What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-14 compared with 2022-02-11 · 353 added, 434 removed, 386 unchanged (67% of the section changed)

4 unchanged sentences

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

Our MD&A is performed on a consolidated basis and is inclusive of the results and operations of Sprint prospectively from the close of the Merger on April 1, 2020.

The Merger enhanced our spectrum portfolio, increased our customer base, altered our product mix and created opportunities for synergies in our operations.

We anticipate an initial increase in our combined operating costs, which we expect to decrease as we realize synergies.

We expect the trends and results of operations of the combined company to be materially different than those of the standalone entities.

Our MD&A is provided as a supplement to, and should be read together with, our audited consolidated financial statements as of December 31, 2022 and 2021, and for each of the three years in the period ended December 31, 2022, included in Part I I , Item 8 of this Form 10-K.

1 unchanged sentence

and its consolidated subsidiaries.

Sprint Merger

Sprint Merger, Network Integration and Decommissioning Activities

Transaction Overview

2 unchanged sentences

The Merger has altered the size and scope of our operations, impacting our assets, liabilities, obligations, capital requirements and performance measures.

We expect the trends and results of operations of the combined company to be materially different than those of the standalone entities.

As a combined company, we have been able to enhance the breadth and depth of our nationwide 5G network, accelerate innovation, increase competition in the U.S.

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

For more information regarding the Merger, see Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements.

Shentel Wireless Assets Acquisition

On July 1, 2021, we completed the acquisition of Shentel’s wireless telecommunications assets (the “Wireless Assets”) used to provide Sprint PCS’s wireless mobility communications network products in certain parts of Maryland, North Carolina, Virginia, West Virginia, Kentucky, Ohio and Pennsylvania.

As a result, T-Mobile become the legal owner of the Wireless Assets.

This transaction represented an opportunity to reacquire the exclusive rights to deliver Sprint’s wireless network services in Shentel’s former affiliate territory and simplify our operations.

The acquisition of the Wireless Assets has altered the composition of certain assets and liabilities on our balance sheet, including Goodwill and Other intangible assets.

For more information regarding our acquisition of the Wireless Assets, see Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements.

For more information regarding our Business Combination Agreement, see Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements.

Merger-Related Costs

Merger-related costs associated with the Merger and acquisitions of affiliates generally include:

• Integration costs to achieve efficiencies in network, retail, information technology and back office operations, migrate customers to the T-Mobile network and the impact of legal matters assumed as part of the Merger;

• Integration costs to achieve efficiencies in network, retail, information technology and back office operations, migrate customers to the T-Mobile network and billing systems and the impact of legal matters assumed as part of the Merger;

• Restructuring costs, including severance, store rationalization and network decommissioning;

• Transaction costs, including legal and professional services related to the completion of the transactions.

Transaction and restructuring costs are disclosed in Note 2 – Business Combinations and Note 1 8 – Restructuring Costs , respectively, of the Notes to the Consolidated Financial Statements.

Restructuring costs are disclosed in Note 20 – Restructuring Costs of the Notes to the Consolidated Financial Statements.

Merger-related costs have been excluded from our calculations of Adjusted EBITDA and Core Adjusted EBITDA, which are non-GAAP financial measures, as we do not consider these costs to be reflective of our ongoing operating performance.

See “Adjusted EBITDA and Core Adjusted EBITDA” in the “ Performance Measures ” section of this MD&A.

Cash payments for Merger-related costs, including payments related to our restructuring plan, are included in Net cash provided by operating activities on our Consolidated Statements of Cash Flows.

Net cash payments for Merger-related costs, including payments related to our restructuring plan, are included in Net cash provided by operating activities on our Consolidated Statements of Cash Flows.

Merger-related costs are presented below:

2 unchanged sentences

Merger-related costs

Cost of services, exclusive of depreciation and amortization $ 1,015 $ 646 $ — $ 369 57 % $ 646 NM

Cost of equipment sales 1,018 6 — 1,012 NM 6 NM

Cost of services, exclusive of depreciation and amortization $ 2,670 $ 1,015 $ 646 $ 1,655 163 % $ 369 57 %

Cost of equipment sales, exclusive of depreciation and amortization 1,524 1,018 6 506 50 % 1,012 NM

Selling, general and administrative 775 1,074 1,263 (299) (28) % (189) (15) %

Total Merger-related costs $ 4,969 $ 3,107 $ 1,915 $ 1,862 60 % $ 1,192 62 %

Cash payments for Merger-related costs $ 2,170 $ 1,493 $ 442 $ 677 45 % $ 1,051 238 %

Net cash payments for Merger-related costs $ 3,364 $ 2,170 $ 1,493 $ 1,194 55 % $ 677 45 %

NM - Not Meaningful

Merger-related costs will be impacted by restructuring and integration activities expected to occur through the end of fiscal year 2023, as we implement initiatives to realize cost efficiencies from the Merger and our acquisitions of affiliates.

Transaction costs, including legal and professional service fees related to the completion of the Merger and acquisitions of affiliates, are expected to continue to decrease.

We expect to incur substantially all of the remaining projected Merger-related costs of approximately $1.0 billion, excluding capital expenditures, by the end of 2023, with the cash expenditure for the Merger-related costs extending beyond 2023.

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

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

Network Integration

As of December 31, 2022, we have decommissioned substantially all Sprint macro sites targeted for shut down.

Our integration and decommissioning initiatives also included the acceleration or termination of certain of our operating and financing leases for cell sites, switch sites and network equipment.

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

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

Restructuring

3 unchanged sentences

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

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

Anticipated Impacts

We expect to incur a total of $12.0 billion of Merger-related costs, excluding capital expenditures, of which $6.5 billion has been incurred since the beginning of 2018, including $700 million of costs incurred by Sprint prior to the Merger.

Our remaining integration and restructuring activities are expected to occur over the next two years with substantially all costs incurred by the end of fiscal year 2023.

We expect to incur total Merger-related costs, excluding capital expenditures, of $5.5 billion to complete our remaining integration and restructuring activities, $4.5 billion to $5.0 billion of which is expected to be incurred in fiscal year 2022.

We expect our principal sources of funding to be sufficient to meet our

liquidity requirements and anticipated payments associated with the restructuring initiatives.

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

We expect these activities to result in a reduction of expenses in Cost of services and Selling, general and administrative on our Consolidated Statements of Comprehensive Income.

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

For more information regarding our restructuring activities, see Note 20 – Restructuring Costs of the Notes to the Consolidated Financial Statements.

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

We became aware of a potential issue on August 12, 2021.

We immediately began a forensic investigation and engaged cybersecurity experts to assist with the assessment of the incident and to help determine what data was impacted.

As we previously reported, we promptly located and closed the unauthorized access to our systems.

Our investigation uncovered that the perpetrator illegally gained access to certain areas of our systems on or about March 18, 2021, but only gained access to and took data of current, former and prospective customers beginning on or about August 3, 2021.

Based on the initial investigation findings, we moved to quickly identify current, former and prospective customers whose information was impacted and notify them, consistent with state and federal requirements.

Simultaneously, we undertook a number of other measures to demonstrate our continued support and commitment to data privacy and protection and continued to work with our cybersecurity experts to finish our forensic investigation, with the goal to ensure we had a complete understanding of the scope and impact of the unauthorized access.

We also coordinated our efforts with law enforcement.

Also as previously reported, our forensic investigation took time and was completed in October 2021, although our overall investigation into the incident is ongoing.

As a result of our forensic investigation, we believe we have a full view of the data compromised.

We have no evidence that individual financial account numbers, such as full credit or debit card numbers, were accessed or taken in relation to the August 2021 cyberattack.

Throughout our forensic investigation of the August 2021 cyberattack, our top priority was to support those individuals impacted by the cyberattack.

We sent notifications to our customers and customer accounts whose names, dates of birth, Social Security numbers (“SSNs”)/Tax Identifiers (“Tax IDs”) and driver’s license/identification numbers (“ID Numbers”) were taken, consistent with state and federal requirements, including to approximately 7.8 million current customer accounts and approximately 40.0 million former and prospective customers.

We also notified an additional 1.9 million former and prospective customers who had their names, dates of birth and ID Numbers (but not valid SSNs/Tax IDs) taken.

Out of an abundance of caution during the earliest days of our investigation and to help alleviate consumer concerns and confusion, we rapidly sent notifications to approximately 5.3 million customer accounts who had their names, dates of birth and addresses taken.

These accounts did not have SSNs/Tax IDs or ID Numbers taken.

Later in our investigation, we identified approximately 790,000 additional former and prospective customers who had similar information — names, dates of birth and, in many cases, addresses, but not SSNs/Tax IDs or ID Numbers — taken and sent them notifications consistent with state and federal requirements.

Our investigation also identified approximately 26.0 million additional individuals with the same types of information taken, but for whom individual notifications were not required under state and federal law in light of the types of information taken.

By that point, since our original notifications, we had already launched a broad-reaching communications outreach program through which we kept our customers and the public informed and made information available and accessible on our website to provide support for any individuals who may have been impacted, including information on how they could take steps to protect themselves.

We also took actions to proactively reset the personal identification numbers (“PINs”) for approximately 870,000 current customer accounts whose names and PINs may have been taken.

We previously reported that further data files including phone numbers, International Mobile Equipment Identity (“IMEI”) numbers and International Mobile Subscriber Identity (“IMSI”) numbers were taken;

a significant portion of this data was related to inactive devices.

For a number of additional current Metro customers, these files included names but no other personally identifiable information.

