T-Mobile US, Inc. 10-Q

Item 1. Financial Statements T-Mobile US, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in millions, except share and per share amounts) March 31, 2022 December 31, 2021 Assets Current assets Cash and cash equivalents $ 3,245 $ 6,631 Accounts receivable, net of allowance for credit losses of $ 164 and $ 146 4,016 4,194 Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $ 522 and $ 494 5,061 4,748 Inventory 2,715 2,567 Prepaid expenses 727 746 Other current assets 1,691 2,005 Total current assets 17,455 20,891 Property and equipment, net 40,006 39,803 Operating lease right-of-use assets 31,449 26,959 Financing lease right-of-use assets 3,287 3,322 Goodwill 12,234 12,188 Spectrum licenses 92,661 92,606 Other intangible assets, net 4,448 4,733 Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $ 127 and $ 136 2,837 2,829 Other assets 6,276 3,232 Total assets $ 210,653 $ 206,563 Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued liabilities $ 11,134 $ 11,405 Short-term debt 2,865 3,378 Short-term debt to affiliates 1,250 2,245 Deferred revenue 842 856 Short-term operating lease liabilities 3,252 3,425 Short-term financing lease liabilities 1,121 1,120 Other current liabilities 959 1,070 Total current liabilities 21,423 23,499 Long-term debt 66,861 67,076 Long-term debt to affiliates 1,494 1,494 Tower obligations 4,037 2,806 Deferred tax liabilities 10,410 10,216 Operating lease liabilities 31,187 25,818 Financing lease liabilities 1,447 1,455 Other long-term liabilities 3,818 5,097 Total long-term liabilities 119,254 113,962 Commitments and contingencies (Note 11) Stockholders' equity Common Stock, par value $ 0.00001 per share, 2,000,000,000 shares authorized; 1,254,917,883 and 1,250,751,148 shares issued, 1,253,352,700 and 1,249,213,681 shares outstanding — — Additional paid-in capital 73,420 73,292 Treasury stock, at cost, 1,565,183 and 1,537,468 shares issued ( 16 ) ( 13 ) Accumulated other comprehensive loss ( 1,329 ) ( 1,365 ) Accumulated deficit ( 2,099 ) ( 2,812 ) Total stockholders' equity 69,976 69,102 Total liabilities and stockholders' equity $ 210,653 $ 206,563 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, (in millions, except share and per share amounts) 2022 2021 Revenues Postpaid revenues $ 11,201 $ 10,303 Prepaid revenues 2,455 2,351 Wholesale and other service revenues 1,472 1,538 Total service revenues 15,128 14,192 Equipment revenues 4,694 5,346 Other revenues 298 221 Total revenues 20,120 19,759 Operating expenses Cost of services, exclusive of depreciation and amortization shown separately below 3,727 3,384 Cost of equipment sales, exclusive of depreciation and amortization shown separately below 5,946 5,142 Selling, general and administrative 5,056 4,805 Depreciation and amortization 3,585 4,289 Total operating expenses 18,314 17,620 Operating income 1,806 2,139 Other expense Interest expense, net ( 864 ) ( 835 ) Other expense, net ( 11 ) ( 125 ) Total other expense, net ( 875 ) ( 960 ) Income before income taxes 931 1,179 Income tax expense ( 218 ) ( 246 ) Net income $ 713 $ 933 Net income $ 713 $ 933 Other comprehensive income (loss), net of tax Unrealized gain on cash flow hedges, net of tax effect of $ 13 and $ 12 37 34 Unrealized (loss) gain on foreign currency translation adjustment, net of tax effect of $ 0 and $ 0 ( 1 ) 2 Other comprehensive income 36 36 Total comprehensive income $ 749 $ 969 Earnings per share Basic $ 0.57 $ 0.75 Diluted $ 0.57 $ 0.74 Weighted-average shares outstanding Basic 1,250,505,999 1,243,520,026 Diluted 1,255,368,592 1,252,783,564 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (in millions) 2022 2021 Operating activities Net income $ 713 $ 933 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 3,585 4,289 Stock-based compensation expense 141 138 Deferred income tax expense 185 211 Bad debt expense 210 82 Losses (gains) from sales of receivables 46 ( 18 ) Losses on redemption of debt — 101 Changes in operating assets and liabilities Accounts receivable ( 984 ) 96 Equipment installment plan receivables ( 535 ) ( 727 ) Inventories ( 93 ) 279 Operating lease right-of-use assets 1,469 1,124 Other current and long-term assets ( 4 ) 54 Accounts payable and accrued liabilities ( 59 ) ( 1,384 ) Short- and long-term operating lease liabilities ( 771 ) ( 1,369 ) Other current and long-term liabilities ( 163 ) ( 217 ) Other, net 105 69 Net cash provided by operating activities 3,845 3,661 Investing activities Purchases of property and equipment, including capitalized interest of ($ 15 ) and ($ 84 ) ( 3,381 ) ( 3,183 ) Purchases of spectrum licenses and other intangible assets, including deposits ( 2,843 ) ( 8,922 ) Proceeds related to beneficial interests in securitization transactions 1,185 891 Acquisition of companies, net of cash and restricted cash acquired ( 52 ) ( 29 ) Other, net ( 1 ) 4 Net cash used in investing activities ( 5,092 ) ( 11,239 ) Financing activities Proceeds from issuance of long-term debt — 6,763 Repayments of financing lease obligations ( 302 ) ( 287 ) Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities — ( 55 ) Repayments of long-term debt ( 1,632 ) ( 2,219 ) Tax withholdings on share-based awards ( 172 ) ( 218 ) Cash payments for debt prepayment