What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-29 compared with 2022-05-06 · 279 added, 151 removed, 410 unchanged (51% of the section changed)

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• restrictive covenants including the agreements governing our indebtedness and other financings;

• the risk of future material weaknesses we may identify while we continue to work to integrate and align policies, principles and practices of the two companies following the Merger (as defined below), or any other failure by us to maintain effective internal controls, and the resulting significant costs and reputational damage;

• the risk of future material weaknesses we may identify while we continue to work to integrate following the Merger (as defined below), or any other failure by us to maintain effective internal controls, and the resulting significant costs and reputational damage;

• any changes in regulations or in the regulatory framework under which we operate;

• laws and regulations relating to the handling of privacy and data protection;

• unfavorable outcomes of existing or future legal proceedings, including these proceedings and inquiries relating to the criminal cyberattack we became aware of in August 2021;

• unfavorable outcomes of and increased costs from existing or future legal proceedings, including these proceedings and inquiries relating to the criminal cyberattack we became aware of in August 2021;

• the possibility that we may be unable to adequately protect our intellectual property rights or be accused of infringing the intellectual property rights of others;

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

Our MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022, included in Part I, Item 1 of this Form 10-Q, and audited consolidated financial statements, included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021.

Our MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2022, included in Part I, Item 1 of this Form 10-Q, and audited consolidated financial statements, included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021.

Except as expressly stated, the financial condition and results of operations discussed throughout our MD&A are those of T-Mobile US, Inc.

and its consolidated subsidiaries.

Sprint Merger and Integration Activities

Sprint Merger, Network Integration and Decommissioning Activities

Merger-Related Costs

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Merger-related costs are presented below:

(in millions) Three Months Ended March 31, Change

(in millions) Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2022 2021 $ % 2022 2021 $ %

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Cost of services, exclusive of depreciation and amortization $ 961 $ 273 $ 688 252 % $ 1,568 $ 409 $ 1,159 283 %

Cost of equipment sales, exclusive of depreciation and amortization 751 17 734 NM

Cost of equipment sales, exclusive of depreciation and amortization 459 87 372 NM 1,210 104 1,106 NM

Selling, general and administrative 248 251 (3) (1) % 303 396 (93) (23) %

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We expect to incur the remaining $2.4 billion to complete our integration and restructuring activities over the next two years with substantially all costs incurred by the end of 2023.

Total Merger related costs for the twelve months ended December 31, 2022 are expected to be between $4.5 billion to $5.0 billion, including $1.4 billion incurred during the three months ended March 31, 2022.

Total Merger-related costs for the year ending December 31, 2022, are expected to be between $4.7 billion to $5.0 billion, including $1.7 billion and $3.1 billion incurred during the three and six months ended June 30, 2022, respectively.

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

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

Network Integration

To achieve Merger synergies in network costs, we are performing rationalization activities to identify duplicative networks, backhaul services and other agreements in addition to decommissioning certain small cell sites and distributed antenna systems.

These initiatives also include the acceleration or termination of certain of our operating and financing leases for cell sites, switch sites and network equipment.

We have targeted approximately 35,000 cell sites for decommissioning.

As of June 30, 2022, we had decommissioned nearly two-thirds of the targeted cell sites and expect to substantially complete the remaining site decommissioning in the third quarter of 2022.

To allow for the realization of these synergies associated with network integration, we retired certain legacy networks including the legacy Sprint CDMA network and began the orderly shut-down of the LTE network in the second quarter of 2022.

Customers impacted by the decommissioning of these networks have been excluded from our customer base and postpaid account base.

See Performance Measures for more details.

Restructuring

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• Severance costs associated with the reduction of redundant processes and functions;

• The decommissioning of certain small cell sites and distributed antenna systems to achieve synergies in network costs.

• The decommissioning of certain small cell sites and distributed antenna systems to achieve Merger synergies in network costs.

For more information regarding our restructuring activities, see Note 1 2 – Restructuring Costs of the Notes to the Condensed Consolidated Financial Statements.

Anticipated Impacts

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

For full-year 2022, we expect synergies from Selling, general and administrative expense reductions of $2.3 billion to $2.4 billion and Cost of service expense reductions of $1.6 billion to $1.7 billion.

Other Potential Impacts

The operation of the legacy Sprint CDMA and LTE networks is partially supported by legacy Sprint’s Wireline network acquired through the Merger.

We expect that the legacy Sprint CDMA and LTE networks will be decommissioned during 2022.

In accordance with ASC 360-10, we assess long-lived assets for impairment when events or circumstances indicate that long-lived assets might be impaired.

We expect that the decommissioning of the legacy Sprint CDMA and LTE networks will trigger impairments of certain Wireline long-lived assets as these assets will no longer support our wireless network and the associated customers and cash flows.

The potential non-cash impairment charges are not expected to have a material impact on our condensed consolidated financial statements.

Other Impacts

Anticipated Merger Synergies

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

For full-year 2022, we expect Merger synergies from Selling, general and administrative expense reductions of $2.3 billion to $2.4 billion, Cost of service expense reductions of $1.8 billion to $1.9 billion and avoided network expenses of $1.3 billion.

Wireline Impacts

Previously, the operation of the legacy Sprint CDMA and LTE wireless networks was supported by the legacy Sprint Wireline network.

During the second quarter of 2022, we retired the legacy Sprint CDMA network and began the orderly shut-down of the LTE network.

We determined that the retirement of the legacy Sprint CDMA and LTE wireless networks triggered the need to assess the Wireline long-lived assets for impairment, as these assets no longer support our wireless network and the associated customers and cash flows in a significant manner.

The results of this assessment indicated that certain Wireline long-lived assets were impaired, and as a result, we recorded non-cash impairment expense of $477 million related to Wireline Property and equipment, Operating lease right-of-use assets and Other intangible assets for the three and six months ended June 30, 2022.

We continue to provide Wireline services to existing Wireline customers.

For more information regarding this non-cash impairment, see Note 13 – Additional Financial Information of the Notes to the Condensed Consolidated Financial Statements

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

We promptly located and closed the unauthorized access to our systems.

Our forensic investigation was completed in October 2021, although our overall investigation into the incident is ongoing.