As described above, supporting individuals impacted by the August 2021 cyberattack was a top priority.

As previously reported, this support included:

• Offering two years of free identity protection services with McAfee’s ID Theft Protection Service to any person who believes they may be affected;

• Recommending that all eligible customers sign up for free scam-blocking protection through Scam Shield;

• Supporting individuals impacted by the August 2021 cyberattack with additional best practices and practical security steps such as resetting PINs and passwords;

• Publishing a customer support webpage that includes information and access to these tools at https://www.t-mobile.com/brand/data-breach-2021 1 .

As described above, we take data protection and the protection of our customers very seriously, and we have worked diligently to further enhance security across our platforms throughout this process.

As part of those efforts, and as we have previously reported, we have entered into long-term partnerships with the industry-leading cybersecurity experts at Mandiant, and with consulting firm KPMG LLP, as part of our efforts to ensure that the Company has cybersecurity practices that are among the best in our industry.

We have also created a Cyber Transformation Office reporting directly to our Chief Executive Officer that will be responsible for managing our efforts.

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

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

It is not possible to precisely measure the amount of lost revenue, if any, directly attributable to the August 2021 cyberattack.

We are unable to predict the full impact of the August 2021 cyberattack on customer behavior in the future, including whether a change in our customers’ behavior could negatively impact our results of operations on an ongoing basis.

Accordingly, we are not able to predict with any certainty any possible future impact to our revenues or expenses attributable to the August 2021 cyberattack, which could have a material adverse effect on our future results.

As a result of the attack, we are subject to numerous arbitration demands and lawsuits, including class action lawsuits, and regulatory inquiries as described in Note 1 7 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements and Part I , Item 3 .

Legal Proceedings , and we could be subject to additional lawsuits and inquiries.

We are cooperating fully with regulators in connection with the inquiries, though we cannot predict the timing or outcome of any of these inquiries.

In light of the inherent uncertainties involved in such matters and based on the information currently available to us, as of the date of this Annual Report, we have not recorded any accruals for losses related to the above proceedings and inquiries as any such amounts (or ranges of amounts) are not probable or estimable at this time.

We believe it is reasonably possible that we could incur losses associated with these proceedings and inquiries, and the Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.

Losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries, including ongoing costs related thereto, could be material to our business, reputation, financial condition, cash flows and operating results in future periods.

COVID-19 Pandemic

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

and international debt and equity markets.

The impact of the Pandemic has been wide-ranging, including, but not limited to, the temporary closures of many businesses and schools, “shelter in place” orders, travel restrictions, social distancing guidelines and other governmental, business and individual actions taken in response to the Pandemic.

These restrictions have impacted, and will continue to impact, our business, including the demand for our products and services and the ways in which our customers purchase and use them.

In addition, the Pandemic has resulted in economic uncertainty, which could affect our customers’ purchasing decisions and ability to make timely payments.

The availability of vaccines, as well as our continued social distancing measures and incremental cleaning efforts, have facilitated the continued operation of our retail stores.

Additionally, we have implemented testing policies for our on-site employees to help reduce transmission.

We will continue to monitor the Pandemic and its impacts and may adjust our actions as needed to continue to provide our products and services to our communities and employees.

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.

1 The reference to this website is intended to be an inactive textual reference and information on or accessible from such website is not included or incorporated in this report.

Anticipated Merger Synergies

As a result of our ongoing restructuring and integration activities, we expect to realize Merger synergies by eliminating redundancies within our combined network (see “Network Integration” above) as well as other business processes and operations (see “Restructuring” above).

For full-year 2023, we expect Merger synergies from Selling, general and administrative expense reductions of $2.5 billion to $2.7 billion, Cost of service expense reductions of $3.1 billion to $3.2 billion and avoided network expenses of $1.6 billion.

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

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

As a result of these actions during the second quarter of 2022, 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 year ended December 31, 2022, all of which relates to the impairment recognized during the three months ended June 30, 2022.

We continue to provide Wireline services to existing Wireline customers as of December 31, 2022.

For more information regarding this non-cash impairment, see Note 16 – Wireline of the Notes to the Consolidated Financial Statements.

On September 6, 2022, we entered into the Wireline Sale 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 Wireline Sale Agreement, the Wireline Transaction is expected to close mid-year 2023.

As a result of the Wireline Sale Agreement and related anticipated Wireline Transaction, we concluded that the Wireline Business met the held for sale criteria upon entering into the Wireline Sale 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 Consolidated Balance Sheets as of December 31, 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 year ended December 31, 2022, which is included within Loss on disposal group held for sale on our Consolidated Statements of Comprehensive Income.

The fair value of the Wireline Business disposal group, less costs to sell, will be reassessed during each subsequent 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 Wireline Sale Agreement, see Note 16 – Wireline of the Notes to the Consolidated Financial Statements.

Recent Cyberattacks

In August 2021, we were subject to a criminal cyberattack involving unauthorized access to T-Mobile’s systems.

As a result of the attack, we are subject to numerous arbitration demands and lawsuits, including class action lawsuits, and regulatory inquiries as described in Note 19 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements.

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 during the three months ended June 30, 2022.

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

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

During the year ended December 31, 2022, we recognized $100 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.

In January 2023, we disclosed that a bad actor was obtaining data through a single Application Programming Interface (“API”) without authorization.

Based on our investigation to date, the impacted API is only able to provide a limited set of customer account data, including name, billing address, email, phone number, date of birth, T-Mobile account number and information such as the number of lines on the account and plan features.

The result from our investigation to date indicates that the bad actor(s) obtained data from this API for approximately 37 million current postpaid and prepaid customer accounts, though many of these accounts did not include the full data set.

We believe that the bad actor first retrieved data through the impacted API starting on or around November 25, 2022.

We continue to investigate the incident and have notified individuals whose information was impacted consistent with state and federal requirements.

We will respond to litigation and regulatory inquiries in connection with this incident and may incur significant expenses.

However, we cannot predict the timing or outcome of any of these potential matters, or whether we may be subject to regulatory inquiries, investigations, or enforcement actions.

In addition, we are unable to predict the full impact of this incident on customer behavior in the future, including whether a change in our customers’ behavior could negatively impact our results of operations on an ongoing basis, although we presently do not expect that it will have a material effect on our operations.

Additionally, following the August 2021 cyberattack, we commenced a substantial multi-year investment working with leading external cybersecurity experts to enhance our cybersecurity capabilities and transform our approach to cybersecurity.

While we have made progress to date, we plan to continue to make substantial investments to strengthen our cybersecurity program in future periods.

Revenue Trends

In 2023, we expect Service revenues to continue to grow, primarily due to continued postpaid account and customer growth as well as Postpaid Average Revenue per Account (“postpaid ARPA”) growth driven by the execution of our strategy to continuously deepen our account relationships, including growth in High Speed Internet.

We expect the increase in postpaid service revenues to be partially offset by a decrease in Wholesale and other service revenues, primarily driven by the sale of the Wireline business, which is expected to close mid-2023, the migration by Verizon of legacy TracFone customers off of the T-Mobile network and as DISH services more of its Boost customers with their standalone network.

We also expect lower lease revenues as a result of the continued strategic shift in device financing from leasing to EIP.

Operating Expense Trends

In 2023, we expect Total operating expenses to decrease, primarily due to continued synergy realization benefiting Cost of services and Selling, general and administrative expense as well as a significant decrease in Merger-related costs from $5.0 billion in 2022 to approximately $1.0 billion expected in 2023 as the majority of our integration activities have been completed.

We further expect a decrease in operating expenses, primarily Cost of services, associated with serving Wireline customers driven by the sale of the Wireline business which is expected to close mid-2023.

The trend of decreasing depreciation on leased devices is expected to continue as a result of the continued strategic shift in device financing from leasing to EIP.

Macroeconomic Trends

Macroeconomic trends may result in adverse impacts on our business, and we continue to monitor these potential impacts, including potential economic recession, changes in the Federal Reserve’s monetary policy, as well as geopolitical risks, including the war in Ukraine.

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

To date, price inflation has not had a significant impact on our operations as we have fixed rates established through long-term contracts for many of our most significant costs, including tower agreements and backhaul contracts.

Similarly, our exposure to the impact of rising interest rates is limited, primarily to any new debt issuances or draws on our revolving credit facility, as interest is paid on our Senior Notes at a fixed rate.

We continue to monitor the impact of these trends on the payment performance of our customers.

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 had no significant impact to the 2022 consolidated financial statements.

Management does not expect the IRA to have a significant impact on our operating results or cash flows in 2023, and we continue to review the IRA tax provisions to assess impacts to our future consolidated financial statements.

