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Item 2. Management’s Discussion and Analysis

2022-10-27 compared with 2022-07-29 · 297 added, 223 removed, 466 unchanged (53% of the section changed)

20 unchanged sentences

• our inability to manage the ongoing commercial and transition services arrangements entered into in connection with the Prepaid Transaction, and known or unknown liabilities arising in connection therewith;

• the effects of any future acquisition, investment, or merger involving us;

• the timing and effects of any future acquisition, disposition, investment, or merger involving us;

• any disruption or failure of our third parties (including key suppliers) to provide products or services for the operation of our business;

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• future sales of our common stock by DT and SoftBank and our inability to attract additional equity financing outside the United States due to foreign ownership limitations by the FCC;

• our 2022 Stock Repurchase Program (as defined in Note 9 – Repurchases of Common Stock of the Notes to the Condensed Consolidated Financial Statements) may not be fully consummated, and our share repurchase program may not enhance long-term stockholder value;

• failure to realize the expected benefits and synergies of the merger (the “Merger”) with Sprint, pursuant to the Business Combination Agreement with Sprint and the other parties named therein (as amended, the “Business Combination Agreement”) and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”) in the expected time frames or in the amounts anticipated;

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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 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.

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 nine months ended September 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.

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(in millions) Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2022 2021 $ % 2022 2021 $ %

1 unchanged sentence

Cost of services, exclusive of depreciation and amortization $ 812 $ 279 $ 533 191 % $ 2,380 $ 688 $ 1,692 246 %

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

Cost of equipment sales, exclusive of depreciation and amortization 258 236 22 9 % 1,468 340 1,128 332 %

Selling, general and administrative 226 440 (214) (49) % 529 836 (307) (37) %

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Net cash payments for Merger-related costs $ 942 $ 617 $ 325 53 % $ 2,742 $ 1,084 $ 1,658 153 %

NM - Not Meaningful

We expect to incur a total of $12.0 billion of Merger-related costs, excluding capital expenditures, of which $10.9 billion has been incurred since the beginning of 2018, including $700 million of costs incurred by Sprint prior to the Merger.

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 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 expect to incur the remaining $1.1 billion to complete our integration and restructuring activities over the next year with substantially all costs incurred by the end of 2023.

Total Merger-related costs for the year ending December 31, 2022, are expected to be between $4.8 billion to $5.0 billion, including $1.3 billion and $4.4 billion incurred during the three and nine months ended September 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.

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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.

As of September 30, 2022, we have decommissioned substantially all targeted Sprint macro sites.

To allow for the realization of these synergies associated with network integration, we retired certain legacy networks, including the legacy Sprint CDMA network in the second quarter and the LTE network in the third 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.

See the “ Performance Measures ” section of this MD&A for more details.

Restructuring

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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.

For full-year 2022, we expect Merger synergies from Selling, general and administrative expense reductions of $2.4 billion, Cost of service expense reductions of $2.0 billion to $2.1 billion and avoided network expenses of $1.3 billion.

Wireline Impacts

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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

For more information regarding this non-cash impairment, see Note 10 – Wireline of the Notes to the Condensed Consolidated Financial Statements.

On September 6, 2022, we entered into a Purchase Agreement to sell the Wireline Business for a total purchase price of $1.

In addition, at the consummation of the Wireline Transaction, we will enter into an agreement for IP transit services for $700 million.

Subject to the satisfaction or waiver of certain conditions and the other terms and conditions of the Purchase Agreement, the Wireline Transaction is expected to close in the second half of 2023.

As a result of the Purchase Agreement and related anticipated Wireline Transaction, we concluded that the Wireline Business met the held for sale criteria upon entering into the Purchase Agreement.

As such, the assets and liabilities of the Wireline Business disposal group are classified as held for sale and presented within Other current assets and Other current liabilities on our Condensed Consolidated Balance Sheets as of September 30, 2022.

In connection with the expected sale of the Wireline Business and classification of related assets and liabilities as held for sale, we recognized a pre-tax loss of $1.1 billion during the three and nine months ended September 30, 2022, which is included within Loss on disposal group held for sale on our Condensed Consolidated Statements of Comprehensive Income.

The fair value of the Wireline Business disposal group, less costs to sell, will be reassessed during each reporting period it remains classified as held for sale, and any remeasurement to the lower of carrying amount or fair value less costs to sell will be reported as an adjustment to the Loss on disposal group held for sale.

