 3.000 % Senior Secured Notes due 2041 2,500 2,500 4.500 % Senior Secured Notes due 2050 3,000 3,000 3.300 % Senior Secured Notes due 2051 3,000 3,000 3.400 % Senior Secured Notes due 2052 2,800 — 3.600 % Senior Secured Notes due 2060 1,700 1,000 Other debt 47 240 Unamortized premium on debt to third parties 1,740 2,197 Unamortized discount on debt to affiliates ( 5 ) ( 20 ) Unamortized discount on debt to third parties ( 200 ) ( 197 ) Debt issuance costs and consent fees ( 238 ) ( 244 ) Total debt 74,193 71,125 Less: Current portion of Senior Notes to affiliates 2,245 — Less: 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 consolidated balance sheets as: Long-term debt $ 67,076 $ 61,830 Long-term debt to affiliates 1,494 4,716 Total long-term debt $ 68,570 $ 66,546 89 Index for Notes to the Consolidated Financial Statements 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. The weighted-average debt outstanding was calculated by applying an average of the monthly ending balances of total short-term and long-term debt and short-term and long-term debt to affiliates, net of unamortized premiums, discounts, debt issuance costs and consent fees. Issuances and Borrowings 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 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 $ 1,300 $ ( 11 ) $ 1,289 August 13, 2021 3.600 % Senior Secured Notes due 2060 700 1 701 August 13, 2021 2.400 % Senior Secured Notes due 2029 500 ( 2 ) 498 December 6, 2021 2.700 % Senior Secured Notes due 2032 1,000 ( 8 ) 992 December 6, 2021 3.400 % Senior Secured Notes due 2052 1,500 ( 21 ) 1,479 December 6, 2021 Total of Senior Secured Notes issued $ 5,000 $ ( 41 ) $ 4,959 Credit Facilities 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. 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. 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. 90 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. Accordingly, the Senior Secured Notes 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 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 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. Treasury rates plus a fixed spread; 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 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. Senior Notes 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 . 91 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. 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 Agreement as compliance with the agreements is considered probable. Debt Assumed In connection with the Merger, we assumed the following indebtedness of Sprint: (in millions) Fair value as of April 1, 2020 Principal Outstanding as of December 31, 2021 Carrying Value as of December 31, 2021 7.250 % Senior Notes due 2021 $ 2,324 $ — $ — 7.875 % Senior Notes due 2023 4,682 4,250 4,472 7.125 % Senior Notes due 2024 2,746 2,500 2,650 7.625 % Senior Notes due 2025 1,677 1,500 1,618 7.625 % Senior Notes due 2026 1,701 1,500 1,648 3.360 % Senior Secured Series 2016-1 A-1 Notes due 2021 (1) 1,310 — — 4.738 % Senior Secured Series 2018-1 A-1 Notes due 2025 (1) 2,153 1,706 1,735 5.152 % Senior Secured Series 2018-1 A-2 Notes due 2028 (1) 1,960 1,838 1,936 7.000 % Senior Notes due 2020 1,510 — — 11.500 % Senior Notes due 2021 1,105 — — 6.000 % Senior Notes due 2022 2,372 2,280 2,312 6.875 % Senior Notes due 2028 2,834 2,475 2,772 8.750 % Senior Notes due 2032 2,649 2,000 2,577 Accounts receivable facility 2,310 — — Other debt 464 — — Total Debt Assumed $ 31,797 $ 20,049 $ 21,720 (1) 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. See “Spectrum Financing” section below for further information. 92 Index for Notes to the Consolidated Financial Statements 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 $ 2,000 $ 36 $ 65 March 27, 2021 103.250 % 6.000 % Senior Notes due 2023 1,300 10 — May 23, 2021 100.000 % 6.000 % Senior Notes due 2024 1,000 9 — May 23, 2021 100.000 % 5.125 % Senior Notes due 2025 500 3 6 May 23, 2021 101.281 % 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 $ 1,000 $ 4 $ 22 August 23, 2021 102.250 % Total Senior Notes to affiliates redeemed $ 1,000 $ 4 $ 22 3.360 % Secured Series 2016-1 A-1 Notes due 2021 $ 656 $ — $ — August 20, 2021 N/A 4.738 % Secured Series 2018-1 A-1 Notes due 2025 394 — — Various N/A Other debt 184 — — Various N/A 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, 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 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, 2021, $ 525 million of the aggregate principal amount was classified as Short-term debt on our 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 93 Index for Notes to the Consolidated Financial Statements 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. Simultaneously with the October 2016 offering, Sprint Communications, Inc. entered a long-term lease with the Spectrum Financing SPEs for the ongoing use of the Spectrum Portfolio. Sprint Communications, Inc. 