Results of Operations

4 unchanged sentences

Prepaid revenues 9,857 9,733 9,421 124 1 % 312 3 %

Wholesale revenues 3,751 2,590 1,279 1,161 45 % 1,311 103 %

Other service revenues 2,323 2,078 1,005 245 12 % 1,073 107 %

Wholesale and other service revenues 5,547 6,074 4,668 (527) (9) % 1,406 30 %

Total service revenues 61,323 58,369 50,395 2,954 5 % 7,974 16 %

7 unchanged sentences

Impairment expense 477 — 418 477 NM (418) (100) %

Loss on disposal group held for sale 1,087 — — 1,087 NM — NM

Depreciation and amortization 13,651 16,383 14,151 (2,732) (17) % 2,232 16 %

1 unchanged sentence

Operating income 6,543 6,892 6,636 (349) (5) % 256 4 %

Other income (expense)

Interest expense (3,189) (2,483) (727) (706) 28 % (1,756) 242 %

Interest expense to affiliates (173) (247) (408) 74 (30) % 161 (39) %

Interest income 20 29 24 (9) (31) % 5 21 %

Other expense, net

Interest expense, net (3,364) (3,342) (2,701) (22) 1 % (641) 24 %

Other expense, net (33) (199) (405) 166 (83) % 206 (51) %

Total other expense, net (3,397) (3,541) (3,106) 144 (4) % (435) 14 %

Income from continuing operations before income taxes 3,351 3,530 4,603 (179) (5) % (1,073) (23) %

Income before income taxes 3,146 3,351 3,530 (205) (6) % (179) (5) %

Income tax expense (556) (327) (786) (229) 70 % 459 (58) %

5 unchanged sentences

Net cash used in investing activities (12,359) (19,386) (12,715) 7,027 (36) % (6,671) 52 %

Net cash provided by (used in) financing activities 1,709 13,010 (2,374) (11,301) (87) % 15,384 (648) %

Net cash (used in) provided by financing activities (6,451) 1,709 13,010 (8,160) (477) % (11,301) (87) %

Non-GAAP Financial Measures

1 unchanged sentence

Core Adjusted EBITDA 26,391 23,576 20,376 2,815 12 % 3,200 16 %

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps 5,646 3,001 4,319 2,645 88 % (1,318) (31) %

Free Cash Flow 7,656 5,646 3,001 2,010 36 % 2,645 88 %

NM - Not Meaningful

1 unchanged sentence

For a discussion and analysis of the year ended December 31, 2021, compared to the same period in 2020, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 11, 2022.

On April 1, 2020, we closed our Merger with Sprint.

The Merger was accounted for as business combination and our results are inclusive of the acquired Sprint operations prospectively from the Merger close date.

Our results of operations described below are impacted by a full year of Sprint results included in fiscal year 2021 compared to nine months of Sprint results included in fiscal year 2020.

Total revenues increased $11.7 billion, or 17%.

Total revenues decreased $547 million, or 1%.

The components of these changes are discussed below.

3 unchanged sentences

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

Prepaid revenues increased $312 million, or 3%, primarily from:

• Higher prepaid ARPU.

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

• Higher average prepaid customers.

Wholesale revenues increased $1.2 billion, or 45%, primarily from:

• Our Master Network Service Agreement with DISH, which went into effect on July 1, 2020;

• The success of our other MVNO relationships.

Other service revenues increased $245 million, or 12%, primarily from:

• Higher Lifeline revenues, primarily associated with operations acquired in the Merger;

• Inclusion of wireline operations acquired in the Merger;

partially offset by

• Lower advertising revenues.

Equipment revenues increased $3.4 billion, or 20%, primarily from:

• An increase of $3.5 billion in device sales revenue, excluding purchased leased devices, primarily from:

• An increase in the number of devices sold due to a larger customer base as a result of the Merger, switching activity returning to more normalized levels compared to the muted conditions from the Pandemic in the prior year, a higher upgrade rate and the planned shift in device financing from leasing to EIP;

• Higher average revenue per device sold driven by an increased mix of phone versus other devices, partially offset by an increase in promotional activities;

• An increase of $373 million in sales of accessories, due to increased retail store traffic, compared to lower retail traffic in the prior period due to closures arising from the Pandemic, and a larger customer base as a result of the Merger;

• An increase of $221 million in liquidation revenues, primarily due to a higher volume of returned devices and an increase in the high-end device mix;

Prepaid revenues increased $124 million, or 1%, primarily from higher average prepaid customers.

Wholesale and other service revenues decreased $527 million, or 9%, primarily from:

• Lower advertising, MVNO and Wireline revenues;

partially offset by

• A decrease of $833 million in lease revenues due to a lower number of customer devices under lease as a result of the planned shift in device financing from leasing to EIP.

• Higher Lifeline revenues.

Equipment revenues decreased $3.6 billion, or 17%, primarily from:

• A decrease of $1.9 billion in lease revenues and a decrease of $599 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 $787 million in device sales revenue, excluding purchased leased devices, primarily from:

• A decrease in the number of devices sold primarily driven by lower prepaid sales, partially offset by higher upgrade volume for Sprint customers to facilitate their migration to the T-Mobile network;

• Slightly 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 EIPs, which is recognized in Other revenues over the device financing term.

Other revenues increased $96 million, or 9%, primarily from:

• Higher revenues from our device recovery program;

• Higher interest income on our EIP receivables from the planned shift in device financing from leasing to EIP.

Operating expenses increased $11.5 billion, or 19%.

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

Total operating expenses decreased $198 million.

The components of this change are discussed below.

Cost of services , exclusive of depreciation and amortization, increased $2.1 billion, or 17%, primarily from:

• An increase in expenses associated with leases and utilities primarily due to the Merger and the continued build-out of our nationwide 5G network, including a new tower master lease agreement in 2020;

• An increase of $369 million in Merger-related costs including incremental costs associated with network decommissioning and integration;

• Higher employee-related and benefit-related costs primarily due to increased average headcount as a result of the Merger;

Cost of services , exclusive of depreciation and amortization, increased $732 million, or 5%, primarily from:

• An increase of $1.7 billion in Merger-related costs related to network decommissioning and integration costs;

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

partially offset by

• Higher realized Merger synergies, including a decrease in expenses associated with backhaul due to the termination of certain agreements acquired in the Merger.

Cost of equipment sales , exclusive of depreciation and amortization, increased $6.3 billion, or 38%, primarily from:

• An increase of $5.9 billion in device cost of equipment sales, excluding purchased leased devices, primarily from:

• An increase in the number of devices sold due to a larger customer base as a result of the Merger, switching activity returning to more normalized levels relative to the muted conditions from the Pandemic in the prior year, a higher upgrade rate and the planned shift in device financing from leasing to EIP;

• Higher average costs per device sold due to an increased mix of phone versus other devices;

• An increase of $212 million in cost of accessories, due to increased retail store traffic, compared to lower retail traffic in the prior period due to closures arising from the Pandemic, and a larger customer base as result of the Merger.

• Merger-related costs, primarily related to moving Sprint customers to devices that are compatible with the T-Mobile network, were $1.0 billion for the year ended December 31, 2021, compared to $6 million for the year ended December 31, 2020.

• Higher realized Merger synergies.

Cost of equipment sales , exclusive of depreciation and amortization, decreased $1.1 billion, or 5%, primarily from:

• A decrease of $964 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 $503 million in device cost of equipment sales, excluding purchased leased devices, primarily from:

partially offset by

• Slightly higher average cost per device sold due to an increase in the high-end device mix;

partially offset by

• Higher device insurance claims and warranty fulfillment expense.

• Cost of equipment sales for the year ended December 31, 2022, included $1.5 billion of Merger-related costs, primarily to facilitate the migration of Sprint customers to the T-Mobile network, compared to $1.0 billion for the year ended December 31, 2021.

Selling, general and administrative expenses increased $1.4 billion, or 7%, primarily from:

• Higher advertising expense relative to the muted Pandemic-driven conditions in the prior period;

• Higher external labor and professional services primarily from the Merger;

• Higher employee-related costs due to an increase in the average number of employees primarily from the Merger;

• Higher commissions primarily due to compensation structure changes and higher customer addition volumes;

• An increase of $773 million in bad debt expense and losses from sales of receivables, driven by higher receivable balances, as well as normalization relative to muted Pandemic levels in 2021 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 $100 million in reimbursements from insurance carriers received in 2022 associated with the August 2021 cyberattack;

• Higher costs related to outsourced functions;

partially offset by

• Higher realized Merger synergies;

• Lower bad debt expense primarily due to the release of estimated bad debt reserves established in the prior year associated with macro-economic impact of the Pandemic.

• Selling, general and administrative expenses for the year ended December 31, 2020, included $458 million of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs.

There were insignificant COVID-19 costs for the year ended December 31, 2021.

• Selling, general and administrative expenses for the year ended December 31, 2021, included $1.1 billion of Merger-related costs primarily related to integration, restructuring and legal-related expenses, compared to $1.3 billion of Merger-related costs for the year ended December 31, 2020.

Impairment expense decreased $418 million, or 100%, primarily from:

• A $218 million impairment on the goodwill in the Layer3 reporting unit in 2020;

• A $200 million impairment on the capitalized software development costs related to our postpaid billing system replacement in 2020.

• 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 year ended December 31, 2022, included $775 million of Merger-related costs, primarily related to integration, restructuring and legal-related expenses, partially offset by $333 million received in gross settlements for certain patent litigation assumed in the Merger, compared to $1.1 billion of Merger-related costs for the year ended December 31, 2021.

Impairment expense was $477 million for the year ended December 31, 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 16 - Wireline of the Notes to the Consolidated Financial Statements for additional information.

There was no impairment expense for the year ended December 31, 2021.

Depreciation and amortization increased $2.2 billion, or 16%, primarily from:

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

• Accelerated depreciation expense on certain assets due to our Merger integration;

• Higher amortization from intangible assets, primarily due to a full year of amortization of intangible assets acquired in the Merger.

Operating income , the components of which are discussed above, increased $256 million, or 4%.

Interest expense increased $706 million, or 28%, primarily from:

• Higher average debt outstanding due to debt assumed in the Merger and the issuance of debt;

• Lower capitalized interest;

Loss on disposal group held for sale was $1.1 billion for the year ended December 31, 2022, due to the agreement for the sale of the Wireline Business.

See Note 16 - Wireline of the Notes to the Consolidated Financial Statements for additional information.