For more information regarding the Purchase Agreement to sell the Wireline Business, see Note 10 – Wireline 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.

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Our forensic investigation was completed in October 2021.

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 – Commitments and Contingencies .

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.

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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.

During the three and nine months ended September 30, 2022, we recognized $50 million in reimbursements from insurance carriers for costs incurred related to the August 2021 cyberattack.

We are pursuing additional reimbursements from insurance carriers for costs incurred related to the August 2021 cyberattack.

COVID-19 Pandemic and Other Macroeconomic Trends

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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.

Other macroeconomic trends may result in adverse impacts on our business, and we continue to monitor these potential impacts, including higher inflation, rising interest rates, potential economic recession and changes in the Federal Reserve’s monetary policy and 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.

Inflation Reduction Act

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law.

The IRA includes several changes to existing tax law, including a minimum tax on adjusted financial statement income of applicable corporations and an excise tax on certain corporate stock buybacks.

The tax provisions included in the IRA are generally effective beginning January 1, 2023, and no significant impact to the 2022 consolidated financial statements is anticipated.

Management continues to review the IRA tax provisions to assess impacts to our future consolidated financial statements.

Results of Operations

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

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

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Impairment expense — — — NM 477 — 477 NM

Loss on disposal group held for sale 1,071 — 1,071 NM 1,071 — 1,071 NM

Depreciation and amortization 3,313 4,145 (832) (20) % 10,389 12,511 (2,122) (17) %

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Total other expense, net (830) (896) 66 (7) % (2,577) (2,707) 130 (5) %

(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) %

Income before income taxes 451 688 (237) (34) % 1,219 3,122 (1,903) (61) %

Income tax benefit (expense) 57 3 54 NM (106) (520) 414 (80) %

Net income $ 508 $ 691 $ (183) (26) % $ 1,113 $ 2,602 $ (1,489) (57) %

Statement of Cash Flows Data

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Net cash used in investing activities (2,555) (4,152) 1,597 (38) % (10,206) (17,474) 7,268 (42) %

Net cash (used in) provided by financing activities (1,744) (577) (1,167) 202 % (3,880) 3,297 (7,177) (218) %

Net cash provided by (used in) financing activities 1,927 (3,060) 4,987 (163) % (1,953) 237 (2,190) NM

Non-GAAP Financial Measures

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

Total revenues decreased slightly for the three months ended and were relatively flat for the nine months ended September 30, 2022.

The components of these changes are discussed below.

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:

Postpaid revenues increased $744 million, or 7%, for the three months ended and increased $2.6 billion, or 8%, for the nine months ended September 30, 2022, primarily from:

• Higher average postpaid accounts;

1 unchanged sentence

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

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:

Prepaid revenues were flat for the three months ended and increased $149 million, or 2%, for the nine months ended September 30, 2022.

The increase for the nine months ended September 30, 2022, was primarily from:

• Higher average prepaid customers;

1 unchanged sentence

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 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;

Wholesale and other service revenues decreased $108 million, or 8%, for the three months ended and decreased $345 million, or 8%, for the nine months ended September 30, 2022.

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

• Lower MVNO and Wireline revenues.

The decrease for the nine months ended September 30, 2022, was primarily from:

• Lower advertising, Wireline and MVNO 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;

Equipment revenues decreased $805 million, or 17%, for the three months ended and decreased $2.5 billion, or 17%, for the nine months ended September 30, 2022.

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

• A decrease of $458 million in lease revenues and a decrease of $158 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 in device financing from leasing to EIP;

• A decrease of $102 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;

• A decrease in the number of devices sold due to fewer prepaid and postpaid upgrades;

• An increase in contra-revenue primarily driven by higher imputed interest rates on equipment installment plans, which is recognized in Other revenues over the device financing term;

partially offset by

• 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;

• Higher average revenue per device sold primarily due to an increase in the high-end phone mix.

The decrease for the nine months ended September 30, 2022, was primarily from:

• A decrease of $1.5 billion in lease revenues and a decrease of $493 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 in device financing from leasing to EIP;

• A decrease of $310 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;

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

• An increase in contra-revenue primarily driven by higher imputed interest rates on equipment installment plans, which is recognized in Other revenues over the device financing term;

partially offset by

• 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.

• An increase in the number of devices sold, including higher upgrade volume for Sprint customers to facilitate their migration to the T-Mobile network, partially offset by lower prepaid upgrades.