or debt extinguishment costs — ( 65 ) Other, net ( 30 ) ( 45 ) Net cash (used in) provided by financing activities ( 2,136 ) 3,874 Change in cash and cash equivalents, including restricted cash ( 3,383 ) ( 3,704 ) Cash and cash equivalents, including restricted cash Beginning of period 6,703 10,463 End of period $ 3,320 $ 6,759 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) (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, 2021 1,249,213,681 $ ( 13 ) $ 73,292 $ ( 1,365 ) $ ( 2,812 ) $ 69,102 Net income — — — — 713 713 Other comprehensive income — — — 36 — 36 Stock-based compensation — — 157 — — 157 Exercise of stock options 49,647 — 2 — — 2 Stock issued for employee stock purchase plan 1,276,725 — 138 — — 138 Issuance of vested restricted stock units 4,210,669 — — — — — Shares withheld related to net share settlement of stock awards and stock options ( 1,370,306 ) — ( 172 ) — — ( 172 ) Transfers with NQDC plan ( 27,716 ) ( 3 ) 3 — — — Balance as of March 31, 2022 1,253,352,700 $ ( 16 ) $ 73,420 $ ( 1,329 ) $ ( 2,099 ) $ 69,976 Balance as of December 31, 2020 1,241,805,706 $ ( 11 ) $ 72,772 $ ( 1,581 ) $ ( 5,836 ) $ 65,344 Net income — — — — 933 933 Other comprehensive income — — — 36 — 36 Stock-based compensation — — 154 — — 154 Exercise of stock options 80,802 — 3 — — 3 Stock issued for employee stock purchase plan 1,272,253 — 125 — — 125 Issuance of vested restricted stock units 5,421,839 — — — — — Shares withheld related to net share settlement of stock awards and stock options ( 1,785,987 ) — ( 218 ) — — ( 218 ) Transfers with NQDC plan ( 21,438 ) ( 3 ) 3 — — — Balance as of March 31, 2021 1,246,773,175 $ ( 14 ) $ 72,839 $ ( 1,545 ) $ ( 4,903 ) $ 66,377 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Index for Notes to the Condensed Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies 8 Note 2 Receivables and Related Allowance for Credit Losses 9 Note 3 Sales of Certain Receivables 11 Note 4 Spectrum License Transactions 12 Note 5 Fair Value Measurements 13 Note 6 Debt 14 Note 7 Tower Obligations 14 Note 8 Revenue from Contracts with Customers 16 Note 9 Earnings Per Share 18 Note 10 Leases 18 Note 11 Commitments and Contingencies 19 Note 12 Restructuring Costs 22 Note 13 Additional Financial Information 23 Note 14 Subsequent Events 23 7 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Notes to the Condensed Consolidated Financial Statements Note 1 – Summary of Significant Accounting Policies Basis of Presentation The unaudited condensed consolidated financial statements of T-Mobile US, Inc. (“T-Mobile,” “we,” “our,” “us” or the “Company”) include all adjustments of a normal recurring nature necessary for the fair presentation of the results for the interim periods presented. The results for the interim periods are not necessarily indicative of those for the full year. The condensed consolidated financial statements should be read in conjunction with our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. The condensed 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 our obligations to pay for the management and operation of certain of our wireless communications tower sites. Intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires our management to make estimates and assumptions that affect the financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances. Estimates are inherently subject to judgment and actual results could differ from those estimates. Accounting Pronouncements Adopted During the Current Year 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. As of January 1, 2022, we have elected to apply the practical expedients provided by the reference rate reform standard for all ASC Topics and Industry Subtopics related to eligible contract modifications as they occur. This election did not have a material impact on our condensed consolidated financial statements for the three months ended March 31, 2022, and the impact of applying the election to future eligible contract modifications that occur through December 31, 2022 is also not expected to be material . 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. As of January 1, 2022, we have elected to adopt this standard, and it will be applied prospectively to all business combinations occurring after this date. Accounting Pronouncements Not Yet Adopted Troubled Debt Restructurings and Vintage Disclosures In March 2022, the FASB issued ASU 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The standard eliminates the accounting guidance within ASC 310-40 for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by 8 Index for Notes to the Condensed Consolidated Financial Statements creditors when a borrower is experiencing financial difficulty. Additionally, for public business entities, the standard requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. The standard will become effective for us beginning January 1, 2023, and should be applied prospectively, with an option for modified retrospective application for provisions related to recognition and measurement of troubled debt restructurings. Early adoption is permitted for us at any time. We are currently evaluating the impact of the standard on our future consolidated financial statements. Note 2 – Receivables and Related 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. We consider a receivable past due 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. Our portfolio of receivables is comprised of two portfolio segments: accounts receivable and equipment installment plan (“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, non-consolidated affiliates, other carriers and third-party retail channels. 