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 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 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. Amounts associated with these balances are considered to be restricted cash. Restricted Cash 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. Standby Letters of Credit 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. Our outstanding standby letters of credit were $ 441 million and $ 555 million as of December 31, 2021 and 2020, respectively. Note 9 – Tower Obligations Existing CCI Tower Lease Arrangements In 2012, we conveyed to Crown Castle International Corp. (“CCI”) the exclusive right to manage and operate approximately 6,200 tower sites (“CCI Lease Sites”) via a master prepaid lease with site lease terms ranging from 23 to 37 years. 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. Assets and liabilities associated with the operation of the tower sites were transferred to special purpose entities (“SPEs”). Assets included ground lease agreements or deeds for the land on which the towers are situated, the towers themselves and existing subleasing agreements with other mobile network operator tenants that lease space at the tower sites. Liabilities included the obligation to pay ground lease rentals, property taxes and other executory costs. 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 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. As we determined that we are not the primary beneficiary and do not have a controlling financial interest in the Lease Site SPEs, the Lease Site SPEs are not included in our consolidated financial statements. However, we also considered if this arrangement resulted in the sale of the CCI Lease Sites for which we would de-recognize the tower assets. 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 Consolidated Balance Sheets. We recorded long- 94 Index for Notes to the Consolidated Financial Statements 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. Acquired CCI Tower Lease Arrangements 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 (“Master Lease Sites”) via a master prepaid 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. 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. We considered if this arrangement resulted in the sale of the Master Lease Sites for which we would de-recognize the tower assets. 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 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. We recognize interest expense on the tower obligations at a rate of approximately 6 % using the effective interest method. 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 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, 2021 December 31, 2020 Property and equipment, net $ 2,548 $ 2,838 Tower obligations 2,806 3,028 Other long-term liabilities 1,712 1,712 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. These contingent obligations are not included in Operating lease liabilities as any amount due is contractually owed by CCI based on the subleasing arrangement. Under the arrangement, we remain primarily liable for ground lease payments on approximately 900 sites and have included lease liabilities of $ 282 million in our Operating lease liabilities as of 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. 95 Index for Notes to the Consolidated Financial Statements Note 10 – Revenue from Contracts with Customers Disaggregation of Revenue 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, 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; and • Wholesale customers include Machine-to-Machine and Mobile Virtual Network Operator customers that operate on our network but are managed by wholesale partners. Postpaid service revenues, including postpaid phone revenues and postpaid other revenues, were as follows: Year Ended December 31, (in millions) 2021 2020 2019 Postpaid service revenues Postpaid phone revenues $ 39,154 $ 33,939 $ 21,329 Postpaid other revenues 3,408 2,367 1,344 Total postpaid service revenues $ 42,562 $ 36,306 $ 22,673 We operate as a single operating segment. 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: Year Ended December 31, (in millions) 2021 2020 2019 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 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 Balance as of December 31, 2021 286 763 Change $ 8 $ ( 61 ) Contract assets primarily represent revenue recognized for equipment sales with promotional bill credits offered to customers that are paid over time and are contingent on the customer maintaining a service contract. The change in the Contract asset balance includes customer activity related to new promotions, offset by billings on existing contracts and impairment which is recognized as bad debt expense. The current portion of our Contract assets of approximately $ 219 million and $ 204 million as of December 31, 2021 and 2020, respectively, was included in Other current assets on our Consolidated Balance Sheets. 96 Index for Notes to the Consolidated Financial Statements 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. 