Other revenues increased slightly for the three months ended and increased $108 million, or 15%, for the nine months ended September 30, 2022.

The increase for the nine months ended September 30, 2022, was primarily from:

• Higher interest income driven by higher imputed interest rates on equipment installment plans which is recognized over the device financing term.

Total operating expenses increased slightly for the three months ended and increased $2.0 billion, or 4%, for the nine months ended September 30, 2022.

The components of this change are discussed below.

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:

Cost of services , exclusive of depreciation and amortization, increased $174 million, or 5%, for the three months ended and increased $1.1 billion, or 10%, for the nine months ended September 30, 2022.

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

• An increase of $533 million in Merger-related costs related to network decommissioning and integration costs;

2 unchanged sentences

• Higher realized Merger synergies.

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

The increase for the nine months ended September 30, 2022, was primarily from:

• An increase of $1.7 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;

1 unchanged sentence

• Higher realized Merger synergies.

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;

Cost of equipment sales , exclusive of depreciation and amortization, decreased $163 million, or 3%, for the three months ended and increased $296 million, or 2%, for the nine months ended September 30, 2022.

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

• A decrease of $225 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 in device financing from leasing to EIP;

• A decrease of $81 million in device cost of equipment sales, excluding purchased leased devices, primarily from:

• Lower average costs per device sold;

• A decrease in the number of devices sold due to fewer prepaid and postpaid upgrades;

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:

• Higher average cost per device sold, driven by an increase in the high-end phone mix;

partially offset by

• Higher device insurance claims and warranty fulfillment.

• Merger-related costs, primarily to facilitate the migration of Sprint customers to the T-Mobile network, were $258 million for the three months ended September 30, 2022, compared to $236 million for the three months ended September 30, 2021.

The increase for the nine months ended September 30, 2022, was primarily from:

• An increase of $871 million in device cost of equipment sales, excluding purchased leased devices, primarily from:

• 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;

• 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, partially offset by lower prepaid upgrades;

• Higher device insurance claims and warranty fulfillment;

partially offset by

• 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 $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;

• A decrease of $807 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 in device financing from leasing to EIP.

• Merger-related costs, primarily to facilitate the migration of Sprint customers to the T-Mobile network, were $1.5 billion for the nine months ended September 30, 2022, compared to $340 million for the nine months ended September 30, 2021.

Selling, general and administrative expenses decreased $94 million, or 2%, for the three months ended and increased $1.2 billion, or 8%, for the nine months ended September 30, 2022.

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

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

• Gains from the sale of certain IP addresses held by the Wireline Business;

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.

• Selling, general and administrative expenses for the three months ended September 30, 2022, included $226 million of Merger-related costs, primarily related to integration and restructuring, compared to $440 million of Merger-related costs for the three months ended September 30, 2021.

The increase for the nine months ended September 30, 2022, was primarily from:

• 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;

• Higher legal-related expenses, net of recoveries, including $400 million recognized in June 2022 for the settlement of certain litigation associated with the August 2021 cyberattack;

partially offset by

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

• 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:

• Higher realized Merger synergies and lower Merger-related costs;

• Gains from the sale of certain IP addresses held by the Wireline Business

• Selling, general and administrative expenses for the nine months ended September 30, 2022, included $529 million of Merger-related costs, primarily related to integration, restructuring and legal-related expenses, offset by legal settlement gains, compared to $836 million of Merger-related costs for the nine months ended September 30, 2021.

Impairment expense was $477 million for the nine months ended September 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 10 - Wireline of the Notes to the Condensed Consolidated Financial Statements for additional information.

There was no impairment expense for the three months ended September 30, 2022, or the three and nine months ended September 30, 2021.

Loss on disposal group held for sale was $1.1 billion for the three and nine months ended September 30, 2022, due to the agreement for the sale of the Wireline Business.

See Note 10 - Wireline of the Notes to the Condensed Consolidated Financial Statements for additional information.

There was no loss on disposal group held for sale for the three and nine months ended September 30, 2021.

Depreciation and amortization decreased $832 million, or 20%, for the three months ended and decreased $2.1 billion, or 17%, for the nine months ended September 30, 2022, primarily from:

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

2 unchanged sentences

• 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 $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 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;

Operating income , the components of which are discussed above, decreased $303 million, or 19%, for the three months ended and decreased $2.0 billion, or 35%, for the nine months ended September 30, 2022.