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, and 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. 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 external 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. EIP receivables had a combined weighted-average effective interest rate of 5.7 % and 5.6 % as of March 31, 2022 and December 31, 2021, respectively. 9 Index for Notes to the Condensed Consolidated Financial Statements The following table summarizes the EIP receivables, including imputed discounts and related allowance for credit losses: (in millions) March 31, 2022 December 31, 2021 EIP receivables, gross $ 8,547 $ 8,207 Unamortized imputed discount ( 381 ) ( 378 ) EIP receivables, net of unamortized imputed discount 8,166 7,829 Allowance for credit losses ( 268 ) ( 252 ) EIP receivables, net of allowance for credit losses and imputed discount $ 7,898 $ 7,577 Classified on the condensed consolidated balance sheets as: Equipment installment plan receivables, net of allowance for credit losses and imputed discount $ 5,061 $ 4,748 Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount 2,837 2,829 EIP receivables, net of allowance for credit losses and imputed discount $ 7,898 $ 7,577 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 amortized cost of our EIP receivables by delinquency status, customer credit class and year of origination as of March 31, 2022: Originated in 2022 Originated in 2021 Originated prior to 2021 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 $ 1,434 $ 1,053 $ 2,895 $ 1,736 $ 602 $ 294 $ 4,931 $ 3,083 $ 8,014 31 - 60 days past due 8 8 25 33 5 6 38 47 85 61 - 90 days past due 1 1 9 15 2 3 12 19 31 More than 90 days past due — 1 9 16 3 7 12 24 36 EIP receivables, net of unamortized imputed discount $ 1,443 $ 1,063 $ 2,938 $ 1,800 $ 612 $ 310 $ 4,993 $ 3,173 $ 8,166 We estimate credit losses on our EIP receivables segment by 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 and 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 forecasts and periodic internal statistical analyses. Activity for the three months ended March 31, 2022 and 2021, in the allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivables segments were as follows: March 31, 2022 March 31, 2021 (in millions) Accounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance Total Allowance for credit losses and imputed discount, beginning of period $ 146 $ 630 $ 776 $ 194 $ 605 $ 799 Bad debt expense 96 114 210 28 54 82 Write-offs, net of recoveries ( 78 ) ( 99 ) ( 177 ) ( 79 ) ( 54 ) ( 133 ) Change in imputed discount on short-term and long-term EIP receivables N/A 30 30 N/A 66 66 Impact on the imputed discount from sales of EIP receivables N/A ( 26 ) ( 26 ) N/A ( 35 ) ( 35 ) Allowance for credit losses and imputed discount, end of period $ 164 $ 649 $ 813 $ 143 $ 636 $ 779 10 Index for Notes to the Condensed Consolidated Financial Statements Off-Balance-Sheet Credit Exposures We do not have material, unmitigated off-balance-sheet credit exposures as of March 31, 2022. 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 Condensed Consolidated Balance Sheets measured at fair value that are based on a discounted cash flow model using Level 3 inputs, including customer default rates and credit worthiness, dilutions and recoveries. See Note 3 – Sales of Certain Receivables for further information. Note 3 – Sales of Certain Receivables We regularly enter 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 condensed consolidated financial statements, are described below. Sales of EIP Receivables As of both March 31, 2022 and December 31, 2021, the EIP sale arrangement provided funding of $ 1.3 billion. In connection with this EIP sale arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity (the “EIP BRE”). We consolidate the EIP BRE under the VIE model. The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, and liabilities included on our Condensed Consolidated Balance Sheets with respect to the EIP BRE: (in millions) March 31, 2022 December 31, 2021 Other current assets $ 382 $ 424 Other assets 108 125 Other long-term liabilities 2 — Sales of Service Accounts Receivable The maximum funding commitment of the service receivable sale arrangement is $ 950 million and the facility expires in February 2023. As of both March 31, 2022 and December 31, 2021, the service receivable sale arrangement provided funding of $ 775 million. 