There are no material updates with respect to the August 2021 cyberattack and subsequent inquiries, investigations, litigations and remedial measures from our Annual Report on Form 10-K for the year ended December 31, 2021, except as disclosed in Note 11 – Commitment and Contingencies .

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

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

COVID-19 Pandemic

Our forensic investigation was completed in October 2021.

In connection with the proposed class action settlement and the separate settlements reached with a number of consumers, we recorded a total pre-tax charge of approximately $400 million in the second quarter of 2022.

We expect to continue to incur additional expenses in future periods, including costs to remediate the attack, resolve inquiries by various government authorities, provide additional customer support and enhance customer protection, only some of which may be covered and reimbursable by insurance.

In addition to the committed aggregate incremental spend of $150 million for data security and related technology in 2022 and 2023 under the proposed settlement agreement, we intend to commit substantial additional resources towards cybersecurity initiatives over the next several years.

COVID-19 Pandemic and Other Macroeconomic Trends

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

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

Other macroeconomic trends may result in adverse impacts on our business, and we continue to monitor the potential impacts of, for example, higher inflation, potential for economic recession and changes in the Federal Reserve’s monetary policy, as well as geopolitical risks, including the war in Ukraine.

Such scenarios and uncertainties may affect, among others, expected credit loss activity as well as certain fair value estimates.

Results of Operations

Set forth below is a summary of our consolidated financial results:

Three Months Ended March 31, Change

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

(in millions) 2022 2021 $ % 2022 2021 $ %

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Selling, general and administrative 5,856 4,823 1,033 21 % 10,912 9,628 1,284 13 %

Impairment expense 477 — 477 NM 477 — 477 NM

Depreciation and amortization 3,491 4,077 (586) (14) % 7,076 8,366 (1,290) (15) %

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Operating income 709 2,106 (1,397) (66) % 2,515 4,245 (1,730) (41) %

Other income (expense)

Other expense, net

Interest expense, net (851) (850) (1) — % (1,715) (1,685) (30) 2 %

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Total other expense, net (872) (851) (21) 2 % (1,747) (1,811) 64 (4) %

Income before income taxes 931 1,179 (248) (21) %

Income tax expense (218) (246) 28 (11) %

Net income $ 713 $ 933 $ (220) (24) %

(Loss) income before income taxes (163) 1,255 (1,418) (113) % 768 2,434 (1,666) (68) %

Income tax benefit (expense) 55 (277) 332 (120) % (163) (523) 360 (69) %

Net (loss) income $ (108) $ 978 $ (1,086) (111) % $ 605 $ 1,911 $ (1,306) (68) %

Statement of Cash Flows Data

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Free Cash Flow 1,758 1,671 87 5 % 3,407 2,975 432 15 %

The following discussion and analysis is for the three months ended March 31, 2022, compared to the same period in 2021 unless otherwise stated.

Total revenues increased $361 million, or 2%.

NM - Not Meaningful

The following discussion and analysis is for the three and six months ended June 30, 2022, compared to the same period in 2021 unless otherwise stated.

Total revenues decreased $249 million, or 1%, for the three months ended and was relatively flat for the six months ended June 30, 2022.

The components of these changes are discussed below.

Postpaid revenues increased $898 million, or 9%, primarily from:

Postpaid revenues increased $953 million, or 9%, for the three months ended and increased $1.9 billion, or 9%, for the six months ended June 30, 2022, primarily from:

• Higher average postpaid accounts;

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

Prepaid revenues increased $104 million, or 4%, primarily from:

Prepaid revenues increased $42 million, or 2%, for the three months ended and increased $146 million, or 3%, for six months ended June 30, 2022.

The increase for the three months ended June 30, 2022, was primarily from:

• Higher average prepaid customers;

• Higher prepaid ARPU.

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

The increase for the six months ended June 30, 2022, was primarily from:

• Higher prepaid ARPU.

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

• Higher average prepaid customers.

Wholesale and other service revenues were essentially flat.

Equipment revenues decreased $652 million, or 12%, primarily from:

Wholesale and other service revenues decreased $171 million, or 11%, for the three months ended and decreased $237 million, or 8%, for the six months ended June 30, 2022, primarily from:

• Lower advertising and wireline revenues;

partially offset by

• Higher Lifeline revenues.

Equipment revenues decreased $1.1 billion, or 21%, for the three months ended and decreased $1.7 billion, or 16%, for the six months ended June 30, 2022.

The decrease for the three months ended June 30, 2022, was primarily from:

• A decrease of $528 million in lease revenues and a decrease of $196 million in customer purchases of leased devices primarily due to a lower number of customer devices under lease as a result of the continued strategic shift from device financing from leasing to EIP;

• A decrease of $276 million in device sales revenue, excluding purchased leased devices, primarily from:

• Lower average revenue per device sold, driven primarily by higher promotions, which included promotions for Sprint customers to facilitate their migration to the T-Mobile network;

partially offset by

• An increase of $67 million in device sales revenue, excluding purchased leased devices, primarily from:

• An increase in the number of devices sold, including higher upgrade volume;

• An increase in the number of devices sold, including to facilitate the migration of Sprint customers to the T-Mobile network.

The decrease for the six months ended June 30, 2022, was primarily from:

• A decrease of $1.1 billion in lease revenues and a decrease of $336 million in customer purchases of leased devices primarily due to a lower number of customer devices under lease as a result of the continued strategic shift from device financing from leasing to EIP;

• A decrease of $208 million in device sales revenue, excluding purchased leased devices, primarily from:

• Lower average revenue per device sold, driven primarily by higher promotions, which included promotions for Sprint customers to facilitate their migration to the T-Mobile network, partially offset by an increase in the high-end device mix;

partially offset by

• Lower average revenue per device sold primarily due to higher promotions, which included promotions for Sprint customers to facilitate their migration to the T-Mobile network, partially offset by an increase in the high-end phone mix.

Other revenues were essentially flat.

Operating expenses increased $694 million, or 4%.

• An increase in the number of devices sold, including to facilitate the migration of Sprint customers to the T-Mobile network.

Other revenues were essentially flat for the three months ended and increased $89 million, or 19%, for the six months ended June 30, 2022.

The increase for the six months ended June 30, 2022, was primarily from:

• Higher revenue from our device recovery program;

• Higher interest income on our EIP receivables.