Interest expense, net was essentially flat and was impacted by the following:

• Lower average debt outstanding and a lower average effective interest rate due to the retirement of higher interest rate debt and the issuance of a lower gross principal amount of lower interest rate debt;

• Lower capitalized interest related to the deployment of our 600 MHz spectrum.

Other expense, net decreased $57 million, or 95%, for the three months ended and decreased $151 million, or 81%, for the nine months ended September 30, 2022.

The decrease for the three and nine months ended September 30, 2022, was primarily from lower losses on the extinguishment of debt.

Income before income taxes , the components of which are discussed above, was $451 million and $688 million for the three months ended September 30, 2022 and 2021, respectively, and was $1.2 billion and $3.1 billion for the nine months ended September 30, 2022 and 2021, respectively.

Income tax benefit increased $54 million for the three months ended September 30, 2022 primarily from:

• Tax benefits associated with internal restructuring;

• Lower Income before income taxes;

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:

• Tax benefits recognized in the third quarter of 2021 associated with legal entity reorganization related to historical Sprint entities, including a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions, that did not impact 2022.

Our effective tax rate was (12.4)% and (0.3)% for the three months ended September 30, 2022 and 2021, respectively.

Income tax expense decreased $414 million, or 80%, for the nine months ended September 30, 2022, primarily from:

• Lower Income before income taxes;

• Tax benefits associated with internal restructuring;

partially offset by

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

• 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.

Our effective tax rate was 8.7% and 16.7% for the nine months ended September 30, 2022 and 2021, respectively.

Net income , the components of which are discussed above, was $508 million and $691 million for the three months ended September 30, 2022 and 2021, respectively, and was $1.1 billion and $2.6 billion for the nine months ended September 30, 2022 and 2021, respectively.

Net income for the three months ended September 30, 2022, included the following:

• Merger-related costs, net of tax, of $972 million for the three months ended September 30, 2022, compared to $707 million for the three months ended September 30, 2021.

• Loss on disposal group held for sale of $803 million, net of tax, for the three months ended September 30, 2022, compared to no loss on disposal group held for sale for the three months ended September 30, 2021.

Net income for the nine months ended September 30, 2022, included the following:

• Merger-related costs, net of tax, of $3.3 billion for the nine months ended September 30, 2022, compared to $1.4 billion for the nine months ended September 30, 2021.

• Loss on disposal group held for sale of $803 million, net of tax, for the nine months ended September 30, 2022, compared to no loss on disposal group held for sale for the nine months ended September 30, 2021.

• Impairment expense of $358 million, net of tax, for the nine months ended September 30, 2022, compared to no impairment expense for the nine months ended September 30, 2021.

• Legal-related expenses, net of recoveries, including from the impact of the settlement of certain litigation associated with the August 2021 cyberattack, of $286 million, net of tax, for the nine months ended September 30, 2022.

Guarantor Financial Information

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is presented in the table below:

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

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

Current assets $ 20,131 $ 19,522

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is presented in the table below:

Six Months Ended June 30, 2022

Nine Months Ended

September 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 and Sprint Communications is presented in the table below:

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

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

Current assets $ 12,020 $ 11,969

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Noncurrent liabilities 62,408 70,262

Due to non-guarantors 923 —

Due from non-guarantors — 1,787

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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:

Six Months Ended June 30, 2022 Year Ended

Nine Months Ended

September 30, 2022 Year Ended

December 31, 2021

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Operating loss (2,805) (751)

Net loss (1,593) (2,161)

Net income (loss) 3,382 (2,161)

Other income, net, from non-guarantors 603 1,706

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

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

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

Current assets $ 12,020 $ 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:

Six Months Ended June 30, 2022 Year Ended

Nine Months Ended

September 30, 2022 Year Ended

December 31, 2021

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Operating loss (2,805) (751)

Net loss (1,552) (2,590)

Net income (loss) 3,456 (2,590)

Other income, net, from non-guarantors 900 2,076

Affiliates Whose Securities Collateralize the Senior Secured Notes

The collateral arrangements relating to securities of affiliates that collateralize the Senior Secured Notes are the same as those described in the section entitled “Affiliates Whose Securities Collateralize the Notes and the Guarantees” in the Company’s Registration Statement on Form S-4/A filed with the SEC on April 22, 2022, which section is incorporated herein by reference.