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”). We consolidate the Service BRE under the VIE model. The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, and liabilities included on our Condensed Consolidated Balance Sheets with respect to the Service BRE: (in millions) March 31, 2022 December 31, 2021 Other current assets $ 231 $ 231 Other current liabilities 317 348 11 Index for Notes to the Condensed Consolidated Financial Statements Sales of Receivables The following table summarizes the impact of the sale of certain service receivables and EIP receivables on our Condensed Consolidated Balance Sheets: (in millions) March 31, 2022 December 31, 2021 Derecognized net service receivables and EIP receivables $ 2,480 $ 2,492 Other current assets 613 655 of which, deferred purchase price 611 654 Other long-term assets 108 125 of which, deferred purchase price 108 125 Other current liabilities 317 348 Other long-term liabilities 2 — Net cash proceeds since inception 1,750 1,754 Of which: Change in net cash proceeds during the year-to-date period ( 4 ) 39 Net cash proceeds funded by reinvested collections 1,754 1,715 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 Condensed 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 March 31, 2022 and December 31, 2021, our deferred purchase price related to the sales of service receivables and EIP receivables was $ 719 million and $ 779 million, respectively. We recognized a loss from sales of receivables, including changes in fair value of the deferred purchase price, of $ 46 million and a gain of $ 18 million for the three months ended March 31, 2022 and 2021, respectively, in Selling, general and administrative expense on our Condensed 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 4 – Spectrum License Transactions The following table summarizes our spectrum license activity for the three months ended March 31, 2022: (in millions) 2022 Spectrum licenses, beginning of year $ 92,606 Spectrum license acquisitions 55 Spectrum licenses, end of period $ 92,661 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 February 2022. The aggregate cash payments made to the FCC are included in Other assets as of March 31, 2022 in our Condensed Consolidated Balance Sheets, and will remain there until the corresponding licenses are received. The timing of when the licenses will be issued will be determined by the FCC after all post-auction procedures have been completed, which we expect to occur in mid-2022. Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in Purchases of spectrum licenses and other intangible assets, including deposits in our Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022. 12 Index for Notes to the Condensed Consolidated Financial Statements Note 5 – Fair Value Measurements The carrying values of Cash and cash equivalents, Accounts receivable 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. Cash flows associated with qualifying hedge derivative instruments are presented in the same category on the Condensed Consolidated Statements of Cash Flows as the item being hedged. We did not have any significant derivative instruments outstanding as of March 31, 2022 and December 31, 2021. Interest Rate Lock Derivatives In April 2020, we terminated our interest rate lock derivatives entered into in October 2018. Aggregate changes in the fair value of the interest rate lock derivatives, net of tax and amortization, of $ 1.4 billion and $ 1.5 billion are presented in Accumulated other comprehensive loss on our Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021, respectively. For the three months ended March 31, 2022 and 2021, $ 50 million and $ 46 million, respectively, were amortized from Accumulated other comprehensive loss into Interest expense, net in the Condensed Consolidated Statements of Comprehensive Income. We expect to amortize $ 207 million of the Accumulated other comprehensive loss associated with the derivatives into Interest expense, net over the 12 months ended March 31, 2023. 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 3 – 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 Condensed Consolidated Balance Sheets, were $ 719 million and $ 779 million as of March 31, 2022 and December 31, 2021, respectively. Fair value was equal to the carrying amount at March 31, 2022 and December 31, 2021. 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 March 31, 2022 and December 31, 2021. As such, our estimates are not necessarily indicative of the amount we could realize in a current market exchange. 13 Index for Notes to the Condensed Consolidated Financial Statements The carrying amounts and fair values of our short-term and long-term debt included on our Condensed Consolidated Balance Sheets were as follows: Level within the Fair Value Hierarchy March 31, 2022 December 31, 2021 (in millions) Carrying Amount (1) Fair Value (1) Carrying Amount (1) Fair Value (1) Liabilities: Senior Notes to third parties 1 $ 29,720 $ 29,682 $ 30,309 $ 32,093 Senior Notes to affiliates 2 2,744 2,774 3,739 3,844 Senior Secured Notes to third parties 1 39,964 38,274 40,098 42,393 (1) Excludes $ 42 million and $ 47 million as of March 31, 2022 and December 31, 2021, respectively, in other financial liabilities as the carrying values approximate fair value primarily due to the short-term maturities of these instruments. Note 6 – Debt The following table sets forth the debt balances and activity as of, and for the three months ended, March 31, 2022 : (in millions) December 31, 2021 Note Redemptions (1) Repayments Reclassifications (1) Other (2) March 31, 2022 Short-term debt $ 3,378 $ ( 500 ) $ ( 132 ) $ 132 $ ( 13 ) $ 2,865 Long-term debt 67,076 — — ( 132 ) ( 83 ) 66,861 Total debt to third parties 70,454 ( 500 ) ( 132 ) — ( 96 ) 69,726 Short-term debt to affiliates 2,245 ( 1,000 ) — — 5 1,250 Long-term debt to affiliates 1,494 — — — — 1,494 Total debt $ 74,193 $ ( 1,500 ) $ ( 132 ) $ — $ ( 91 ) $ 72,470 (1) Note redemptions and reclassifications are recorded net of related issuance costs, discounts and premiums. (2) Other includes the amortization of premiums, discounts, debt issuance costs and consent fees. Our effective interest rate, excluding the impact of derivatives and capitalized interest, was approximately 3.9 % and 4.3 % for the three months ended March 31, 2022 and 2021, respectively, on weighted-average debt outstanding of $ 73.7 billion for both the three months ended March 31, 2022 and 2021. 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. Note Redemptions and Repayments During the three months ended March 31, 2022, we made the following note redemptions and repayments: (in millions) Principal Amount Redemption or Repayment Date Redemption Price 4.000 % Senior Notes due 2022 $ 500 March 16, 2022 100.000 % 4.000 % Senior Notes to affiliates due 2022 1,000 March 16, 2022 100.000 % Total Redemptions $ 1,500 4.738 % Secured Series 2018-1 A-1 Notes due 2025 $ 131 Various N/A Other debt 1 Various N/A Total Repayments $ 132 Subsequent to March 31, 2022, on April 15, 2022, we repaid at maturity $ 1.25 billion of our 5.375 % Senior Notes to affiliates due 2022. Note 7 – 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. 14 Index for Notes to the Condensed Consolidated Financial Statements Assets and liabilities associated with the operation of the tower sites were transferred to special purpose entities (“SPEs”). 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 condensed 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 Condensed Consolidated Balance Sheets. We recorded long-term financial obligations in the amount of the net proceeds received and recognize interest on the tower obligations. 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 (the “Merger”) with Sprint Corporation (“Sprint”), 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. 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 Condensed 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 include unfavorable terms associated with the fixed-price purchase option in 2037. We recognize interest expense on the tower obligations. The tower obligations are increased by the 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 Condensed Consolidated Balance Sheets and are depreciated to their estimated residual values over the expected useful life of the towers, which is 20 years. Leaseback Arrangement On January 3, 2022, we entered into an agreement (the “Crown Agreement”) with CCI. The Crown Agreement extends the current term of the leasebacks by up to twelve years and modifies the leaseback payments for both the Existing CCI Tower Lease Arrangement and the Acquired CCI Tower Lease Arrangement. As a result of the Crown Agreement, there was an increase in our financing obligation as of the effective date of the agreement of approximately $ 1.2 billion, with a corresponding decrease to Other long-term liabilities associated with unfavorable contract terms. The modification resulted in a revised interest rate under the effective interest method for the tower obligations: 11.6 % for the Existing CCI Tower Lease Arrangement and 5.3 % for the Acquired CCI Tower Lease Arrangement. There were no changes made to either of our master prepaid leases with CCI. 15 Index for Notes to the Condensed Consolidated Financial Statements The following table summarizes the balances associated with both of the tower arrangements on our Condensed Consolidated Balance Sheets: (in millions) March 31, 2022 December 31, 2021 Property and equipment, net $ 2,505 $ 2,548 Tower obligations 4,037 2,806 Other long-term liabilities 554 1,712 Future minimum payments related to the tower obligations are approximately $ 415 million for the 12-month period ending March 31, 2023, $ 848 million in total for the 12-month periods ending March 31, 2024 and 2025, $ 774 million in total for the 12-month periods ending March 31, 2026 and 2027, and $ 4.8 billion in total thereafter. Note 8 – 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 include 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: Three Months Ended March 31, (in millions) 2022 2021 Postpaid service revenues Postpaid phone revenues $ 10,231 $ 9,483 Postpaid other revenues 970 820 Total postpaid service revenues $ 11,201 $ 10,303 We operate as a single operating segment. The balances presented in each revenue line item on our Condensed Consolidated Statements of Comprehensive Income represent categories of revenue from contracts with customers disaggregated by type of product and service. Service revenues also include revenues earned for providing premium services to customers, such as device insurance services and customer-based, third-party services. Revenue generated from the lease of mobile communication devices is included in Equipment revenues on our Condensed Consolidated Statements of Comprehensive Income. Equipment revenues from the lease of mobile communication devices were as follows: Three Months Ended March 31, (in millions) 2022 2021 Equipment revenues from the lease of mobile communication devices $ 487 $ 1,041 We provide wireline communication services to domestic and international customers. Wireline service revenues were $ 146 million and $ 197 million for the three months ended March 31, 2022 and 2021, respectively. Wireline service revenues are presented in Wholesale and other service revenues on our Condensed Consolidated Statements of Comprehensive Income. 