There was no loss on disposal group held for sale for the year ended December 31, 2021.

Depreciation and amortization decreased $2.7 billion, or 17%, primarily from:

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

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

• Lower amortization expense on certain intangible assets acquired in the Merger;

partially offset by

• A lower average effective interest rate due to refinancing of existing debt at lower rates.

Interest expense to affiliates decreased $74 million, or 30%, primarily from:

• Lower average debt outstanding due to the redemption of debt;

• 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 $349 million, or 5%.

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 $166 million, or 83%, primarily from losses on the extinguishment of debt in 2021.

Income before income taxes , the components of which are discussed above, was $3.1 billion and $3.4 billion for the years ended December 31, 2022 and 2021, respectively.

Income tax expense increased $229 million, or 70%, primarily from:

• Tax benefits recognized in the year ended December 31, 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;

partially offset by

• Lower capitalized interest.

Other expense, net decreased $206 million, or 51%, primarily from lower losses on the extinguishment of debt.

Income from continuing operations before income taxes , the components of which are discussed above, was $3.4 billion and $3.5 billion for the years ended December 31, 2021 and 2020, respectively.

Income tax expense decreased $459 million, or 58%, primarily from:

• Tax benefits 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;

• Lower Income from continuing operations before income taxes;

• Increased benefits from tax credits.

• Tax benefits recognized in 2022 associated with internal restructuring.

Our effective tax rate was 17.7% and 9.8% for the years ended December 31, 2022 and 2021, respectively.

Income from continuing operations was $3.0 billion and $2.7 billion for the years ended December 31, 2021 and 2020, respectively.

The change in Income from continuing operations was primarily due to the items discussed above.

Income from discontinued operations, net of tax was $320 million for the year ended December 31, 2020 and consisted of the results of the Prepaid Business that was divested on July 1, 2020.

There were no discontinued operations for the year ended December 31, 2021.

Net income , the components of which are discussed above, decreased $40 million, or 1%, and included the following:

Net income , the components of which are discussed above, was $2.6 billion and $3.0 billion for the years ended December 31, 2022 and 2021, respectively.

Net income for the year ended December 31, 2022, included the following:

• Merger-related costs, net of tax, of $3.7 billion for the year ended December 31, 2022, compared to $2.3 billion for the year ended December 31, 2021.

• Loss on disposal group held for sale of $815 million, net of tax, for the year ended December 31, 2022, compared to no loss on disposal group held for sale for the year ended December 31, 2021.

• Impairment expense of $358 million, net of tax, for the year ended December 31, 2022, compared to no impairment expense for the year ended December 31, 2021.

• The negative impact of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs, net of tax, of $339 million for the year ended December 31, 2020, compared to an insignificant impact for the year ended December 31, 2021.

• Certain legal-related expenses, net of recoveries, including from the impact of the settlement of certain litigation associated with the August 2021 cyberattack, of $293 million, net of tax, for the year ended December 31, 2022.

Guarantor Financial Information

1 unchanged sentence

(“Sprint Communications”) and Sprint Capital Corporation (collectively, the “Sprint Issuers”).

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

These revisions to the estimated values did not have a significant impact on our summarized financial information for the consolidated obligor group.

As of December 31, 2022, all the registered debt to third parties issued by Sprint Communications had matured and Sprint Communications no longer has any such debt outstanding.

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

and the Sprint Issuers (collectively, the “Issuers”) are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by T-Mobile (“Parent”) and certain of Parent’s 100% owned subsidiaries (“Guarantor Subsidiaries”).

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

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

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

The indentures, supplemental indentures and credit agreements governing the long-term debt 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, 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 restrict the ability of the Issuers or borrowers to loan funds or make payments to Parent.

However, the Issuers or borrowers and Guarantor Subsidiaries are allowed to make certain permitted payments to Parent under the terms of the indentures, supplemental indentures and credit agreements.

Generally, the guarantees of the Guarantor Subsidiaries with respect to the Senior Notes issued by T-Mobile USA, Inc.

(other than $3.5 billion in principal amount of Senior Notes issued in 2017 and 2018) and the credit agreement entered into by T-Mobile USA, Inc.

will be automatically and unconditionally released if, immediately following such release and any concurrent releases of other guarantees, the aggregate principal amount of indebtedness of non-guarantor subsidiaries (other than certain specified subsidiaries) would not exceed $2.0 billion.

The indentures, supplemental indentures and credit agreements governing the long-term debt contain covenants that, among other things, limit the ability of the Issuers or borrowers and the Guarantor Subsidiaries to incur more debt, create liens or other encumbrances, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets.

Basis of Presentation

The following tables include summarized financial information of the obligor groups of debt issued by T-Mobile USA, Inc., Sprint, Sprint Communications and Sprint Capital Corporation.

The following tables include summarized financial information of the obligor groups of debt issued by T-Mobile USA, Inc., Sprint and Sprint Capital Corporation.

The summarized financial information of each obligor group is presented on a combined basis with balances and transactions within the obligor group eliminated.

Investments in and the equity in earnings of non-guarantor subsidiaries, which would otherwise be consolidated in accordance with U.S.

GAAP, are excluded from the below summarized financial information pursuant to SEC Regulation S-X Rule 13-01.

Investments in and the equity in earnings of non-guarantor subsidiaries, which would otherwise be consolidated in accordance with GAAP, are excluded from the below summarized financial information pursuant to SEC Regulation S-X Rule 13-01.

The summarized balance sheet information for the consolidated obligor group of debt issued by T-Mobile USA, Inc.

7 unchanged sentences

Due to related parties 1,571 3,842

Due from related parties 27 22

The summarized results of operations information for the consolidated obligor group of debt issued by T-Mobile USA, Inc.

is presented in the table below:

Year Ended December 31, 2021

Year Ended December 31, 2020

December 31, 2022 Year Ended

December 31, 2021

(in millions)

1 unchanged sentence

Operating income 2,985 3,835

Net income 402 1,148

Net (loss) income (572) 402

Revenue from non-guarantors 2,427 1,769

1 unchanged sentence

Other expense to non-guarantors (327) (148)

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

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

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

3 unchanged sentences

Noncurrent liabilities 65,118 70,262

Due to non-guarantors 3,930 —

Due from non-guarantors — 1,787

Due to related parties 1,571 3,842

Due from related parties 27 —

The summarized results of operations information for the consolidated obligor group of debt issued by Sprint and Sprint Communications, since the acquisition of Sprint on April 1, 2020, is presented in the table below:

Year Ended December 31, 2021 Nine Months Ended December 31, 2020

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

December 31, 2022 Year Ended

December 31, 2021

(in millions)

1 unchanged sentence

Operating loss (3,479) (751)

Net loss (2,161) (2,229)

Revenue from non-guarantors 2 6

Net income (loss) (1)

2,471 (2,161)

Other income, net, from non-guarantors 525 1,706

(1) Net income for the year ended December 31, 2022, includes tax benefits recognized associated with internal restructuring.

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

6 unchanged sentences

Due to related parties 1,571 3,842

Due from related parties 27 —

The summarized results of operations information for the consolidated obligor group of debt issued by Sprint Capital Corporation, since the acquisition of Sprint on April 1, 2020, is presented in the table below:

Year Ended December 31, 2021 Nine Months Ended December 31, 2020

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

December 31, 2022 Year Ended

December 31, 2021

(in millions)

1 unchanged sentence

Operating loss (3,479) (751)

Net loss (2,590) (2,165)

Revenue from non-guarantors 2 6

Net income (loss) (1)

2,604 (2,590)

Other income, net, from non-guarantors 941 2,076

Affiliates Whose Securities Collateralize the Senior Secured Notes

For a description of the collateral arrangements relating to securities of affiliates that collateralize the Senior Secured Notes, please refer to 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 21, 2021, 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 consolidated financial statements of the Company.

(1) Net income for the year ended December 31, 2022, includes tax benefits recognized associated with internal restructuring.

Performance Measures

In managing our business and assessing financial performance, we supplement the information provided by our consolidated financial statements with other operating or statistical data and non-GAAP financial measures.

These operating and financial measures are utilized by our management to evaluate our operating performance and, in certain cases, our ability to meet liquidity requirements.

These operating and financial measures are utilized by our management to evaluate our operating performance and, in certain cases, our ability to meet

liquidity requirements.

Although companies in the wireless industry may not define each of these measures in precisely the same way, we believe that these measures facilitate comparisons with other companies in the wireless industry on key operating and financial measures.

The performance measures presented below include the impact of the Merger on a prospective basis from the close date of April 1, 2020 and the impact of the acquisition of the Wireless Assets from Shentel on a prospective basis from the close date of July 1, 2021.

Historical results prior to the respective close dates have not been retroactively adjusted.

Total Postpaid Accounts

A postpaid account is generally defined as a billing account number that generates revenue.

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

As of December 31, 2022 Versus 2021 2021 Versus 2020

(in thousands) 2022 2021 2020 # Change % Change # Change % Change

Total postpaid customer accounts (1) (2) (3)

28,526 27,216 25,754 1,310 5 % 1,462 6 %

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

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

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

(3) Includes accounts acquired in connection with the Merger and certain account base adjustments.

See Sprint Merger Account Base Adjustments table below.

Total postpaid customer accounts increased 1,310,000, or 5%, primarily due to the Company’s differentiated growth strategy in new and under-penetrated markets, including continued growth in High Speed Internet.

Sprint Merger Account Base Adjustments

Certain adjustments were made to align the account reporting policies of T-Mobile and Sprint.