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

Performance Measures

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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 June 30, Change

As of September 30, Change

(in thousands) 2022 2021 # %

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

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

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

Total postpaid customer accounts increased 1,311,000, or 5%, primarily due to the Company’s differentiated growth strategy in new and under-penetrated markets, including continued growth in High Speed Internet.

Postpaid Net Account Additions

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

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

Postpaid net account additions 394 268 126 47 % 1,122 873 249 29 %

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.

Postpaid net account additions increased 126,000, or 47%, for the three months ended and increased 249,000, or 29%, for the nine months ended September 30, 2022, primarily due to the Company’s differentiated growth strategy in new and under-penetrated markets, including 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 June 30, Change

As of September 30, Change

(in thousands) 2022 2021 # %

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Prepaid customers (1)

21,341 21,007 334 2 %

Total customers 111,755 106,920 4,835 5 %

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(1,878) 818 (2,696) NM

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

(1) 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.

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

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

NM - Not Meaningful

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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 1,544,000 and 288,000 as of June 30, 2022 and 2021, respectively.

Total customers included High Speed Internet customers of 2,122,000 and 422,000 as of September 30, 2022 and 2021, respectively.

Net Customer Additions

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

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

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Total customers 1,732 1,325 407 31 % 4,914 4,038 876 22 %

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

Adjustments to customers — 806 (806) (100) % (1,878) 818 (2,696) NM

NM - Not Meaningful

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 lower churn;

• 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.

Total net customer additions increased 407,000, or 31%, for the three months ended and increased 876,000, or 22%, for the nine months ended September 30, 2022.

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

• Higher postpaid other net customer additions, primarily due to continued growth in High Speed Internet, partially offset by lower net additions from mobile internet devices and wearables;

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

• Higher prepaid net customer additions, primarily due to the introduction of our High Speed Internet offering.

• High Speed Internet net customer additions included in postpaid other net customer additions were 488,000 and 134,000 for the three months ended September 30, 2022 and 2021, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 90,000 for the three months ended September 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 September 30, 2021.

The increase for the nine months ended September 30, 2022, was primarily from:

• Higher postpaid other net customer additions, primarily due to an increase in High Speed Internet net customer additions and wearables, partially offset by lower net additions from mobile internet devices;

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

• Higher prepaid net customer additions, primarily due to the introduction of our High Speed Internet offering, partially offset by the continued industry shift to postpaid plans.

• High Speed Internet net customer additions included in postpaid other net customer additions were 1,314,000 and 322,000 for the nine months ended September 30, 2022 and 2021, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 162,000 for the nine months ended September 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 nine months ended September 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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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2022 2021 2022 2021

1 unchanged sentence

Prepaid churn 2.88 % 2.90 % -2 bps 2.71 % 2.76 % -5 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:

Postpaid phone churn decreased 8 basis points for the three months ended and decreased 6 basis points for the nine months ended September 30, 2022, primarily from:

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

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• 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:

Prepaid churn decreased 2 basis points for the three months ended and decreased 5 basis points for the nine months ended September 30, 2022, primarily from:

• Promotional activity;

partially offset by

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

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

Average Revenue Per Account

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(in dollars) Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2022 2021 $ % 2022 2021 $ %

Postpaid ARPA $ 137.49 $ 134.54 $ 2.95 2 % $ 137.32 $ 133.68 $ 3.64 3 %

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:

Postpaid ARPA increased $2.95, or 2%, for the three months ended and increased $3.64, or 3%, for the nine months ended September 30, 2022.

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

• Higher premium services, including Magenta Max;

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

• Continued adoption of High Speed Internet from existing accounts;

• Higher non-recurring charges relative to muted Pandemic levels;

partially offset by

• An increase in High Speed Internet only accounts;

• An increase in promotional impacts for Sprint customers from the network transition.

The increase for the nine months ended September 30, 2022, was primarily from:

• Higher premium services, including Magenta Max;

• Continued adoption of High Speed Internet from existing accounts;

• Higher non-recurring charges relative to muted Pandemic levels;

partially offset by

• An increase in promotional impacts for Sprint customers from the network transition;

• An increase in High Speed Internet only accounts.

Average Revenue Per User

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(in dollars) Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2022 2021 $ % 2022 2021 $ %

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Postpaid Phone ARPU

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:

Postpaid phone ARPU increased $0.83, or 2%, for the three months ended and increased $1.09, or 2%, for the nine months ended September 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 non-recurring charges relative to muted Pandemic levels;

partially offset by

• An increase in promotional impacts for Sprint customers from the network transition;

• Higher lines per account driven by deepening Sprint relationships.