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: Year Ended December 31, (in millions) 2021 2020 2019 Amounts included in the beginning of year contract liability balance $ 767 $ 545 $ 643 Remaining Performance Obligations 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, 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 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 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. There were no impairment losses recognized on deferred contract cost assets for the years ended December 31, 2021, 2020 and 2019. 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 (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. As of December 31, 2021, there were approximately 20 million shares of common stock available for future grants under our Incentive Plans. 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 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. The number of shares ultimately received by the holder of PRSUs is dependent on our business performance against the specified performance goal(s) over a pre-established performance period. We also maintain an employee stock purchase plan (“ESPP”), under which eligible employees can purchase our common stock at a discounted price. 97 Index for Notes to the Consolidated Financial Statements Stock-based compensation expense and related income tax benefits were as follows: As of and for the Year Ended December 31, (in millions, except shares, per share and contractual life amounts) 2021 2020 2019 Stock-based compensation expense $ 540 $ 694 $ 495 Income tax benefit related to stock-based compensation $ 100 $ 132 $ 92 Weighted-average fair value per stock award granted $ 116.11 $ 96.27 $ 73.25 Unrecognized compensation expense $ 625 $ 592 $ 515 Weighted-average period to be recognized (years) 1.8 1.9 1.6 Fair value of stock awards vested $ 944 $ 1,315 $ 512 Stock 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 (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. The following activity occurred under the Incentive Plans during the year ended December 31, 2021: Time-Based Restricted Stock Units and Restricted Stock Awards (in millions, except shares, per share and contractual life amounts) Number of Units or Awards Weighted-Average Grant Date Fair Value Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Nonvested, December 31, 2020 10,101,222 $ 84.61 0.9 $ 1,362 Granted 4,884,185 121.40 Vested ( 5,273,134 ) 79.67 Forfeited ( 818,985 ) 104.40 Nonvested, December 31, 2021 8,893,288 105.96 0.8 1,031 98 Index for Notes to the Consolidated Financial Statements Performance-Based Restricted Stock Units and Restricted Stock Awards (in millions, except shares, per share and contractual life amounts) Number of Units or Awards Weighted-Average Grant Date Fair Value Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Nonvested, December 31, 2020 3,173,101 $ 86.58 1.0 $ 428 Granted 433,116 125.34 Performance award achievement adjustments (1) 576,866 64.44 Vested ( 2,236,918 ) 69.14 Forfeited ( 56,608 ) 99.51 Nonvested, December 31, 2021 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. 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 Our ESPP allows eligible employees to contribute up to 15 % of their eligible earnings toward the semi-annual purchase of our shares of common stock at a discounted price, subject to an annual maximum dollar amount. Employees can purchase stock at a 15 % discount applied to the closing stock price on the first or last day of the six-month offering period, whichever price is lower. The number of shares issued under our ESPP was 2,189,542 , 2,144,036 and 2,091,650 for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, the number of securities remaining available for future sale and issuance under the ESPP was 7,064,316 . Sprint’s ESPP was terminated prior to the Merger close and legacy Sprint employees were eligible to enroll in our ESPP on August 15, 2020. Our ESPP provides for an annual increase in the aggregate number of shares of our common stock reserved for sale and authorized for issuance thereunder as of the first day of each fiscal year (beginning with fiscal year 2016) equal to the lesser of (i) 5,000,000 shares of our common stock, and (ii) the number of shares of T-Mobile common stock determined by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”). 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 each of January 1, 2020 and January 1, 2021. Stock Options Stock options outstanding relate to the Metro Communications, Inc. 2010 Equity Incentive Compensation Plan, the Amended and Restated Metro Communications, Inc. 2004 Equity Incentive Compensation Plan, the Layer3 TV, Inc. 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. 99 Index for Notes to the Consolidated Financial Statements The following activity occurred under the Stock Option Plans: Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Outstanding at December 31, 2020 918,695 $ 51.77 4.0 Exercised ( 218,495 ) 48.02 Expired/canceled ( 4,356 ) 40.74 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 $ 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. As of December 31, 2005, the Pension Plan was amended to freeze benefit plan accruals for the participants. The plan assets acquired and obligations assumed were recognized at fair value on the Merger close date. The objective for the investment portfolio of the Pension Plan is to achieve a long-term nominal rate of return, net of fees, that exceeds the Pension Plan's long-term expected rate of return on investments for funding purposes. 