Total operating expenses increased $1.1 billion, or 6%, for the three months ended and increased $1.8 billion, or 5%, for the six months ended June 30, 2022.

The components of this change are discussed below.

Cost of services , exclusive of depreciation and amortization, increased $343 million, or 10%, primarily from:

Cost of services , exclusive of depreciation and amortization, increased $569 million, or 16%, for the three months ended and increased $912 million, or 13%, for the six months ended June 30, 2022.

The increase for the three months ended June 30, 2022, was primarily from:

• An increase of $688 million in Merger-related costs related to network decommissioning and integration costs;

• Higher site costs related to the continued build-out of our nationwide 5G network;

partially offset by

• Higher realized Merger synergies.

The increase for the six months ended June 30, 2022, was primarily from:

• An increase of $1.2 billion in Merger-related costs related to network decommissioning and integration costs;

• Higher lease expenses related to a new tower master lease agreement.

See Note 10 - Leases of the Notes to the Condensed Consolidated Financial Statements for additional information;

• Higher site costs related to the continued build-out of our nationwide 5G network;

partially offset by

• Higher realized Merger synergies.

Cost of equipment sales , exclusive of depreciation and amortization, increased $804 million, or 16%, primarily from:

Cost of equipment sales , exclusive of depreciation and amortization, decreased $345 million, or 6%, for the three months ended and increased $459 million, or 4%, for the six months ended June 30, 2022.

The decrease for the three months ended June 30, 2022, was primarily from:

• A decrease of $298 million in customer purchases of leased devices primarily due to a lower number of customer devices under lease as a result of the continued strategic shift from device financing from leasing to EIP;

• A decrease of $35 million in device cost of equipment sales, excluding purchased leased devices, primarily from:

• Lower average costs per device sold;

partially offset by

• An increase in the number of devices sold, driven by devices sold to facilitate the migration of Sprint customers to the T-Mobile network.

• Merger-related costs, primarily to facilitate the migration of Sprint customers to the T-Mobile network, were $459 million for the three months ended June 30, 2022, compared to $87 million for the three months ended June 30, 2021.

The increase for the six months ended June 30, 2022, was primarily from:

• An increase of $952 million in device cost of equipment sales, excluding purchased leased devices, primarily from:

• An increase in the number of devices sold, including higher upgrade volume, primarily to facilitate the migration of Sprint customers to the T-Mobile network;

• An increase in the number of devices sold, including devices sold to facilitate the migration of Sprint customers to the T-Mobile network;

• Higher average costs per device sold due to an increase in the high-end device mix;

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• A decrease of $582 million in customer purchases of leased devices primarily due to a lower number of customer devices under lease as a result of the continued strategic shift from device financing from leasing to EIP.

• Merger-related costs, primarily to facilitate the migration of Sprint customers to the T-Mobile network, were $751 million for the three months ended March 31, 2022, compared to $17 million for the three months ended March 31, 2021.

Selling, general and administrative expenses increased $251 million, or 5%, primarily from:

• Higher bad debt expense primarily due to estimated credit losses normalizing from muted Pandemic levels, as well as higher EIP receivables driven by higher equipment sales and a mix shift in device financing;

• Merger-related costs, primarily to facilitate the migration of Sprint customers to the T-Mobile network, were $1.2 billion for the six months ended June 30, 2022, compared to $104 million for the six months ended June 30, 2021.

Selling, general and administrative expenses increased $1.0 billion, or 21%, for the three months ended and increased $1.3 billion, or 13%, for the six months ended June 30, 2022.

The increase for the three months ended June 30, 2022, was primarily from:

• Higher legal-related expenses, including the settlement of certain litigation associated with the August 2021 cyberattack of $400 million;

• Higher bad debt expense driven by higher receivable balances, as well as normalization relative to muted Pandemic levels a year ago and estimated potential future macroeconomic impacts;

partially offset by

• Higher realized Merger synergies.

• Selling, general and administrative expenses for the three months ended June 30, 2022, included $248 million of Merger-related costs primarily related to integration and restructuring, compared to $251 million of Merger-related costs for the three months ended June 30, 2021.

The increase for the six months ended June 30, 2022, was primarily from:

• Higher legal-related expenses, including the settlement of certain litigation associated with the August 2021 cyberattack of $400 million;

• Higher bad debt expense driven by higher receivable balances, as well as normalization relative to muted Pandemic levels a year ago and estimated potential future macroeconomic impacts;

partially offset by

• Lower Merger-related costs and higher realized Merger synergies.

• Selling, general and administrative expenses for the three months ended March 31, 2022 included $55 million of Merger-related costs primarily related to integration, restructuring and legal-related expenses, offset by legal settlement gains, compared to $145 million of Merger-related costs for the three months ended March 31, 2021.

Depreciation and amortization decreased $704 million, or 16%, primarily from:

• Selling, general and administrative expenses for the six months ended June 30, 2022, included $303 million of Merger-related costs primarily related to integration, restructuring and legal-related expenses, offset by legal settlement gains, compared to $396 million of Merger-related costs for the six months ended June 30, 2021.

Impairment expense was $477 million for the three and six months ended June 30, 2022, due to the non-cash impairment of certain Wireline Property and equipment, Operating lease right-of-use assets and Other intangible assets.

See Note 13 - Additional Financial Information of the Notes to the Condensed Consolidated Financial Statements for additional information.

There was no impairment expense for the three and six months ended June 30, 2021.

Depreciation and amortization decreased $586 million, or 14%, for three months ended and decreased $1.3 billion, or 15%, for the six months ended June 30, 2022, primarily from:

• Lower depreciation expense on leased devices resulting from a lower number of total customer devices under lease;

• Certain 4G-related network assets becoming fully depreciated;

• Certain 4G-related network assets becoming fully depreciated, including assets impacted by the decommissioning of the legacy Sprint CDMA and LTE networks;

partially offset by

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

Operating income , the components of which are discussed above, decreased $333 million, or 16%.

Operating income , the components of which are discussed above, decreased $1.4 billion, or 66%, for the three months ended and decreased $1.7 billion, or 41%, for the six months ended June 30, 2022.

Interest expense, net was essentially flat.

Other expense, net decreased $114 million, or 91%, primarily from lower losses on the extinguishment of debt.

Income before income taxes , the components of which are discussed above, was $931 million and $1.2 billion for the three months ended March 31, 2022 and 2021, respectively.