16 Index for Notes to the Condensed Consolidated Financial Statements Contract Balances The contract asset and contract liability balances from contracts with customers as of March 31, 2022 and December 31, 2021, were as follows: (in millions) Contract Assets Contract Liabilities Balance as of December 31, 2021 $ 286 $ 763 Balance as of March 31, 2022 275 768 Change $ ( 11 ) $ 5 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 $ 210 million and $ 219 million as of March 31, 2022 and December 31, 2021, respectively, was included in Other current assets on our Condensed Consolidated Balance Sheets. Contract liabilities are recorded when fees are collected, or we have an unconditional right to consideration (a receivable) in advance of delivery of goods or services. Changes in contract liabilities are primarily related to the activity of prepaid customers. Contract liabilities are primarily included in Deferred revenue on our Condensed Consolidated Balance Sheets. Revenues for the three months ended March 31, 2022 and 2021 include the following: Three Months Ended March 31, (in millions) 2022 2021 Amounts included in the beginning of year contract liability balance $ 654 $ 683 Remaining Performance Obligations As of March 31, 2022, 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 $ 798 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. 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 March 31, 2022, the aggregate amount of the contractual minimum consideration for wholesale, roaming and service contracts is $ 936 million, $ 1.0 billion and $ 2.7 billion 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 balance of deferred incremental costs to obtain contracts with customers was $ 1.6 billion and $ 1.5 billion as of March 31, 2022 and December 31, 2021, respectively, and is included in Other assets on our Condensed Consolidated Balance Sheets. Deferred contract costs incurred to obtain postpaid service contracts are amortized over a period of 24 months. The amortization period is monitored to reflect any significant change in assumptions. Amortization of deferred contract costs is included in Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income and were $ 324 million and $ 248 million for the three months ended March 31, 2022 and 2021, respectively. The deferred contract cost asset is assessed for impairment on a periodic basis. There were no impairment losses recognized on deferred contract cost assets for the three months ended March 31, 2022 and 2021. 17 Index for Notes to the Condensed Consolidated Financial Statements Note 9 – Earnings Per Share The computation of basic and diluted earnings per share was as follows: Three Months Ended March 31, (in millions, except shares and per share amounts) 2022 2021 Net income $ 713 $ 933 Weighted-average shares outstanding – basic 1,250,505,999 1,243,520,026 Effect of dilutive securities: Outstanding stock options and unvested stock awards 4,862,593 9,263,538 Weighted-average shares outstanding – diluted 1,255,368,592 1,252,783,564 Earnings per share – basic $ 0.57 $ 0.75 Earnings per share – diluted $ 0.57 $ 0.74 Potentially dilutive securities: Outstanding stock options and unvested stock awards 2,054,344 6 SoftBank contingent consideration (1) 48,751,557 48,751,557 (1) Represents the weighted-average SoftBank Specified Shares that are contingently issuable from the acquisition date of April 1, 2020, pursuant to a letter agreement dated February 20, 2020 between T-Mobile, SoftBank and Deutsche Telekom AG (“DT”). As of March 31, 2022, 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 March 31, 2022 and 2021. 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 10 – 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 for five to 50 years. In addition, we have financing leases for network equipment that generally have a non-cancelable lease term of three to five years . The financing leases do not have renewal options and contain a bargain purchase option at the end of the lease. 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 payments 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 three optional five-year renewals. As a result of this modification, we remeasured the associated right-of use assets and lease liabilities resulting in an increase of $ 5.3 billion to each on the effective date of the modification, with a corresponding gross increase to both deferred tax liabilities and assets of $ 1.3 billion. 18 Index for Notes to the Condensed Consolidated Financial Statements The components of lease expense were as follows: Three Months Ended March 31, (in millions) 2022 2021 Operating lease expense $ 1,748 $ 1,391 Financing lease expense: Amortization of right-of-use assets 185 173 Interest on lease liabilities 15 20 Total financing lease expense 200 193 Variable lease expense 127 95 Total lease expense $ 2,075 $ 1,679 As of March 31, 2022, the weighted-average remaining lease term and discount rate for operating leases were 10 years and 3.9 %, respectively. Maturities of lease liabilities as of March 31, 2022, were as follows: (in millions) Operating Leases Finance Leases Twelve Months Ending March 31, 2023 $ 4,199 $ 1,163 2024 4,479 835 2025 4,103 495 2026 3,553 101 2027 3,274 29 Thereafter 23,509 25 Total lease payments 43,117 2,648 Less: imputed interest 8,678 80 Total $ 34,439 $ 2,568 Interest payments for financing leases were $ 15 million and $ 19 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we have additional operating leases for commercial properties that have not yet commenced with future lease payments of approximately $ 85 million. Note 11 – Commitments and Contingencies Purchase Commitments We have commitments for non-dedicated transportation lines with varying expiration terms that generally extend through 2038. 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 $ 4.4 billion for the twelve-month period ending March 31, 2023, $ 5.5 billion in total for each of the twelve-month periods ending March 31, 2024 and 2025, $ 2.4 billion in total for each of the twelve-month periods ending March 31, 2026 and 2027 and $ 3.1 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. Spectrum Leases We lease spectrum from various parties. These leases include service obligations to the lessors. Certain 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. Certain spectrum leases also include purchase options and right-of-first refusal clauses in which we are provided the opportunity to exercise our purchase option if the lessor receives a purchase offer from a third party. The purchase of the leased spectrum is at our option and therefore the option price is not included in the commitments below. 19 Index for Notes to the Condensed Consolidated Financial Statements Our spectrum lease and service credit commitments, including renewal periods, are approximately $ 345 million for the twelve-month period ending March 31, 2023, $ 627 million in total for each of the twelve-month periods ending March 31, 2024 and 2025, $ 623 million in total for each of the twelve-month periods ending March 31, 2026 and 2027 and $ 4.9 billion in total thereafter. 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 or other government agency rules and regulations. Those Litigation and Regulatory Matters are at various stages, and some of them may proceed to trial, arbitration, hearing, or other adjudication that could result in fines, penalties, or awards of monetary or injunctive relief in the coming 12 months if they are not otherwise resolved. We have established an accrual with respect to certain of these matters, where appropriate. The accruals are reflected in the condensed consolidated financial statements, but they are not considered to be, individually or in the aggregate, material. An accrual is established when we believe it is both probable that a loss has been incurred and an amount can be reasonably estimated. For other matters, where we have not determined that a loss is probable or because the amount of loss cannot be reasonably estimated, we have not recorded an accrual due to various factors typical in contested proceedings, including, but not limited to, uncertainty concerning legal theories and their resolution by courts or regulators, uncertain damage theories and demands, and a less than fully developed factual record. For Litigation and Regulatory Matters that may result in a contingent gain, we recognize such gains in the condensed consolidated financial statements when the gain is realized or realizable. 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 March 31, 2022, and that accrual was included in Accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheets. On April 1, 2020, in connection with the closing of the Merger, we assumed the contingencies and litigation matters of Sprint. Those matters include a wide variety of disputes, claims, government agency investigations and enforcement actions, and other 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 certain states for excess subsidy payments. We note that pursuant to Amendment No. 2, dated as of February 20, 2020, to the Business Combination Agreement, dated as of April 29, 2018, by and among the Company, Sprint and the other parties named therein (as amended, 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. 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 Mobile Virtual Network Operators (“MVNOs”) using the legacy Sprint CDMA network that we 20 Index for Notes to the Condensed Consolidated Financial Statements planned to sunset that network on December 31, 2021. In response to that notice, DISH Network Corporation (“DISH”), which has Boost Mobile customers who use the legacy Sprint CDMA network, made several efforts to prevent us from sunsetting the CDMA network until mid-2023, including by urging the U.S. Department of Justice to move for a finding of contempt under the April 1, 2020 Final Judgment entered by the U.S. District Court for the District of Columbia, and by pursuing a Petition for Modification and related proceedings pursuant to the California Public Utilities Commission’s (the “CPUC”) April 2020 decision concerning the 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 full decommissioning 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 decommissioning. In March 2022, the CPUC denied DISH’s Petition for Modification. We cannot predict the outcome of the other proceedings described above, but we intend to vigorously oppose any efforts to further delay the sunset of the legacy Sprint CDMA network. The orderly decommissioning of the legacy Sprint CDMA network began as planned on March 31, 2022, and is expected to be completed during the second fiscal quarter of 2022, and we will continue to help ensure that DISH and other MVNOs fulfill their contractual responsibilities and transition customers off the legacy Sprint CDMA network before the decommissioning. 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 mass arbitration claims and 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. In April 2022, the Litwin case was voluntarily dismissed without prejudice. We are unable to predict at this time the potential outcome of any of the other claims described above 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 Quarterly Report, we have not recorded any accruals for losses related to the above proceedings and inquiries, as any such amounts (or ranges of amounts) are not probable or estimable at this time. We believe it is reasonably possible that we could incur losses associated with these proceedings and inquiries, and the Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. Ongoing legal and other costs related to these proceedings and inquiries, as well as any potential future proceedings and inquiries, may be substantial, and losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries could be material to our business, reputation, financial condition, cash flows and operating results. In March 2022, we received $ 220 million in settlement of certain patent litigation. We recognized the settlement, net of legal fees, as a reduction to Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income. 21 Index for Notes to the Condensed Consolidated Financial Statements Note 12 – 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) Three Months Ended March 31, 2022 Incurred to Date Contract termination costs $ — $ 192 Severance costs 4 406 Network decommissioning 133 814 Total restructuring plan expenses $ 137 $ 1,412 The expenses associated with the restructuring initiatives are included in Costs of services and Selling, general and administrative on our Condensed 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 $ 464 million and $ 123 million for the three months ended March 31, 2022 and 2021, respectively, and are included in Costs of services and Selling, general and administrative on our Condensed 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, 2021 Expenses Incurred Cash Payments Adjustments for Non-Cash Items (1) March 31, 2022 Contract termination costs $ 14 $ — $ ( 5 ) $ — $ 9 Severance costs 1 4 ( 3 ) — 2 Network decommissioning 71 133 ( 59 ) ( 5 ) 140 Total $ 86 $ 137 $ ( 67 ) $ ( 5 ) $ 151 (1) Non-cash items consist of 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 Condensed 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. 22 Index for Notes to the Condensed Consolidated Financial Statements Note 13 – Additional Financial Information Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities are summarized as follows: (in millions) March 31, 2022 December 31, 2021 Accounts payable $ 6,739 $ 6,499 Payroll and related benefits 842 1,343 Property and other taxes, including payroll 1,764 1,830 Accrued interest 825 710 Commissions 270 348 Toll and interconnect 230 248 Advertising 11 59 Other 453 368 Accounts payable and accrued liabilities $ 11,134 $ 11,405 Book overdrafts included in accounts payable were $ 405 million and $ 378 million as of March 31, 2022 and December 31, 2021, respectively. Supplemental Condensed Consolidated Statements of Cash Flows Information The following table summarizes T-Mobile’s supplemental cash flow information: Three Months Ended March 31, (in millions) 2022 2021 Interest payments, net of amounts capitalized $ 778 $ 945 Operating lease payments 1,048 1,651 Income tax payments — 22 Non-cash investing and financing activities Non-cash beneficial interest obtained in exchange for securitized receivables 1,018 1,381 Change in accounts payable and accrued liabilities for purchases of property and equipment ( 183 ) ( 173 ) Leased devices transferred from inventory to property and equipment 129 485 Returned leased devices transferred from property and equipment to inventory ( 183 ) ( 445 ) Increase in Tower obligations from contract modification 1,158 — Operating lease right-of-use assets obtained in exchange for lease obligations 5,975 911 Financing lease right-of-use assets obtained in exchange for lease obligations 298 109 Note 14 – Subsequent Events Subsequent to March 31, 2022, on April 15, 2022, we repaid at maturity $ 1.25 billion of our 5.375 % Senior Notes to affiliates due 2022. 23 Table of Contents