Prepaid ARPU decreased $0.63, or 2%, for the three months ended and increased $0.31, or 1%, for the nine months ended September 30, 2022.

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

• Increased promotional activity;

partially offset by

• An increase in one-time fees.

The increase for the nine months ended September 30, 2022, was primarily from:

• Higher premium services;

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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, 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 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, losses on disposal groups held for sale and certain legal-related recoveries and 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 (loss) income, which we consider to be the most directly comparable GAAP financial measure:

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

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

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

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

Net income $ 508 $ 691 $ (183) (26) % $ 1,113 $ 2,602 $ (1,489) (57) %

Interest expense, net 827 836 (9) (1) % 2,542 2,521 21 1 %

Other expense, net 3 60 (57) (95) % 35 186 (151) (81) %

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

Income tax (benefit) expense (57) (3) (54) NM 106 520 (414) (80) %

Operating income 1,281 1,584 (303) (19) % 3,796 5,829 (2,033) (35) %

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Impairment expense — — — NM 477 — 477 NM

Legal-related expenses (2)

Legal-related (recoveries) expenses, net (2)

(19) — (19) NM 381 — 381 NM

Loss on disposal group held for sale 1,071 — 1,071 NM 1,071 — 1,071 NM

Other, net (3)

110 (17) 127 (747) % 120 32 88 275 %

(48) — (48) NM 72 32 40 125 %

Adjusted EBITDA 7,039 6,811 228 3 % 20,993 20,622 371 2 %

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$ 6,728 $ 6,041 $ 687 11 % $ 19,809 $ 17,897 $ 1,912 11 %

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

Net income margin (Net income divided by Service revenues) 3 % 5 % -200 bps 2 % 6 % -400 bps

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

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44 % 41 % 300 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.

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

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

(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.

(2) Legal-related (recoveries) expenses, net, consists of the settlement of certain litigation associated with the August 2021 cyberattack and is presented net of insurance recoveries.

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

NM - Not meaningful

Core Adjusted EBITDA increased $687 million, or 11%, for the three months ended and increased $1.9 billion, or 11%, for the nine months ended September 30, 2022.

The components comprising Core Adjusted EBITDA are discussed further above.

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

The increase for the three months ended September 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;

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

partially offset by

• Lower Equipment revenues, excluding lease revenues;

• 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 Selling, general and administrative expenses, excluding Merger-related costs and other special items, such as gains from the sale of IP addresses.

The increase for the nine months ended September 30, 2022, was primarily due to:

• Higher Total service revenues;

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partially offset by

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

• Higher Selling, general and administrative expenses, excluding Merger-related costs, certain legal-related expenses, net of recoveries, and other special items, such as gains from the sale of IP addresses;

• Lower Equipment revenues, excluding lease revenues.

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

Adjusted EBITDA increased $228 million, or 3%, for the three months ended and increased $371 million, or 2%, for the nine months ended September 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.

Lease revenues decreased $459 million for the three months ended and decreased $1.5 billion for the nine months ended September 30, 2022.

Liquidity and Capital Resources

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

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

1 unchanged sentence

Net cash used in investing activities (2,555) (4,152) 1,597 (38) % (10,206) (17,474) 7,268 (42) %

Net cash (used in) provided by financing activities (1,744) (577) (1,167) 202 % (3,880) 3,297 (7,177) (218) %

Net cash provided by (used in) financing activities 1,927 (3,060) 4,987 (163) % (1,953) 237 (2,190) (924) %

Operating Activities

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;

Net cash provided by operating activities increased $914 million, or 26%, for the three months ended and increased $1.5 billion, or 14%, for the nine months ended September 30, 2022.

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

• A $1.4 billion decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Short- and long-term operating lease liabilities, including the impact of a $1.0 billion advance rent payment related to the modification of one of our master lease agreements during the three months ended September 30, 2021, Other current and long-term liabilities and Equipment installment plan receivables, partially offset by higher use of cash from Accounts receivable;

partially offset by

• 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;

• A $468 million decrease in Net income, adjusted for non-cash income and expense.

• Net cash provided by operating activities includes the impact of $942 million and $617 million in net payments for Merger-related costs for the three months ended September 30, 2022 and 2021, respectively.