Income tax expense decreased $28 million, or 11%, primarily from:

Other expense, net was essentially flat for the three months ended and decreased $94 million, or 75%, for the six months ended, June 30, 2022.

The decrease for the six months ended June 30, 2022, was primarily from lower losses on the extinguishment of debt.

(Loss) income before income taxes , the components of which are discussed above, was a loss of $163 million and income of $1.3 billion for the three months ended June 30, 2022 and 2021, respectively, and was income of $768 million and $2.4 billion for the six months ended June 30, 2022 and 2021, respectively.

Income tax expense decreased $332 million, or 120%, for the three months ended and decreased $360 million, or 69%, for the six months ended June 30, 2022.

The decrease for the three months ended June 30, 2022, was primarily from:

• A loss before income taxes for the three months ended June 30, 2022;

partially offset by

• Reduced benefits from state law changes.

Our effective tax rate was 33.6% and 22.0% for the three months ended June 30, 2022 and 2021, respectively.

The decrease for the six months ended June 30, 2022, was primarily from:

• Lower Income before income taxes;

partially offset by

• A higher effective tax rate, primarily from:

• A decrease in excess tax benefits related to the vesting of restricted stock awards;

• Reduced benefits from tax credits.

Our effective tax rate was 23.3% and 20.9% for the three months ended March 31, 2022 and 2021, respectively.

Net income , the components of which are discussed above, decreased $220 million, or 24%, and included the following:

• Merger-related costs, net of tax, of $1.1 billion for the three months ended March 31, 2022, compared to $220 million for the three months ended March 31, 2021.

• Reduced benefits from state law changes.

Our effective tax rate was 21.2% and 21.5% for the six months ended June 30, 2022 and 2021, respectively.

Net (loss) income , the components of which are discussed above, was a loss of $108 million and income of $978 million for the three months ended June 30, 2022 and 2021, respectively, and was income of $605 million and $1.9 billion for the six months ended June 30, 2022 and 2021, respectively, and included the following:

• Merger-related costs, net of tax, of $1.3 billion and $2.3 billion for the three and six months ended June 30, 2022, respectively, compared to $453 million and $673 million for the three and six months ended June 30, 2021, respectively.

• Impairment expense of $358 million, net of tax, for the three and six months ended June 30, 2022, compared to no impairment expense for the three and six months ended June 30, 2021.

• Legal-related expenses, including from the impact of the settlement of certain litigation associated with the August 2021 cyberattack, of $300 million, net of tax, for the three and six months ended June 30, 2022.

Guarantor Financial Information

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

are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Parent and the Guarantor

Subsidiaries, except for the guarantees of Sprint, Sprint Communications and Sprint Capital Corporation, which are provided on a senior unsecured basis.

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

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

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is presented in the table below:

(in millions) March 31, 2022 December 31, 2021

(in millions) June 30, 2022 December 31, 2021

Current assets $ 16,117 $ 19,522

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is presented in the table below:

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

December 31, 2021

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

(in millions) March 31, 2022 December 31, 2021

(in millions) June 30, 2022 December 31, 2021

Current assets $ 8,313 $ 11,969

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

Three Months Ended March 31, 2022 Year Ended

Six Months Ended June 30, 2022 Year Ended

December 31, 2021

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

(in millions) March 31, 2022 December 31, 2021

(in millions) June 30, 2022 December 31, 2021

Current assets $ 8,313 $ 11,969

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The summarized results of operations information for the consolidated obligor group of debt issued by Sprint Capital Corporation is presented in the table below:

Three Months Ended March 31, 2022 Year Ended

Six Months Ended June 30, 2022 Year Ended

December 31, 2021

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

As of March 31, Change

As of June 30, Change

(in thousands) 2022 2021 # %

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27,818 26,363 1,455 6 %

(1) Customers impacted by the decommissioning of the legacy Sprint CDMA network, who did not migrate to the T-Mobile network, have been excluded from our postpaid account base resulting in the removal of 57,000 postpaid accounts in the first quarter of 2022.

(1) Customers impacted by the decommissioning of the legacy Sprint CDMA and LTE and T-Mobile UMTS networks have been excluded from our postpaid account base resulting in the removal of 57,000 postpaid accounts in the first quarter of 2022 and 69,000 postpaid accounts in the second quarter of 2022.

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

Total postpaid customer accounts increased 1,493,000, or 6%, primarily due to the continued focus on growing new relationships with customers driven by higher switching activity and growth in new and under-penetrated segments, including High Speed Internet.

Total postpaid customer accounts increased 1,455,000, or 6%, primarily due to continued growth in High Speed Internet.

Postpaid Net Account Additions

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

Three Months Ended March 31, Change

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

(in thousands) 2022 2021 # % 2022 2021 # %

Postpaid net account additions 380 348 32 9 % 728 605 123 20 %

Postpaid net account additions increased 91,000, or 35%, primarily due to the continued focus on growing new relationships with customers driven by higher switching activity and growth in new and under-penetrated segments, including High Speed Internet.

Postpaid net account additions increased 32,000, or 9%, for the three months ended and increased 123,000, or 20%, for the six months ended June 30, 2022, primarily due to continued growth in High Speed Internet.

A customer is generally defined as a SIM number with a unique T-Mobile identifier which is associated with an account that generates revenue.

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The following table sets forth the number of ending customers:

As of March 31, Change

As of June 30, Change

(in thousands) 2022 2021 # %

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Total customers 110,023 104,789 5,234 5 %

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

Adjustments to customers (1) (2)

(1,878) 12 (1,890) NM

(1) Customers impacted by the decommissioning of the legacy Sprint CDMA network, who did not migrate to the T-Mobile network, have been excluded from our postpaid customer base resulting in the removal of 212,000 postpaid phone customers and 349,000 postpaid other customers in the first quarter of 2022.

(1) The total base adjustment in the second quarter of 2022 was a reduction of 1,320,000 total customers.

Customers impacted by the decommissioning of the legacy Sprint CDMA and LTE and T-Mobile UMTS networks have been excluded from our customer base resulting in the removal of 212,000 postpaid phone customers and 349,000 postpaid other customers in the first quarter of 2022 and 284,000 postpaid phone customers, 946,000 postpaid other customers and 28,000 prepaid customers in the second quarter of 2022.