The adjustments made to the reported T-Mobile and Sprint ending account base as of March 31, 2020 are presented below:

(in thousands) Postpaid Accounts

Reconciliation to beginning accounts

T-Mobile accounts as reported, end of period March 31, 2020 15,244

Sprint accounts, end of period March 31, 2020 11,246

Total combined accounts, end of period March 31, 2020 26,490

Reseller reclassification to wholesale accounts (1)

EIP reclassification from postpaid to prepaid (2)

Rate plan threshold (3)

Collection policy alignment (4)

Miscellaneous adjustments (5)

Total Adjustments (1,105)

Adjusted beginning accounts as of April 1, 2020 25,385

(1) In connection with the closing of the Merger, we refined our definition of wholesale accounts resulting in the reclassification of certain postpaid and prepaid reseller accounts to wholesale accounts.

(2) Prepaid accounts with a customer with a device installment billing plan historically included as Sprint postpaid accounts have been reclassified to prepaid accounts to align with T-Mobile policy.

(3) Accounts with customers who have rate plans with monthly recurring charges that are considered insignificant have been excluded from our reported accounts.

(4) Certain Sprint accounts subject to collection activity for an extended period of time have been excluded from our reported accounts to align with T-Mobile policy.

(5) Miscellaneous insignificant adjustments to align with T-Mobile policy.

Postpaid Net Account Additions

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

Year Ended December 31, 2022 Versus 2021 2021 Versus 2020

(in thousands) 2022 2021 2020 # Change % Change # Change % Change

Postpaid net account additions 1,436 1,188 566 248 21 % 622 110 %

Postpaid net account additions increased 248,000, or 21%, primarily due to continued growth resulting from 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.

Customers are qualified either 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, or prepaid service, where they generally pay in advance of receiving service.

Customers are qualified either for postpaid service utilizing phones, High Speed Internet, tablets, wearables, DIGITS or other connected devices, where they generally pay after receiving service, or prepaid service, where they generally pay in advance of receiving service.

The following table sets forth the number of ending customers:

As of December 31, 2022 Versus 2021 2021 Versus 2020

(in thousands) 2021 2020 2019 # % # %

(in thousands) 2022 2021 2020 # Change % Change # Change % Change

Customers, end of period

8 unchanged sentences

Acquired customers, net of base adjustments (1) (2) (3)

818 29,228 (616) (28,410) (97) % 29,844 NM

(1) Includes customers acquired in connection with the Merger and certain customer base adjustments.

See Customer Base Adjustments and Net Customer Additions tables below.

(1,878) 818 29,228 (2,696) (330) % (28,410) (97) %

(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.

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

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

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

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

(3) Includes customers acquired in connection with the Merger and certain customer base adjustments.

See Sprint Merger Customer Base Adjustments and Net Customer Additions tables below.

Total customers increased 4,879,000, or 4%, primarily from:

• Higher postpaid phone customers, primarily due to the continued success of new customer segments and rate plans, and continued growth in existing and new markets, along with targeted promotional activity and increased retail store traffic, compared to lower retail traffic in the prior period due to closures arising from the Pandemic;

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

• Higher prepaid customers, primarily due to the continued success of our prepaid business due to promotional activity and rate plan offers.

Customer Base Adjustments

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

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

• Higher prepaid customers, primarily due to the continued success of our prepaid business due to promotional activity and rate plan offers, including the introduction of our prepaid High Speed Internet offering, partially offset by lower prepaid industry demand associated with continued industry shift to postpaid plans.

Total customers included High Speed Internet customers of 2,646,000 and 646,000 as of December 31, 2022 and 2021, respectively.

Sprint Merger Customer Base Adjustments

Certain adjustments were made to align the customer reporting policies of T-Mobile and Sprint.

32 unchanged sentences

Year Ended December 31, 2022 Versus 2021 2021 Versus 2020

(in thousands) 2021 2020 2019 # % # %

(in thousands) 2022 2021 2020 # Change % Change # Change % Change

Net customer additions

1 unchanged sentence

Postpaid other customers 3,326 2,578 3,268 748 29 % (690) (21) %

Total postpaid customers 5,495 5,486 4,515 9 NM 971 22 %

Total postpaid customers 6,419 5,495 5,486 924 17 % 9 — %

Prepaid customers 338 342 145 (4) (1) % 197 136 %

Total customers 6,757 5,837 5,631 920 16 % 206 4 %

Acquired customers, net of base adjustments 818 29,228 (616) (28,410) (97) % 29,844 NM

NM - Not Meaningful

Adjustments to customers (1,878) 818 29,228 (2,696) (330) % (28,410) (97) %

Total net customer additions increased 920,000, or 16%, primarily from:

• Higher postpaid phone net customer additions, primarily due to increased retail store traffic, compared to lower retail traffic in the prior period due to closures arising from the Pandemic, partially offset by higher churn;

• Higher prepaid net customer additions, primarily due to lower churn;

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

• Higher postpaid phone net customer additions, primarily due to lower churn, partially offset by lower gross additions driven by industry switching activity normalizing closer to pre-Pandemic levels;

partially offset by

• Lower postpaid other net customer additions, primarily due to elevated gross additions in the prior period related to the public and educational sector resulting from the Pandemic and higher disconnects from an increased customer base, partially offset by growth in High Speed Internet.

High Speed Internet net customer additions were 546,000 and 87,000 for the years ended December 31, 2021 and 2020, respectively.

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

• High Speed Internet net customer additions included in postpaid other net customer additions were 1,764,000 and 546,000 for the years ended December 31, 2022 and 2021, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 236,000 for the year ended December 31, 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 year ended December 31, 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.

The number of customers whose service was disconnected is presented net of customers that subsequently have their service restored within a certain period of time.

The number of customers whose service was disconnected is presented net of customers that subsequently had their service restored within a certain period of time and excludes customers who received service for less than a certain minimum period of time.

We believe that churn provides management, investors and analysts with useful information to evaluate customer retention and loyalty.

4 unchanged sentences

Prepaid churn 2.77 % 2.83 % 3.03 % -6 bps -20 bps

Postpaid phone churn increased 8 basis points, primarily from:

• Higher churn from customers acquired in the Merger;

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

Postpaid phone churn decreased 10 basis points, primarily from:

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

partially offset by

• More normalized payment performance relative to muted Pandemic levels in 2021.

Prepaid churn decreased 6 basis points, primarily from:

• Promotional activity;

• Improved quality of recently acquired customers.

Total Postpaid Accounts

A postpaid account is generally defined as a billing account number that generates revenue.

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 December 31, 2021 Versus 2020 2020 Versus 2019

(in thousands) 2021 2020 2019 # Change % Change # Change % Change

Total postpaid customer accounts (1)(2)

27,216 25,754 15,047 1,462 6 % 10,707 71 %

(1) Includes accounts acquired in connection with the Merger and certain account base adjustments.

See Account Base Adjustments table below.

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

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 1,462,000, or 6%, primarily due to the continued success of new customer segments and rate plans, continued growth in existing and new markets, including our High Speed Internet product, along with targeted promotional activity and increased retail store traffic compared to the prior period due to closures arising from the Pandemic.

Account Base Adjustments

Certain adjustments were made to align the account reporting policies of T-Mobile and Sprint.

The adjustments made to the reported T-Mobile and Sprint ending account base as of March 31, 2020 are presented below:

(in thousands) Postpaid Accounts

Reconciliation to beginning accounts

T-Mobile accounts as reported, end of period March 31, 2020 15,244

Sprint accounts, end of period March 31, 2020 11,246

Total combined accounts, end of period March 31, 2020 26,490

Reseller reclassification to wholesale accounts (1)

EIP reclassification from postpaid to prepaid (2)

Rate plan threshold (3)

Collection policy alignment (4)

Miscellaneous adjustments (5)

Total Adjustments (1,105)

Adjusted beginning accounts as of April 1, 2020 25,385

(2) Prepaid accounts with a customer with a device installment billing plan historically included as Sprint postpaid accounts have been reclassified to prepaid accounts to align with T-Mobile policy.

(3) Accounts with customers who have rate plans with monthly recurring charges that are considered insignificant have been excluded from our reported accounts.

(4) Certain Sprint accounts subject to collection activity for an extended period of time have been excluded from our reported accounts to align with T-Mobile policy.

(5) Miscellaneous insignificant adjustments to align with T-Mobile policy.

Postpaid Net Account Additions

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

As of December 31, 2021 Versus 2020 2020 Versus 2019

(in thousands) 2021 2020 2019 # Change % Change # Change % Change

Postpaid net account additions 1,188 566 1,018 622 110 % (452) (44) %

Postpaid net account additions increased 622,000, or 110%, primarily due to the continued success of new customer segments

and rate plans, continued growth in existing and new markets, including our High Speed Internet product, along with targeted promotional activity and increased retail store traffic compared to the prior period due to closures arising from the Pandemic.

Average Revenue Per User

ARPU represents the average monthly service revenue earned from customers.

We believe ARPU provides management, investors and analysts with useful information to assess and evaluate our service revenue per customer and assist in forecasting our future service revenues generated from our customer base.

Postpaid phone ARPU excludes postpaid other customers and related revenues, which include High Speed Internet, wearables, DIGITS and other connected devices such as tablets and SyncUp products.