The increase for the nine months ended September 30, 2022, was primarily from:

• A $3.9 billion decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Short- and long-term operating lease liabilities, including the impact of a $1.0 billion advance rent payment related to the modification of one of our master lease agreements during the nine months ended September 30, 2021, Accounts payable and accrued liabilities, Equipment installment plan receivables, other Current and long-term liabilities and

Operating lease right-of-use assets, partially offset by higher use of cash from Accounts receivable and Inventories;

partially offset by

• A $2.4 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.

• Net cash provided by operating activities includes the impact of $2.7 billion and $1.1 billion in net payments for Merger-related costs for the nine months ended September 30, 2022 and 2021, respectively.

Investing Activities

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:

Net cash used in investing activities decreased $1.6 billion, or 38%, for the three months ended and decreased $7.3 billion, or 42%, for the nine months ended September 30, 2022.

The use of cash for the three months ended September 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;

• $360 million in Purchases of spectrum licenses and other intangible assets, including deposits, primarily due to $239 million paid for spectrum licenses won at the conclusion of Auction 108 in September 2022;

partially offset by

• $1.3 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:

The use of cash for the nine months ended September 30, 2022, was primarily from:

• $10.6 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;

• $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;

• $3.3 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 and $304 million paid in total for spectrum licenses won at the conclusion of Auction 108 in September 2022;

partially offset by

1 unchanged sentence

Financing Activities

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;

Net cash provided by financing activities increased $5.0 billion from a net use of cash for the three months ended September 30, 2021, to a net source of cash for the three months ended September 30, 2022.

Net cash used in financing activities increased $2.2 billion from a net source of cash for the nine months ended September 30, 2021, to a net use of cash for the nine months ended September 30, 2022.

The net source of cash for the three months ended September 30, 2022, was primarily from:

• $3.0 billion in Proceeds from issuance of long-term debt;

partially offset by

• $557 million in Repurchases of common stock;

• $311 million in Repayments of financing lease obligations.

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

The net use of cash for the nine months ended September 30, 2022, was primarily from:

• $3.1 billion in Repayments of long-term debt;

• $901 million in Repayments of financing lease obligations;

• $557 million in Repurchases of common stock;

• $225 million in Tax withholdings on share-based awards;

partially offset by

• $3.0 billion in Proceeds from issuance of long-term debt.

Cash and Cash Equivalents

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

As of September 30, 2022, our Cash and cash equivalents were $6.9 billion compared to $6.6 billion at December 31, 2021.

Free Cash Flow

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

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

Net cash provided by operating activities $ 4,391 $ 3,477 $ 914 26 % $ 12,445 $ 10,917 $ 1,528 14 %

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) %

Cash purchases of property and equipment, including capitalized interest (3,634) (2,944) (690) 23 % (10,587) (9,397) (1,190) 13 %

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

Proceeds related to beneficial interests in securitization transactions 1,308 1,071 237 22 % 3,614 3,099 515 17 %

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Free Cash Flow $ 2,065 $ 1,559 $ 506 32 % $ 5,472 $ 4,534 $ 938 21 %

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:

Free Cash Flow increased $506 million, or 32%, for the three months ended and increased $938 million, or 21%, for the nine months ended September 30, 2022.

The increase for the three months ended September 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, which were offset in Net cash provided by operating activities;

partially offset by

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

• 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:

• Free Cash Flow includes $942 million and $617 million in net payments for Merger-related costs for the three months ended September 30, 2022 and 2021, respectively.

The increase for the nine months ended September 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;

• Higher Proceeds related to beneficial interests in securitization transactions, which were offset in Net cash provided by operating activities;

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.

• Free Cash Flow includes $2.7 billion and $1.1 billion in net payments for Merger-related costs for the nine months ended September 30, 2022 and 2021, respectively.

During the three and nine months ended September 30, 2022 and 2021, there were no significant net cash proceeds from securitization.

Borrowing Capacity

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

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

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

Subsequent to September 30, 2022, on October 17, 2022, we entered into an Amended and Restated Credit Agreement, which, among other things, increased the aggregate commitment amount of the Revolving Credit Facility to $7.5 billion.

See Note 6 - Debt of the Notes to the Condensed Consolidated Financial Statements for more information regarding the Amended and Restated Credit Agreement.

Debt Financing

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.

As of September 30, 2022, our total debt and financing lease liabilities were $76.6 billion, excluding our tower obligations, of which $66.3 billion was classified as long-term debt and $1.6 billion was classified as long-term financing lease liabilities.