In connection with our acquisition of companies, we included a base adjustment in the first quarter of 2022 to increase postpaid phone customers by 17,000 and reduce postpaid other customers by 14,000.

Certain customers now serviced through reseller contracts were removed from our reported postpaid customer base resulting in the removal of 42,000 postpaid phone customers and 20,000 postpaid other customers in the second quarter of 2022.

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

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Total customers increased 5,234,000, or 5%, primarily from:

• Higher postpaid phone customers, primarily due to the continued focus on growing new relationships with customers, driven by higher switching activity and growth in new and under-penetrated segments;

• Higher postpaid phone customers, primarily due to growth in new customer account relationships;

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

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partially offset by lower prepaid industry demand associated with continued industry shift to postpaid plans.

Total customers included High Speed Internet customers of 984,000 and 193,000 as of March 31, 2022 and 2021, respectively.

Total customers included High Speed Internet customers of 1,544,000 and 288,000 as of June 30, 2022 and 2021, respectively.

Net Customer Additions

The following table sets forth the number of net customer additions:

Three Months Ended March 31, Change

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

(in thousands) 2022 2021 # % 2022 2021 # %

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Total customers 1,802 1,352 450 33 % 3,182 2,713 469 17 %

Acquired customers, net of base adjustments (558) 12 (570) NM

Adjustments to customers (1,320) — (1,320) NM (1,878) 12 (1,890) NM

NM - Not Meaningful

Total net customer additions increased 19,000, or 1%, primarily from:

• Higher postpaid other net customer additions, primarily due to an increase in High Speed Internet customers, connected devices and wearables;

Total net customer additions increased 450,000, or 33%, for the three months ended and increased 469,000, or 17%, for the six months ended June 30, 2022.

The increase for the three months ended June 30, 2022, was primarily from:

• Higher postpaid other net customer additions primarily due to an increase in High Speed Internet net customer additions;

• Higher postpaid phone net customer additions primarily due to higher gross additions driven by growth in new customer account relationships and lower churn, partially offset by lower migrations of prepaid to postpaid plans;

• Higher prepaid net customer additions primarily due to the introduction of our High Speed Internet offering, higher gross additions, lower churn and lower migrations to postpaid plans.

• High Speed Internet net customer additions included in postpaid other net customer additions were 497,000 and 95,000 for the three months ended June 30, 2022 and 2021, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 63,000 for the three months ended June 30, 2022.

Our prepaid High Speed Internet launch was in the first quarter of 2022, therefore there were no prepaid High Speed Internet net customer additions for the three months ended June 30, 2021.

The increase for the six months ended June 30, 2022, was primarily from:

• Higher postpaid other net customer additions primarily due to an increase in High Speed Internet net customer additions, connected devices and wearables;

partially offset by

• Lower postpaid phone net customer additions driven by a focus on deepening Sprint customer relationships in the prior year in order to decrease churn, as Sprint customers historically had fewer lines per account, partially offset by higher industry switching activity and lower churn;

• Lower prepaid net customer additions associated with the continued industry shift to postpaid plans, partially offset by lower churn.

• High Speed Internet net customer additions included in postpaid other net customer additions were 329,000 and 93,000 for the three months ended March 31, 2022 and 2021, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 9,000 for the three months ended March 31, 2022.

There were no prepaid High Speed Internet customer additions for the three months ended March 31, 2021.

• Lower prepaid net customer additions associated with the continued industry shift to postpaid plans, partially offset by the introduction of our High Speed Internet offering and lower churn.

• High Speed Internet net customer additions included in postpaid other net customer additions were 826,000 and 188,000 for the six months ended June 30, 2022 and 2021, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 72,000 for the six months ended June 30, 2022.

Our prepaid High Speed Internet launch was in the first quarter of 2022, therefore there were no prepaid High Speed Internet net customer additions for the six months ended June 30, 2021.

Churn represents the number of customers whose service was disconnected as a percentage of the average number of customers during the specified period further divided by the number of months in the period.

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The following table sets forth the churn:

Three Months Ended March 31, Change

Postpaid phone churn 0.93 % 0.98 % -5 bps

Prepaid churn 2.67 % 2.78 % -11 bps

Postpaid phone churn decreased 5 basis points, primarily from:

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2022 2021 2022 2021

Postpaid phone churn 0.80 % 0.87 % -7 bps 0.86 % 0.92 % -6 bps

Prepaid churn 2.58 % 2.62 % -4 bps 2.62 % 2.70 % -8 bps

Postpaid phone churn decreased 7 basis points for three months ended and decreased 6 basis points for the six months ended June 30, 2022, primarily from:

• Reduced Sprint churn as we progress through the integration process;

partially offset by

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

Prepaid churn decreased 11 basis points, primarily from:

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

Prepaid churn decreased 4 basis points for the three months ended and decreased 8 basis points for the six months ended June 30, 2022, primarily from:

• Promotional activity;

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The following table sets forth our operating measure ARPA:

(in dollars) Three Months Ended March 31, Change

(in dollars) Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2022 2021 $ % 2022 2021 $ %

Postpaid ARPA $ 137.92 $ 133.55 $ 4.37 3 % $ 137.23 $ 133.23 $ 4.00 3 %

Postpaid ARPA increased $3.62, or 3%, primarily from:

Postpaid ARPA increased $4.37, or 3%, for the three months ended and increased $4.00, or 3%, for the six months ended June 30, 2022, primarily due to:

• Higher premium services, including Magenta Max;

• An increase in customers per account, including from the success of High Speed Internet.

partially offset by

• Increased promotional activity.

Average Revenue Per User

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The following table sets forth our operating measure ARPU:

(in dollars) Three Months Ended March 31, Change

(in dollars) Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2022 2021 $ % 2022 2021 $ %

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Postpaid Phone ARPU

Postpaid phone ARPU increased $1.11, or 2%, and was primarily impacted by:

Postpaid phone ARPU increased $1.35, or 3%, for the three months ended and increased $1.24, or 3%, for the six months ended June 30, 2022, primarily due to:

• Higher premium services, including Magenta Max.

Prepaid ARPU increased slightly for the three and six months ended June 30, 2022, primarily due to:

• Higher premium services;

partially offset by

• Increased promotional activity.