The following table illustrates the calculation of our operating measure ARPU and reconciles this measure to the related service revenues:

(in millions, except average number of customers and ARPU) Year Ended December 31, 2021 Versus 2020 2020 Versus 2019

2021 2020 2019 $ Change % Change $ Change % Change

Calculation of Postpaid Phone ARPU

Postpaid service revenues $ 42,562 $ 36,306 $ 22,673 $ 6,256 17 % $ 13,633 60 %

Postpaid other revenues (3,408) (2,367) (1,344) (1,041) 44 % (1,023) 76 %

Postpaid phone service revenues 39,154 33,939 21,329 5,215 15 % 12,610 59 %

Average number of postpaid phone customers (in thousands) and number of months in period 68,327 59,249 38,602 9,078 15 % 20,647 53 %

Postpaid phone ARPU $ 47.75 $ 47.74 $ 46.04 $ 0.01 NM $ 1.70 4 %

Calculation of Prepaid ARPU

Prepaid service revenues $ 9,733 $ 9,421 $ 9,543 $ 312 3 % $ (122) (1) %

Average number of prepaid customers (in thousands) and number of months in period 20,909 20,594 20,955 315 2 % (361) (2) %

Prepaid ARPU $ 38.79 $ 38.12 $ 37.95 $ 0.67 2 % $ 0.17 — %

NM - Not Meaningful

Postpaid Phone ARPU

Postpaid phone ARPU was essentially flat and was primarily impacted by:

• Higher premium services, including Magenta Max;

• The net impact of customers acquired in the Merger, which have higher ARPU (net of changes arising from the reduction in base due to policy adjustments and reclassification of certain ARPU components from the acquired customers being moved to other revenue lines);

• Promotional activity;

• The impact of the transition of Sprint customers to tax-inclusive rate plans.

Prepaid ARPU increased $0.67, or 2%, primarily due to:

• Higher premium services;

• Higher revenues due to improved rate plan mix;

partially offset by

• A reduction in certain non-recurring charges.

Average Revenue Per Account

Average Revenue per Account (“ARPA”) represents the average monthly postpaid service revenue earned per account.

• More normalized payment performance relative to muted Pandemic levels in 2021.

Postpaid Average Revenue Per Account

Postpaid ARPA represents the average monthly postpaid service revenue earned per account.

Postpaid ARPA is calculated as Postpaid revenues for the specified period divided by the average number of postpaid accounts during the period, further divided by the number of months in the period.

We believe postpaid ARPA provides management, investors and analysts with useful information to assess and evaluate our postpaid service revenue realization and assist in forecasting our future postpaid service revenues on a per account basis.

We consider postpaid ARPA to be indicative of our revenue growth potential given the increase in the average number of postpaid phone customers per account and increases in postpaid other customers, including High Speed Internet, wearables, DIGITS or other connected devices, which include tablets and SyncUp products.

The following table illustrates the calculation of our operating measure ARPA and reconciles this measure to the related service revenues:

(in millions, except average number of accounts, ARPA) Year Ended December 31, 2021 Versus 2020 2020 Versus 2019

We consider postpaid ARPA to be indicative of our revenue growth potential given the increase in the average number of postpaid phone customers per account and increases in postpaid other customers, including High Speed Internet, tablets, wearables, DIGITS or other connected devices.

The following table sets forth our operating measure ARPA:

(in dollars) Year Ended December 31, 2022 Versus 2021 2021 Versus 2020

2022 2021 2020 $ Change % Change $ Change % Change

Calculation of Postpaid ARPA

Postpaid service revenues $ 42,562 $ 36,306 $ 22,673 $ 6,256 17 % $ 13,633 60 %

Average number of postpaid accounts (in thousands) and number of months in period 26,464 22,959 14,486 3,505 15 % 8,473 58 %

Postpaid ARPA $ 137.43 $ 134.03 $ 131.78 $ 3.40 3 % $ 2.25 2 %

Postpaid ARPA increased $3.40, or 3%, primarily from:

• An increase in customers per account;

• Higher premium services, including Magenta Max;

• Higher non-recurring charges relative to muted Pandemic levels in 2021;

• An increase in customers per account, including continued adoption of High Speed Internet from existing accounts;

partially offset by

• Promotional activity.

• An increase in High Speed Internet only accounts and increased promotional activity, including growth in rate plans for specific customer cohorts such as Business, Military, and First Responder.

Average Revenue Per User

Average Revenue per User (“ARPU”) represents the average monthly service revenue earned per customer.

ARPU is calculated as service revenues for the specified period divided by the average number of customers during the period, further divided by the number of months in the period.

Postpaid phone ARPU excludes postpaid other customers and related revenues, which include High Speed Internet, tablets, wearables, DIGITS and other connected devices.

The following table sets forth our operating measure ARPU:

(in dollars) Year Ended December 31, 2022 Versus 2021 2021 Versus 2020

2022 2021 2020 $ Change % Change $ Change % Change

Postpaid phone ARPU $ 48.78 $ 47.75 $ 47.74 $ 1.03 2 % $ 0.01 — %

Prepaid ARPU 38.76 38.79 38.12 (0.03) — % 0.67 2 %

Postpaid Phone ARPU

Postpaid phone ARPU increased $1.03, or 2%, primarily due to:

• Higher premium services, including Magenta Max;

• Higher non-recurring charges relative to muted Pandemic levels in 2021;

partially offset by

• Increased promotional activity, including growth in rate plans for specific customer cohorts such as Business, Military, and First Responder.

Prepaid ARPU was essentially flat, primarily from:

• Increased promotional activity;

• Higher premium services;

• Higher non-recurring charges.

Adjusted EBITDA and Core Adjusted EBITDA

Beginning in the first quarter of 2021, we began disclosing Core Adjusted EBITDA as a financial measure to improve comparability as we de-emphasize device leasing programs as part of our value proposition.

Adjusted EBITDA represents earnings before Interest expense, net of Interest income, Income tax expense, Depreciation and amortization, stock-based compensation and certain income and expenses not reflective of our ongoing operating performance.

3 unchanged sentences

Adjusted EBITDA, Adjusted EBITDA margin, Core Adjusted EBITDA and Core Adjusted EBITDA margin are non-GAAP financial measures utilized by our management to monitor the financial performance of our operations.

We use Adjusted EBITDA internally as a measure to evaluate and compensate our personnel and management for their performance.

We historically used Adjusted EBITDA and we currently use Core Adjusted EBITDA internally as a measure to evaluate and compensate our personnel and management for their performance.

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 and incremental costs directly attributable to the Pandemic, as they are not indicative of our ongoing operating performance, as well as certain other 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 to 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 well as other special income and expenses which are not reflective of our core business activities.

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 U.S.

Generally Accepted Accounting Principles (“GAAP”).

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

4 unchanged sentences

Income from continuing operations 2,590 3,024 2,744 (434) (14) % 280 10 %

Interest expense 3,189 2,483 727 706 28 % 1,756 242 %

Interest expense to affiliates 173 247 408 (74) (30) % (161) (39) %

Interest income (20) (29) (24) 9 (31) % (5) 21 %

Interest expense, net 3,364 3,342 2,701 22 1 % 641 24 %

Other expense, net 33 199 405 (166) (83) % (206) (51) %

9 unchanged sentences

Impairment expense 477 — 418 477 NM (418) (100) %

Legal-related expenses, net (3)

391 — — 391 NM — NM

Loss on disposal group held for sale 1,087 — — 1,087 NM — NM

Other, net (4)

8 unchanged sentences

43 % 40 % 40 % 300 bps — bps

NM - Not Meaningful

(1) Following the Prepaid Transaction starting on July 1, 2020, we provide MVNO services to DISH.

We have included the operating income from April 1, 2020 through June 30, 2020, in our determination of Adjusted EBITDA to reflect contributions of the Prepaid Business that were replaced by the MVNO Agreement beginning on July 1, 2020 in order to enable management, analysts and investors to better assess ongoing operating performance and trends.

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

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

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

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

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

(4) 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 are not reflective of T-Mobile’s core business activities (“special items”), and are, therefore, excluded from Adjusted EBITDA and Core Adjusted EBITDA.

NM - Not meaningful

Core Adjusted EBITDA increased $2.8 billion, or 12%, for the year ended December 31, 2022.

2 unchanged sentences

• Higher Total service revenues;

• Higher Equipment revenues, excluding Lease revenues;

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

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

partially offset by

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

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

• Higher Selling, general and administrative expenses, excluding Merger-related costs and supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs.

Adjusted EBITDA increased $2.4 billion, or 10%, for the year ended December 31, 2021.

The change was primarily due to the increase in Core Adjusted EBITDA, discussed above, partially offset by a decrease of Lease revenues of $833 million for the year ended December 31, 2021.

• Lower Equipment revenues, excluding lease revenues;

• 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.

Adjusted EBITDA increased $897 million, or 3%, for the year ended December 31, 2022, primarily due to the fluctuations in Core Adjusted EBITDA, discussed above, partially offset by lower lease revenues, which decreased $1.9 billion for the year ended December 31, 2022.

Liquidity and Capital Resources

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

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

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

Further, the incurrence of additional indebtedness may inhibit our ability to incur new debt in the future to finance our business strategy under the terms governing our existing and future indebtedness.