During the nine months ended September 30, 2022, we issued long-term debt for net proceeds of $3.0 billion and repaid short- and long-term debt with an aggregate principal amount of $3.1 billion.

Subsequent to September 30, 2022, on October 12, 2022, we issued $750 million of 4.910% Class A senior ABS Notes to third-party investors in a private placement transaction.

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

Spectrum Auction

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.

Spectrum Auctions

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

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

We paid the FCC the remaining $2.8 billion for the licenses won in the auction in February 2022.

In September 2022, the FCC announced that we were the winning bidder of 7,156 licenses in Auction 108 (2.5 GHz) for an aggregate price of $304 million.

At the inception of Auction 108 in June 2022, we deposited $65 million.

We paid the FCC the remaining $239 million for the licenses won in the auction in September 2022.

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

License Purchase Agreements

On August 8, 2022, we entered into License Purchase Agreements to acquire spectrum in the 600 MHz band from Channel 51 License Co LLC and LB License Co, LLC in exchange for total cash consideration of $3.5 billion.

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

Off-Balance Sheet Arrangements

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

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

As of September 30, 2022, we derecognized net receivables of $2.4 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.

Future Sources and Uses of Liquidity

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, 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.

We determine future liquidity requirements, for both operations and capital expenditures, based in large part upon projected financial and operating performance, and opportunities to acquire additional spectrum.

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

Excluding liquidity that could be needed for spectrum acquisitions, other long-lived assets or for any potential stockholder 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.

We determine future liquidity requirements for operations, capital expenditures and share repurchases based in large part upon projected financial and operating performance, and opportunities to acquire additional spectrum or repurchase shares.

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

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

See “Restructuring” of this MD&A.

See “Restructuring” in this MD&A.

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

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

The indentures, supplemental indentures and credit agreements governing our long-term debt to affiliates and third parties, excluding financing leases, contain covenants that, among other things, limit the ability of the Issuers or borrowers and the Guarantor Subsidiaries to incur more debt, pay dividends and make distributions on our common stock, make certain investments, repurchase stock, create liens or other encumbrances, enter into transactions with affiliates, enter into transactions that restrict dividends or distributions from subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets.

Certain provisions of each of the credit agreements, indentures and supplemental indentures relating to the long-term debt to affiliates and third parties restrict the ability of the Issuers or borrowers to loan funds or make payments to Parent.

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 June 30, 2022.

We were in compliance with all restrictive debt covenants as of September 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 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.

As of September 30, 2022, we have committed to $7.5 billion of financing leases under these financing lease facilities, of which $325 million and $1.2 billion was executed during the three and nine months ended September 30, 2022, respectively.

We expect to enter into up to an additional $40 million in financing lease commitments during the year ending December 31, 2022.

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

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

During the three and nine months ended September 30, 2022, we repurchased shares of our common stock for a total purchase price of $669 million, all of which were purchased under the 2022 Stock Repurchase program and occurred during the period from September 8, 2022, through September 30, 2022.

As of September 30, 2022, we had up to approximately $13.3 billion remaining under the 2022 Stock Repurchase Program, of which up to approximately $2.3 billion was available for the remainder of 2022.

Subsequent to September 30, 2022, from October 1, 2022, through October 20, 2022, we repurchased additional shares of our common stock for a total purchase price of $815 million.

As of October 20, 2022, we had up to approximately $12.5 billion remaining under the 2022 Stock Repurchase Program, of which up to approximately $1.5 billion is available for the remainder of 2022.

For additional information regarding the 2022 Stock Repurchase Program, see Note 9 – Repurchases of Common Stock of the Notes to the Condensed Consolidated Financial Statements.

Related Party Transactions

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.

As of October 20, 2022, DT and SoftBank held, directly or indirectly, approximately 48.6% and 3.2%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.2% 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 October 20, 2022, over approximately 52.2% 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 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.

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 September 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 June 30, 2022, DT, through certain of its non-U.S.

In addition, during the three months ended September 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 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.

For the three months ended September 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 June 30, 2022 were less than $0.1 million.

Gross revenues and net profits recorded from these activities for the three months ended September 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 June 30, 2022, SoftBank had no gross revenues from such services and no net profit was generated.

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

During the three months ended September 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 June 30, 2022, were both under $0.1 million.

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

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

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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