Prepaid ARPU increased $1.38, or 4%, primarily due to higher premium services.

Adjusted EBITDA and Core Adjusted EBITDA

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

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

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

Management believes analysts and investors use Core Adjusted EBITDA because it normalizes for the transition in the Company’s device financing strategy, by excluding the impact of device lease revenues from Adjusted EBITDA, to align with the exclusion of the related depreciation expense on leased devices from Adjusted EBITDA.

Adjusted EBITDA, Adjusted EBITDA margin, Core Adjusted EBITDA and Core Adjusted EBITDA margin have limitations as analytical tools and should not be considered in isolation or as substitutes for income from operations, net income or any other measure of financial performance reported in accordance with GAAP.

The following table illustrates the calculation of Adjusted EBITDA and Core Adjusted EBITDA and reconciles Adjusted EBITDA and Core Adjusted EBITDA to Net income, which we consider to be the most directly comparable GAAP financial measure:

Three Months Ended March 31, Change

The following table illustrates the calculation of Adjusted EBITDA and Core Adjusted EBITDA and reconciles Adjusted EBITDA and Core Adjusted EBITDA to Net (loss) income, which we consider to be the most directly comparable GAAP financial measure:

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

(in millions) 2022 2021 $ % 2022 2021 $ %

Net income $ 713 $ 933 $ (220) (24) %

Net (loss) income $ (108) $ 978 $ (1,086) (111) % $ 605 $ 1,911 $ (1,306) (68) %

Interest expense, net 851 850 1 — % 1,715 1,685 30 2 %

Other expense, net 21 1 20 2,000 % 32 126 (94) (75) %

Income tax expense 218 246 (28) (11) %

Income tax (benefit) expense (55) 277 (332) (120) % 163 523 (360) (69) %

Operating income 709 2,106 (1,397) (66) % 2,515 4,245 (1,730) (41) %

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Merger-related costs 1,668 611 1,057 173 % 3,081 909 2,172 239 %

Impairment expense 477 — 477 NM 477 — 477 NM

Legal-related expenses (2)

400 — 400 NM 400 — 400 NM

Other, net (3)

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$ 6,618 $ 5,992 $ 626 10 % $ 13,081 $ 11,856 $ 1,225 10 %

Net income margin (Net income divided by Service revenues) 5 % 7 % -200 bps

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

Net (loss) income margin (Net (loss) income divided by Service revenues) (1) % 7 % -800 bps 2 % 7 % -500 bps

Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues) 46 % 48 % -200 bps 46 % 48 % -200 bps

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

43 % 41 % 200 bps

43 % 41 % 200 bps 43 % 41 % 200 bps

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

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

(2) Other, net may not agree with the Condensed Consolidated Statements of Comprehensive Income primarily due to certain non-routine operating activities, such as other special items that would not be expected to reoccur or are not reflective of T-Mobile’s ongoing operating performance, and are, therefore, excluded from Adjusted EBITDA and Core Adjusted EBITDA.

Core Adjusted EBITDA increased $599 million, or 10%, for the three months ended March 31, 2022.

(2) Legal-related expenses consists of the settlement of certain litigation associated with the August 2021 cyberattack.

(3) Other, net, primarily consists of certain severance, restructuring and other expenses and income not directly attributable to the Merger which would not be expected to reoccur or are not reflective of T-Mobile’s ongoing operating performance, and are, therefore, excluded from Adjusted EBITDA and Core Adjusted EBITDA.

Core Adjusted EBITDA increased $626 million, or 10%, for the three months ended and increased $1.2 billion, or 10%, for the six months ended June 30, 2022.

The components comprising Core Adjusted EBITDA are discussed further above.

The increase was primarily due to:

The increase for the three months ended June 30, 2022, was primarily due to:

• Higher Total service revenues;

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

• Lower Cost of services, excluding Merger-related costs;

partially offset by

• Higher Selling, general and administrative expenses, excluding Merger-related costs;

• Lower Equipment revenues, excluding lease revenues;

Adjusted EBITDA increased $45 million, or 1%, for the three months ended March 31, 2022.

The change was primarily due to the increase in Core Adjusted EBITDA, discussed above, partially offset by a decrease in Lease revenues of $554 million for the three months ended March 31, 2022.

• Higher Selling, general and administrative expenses, excluding Merger-related costs and other special expense items.

The increase for the six months ended June 30, 2022, was primarily due to:

• Higher Total service revenues;

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

• Lower Cost of services, excluding Merger-related costs;

partially offset by

• Higher Selling, general and administrative expenses, excluding Merger-related costs and other special expense items;

• Lower Equipment revenues, excluding lease revenues.

Adjusted EBITDA was relatively flat for the three and six months ended June 30, 2022.

The slight increases were primarily due to the fluctuations in Core Adjusted EBITDA, discussed above, including changes in Lease revenues.

Lease revenues decreased $528 million for the three months ended and decreased $1.1 billion for the six months ended June 30, 2022.

Liquidity and Capital Resources

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

Our principal sources of liquidity are our cash and cash equivalents and cash generated from operations, proceeds from issuance of debt, financing leases, the sale of certain receivables and the Revolving Credit Facility (as defined below).

Further, the incurrence of additional indebtedness may inhibit our ability to incur new debt under the terms governing our existing and future indebtedness, which may make it more difficult for us to incur new debt in the future to finance our business strategy.

The following is a condensed schedule of our cash flows:

Three Months Ended March 31, Change

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

(in millions) 2022 2021 $ % 2022 2021 $ %

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Operating Activities

Net cash provided by operating activities increased $184 million, or 5%, primarily from:

• A $1.0 billion decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Accounts payable and accrued liabilities, Short- and long-term operating lease liabilities and Operating lease right-of-use assets, partially offset by higher use of cash from Accounts receivable and Inventories;

Net cash provided by operating activities increased $430 million, or 11%, for the three months ended and increased $614 million, or 8%, for the six months ended June 30, 2022.

The increase for the three months ended June 30, 2022, was primarily from:

• A $1.5 billion decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Operating lease right-of-use assets, Equipment installment plan receivables, Accounts receivable, Short- and long-term operating lease liabilities and Other current and long-term liabilities, partially offset by higher use of cash from Inventories;

partially offset by

• An $820 million decrease in Net income, adjusted for non-cash income and expense.