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: 41 % to equities; 44 % to fixed income 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 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: Year Ended December 31, (in millions) 2021 2020 Interest on projected benefit obligations $ 61 $ 52 Expected return on pension plan assets ( 56 ) ( 45 ) Net pension expense $ 5 $ 7 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. 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 100 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. Future benefits expected to be paid are approximately $ 100 million for the year ending December 31, 2022, $ 206 million in total for the years ending December 31, 2023 and 2024, $ 215 million in total for the years ending December 31, 2025 and 2026, and $ 562 million in total for the years ending December 31, 2027 through December 31, 2031. Employee Retirement Savings Plan 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 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. Employer matching contributions were $ 190 million, $ 179 million and $ 119 million for the years ended December 31, 2021, 2020 and 2019, respectively. Note 12 – Discontinued Operations On July 26, 2019, we entered into an Asset Purchase Agreement with Sprint and DISH. On June 17, 2020, T-Mobile, Sprint and DISH entered into the First Amendment. Pursuant to the First Amendment to the Asset Purchase Agreement, T-Mobile, Sprint and DISH agreed to proceed with the closing of the Prepaid Transaction in accordance with the Asset Purchase Agreement on July 1, 2020, subject to the terms and conditions of the Asset Purchase Agreement and the terms and conditions of the Consent Decree. On July 1, 2020, pursuant to the Asset Purchase Agreement, upon the terms and subject to the conditions thereof, we completed the Prepaid Transaction. Upon closing of the Prepaid Transaction, we received $ 1.4 billion from DISH for the Prepaid Business, subject to a working capital adjustment. The close of the Prepaid Transaction did not have a significant impact on our Consolidated Statements of Comprehensive Income. The assets of the Prepaid Business included EIP receivables originated pursuant to financed equipment purchases by customers of the Prepaid Business. At the time of the Prepaid Transaction, DISH did not hold certain licenses required to purchase or originate such contracts. In order to transfer the economics of the contracts to DISH without transferring ownership of them, the parties entered into a Participation Agreement under which we agreed to transfer a 100 % participation interest in the contracts to DISH. Under the terms of the agreement, DISH retains all cash flows collected on these assets and there is no recourse against us for any credit losses on such loans. The proceeds received from DISH in exchange for this participation interest was a component of total consideration received for the Prepaid Transaction. We will temporarily continue to originate equipment installment contracts on DISH’s behalf under the same terms in exchange for an amount equal to the initial outstanding principal balance of the originated contracts, again without recourse against us for any credit losses. 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 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 on our Consolidated Statements of Comprehensive Income. There was no income from discontinued operations for the years ended December 31, 2021 or 2019. 101 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: (in millions) Year Ended December 31, 2020 Major classes of line items constituting pretax income from discontinued operations Prepaid revenues $ 973 Roaming and other service revenues 27 Total service revenues 1,000 Equipment revenues 270 Total revenues 1,270 Cost of services 25 Cost of equipment sales 499 Selling, general and administrative 314 Total operating expenses 838 Pretax income from discontinued operations 432 Income tax expense ( 112 ) Income from discontinued operations $ 320 Net cash provided by operating activities from the Prepaid Business included in the Consolidated Statements of Cash Flows for the year ended December 31, 2020, were $ 611 million, all of which relates to the operations of the Prepaid Business during the three months ended June 30, 2020. There were no cash flows from investing or financing activities related to the Prepaid Business for the year ended December 31, 2020. Continuing Involvement Upon the closing of the Prepaid Transaction, we and DISH entered into (i) a License Purchase Agreement pursuant to which (a) DISH has the option to purchase certain 800 MHz spectrum licenses for a total of approximately $ 3.6 billion in a transaction to be completed, subject to certain additional closing conditions, following an application for FCC approval to be filed three years following the closing of the Merger and (b) we will have the option to lease back