The following is a condensed schedule of our cash flows:

Year Ended December 31, 2022 Versus 2021 2021 Versus 2020

(in millions) 2021 2020 2019 $ % $ %

(in millions) 2022 2021 2020 $ Change % Change $ Change % Change

Net cash provided by operating activities $ 16,781 $ 13,917 $ 8,640 $ 2,864 21 % $ 5,277 61 %

Net cash used in investing activities (12,359) (19,386) (12,715) 7,027 (36) % (6,671) 52 %

Net cash provided by (used in) financing activities 1,709 13,010 (2,374) (11,301) (87) % 15,384 (648) %

Net cash (used in) provided by financing activities (6,451) 1,709 13,010 (8,160) (477) % (11,301) (87) %

Operating Activities

Net cash provided by operating activities increased $2.9 billion, or 21%, primarily from:

• A $4.8 billion decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Accounts payable and accrued liabilities and Inventories, the one-time impact of $2.3 billion in gross payments for the settlement of interest rate swaps related to Merger financing for the year ended December 31, 2020, included in the use of cash from Other current and long-term liabilities, as well as lower use of cash from Operating lease right-of-use assets, partially offset by higher use of cash from Equipment installment plan receivables and Short- and long-term operating lease liabilities, including a $1.0 billion advance rent payment related to the modification of one of our master lease agreements;

• A $506 million increase in Net income, adjusted for non-cash income and expense.

• Net cash provided by operating activities includes $2.2 billion and $1.5 billion in payments for Merger-related costs for the years ended December 31, 2021 and 2020, respectively.

• A $4.1 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 year ended December 31, 2021, EIP receivables, Other current and long-term liabilities and Inventories, partially offset by higher use of cash from Accounts receivable;

partially offset by

• A $1.2 billion decrease in Net income, adjusted for non-cash income and expense.

• Net cash provided by operating activities includes the impact of $3.4 billion and $2.2 billion in net payments for Merger-related costs for the years ended December 31, 2022 and 2021, respectively.

Investing Activities

Net cash used in investing activities increased $6.7 billion, or 52%.

Net cash used in investing activities decreased $7.0 billion or 36%.

The use of cash was primarily from:

• $12.3 billion in Purchases of property and equipment, including capitalized interest, from network integration related to the Merger and the continued build-out of our nationwide 5G network;

• $9.4 billion in Purchases of spectrum licenses and other intangible assets, including deposits, primarily due to $8.9 billion paid for spectrum licenses won at the conclusion of Auction 107 in March 2021;

• $1.9 billion in Acquisitions of companies, primarily due to our acquisition of the Wireless Assets from Shentel;

• $14.0 billion in Purchases of property and equipment, including capitalized interest, from the accelerated build-out of our nationwide 5G network, including from network integration related to the Merger;

• $3.3 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 provided by financing activities decreased $11.3 billion, or 87%.

The source of cash was primarily from:

• $14.7 billion in Proceeds from issuance of long-term debt, net of issuance costs;

partially offset by

Net cash used in financing activities was $6.5 billion for the year ended December 31, 2022, compared to net cash provided by financing activities of $1.7 billion for the year ended December 31, 2021.

The use of cash was primarily from:

• $5.6 billion in Repayments of long-term debt;

• $3.0 billion in Repurchases of common stock;

• $1.2 billion in Repayments of financing lease obligations;

• $243 million in Tax withholdings on share-based awards;

partially offset by

• $3.7 billion in Proceeds from issuance of long-term debt.

Cash and Cash Equivalents

1 unchanged sentence

Free Cash Flow

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

Free Cash Flow and Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, are non-GAAP financial measures utilized by our management, investors and analysts of our financial information to evaluate cash available to pay debt and provide further investment in the business.

In 2021 and 2019, we sold tower sites for proceeds of $40 million and $38 million, respectively, which are included in Proceeds from sales of tower sites within Net cash used in investing activities on our Consolidated Statements of Cash Flows.

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

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

In 2022 and 2021, we received proceeds from the sale of tower sites of $9 million and $40 million, respectively, which are included in Proceeds from sales of tower sites within Net cash used in investing activities on our Consolidated Statements of Cash Flows.

As these proceeds were from the sale of fixed assets and are used by management to assess cash available for capital expenditures during the year, we determined the proceeds are relevant for the calculation of Free Cash Flow and included them in the table below.

4 unchanged sentences

Net cash provided by operating activities $ 16,781 $ 13,917 $ 8,640 $ 2,864 21 % $ 5,277 61 %

Cash purchases of property and equipment (12,326) (11,034) (6,391) (1,292) 12 % (4,643) 73 %

Cash purchases of property and equipment, including capitalized interest (13,970) (12,326) (11,034) (1,644) 13 % (1,292) 12 %

Proceeds from sales of tower sites 9 40 — (31) (78) % 40 NM

5 unchanged sentences

NM - Not Meaningful

Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, increased $2.6 billion, or 88%.

Free Cash Flow increased $2.0 billion, or 36%.

The increase 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, excluding gross payments for settlement of interest rate swaps, includes $2.2 billion and $1.5 billion in payments for Merger-related costs for the years ended December 31, 2021 and 2020, respectively.

• The calculation of Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, excludes the one-time impact of gross payments for the settlement of interest rate swaps related to Merger financing of $2.3 billion for the year ended December 31, 2020.

• Free Cash Flow includes $3.4 billion and $2.2 billion in net payments for Merger-related costs for the years ended December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021, there were no significant net cash proceeds from securitization.

Borrowing Capacity

We maintain a financing arrangement with Deutsche Bank AG, which allows for up to $108 million in borrowings.

Under the financing arrangement, we can effectively extend payment terms for invoices payable to certain vendors.

As of December 31, 2021, there were no outstanding balances under such financing arrangement.

We also maintain vendor financing arrangements primarily with our main network equipment suppliers.

Under the respective agreements, we can obtain extended financing terms.

During the year ended December 31, 2021, we repaid $184 million, associated with the vendor financing arrangements and other financial liabilities.

These payments are included in Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities, on our Consolidated Statements of Cash Flows.

As of December 31, 2021 and December 31, 2020, the outstanding balance under the vendor financing arrangements and other financial liabilities was $47 million and $240 million, respectively, of which $0 and $122 million, respectively, was assumed in connection with the closing of the Merger.

We maintain a revolving credit facility (the “Revolving Credit Facility”) with an aggregate commitment amount of $7.5 billion.

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

On October 30, 2020, we entered into a $5.0 billion senior secured term loan commitment with certain financial institutions.

On January 14, 2021, we issued an aggregate of $3.0 billion of Senior Notes.

The senior secured term loan commitment was reduced by an amount equal to the aggregate gross proceeds of the Senior Notes, which reduced the commitment to $2.0 billion.

On March 23, 2021, we issued an aggregate of $3.8 billion of Senior Notes.

The senior secured term loan commitment was terminated upon the issuance of the $3.8 billion of Senior Notes.

See Note 8 - Debt of the Notes to the Consolidated Financial Statements for more information regarding the Revolving Credit Facility.

Debt Financing

As of December 31, 2022, our total debt and financing lease liabilities were $74.5 billion, excluding our tower obligations, of which $66.8 billion was classified as long-term debt and $1.4 billion was classified as long-term financing lease liabilities.

During the year ended December 31, 2021, we issued long-term debt for net proceeds of $14.7 billion and redeemed and repaid short- and long-term debt with an aggregate principal amount of $11.3 billion.

During the year ended December 31, 2022, we issued long-term debt for net proceeds of $3.7 billion and repaid short- and long-term debt with an aggregate principal amount of $5.6 billion.

Subsequent to December 31, 2022, on February 9, 2023, we issued $1.0 billion of 4.950% Senior Notes due 2028, $1.3 billion of 5.050% Senior Notes due 2033 and $750 million of 5.650% Senior Notes due 2053.

For more information regarding our debt financing transactions, see Note 8 – Debt of the Notes to the Consolidated Financial Statements.

1 unchanged sentence

In March 2021, the FCC announced that we were the winning bidder of 142 licenses in Auction 107 (C-band spectrum) for an aggregate purchase price of $9.3 billion, excluding relocation costs.

At the inception of Auction 107 in October 2020, we deposited $438 million.

Upon conclusion of Auction 107 in March 2021, we paid the FCC the remaining $8.9 billion for the licenses won in the auction.

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

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.

We expect to incur an additional $767 million in fixed relocation costs, which will be paid through 2024.

In January 2022, the FCC announced that we were the winning bidder of 199 licenses in Auction 110 (3.45 GHz 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 the first quarter of 2022.

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 spectrum) 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.

Our receipt of these licenses was still awaiting FCC final approval of the auction results as of December 31, 2022.

For more information regarding our spectrum licenses, see Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements.

Shentel Wireless Assets Acquisition

On July 1, 2021, we closed on the acquisition of the Wireless Assets for a cash purchase price of approximately $1.9 billion.

For more information regarding the acquisition of the Wireless Assets, see Note 2 – Business Combinations of the Notes to the 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.

The closing of this purchase was still awaiting FCC final approval as of December 31, 2022.

For more information regarding our License Purchase Agreements, see Note 6 – Goodwill, Spectrum License Trans actions and Other Intangible Assets of the Notes to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

3 unchanged sentences

Future Sources and Uses of Liquidity

We may seek additional sources of liquidity, including through the issuance of additional debt in 2022, to continue to opportunistically acquire spectrum licenses or other assets in private party transactions or for the refinancing of existing long-term debt on an opportunistic basis.

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

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.

1 unchanged sentence

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 December 31, 2022.

Financing Lease Facilities

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

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 December 31, 2022, we have committed to $7.5 billion of financing leases under these financing lease facilities, of which $1.2 billion was executed during the year ended December 31, 2022.

1 unchanged sentence

Capital Expenditures

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

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

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

We expect cash purchases of property and equipment to range from $13.0 billion to $13.5 billion in 2022.

For more information regarding our spectrum licenses, see Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements.

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

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

For more information regarding our spectrum licenses, see Note 6 – Goodwill, Spectrum License Transactions and Other Intan gible As s ets of the Notes to the Consolidated Financial Statements.

Stockholder Returns

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 excess 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 liquidity, including potentially debt capital markets.

On September 8, 2022, our Board of Directors authorized our 2022 Stock Repurchase Program for up to $14.0 billion of our common stock through September 30, 2023.

During the year ended December 31, 2022, we repurchased shares of our common stock for a total purchase price of $3.0 billion, all of which were purchased under the 2022 Stock Repurchase Program and occurred during the period from September 8, 2022, through December 31, 2022.

As of December 31, 2022, we had up to $11.0 billion remaining under the 2022 Stock Repurchase Program.

Subsequent to December 31, 2022, from January 1, 2023, through February 10, 2023, we repurchased additional shares of our common stock for a total purchase price of $2.1 billion.

As of February 10, 2023, we had up to $8.9 billion remaining under the 2022 Stock Repurchase Program.

For additional information regarding the 2022 Stock Repurchase Program, see Note 15 – Repurchases of Common Stock of the Notes to the Consolidated Financial Statements.

Contractual Obligations

In connection with the regulatory approvals of the Transactions, we made commitments to various state and federal agencies, including the U.S.

Department of Justice (the “DOJ”) and FCC.

Department of Justice and FCC.

For more information regarding these commitments, see Note 1 9 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements.

22 unchanged sentences

See Note 1 9 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements for further information.

(4) 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.

The agreements remain subject to regulatory approval and the purchase price of $3.5 billion is excluded from our reported purchase obligations above.

(5) Spectrum lease agreements are typically for five to 10 years with automatic renewal provisions, bringing the total term of the agreements up to 30 years.

5 unchanged sentences

The acquisition of spectrum licenses is subject to regulatory approval and other customary closing conditions.

Subsequent to December 31, 2021, on January 3, 2022, we entered into an agreement (the “Crown Agreement”) with Crown Castle International Corp that will enable us to lease towers from CCI through December 2033, followed by optional renewals.

The Crown Agreement amends the pricing for our non-dedicated transportation lines, which includes lit fiber backhaul and small cell circuits.

We have committed to an annual volume commitment to execute and deliver 35,000 small cell contracts, including upgrades to existing locations, over the next five years.

The minimum commitment for small cells is $1.8 billion through 2039.

Related Party Transactions

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

See Note 1 9 – Additional Financial Information of the Notes to the Consolidated Financial Statements for further information.

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

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act of 1934, as amended (“Exchange Act”).

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

As of February 10, 2023, DT and SoftBank held, directly or indirectly, approximately 49.6% and 3.3%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 47.1% 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 February 10, 2023, over approximately 53.3% of the outstanding T-Mobile common stock.

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

Section 219 of the Iran Threat Reduction and the Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act.

Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction.

5 unchanged sentences

subsidiaries, is party to roaming and interconnect agreements with the following mobile and fixed line telecommunication providers in Iran, some of which are or may be government-controlled entities:

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

Telecommunication Kish Company, Mobile Telecommunication Company of Iran, and Telecommunication Infrastructure Company of Iran.

In addition, during the year ended December 31, 2022, DT, through certain of its non-U.S.

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

Department of Treasury’s Office of Foreign Assets Control:

Bank Melli and Europäisch-Iranische Handelsbank.

Bank Melli, Europäisch-Iranische Handelsbank, CPG Engineering & Commercial Services GmbH and Golgohar Trade and Technology GmbH.

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

2 unchanged sentences

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 year ended December 31, 2021 were less than $0.4 million.

Gross revenues and net profits recorded from these activities for the year ended, were less than $0.1 million.

We understand that DT intends to continue these activities.

13 unchanged sentences

See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further information.

Three of these policies, discussed below, are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.

Two of these policies, discussed below, relate to critical estimates because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.

Actual results could differ from those estimates.

Management and the Audit Committee of the Board of Directors have reviewed and approved these critical accounting policies.

Management and the Audit Committee of the Board of Directors have reviewed and approved the accounting policies associated with these critical estimates.

Our property and equipment balance represents a significant component of our consolidated assets.

2 unchanged sentences

See Note 1 – Summary of Significant Accounting Policies and Note 5 – Property and Equipment of the Notes to the Consolidated Financial Statements for information regarding depreciation of assets, including management’s underlying estimates of useful lives.

Evaluation of Goodwill and Indefinite-Lived Intangible Assets for Impairment

Goodwill and other indefinite-lived intangible assets, such as our spectrum licenses, are not amortized but tested for potential impairment annually, as of December 31, or more frequently if events or changes in circumstances indicate such assets might be impaired.

We test goodwill on a reporting unit basis by comparing the estimated fair value of the reporting unit to its book value.

If the fair value exceeds the book value, then no impairment is measured.

As of December 31, 2021, we have identified one reporting unit for which discrete financial information is available and results are regularly reviewed by management:

The wireless reporting unit consists of all the assets and liabilities of T-Mobile US, Inc.

When assessing goodwill for impairment we may elect to first perform a qualitative assessment to determine if the quantitative impairment test is necessary.

If we do not perform a qualitative assessment, or if the qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we perform a quantitative test.

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

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

We employed a qualitative approach to assess the wireless reporting unit.

The fair value of the wireless reporting unit is determined using a market approach, which is based on market capitalization.

We recognize market capitalization is subject to volatility and will monitor changes in market capitalization to determine whether declines, if any, necessitate an interim impairment review.

In the event market capitalization does decline below its book value, we will consider the length, severity and reasons for the decline when assessing whether potential impairment exists, including considering whether a control premium should be added to the market capitalization.

We believe short-term fluctuations in share price may not necessarily reflect the underlying aggregate fair value.

No events or change in circumstances have occurred that indicate the fair value of the wireless reporting unit may be below its carrying amount at December 31, 2021.

We previously identified Layer3, which consisted of the assets and liabilities of Layer3 TV, Inc.

and provided services branded as TVision TM , as its own reporting unit.

However, we wound down our TVision TM services offering on April 29, 2021 and discrete financial information for Layer3 is no longer available or regularly reviewed by management.

Accordingly, we no longer identify Layer3 as its own reporting unit as of December 31, 2021.

During the year ended December 31, 2020, while Layer3 was still identified as its own reporting unit, we determined that our enhanced in-home broadband opportunity following the Merger, along with the acquisition of certain content rights, created a strategic shift in our TVision TM services offering that indicated that the recoverability of the carrying amount of goodwill assigned to the Layer3 reporting unit should be evaluated for impairment.

As a result, we completed an interim goodwill impairment evaluation and determined the carrying value of the Layer3 reporting unit exceeded its estimated fair value.

Accordingly, we recorded an impairment loss of $218 million for the year ended December 31, 2020, all of which relates to the impairment recognized during the three months ended June 30, 2020.

This impairment reduced the goodwill balance previously assigned to the Layer3 reporting unit to zero.

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

national level.

We may elect to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an intangible asset is less than its carrying value.

If we do not perform the qualitative assessment, or if the qualitative

assessment indicates it is more likely than not that the fair value of the intangible asset is less than its carrying amount, we calculate the estimated fair value of the intangible asset.

If the estimated fair value of the spectrum licenses is lower than their

carrying amount, an impairment loss is recognized.

We estimate fair value using the Greenfield methodology, which is an income approach, to estimate the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under current market conditions.

The Greenfield methodology values the spectrum licenses by calculating the cash flow generating potential of a hypothetical start-up company that goes into business with no assets except for the asset to be valued (in this case, spectrum licenses) and makes investments required to build an operation comparable to current use.

The value of the spectrum licenses can be considered as equal to the present value of the cash flows of this hypothetical start-up company.

We base the assumptions underlying the Greenfield methodology on a combination of market participant data and our historical results, trends and business plans.

Future cash flows in the Greenfield methodology are based on estimates and assumptions of market participant revenues, EBITDA margin, network build-out period and a long-term growth rate for a market participant.

The cash flows are discounted using a weighted-average cost of capital.

No events or change in circumstances have occurred that indicate the fair value of the Spectrum licenses may be below their carrying amount at December 31, 2021.

The valuation approaches utilized to estimate fair value for the purposes of the impairment tests of goodwill and spectrum

licenses require the use of assumptions and estimates, which involve a degree of uncertainty.

If actual results or future

expectations are not consistent with the assumptions used in our estimate of fair value, it may result in the recording of significant impairment charges on goodwill or spectrum licenses.

The most significant assumptions within the valuation models are the discount rate, revenues, EBITDA margins, capital expenditures and long-term growth rate.

For more information regarding our impairment assessments, see Note 1 – Summary of Significant Accounting Policies and Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements.

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

3 unchanged sentences

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

The income tax laws of the jurisdictions in which we operate are complex and subject to different interpretations by management and the relevant government taxing authorities.

In establishing a provision for income tax expense, we must make judgments about the application of these inherently complex tax laws.

We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions.

Our interpretations may be subjected to review during examination by taxing authorities and disputes may arise over the respective tax positions.

We attempt to resolve these disputes during the tax examination and audit process and ultimately through the court system when applicable.

We monitor relevant tax authorities and revise our estimate of accrued income taxes due to changes in income tax laws and their interpretation by the courts and regulatory authorities on a quarterly basis.

Revisions of our estimate of accrued income taxes also may result from our own income tax planning and from the resolution of income tax controversies.

Such revisions in our estimates may be material to our Income tax expense for any given quarter.

Accounting Pronouncements Not Yet Adopted

1 unchanged sentence

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

What changed 10-K

Item 7. Management’s Discussion and Analysis