• Net cash provided by operating activities includes $893 million and $277 million in net payments for Merger-related costs for the three months ended March 31, 2022 and 2021, respectively.

• A $1.1 billion decrease in Net income, adjusted for non-cash income and expense.

• Net cash provided by operating activities includes the impact of $907 million and $190 million in net payments for Merger-related costs for the three months ended June 30, 2022 and 2021, respectively.

The increase for the six months ended June 30, 2022, was primarily from:

• A $2.5 billion decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Accounts payable and accrued liabilities, Short- and long-term operating lease liabilities, Operating lease right-of-use assets and Equipment installment plan receivables, partially offset by higher use of cash from Accounts receivable and Inventories;

partially offset by

• A $1.9 billion decrease in Net income, adjusted for non-cash income and expense.

• Net cash provided by operating activities includes the impact of $1.8 billion and $467 million in net payments for Merger-related costs for the six months ended June 30, 2022 and 2021, respectively.

Investing Activities

Net cash used in investing activities decreased $6.1 billion, or 55%.

The use of cash was primarily from:

• $3.4 billion in Purchases of property and equipment, including capitalized interest, from network integration related to the Merger and the accelerated build-out of our nationwide 5G network;

Net cash used in investing activities increased $476 million, or 23%, for the three months ended and decreased $5.7 billion, or 43%, for the six months ended June 30, 2022.

The use of cash for the three months ended June 30, 2022, was primarily from:

• $3.6 billion in Purchases of property and equipment, including capitalized interest, from the accelerated build-out of our nationwide 5G network, including from network integration related to the Merger;

partially offset by

• $1.1 billion in Proceeds related to beneficial interests in securitization transactions.

The use of cash for the six months ended June 30, 2022, was primarily from:

• $7.0 billion in Purchases of property and equipment, including capitalized interest, from the accelerated build-out of our nationwide 5G network, including from network integration related to the Merger;

• $3.0 billion in Purchases of spectrum licenses and other intangible assets, including deposits, primarily due to $2.8 billion paid for spectrum licenses won at the conclusion of Auction 110 in February 2022;

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Financing Activities

Net cash provided by financing activities decreased $6.0 billion, or 155%.

The use of cash was primarily from:

Net cash used in financing activities increased $1.2 billion, or 202%, for the three months ended June 30, 2022, and increased $7.2 billion from a net source of cash for the six months ended June 30, 2021, to a net use of cash for the six months ended June 30, 2022.

The use of cash for the three months ended June 30, 2022, was primarily from:

• $1.4 billion in Repayments of long-term debt;

• $288 million in Repayments of financing lease obligations.

The use of cash for the six months ended June 30, 2022, was primarily from:

• $3.0 billion in Repayments of long-term debt;

• $590 million in Repayments of financing lease obligations;

• $215 million in Tax withholdings on share-based awards.

Cash and Cash Equivalents

As of March 31, 2022, our Cash and cash equivalents were $3.2 billion compared to $6.6 billion at December 31, 2021.

As of June 30, 2022, our Cash and cash equivalents were $3.2 billion compared to $6.6 billion at December 31, 2021.

Free Cash Flow

Free Cash Flow represents Net cash provided by operating activities less cash payments for Purchases of property and equipment, including Proceeds related to beneficial interests in securitization transactions, less Cash payments for debt prepayment or debt extinguishment.

Free Cash Flow represents Net cash provided by operating activities less cash payments for Purchases of property and equipment, including Proceeds from sales of tower sites and Proceeds related to beneficial interests in securitization transactions, less Cash payments for debt prepayment or debt extinguishment.

Free Cash Flow is a non-GAAP financial measure utilized by management, investors and analysts of our financial information to evaluate cash available to pay debt and provide further investment in the business.

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be the most directly comparable GAAP financial measure.

Three Months Ended March 31, Change

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

(in millions) 2022 2021 $ % 2022 2021 $ %

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Cash purchases of property and equipment (3,572) (3,270) (302) 9 % (6,953) (6,453) (500) 8 %

Proceeds from sales of tower sites — 31 (31) (100) % — 31 (31) (100) %

Proceeds related to beneficial interests in securitization transactions 1,121 1,137 (16) (1) % 2,306 2,028 278 14 %

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Free Cash Flow $ 1,758 $ 1,671 $ 87 5 % $ 3,407 $ 2,975 $ 432 15 %

Free Cash Flow increased $345 million, or 26%.

The increase was primarily impacted by the following:

• Higher Proceeds related to beneficial interests in securitization transactions;

Free Cash Flow increased $87 million, or 5%, for the three months ended and increased $432 million, or 15%, for the six months ended June 30, 2022.

The increase for the three months ended June 30, 2022, was primarily impacted by the following:

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

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

• Free Cash Flow includes $893 million and $277 million in net payments for Merger-related costs for the three months ended March 31, 2022 and 2021, respectively.

• Free Cash Flow includes $907 million and $190 million in net payments for Merger-related costs for the three months ended June 30, 2022 and 2021, respectively.

The increase for the six months ended June 30, 2022, was primarily impacted by the following:

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

• Higher Proceeds related to beneficial interests in securitization transactions;

partially offset by

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

• Free Cash Flow includes $1.8 billion and $467 million in net payments for Merger-related costs for the six months ended June 30, 2022 and 2021, respectively.

Borrowing Capacity

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

As of March 31, 2022, there was no outstanding balance under the Revolving Credit Facility.

As of June 30, 2022, there was no outstanding balance under the Revolving Credit Facility.

Debt Financing

As of March 31, 2022, our total debt and financing lease liabilities were $75.0 billion, excluding our tower obligations, of which $68.4 billion was classified as long-term debt and $1.4 billion was classified as long-term financing lease liabilities.

During the three months ended March 31, 2022, we repaid short- and long-term debt with an aggregate principal amount of $1.6 billion.

There were no new issuances or borrowings during the three months ended March 31, 2022.

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.

As of June 30, 2022, our total debt and financing lease liabilities were $73.8 billion, excluding our tower obligations, of which $68.0 billion was classified as long-term debt and $1.6 billion was classified as long-term financing lease liabilities.

During the six months ended June 30, 2022, we repaid short- and long-term debt with an aggregate principal amount of $3.0 billion.