from DISH, as needed, a portion of the spectrum sold for an additional two years following the closing of the spectrum sale transaction, (ii) a Transition Services Agreement providing for our provisioning of transition services to DISH in connection with the Prepaid Business for a period of up to three years following the closing of the Prepaid Transaction, (iii) a Master Network Services Agreement providing for the provisioning of network services to customers of the Prepaid Business for a period of up to seven years following the closing of the Prepaid Transaction, and (iv) an Option to Acquire Tower and Retail Assets, offering DISH the option to acquire certain decommissioned towers and retail locations from us, subject to obtaining all necessary third-party consents, for a period of up to five years following the closing of the Prepaid Transaction. In the event DISH breaches the License Purchase Agreement or fails to deliver the purchase price following the satisfaction or waiver of all closing conditions, DISH’s sole liability is to pay us a fee of approximately $ 72 million. Additionally, if DISH does not exercise the option to purchase the 800 MHz spectrum licenses, we have an obligation to offer the licenses for sale through an auction. If the specified minimum price of $ 3.6 billion was not met in the auction, we would retain the licenses. 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 in Net cash provided by operating activities on our Consolidated Statements of Cash Flows. Note 13 – Income Taxes Our sources of Income (loss) before income taxes were as follows: Year Ended December 31, (in millions) 2021 2020 2019 U.S. income $ 3,401 $ 3,493 $ 4,557 Foreign (loss) income ( 50 ) 37 46 Income from continuing operations before income taxes $ 3,351 $ 3,530 $ 4,603 102 Index for Notes to the Consolidated Financial Statements Income tax expense is summarized as follows: Year Ended December 31, (in millions) 2021 2020 2019 Current tax (expense) benefit Federal $ ( 22 ) $ 17 $ 24 State ( 89 ) ( 84 ) ( 70 ) Foreign ( 19 ) ( 10 ) 2 Total current tax expense ( 130 ) ( 77 ) ( 44 ) Deferred tax (expense) benefit Federal ( 541 ) ( 676 ) ( 954 ) State 327 ( 34 ) ( 125 ) Foreign 17 1 ( 12 ) Total deferred tax expense ( 197 ) ( 709 ) ( 1,091 ) Total income tax expense $ ( 327 ) $ ( 786 ) $ ( 1,135 ) The reconciliation between the U.S. federal statutory income tax rate and our effective income tax rate is as follows: Year Ended December 31, 2021 2020 2019 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 ) Foreign taxes, net of federal benefit 0.1 0.3 0.3 Permanent differences 0.3 0.4 0.6 Federal tax credits, net of reserves ( 2.5 ) ( 0.9 ) ( 0.8 ) Equity-based compensation ( 2.6 ) ( 2.5 ) ( 0.6 ) Non-deductible compensation 1.5 2.3 0.6 Other, net ( 0.1 ) 0.3 ( 0.1 ) Effective income tax rate 9.8 % 22.3 % 24.7 % Significant components of deferred income tax assets and liabilities, tax effected, are as follows: (in millions) December 31, 2021 December 31, 2020 Deferred tax assets Loss carryforwards $ 4,414 $ 4,540 Lease liabilities 7,717 8,031 Property and equipment — 90 Reserves and accruals 1,280 1,348 Federal and state tax credits 404 411 Other 2,888 2,665 Deferred tax assets, gross 16,703 17,085 Valuation allowance ( 435 ) ( 878 ) Deferred tax assets, net 16,268 16,207 Deferred tax liabilities Spectrum licenses 18,060 17,518 Property and equipment 380 — Lease right-of-use assets 6,761 7,239 Other intangible assets 769 912 Other 514 504 Total deferred tax liabilities 26,484 26,173 Net deferred tax liabilities $ 10,216 $ 9,966 Classified on the consolidated balance sheets as: Deferred tax liabilities $ 10,216 $ 9,966 103 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, 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 of December 31, 2021, 2020 and 2019, our valuation allowance was $ 435 million, $ 878 million and $ 129 million, respectively. 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. We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. 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. The IRS has concluded its audits of our federal tax returns through the 2009 tax year; however, NOL and other carryforwards for certain audited periods remain open for examination. U.S. federal, state and foreign examination for years prior to 2002 are generally closed. A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows: Year Ended December 31, (in millions) 2021 2020 2019 Unrecognized tax benefits, beginning of year $ 1,159 $ 514 $ 462 Gross increases to tax positions in prior periods 73 6 — Gross decreases to tax positions in prior periods ( 123 ) ( 28 ) — Gross increases to current period tax positions 72 45 64 Gross increases due to current period business acquisitions 36 624 — Gross decreases due to settlements with taxing authorities — ( 2 ) ( 12 ) Unrecognized tax benefits, end of year $ 1,217 $ 1,159 $ 514 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. 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. Note 14 – SoftBank Equity Transaction On June 22, 2020, we entered into a Master Framework Agreement (the “Master Framework Agreement”) by and among the Company, SoftBank, SoftBank Group Capital Ltd, a wholly-owned subsidiary of SoftBank (“SBGC”), Delaware Project 4 L.L.C., a wholly-owned subsidiary of SoftBank, Delaware Project 6 L.L.C., a wholly-owned subsidiary of SoftBank, Claure Mobile LLC (“CM LLC”), DT, and T-Mobile Agent LLC, a wholly-owned subsidiary of the Company. The Master Framework Agreement and related transactions were entered into to facilitate SoftBank’s monetization of a portion of our common stock held by SoftBank (the “SoftBank Monetization”). In connection with the Master Framework Agreement, DT waived the restriction on the transfer under its Proxy, Lock-Up and ROFR Agreement, dated April 1, 2020, with SoftBank (the “SoftBank Proxy Agreement”) with respect to approximately 198 million shares of our common stock held by SoftBank (the “Released Shares”). 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 on our Consolidated Balance Sheets and is presented as a 104 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: Public Equity Offering On June 26, 2020, we completed a registered public offering of approximately 154.1 million shares of our common stock ( the “Public Equity Offering”) at a price of $ 103.00 per share. The net proceeds of the Public Equity Offering were used to repurchase an equal number of issued and outstanding shares of our common stock from SBGC, pursuant to a Share Repurchase Agreement, dated as of June 22, 2020 (the “Share Repurchase Agreement”), between us and SBGC. Mandatory Exchangeable Offering Concurrent with the Public Equity Offering, we sold approximately 19.4 million shares of our common stock to a third-party trust. The net proceeds from the sale of shares to the trust were used to repurchase an equal number of issued and outstanding shares of our common stock from SBGC. 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”). The trust was required to use a portion of the net proceeds from the Mandatory Exchangeable Offering to purchase U.S. Treasury securities, to fund quarterly distributions on the mandatory exchangeable trust securities, and the holders of the mandatory exchangeable trust securities will be entitled to a final mandatory exchange amount on June 1, 2023 that will depend on the daily volume-weighted average price of shares of our common stock. The sale of shares through the Public Equity Offering and to the trust occurred simultaneously with the purchase of shares from SBGC. 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 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 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 on our Consolidated Statements of Cash Flows. 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. Rights Offering The Master Framework Agreement provides for the issuance of registered, transferable subscription rights (the “Rights Offering”) resulting in the sale of 19,750,000 shares of our common stock to our stockholders (other than SoftBank, DT and Marcelo Claure and their respective affiliates, who agreed to waive their ability to exercise or transfer such rights). The subscription rights provided the stockholders the option to purchase one share of common stock for every 20 shares of common stock owned, at the same price per share as the common stock sold in the Public Equity Offering of $ 103.00 per share. The Rights Offering exercise period expired on July 27, 2020. On August 3, 2020, the Rights Offering closed, resulting in the sale of 19,750,000 shares of our common stock. The net proceeds from the Rights Offering were used to purchase an equal number of shares from SBGC pursuant to the Share Repurchase Agreement. Marcelo Claure 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. 105 Index for Notes to the Consolidated Financial Statements 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. DT Call Option In exchange for DT consenting to the transfer of the Released Shares and as provided for in the Master Framework Agreement, DT received direct and indirect call options over up to approximately 101.5 million shares of our common stock held by SBGC. The arrangement provided DT with a fixed-price call option to purchase up to approximately 44.9 million shares at a price of $ 101.46 per share indirectly from SBGC through a back-to-back arrangement where (i) DT could purchase such shares from us (the “DT Fixed-Price Call Option”) and (ii) we would fulfill our obligations under the DT Fixed-Price Call Option by simultaneously purchasing the same number of shares on the same economic terms from SBGC (the “T-Mobile Fixed-Price Call Option”). In addition, DT has a floating-price call option to purchase up to approximately 56.6 million shares from SBGC directly. The DT Fixed-Price Call Option and the T-Mobile Fixed-Price Call Option represented free-standing derivatives and were recorded at fair value and marked-to-market each period. As the mark-to-market valuations of the T-Mobile Fixed-Price Call Option and the DT Fixed-Price Call Option moved in equal and offsetting directions, there was no net impact on our Consolidated Statements of Comprehensive Income. 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. 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. 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. 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. 106 Index for Notes to the Consolidated Financial Statements Note 15 – Earnings Per Share The computation of basic and diluted earnings per share was as follows: Year Ended December 31, (in millions, except shares and per share amounts) 2021 2020 2019 Income from continuing operations $ 3,024 $ 2,744 $ 3,468 Income from discontinued operations, net of tax — 320 — Net income $ 3,024 $ 3,064 $ 3,468 Weighted-average shares outstanding – basic 1,247,154,988 1,144,206,326 854,143,751 Effect of dilutive securities: Outstanding stock options and unvested stock awards 7,614,938 10,543,102 9,289,760 Weighted-average shares outstanding – diluted 1,254,769,926 1,154,749,428 863,433,511 Basic earnings per share: Continuing operations $ 2.42 $ 2.40 $ 4.06 Discontinued operations — 0.28 — Earnings per share – basic $ 2.42 $ 2.68 $ 4.06 Diluted earnings per share: Continuing operations $ 2.41 $ 2.37 $ 4.02 Discontinued operations — 0.28 — Earnings per share – diluted $ 2.41 $ 2.65 $ 4.02 Potentially dilutive securities: Outstanding stock options and unvested stock awards 139,619 80,180 16,359 SoftBank contingent consideration (1) 48,751,557 36,630,268 — (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. 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 Lessee We are a lessee for non-cancelable operating and financing leases for cell sites, switch sites, retail stores, network equipment and office facilities with contractual terms that generally extend through 2035. Additionally, we lease dark fiber through non-cancelable operating leases with contractual terms that generally extend through 2041. The majority of cell site leases have a non-cancelable term of five to 15 years with several renewal options that can extend the lease term from five to 35 years. In addition, we have financing leases for network equipment that generally have a non-cancelable lease term of two to five years . The financing leases do not have renewal options and contain a bargain purchase option at the end of the lease. On September 15, 2021, we modified the terms of one of our master lease agreements, which resulted in a $ 1.0 billion advance rent payment. Our operating lease liabilities were reduced as a result of this prepayment. 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 107 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: Year Ended December 31, (in millions) 2021 2020 2019 Operating lease expense $ 5,921 $ 4,438 $ 2,558 Financing lease expense: Amortization of right-of-use assets 738 681 523 Interest on lease liabilities 69 81 82 Total financing lease expense 807 762 605 Variable lease expense 429 328 243 Total lease expense $ 7,157 $ 5,528 $ 3,406 Information relating to the lease term and discount rate is as follows: Year Ended December 31, 2021 2020 2019 Weighted-Average Remaining Lease Term (Years) Operating leases 9 10 6 Financing leases 3 3 3 Weighted-Average Discount Rate Operating leases 3.6 % 3.9 % 4.8 % Financing leases 2.5 % 3.3 % 4.0 % Maturities of lease liabilities as of December 31, 2021, were as follows: (in millions) Operating Leases Finance Leases Twelve Months Ending December 31, 2022 $ 3,868 $ 1,161 2023 4,237 800 2024 3,846 505 2025 3,343 128 2026 2,971 36 Thereafter 17,387 29 Total lease payments 35,652 2,659 Less: imputed interest 6,409 84 Total $ 29,243 $ 2,575 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. These contingent obligations are not included in the above table as the amounts owed are contractually owed by Crown Castle International Corp. based on the subleasing arrangement. See Note 9 – Tower Obligations for further information. 108 Index for Notes to the Consolidated Financial Statements Lessor The components of leased wireless devices under our Leasing Programs were as follows: (in millions) Average Remaining Useful Life December 31, 2021 December 31, 2020 Leased wireless devices, gross 8 months $ 3,832 $ 6,989 Accumulated depreciation ( 2,373 ) ( 2,170 ) Leased wireless devices, net $ 1,459 $ 4,819 For equipment revenues from the lease of mobile communication devices, see Note 10 – Revenue from Contracts with Customers . Future minimum payments expected to be received over the lease term related to leased wireless devices, which exclude optional residual buy-out amounts at the end of the lease term, are summarized below: (in millions) Expected Payments Twelve Months Ending December 31, 2022 $ 402 2023 44 Total $ 446 Note 17 – Commitments and Contingencies Purchase Commitments We have commitments for non-dedicated transportation lines with varying expiration terms that generally extend through 2031. In addition, we have commitments to purchase wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary course of business, with various terms through 2043. Our purchase commitments are approximately $ 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 In connection with the Merger, we assumed certain spectrum lease contracts from Sprint that include service obligations to the lessors. Certain of the spectrum leases provide for minimum lease payments, additional charges, renewal options and escalation clauses. Leased spectrum agreements have varying expiration terms that generally extend through 2050. 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 $ 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. The obligation is reduced by services provided and as actual invoices are presented and paid to the lessors. 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. 109 Index for Notes to the Consolidated Financial Statements 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 Network Corporation (“DISH”) and entered by the U.S. 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. Other commitments relate to national security, pricing, service, employment and support of diversity initiatives. Many of the commitments specify time frames for compliance. 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 $ 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 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. 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. As such, our view of these matters is subject to inherent uncertainties and may change in the future. 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. 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. Those matters include a wide variety of disputes, claims, government agency investigations and enforcement actions, and other proceedings. These matters include, among other things, certain ongoing FCC and state government agency investigations into Sprint’s Lifeline program. 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 110 Index for Notes to the Consolidated Financial Statements 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 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 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. , Case No. C.A. No. 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 111 Index for Notes to the Consolidated Financial Statements 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 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 Year Ended December 31, 2021 Incurred to Date Contract termination costs $ 178 $ 14 $ 192 Severance costs 385 17 402 Network decommissioning 497 184 681 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 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 $ 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) December 31, 2020 Expenses Incurred Cash Payments Adjustments for Non-Cash Items (1) December 31, 2021 Contract termination costs $ 81 $ 14 $ ( 80 ) $ ( 1 ) $ 14 Severance costs 52 17 ( 65 ) ( 3 ) 1 Network decommissioning 30 184 ( 106 ) ( 37 ) 71 Total $ 163 $ 215 $ ( 251 ) $ ( 41 ) $ 86 (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. 112 Index for Notes to the Consolidated Financial Statements Note 19 – Additional Financial Information Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities are summarized as follows: (in millions) December 31, 2021 December 31, 2020 Accounts payable $ 6,499 $ 5,564 Payroll and related benefits 1,343 1,163 Property and other taxes, including payroll 1,830 1,540 Accrued interest 710 771 Commissions 348 399 Toll and interconnect 248 217 Advertising 59 135 Other 368 407 Accounts payable and accrued liabilities $ 11,405 $ 10,196 Book overdrafts included in accounts payable and accrued liabilities were $ 378 million and $ 628 million as of December 31, 2021 and 2020, respectively. Related Party Transactions 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 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: Year Ended December 31, (in millions) 2021 2020 2019 Discount related to roaming expenses $ ( 2 ) $ ( 5 ) $ ( 9 ) Fees incurred for use of the T-Mobile brand 80 83 88 International long distance agreement 37 47 39 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. 113 Index for Notes to the Consolidated Financial Statements Supplemental Consolidated Statements of Cash Flows Information The following table summarizes T-Mobile’s supplemental cash flow information: Year Ended December 31, (in millions) 2021 2020 2019 Interest payments, net of amounts capitalized $ 3,723 $ 2,733 $ 1,128 Operating lease payments 6,248 4,619 2,783 Income tax payments 167 218 88 Non-cash investing and financing activities Non-cash beneficial interest obtained in exchange for securitized receivables 4,237 6,194 6,509 Non-cash consideration for the acquisition of Sprint — 33,533 — Change in accounts payable and accrued liabilities for purchases of property and equipment 366 589 ( 935 ) Leased devices transferred from inventory to property and equipment 1,198 2,795 1,006 Returned leased devices transferred from property and equipment to inventory ( 1,437 ) ( 1,460 ) ( 267 ) Short-term debt assumed for financing of property and equipment — 38 800 Operating lease right-of-use assets obtained in exchange for lease obligations 3,773 14,129 3,621 Financing lease right-of-use assets obtained in exchange for lease obligations 1,261 1,273 1,041 Note 20 – Subsequent Events 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. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.