There were no new issuances or borrowings during the six months ended June 30, 2022.

For more information regarding our debt financing transactions, see Note 6 – Debt of the Notes to the Condensed Consolidated Financial Statements.

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We have arrangements, as amended from time to time, to sell certain EIP accounts receivable and service accounts receivable on a revolving basis as a source of liquidity.

As of March 31, 2022, we derecognized net receivables of $2.5 billion upon sale through these arrangements.

As of June 30, 2022, we derecognized net receivables of $2.3 billion upon sale through these arrangements.

For more information regarding these off-balance sheet arrangements, see Note 3 – Sales of Certain Receivables of the Notes to the Condensed Consolidated Financial Statements.

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

Excluding liquidity that could be needed for spectrum acquisitions, or for other assets, we expect our principal sources of funding to be sufficient to meet our anticipated liquidity needs for business operations for the next 12 months as well as our longer-term liquidity needs.

Excluding liquidity that could be needed for spectrum acquisitions, other assets or for any potential shareholder returns, we expect our principal sources of funding to be sufficient to meet our anticipated liquidity needs for business operations for the next 12 months as well as our longer-term liquidity needs.

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

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However, the Issuers or borrowers are allowed to make certain permitted payments to Parent under the terms of each of the credit agreements, indentures and supplemental indentures relating to the long-term debt to affiliates and third parties.

We were in compliance with all restrictive debt covenants as of March 31, 2022.

We were in compliance with all restrictive debt covenants as of June 30, 2022.

Financing Lease Facilities

We have entered into uncommitted financing lease facilities with certain third parties that provide us with the ability to enter into financing leases for network equipment and services.

As of March 31, 2022, we have committed to $6.6 billion of financing leases under these financing lease facilities, of which $299 million was executed during the three months ended March 31, 2022.

As of June 30, 2022, we have committed to $7.2 billion of financing leases under these financing lease facilities, of which $536 million and $836 million was executed during the three and six months ended June 30, 2022, respectively.

We expect to enter into up to an additional $364 million in financing lease commitments during the year ending December 31, 2022.

Capital Expenditures

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

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

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

We expect a reduction in capital expenditures related to these efforts following 2022.

Future capital expenditure requirements will include the deployment of our recently acquired C-band and 3.45 GHz licenses.

For more information regarding our spectrum licenses, see Note 4 – Spectrum License Transactions of the Notes to the Condensed Consolidated Financial Statements.

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Related Party Transactions

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

As of April 29, 2022, DT and SoftBank held, directly or indirectly, approximately 48.3% and 3.2%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.5% of the outstanding T-Mobile common stock held by other stockholders.

As a result of the Proxy, Lock-Up and ROFR Agreement, dated April 1, 2020, by and between DT and SoftBank and the Proxy, Lock-Up and ROFR Agreement, dated June 22, 2020, by and among DT, Claure Mobile LLC, and Marcelo Claure, DT has voting control, as of April 29, 2022, over approximately 51.8% of the outstanding T-Mobile common stock.

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

SoftBank and its affiliates are no longer deemed related parties to us pursuant to our Related Person Transaction Policy.

As of July 22, 2022, DT and SoftBank held, directly or indirectly, approximately 48.3% and 3.2%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.5% of the outstanding T-Mobile common stock held by other stockholders.

As a result of the Proxy, Lock-Up and ROFR Agreement, dated April 1, 2020, by and between DT and SoftBank and the Proxy, Lock-Up and ROFR Agreement, dated June 22, 2020, by and among DT, Claure Mobile LLC, and Marcelo Claure, DT has voting control, as of July 22, 2022, over approximately 51.8% of the outstanding T-Mobile common stock.

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

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affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S.

As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the three months ended March 31, 2022, that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below with respect to affiliates that we do not control and that are our affiliates solely due to their common control with either DT or SoftBank.

As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the three months ended June 30, 2022, that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below with respect to affiliates that we do not control and that are our affiliates solely due to their common control with either DT or SoftBank.

We have relied upon DT and SoftBank for information regarding their respective activities, transactions and dealings.

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Irancell Telecommunications Services Company, Telecommunication Kish Company, Mobile Telecommunication Company of Iran, and Telecommunication Infrastructure Company of Iran.

In addition, during the three months ended March 31, 2022, DT, through certain of its non-U.S.

In addition, during the three months ended June 30, 2022, DT, through certain of its non-U.S.

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

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

For the three months ended March 31, 2022, gross revenues of all DT affiliates generated by roaming and

interconnection traffic and telecommunications services with the Iranian parties identified herein were less than $0.1 million, and the estimated net profits were less than $0.1 million.

For the three months ended June 30, 2022, gross revenues of all DT affiliates generated by roaming and interconnection traffic and telecommunications services with the Iranian parties identified herein were less than $0.1 million, and the estimated net profits were less than $0.1 million.

In addition, DT, through certain of its non-U.S.

subsidiaries that operate a fixed-line network in their respective European home countries (in particular Germany), provides telecommunications services in the ordinary course of business to the Embassy of Iran in those European countries.

Gross revenues and net profits recorded from these activities for the three months ended March 31, 2022 were less than $0.1 million.

Gross revenues and net profits recorded from these activities for the three months ended June 30, 2022 were less than $0.1 million.

We understand that DT intends to continue these activities.

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

During the three months ended March 31, 2022, SoftBank had no gross revenues from such services and no net profit was generated.

During the three months ended June 30, 2022, SoftBank had no gross revenues from such services and no net profit was generated.

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

This subsidiary also provides telecommunications services in the ordinary course of business to accounts affiliated with the Embassy of Iran in Japan.

During the three months ended March 31, 2022, SoftBank estimates that gross revenues and net profit generated by such services were both under $0.1 million.

During the three months ended June 30, 2022, SoftBank estimates that gross revenues and net profit generated by such services were both under $0.1 million.

We understand that the SoftBank subsidiary is obligated under contract and intends to continue such services.

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indirect subsidiaries, provides office supplies to the Embassy of Iran in Japan.

SoftBank estimates that gross revenue and net profit generated by such services during the three months ended March 31, 2022, were both under $0.1 million.

SoftBank estimates that gross revenue and net profit generated by such services during the three months ended June 30, 2022, were both under $0.1 million.

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

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis