What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-25 compared with 2023-07-27 · 260 added, 245 removed, 463 unchanged (52% of the section changed)

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• the difficulties in maintaining multiple billing systems following our merger (the “Merger”) with Sprint Corporation (“Sprint”) pursuant to a Business Combination Agreement with Sprint and the other parties named therein (as amended, the “Business Combination Agreement”) and any unanticipated difficulties, disruption, or significant delays in our long-term strategy to convert Sprint’s legacy customers onto T-Mobile’s billing platforms;

• the impacts of the actions we have taken and conditions we have agreed to in connection with the regulatory proceedings and approvals of the Merger and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”), including the acquisition by DISH Network Corporation (“DISH”) of the prepaid wireless business operated under the Boost Mobile and Sprint prepaid brands (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Personal Communications Company LLC (“Shentel”) and Swiftel Communications, Inc.), including customer accounts, inventory, contracts, intellectual property and certain other specified assets, and the assumption of certain related liabilities (collectively, the “Prepaid Transaction”), the complaint and proposed final judgment agreed to by us, Deutsche Telekom AG (“DT”), Sprint, SoftBank Group Corp.

• the impacts of the actions we have taken and conditions we have agreed to in connection with the regulatory proceedings and approvals of the Merger and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”), including the acquisition by DISH Network Corporation (“DISH”) of the prepaid wireless business operated under the Boost Mobile and Sprint prepaid brands (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Personal Communications Company LLC (“Shentel”) and Swiftel Communications, Inc.), including customer accounts, inventory, contracts, intellectual property and certain other specified assets, and the assumption of certain related liabilities (collectively, the “Prepaid Transaction”), the complaint and proposed final judgment (the “Final Judgment”) agreed to by us, Deutsche Telekom AG (“DT”), Sprint, SoftBank Group Corp.

(“SoftBank”) and DISH with the U.S.

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• adverse economic, political or market conditions in the U.S.

and international markets, including changes resulting from increases in inflation or interest rates, supply chain disruptions and impacts of current geopolitical instability caused by the war in Ukraine;

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

and international markets, including changes resulting from increases in inflation or interest rates, supply chain disruptions and impacts of geopolitical instability, such as the Ukraine-Russia war and Israel-Hamas war;

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

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

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

• our 2022 Stock Repurchase Program (as defined in Note 10 – Repurchases of Common Stock of the Notes to the Condensed Consolidated Financial Statements) may not be fully consummated, and our share repurchase program may not enhance long-term stockholder value.

• the dollar amount authorized for our 2023-2024 Stockholder Return Program (as defined in Note 10 – Stockholder Return Programs of the Notes to the Condensed Consolidated Financial Statements) may not be fully utilized, and our share repurchases and dividend payments pursuant thereto may fail to have the desired impact on stockholder value.

Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

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

Our MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2023, included in Part I, Item 1 of this Form 10-Q, and audited consolidated financial statements, included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022.

Our MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2023, included in Part I, Item 1 of this Form 10-Q, and audited consolidated financial statements, included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022.

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

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

Restructuring costs are disclosed below under “Restructuring” and in Note 14 – Restructuring Costs of the Notes to the Condensed Consolidated Financial Statements.

Restructuring costs are disclosed in Note 14 – Restructuring Costs of the Notes to the Condensed 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.

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(in millions) Three Months Ended

June 30, Change Six Months Ended

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September 30, Change Nine Months Ended

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2023 2022 $ % 2023 2022 $ %

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We expect to incur substantially all of the remaining projected Merger-related costs of approximately $200 million, 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.

Restructuring

Upon the close of the Merger in April 2020, we began implementing restructuring initiatives to realize cost efficiencies from the Merger.

The major activities associated with the Merger restructuring initiatives to date include:

• Contract termination costs associated with rationalization of retail stores, distribution channels, duplicative network and backhaul services and other agreements;

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

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

For more information regarding our Merger restructuring activities, see Note 14 – Restructuring Costs of the Notes to the Condensed Consolidated Financial Statements.

Anticipated Merger Synergies

As a result of our ongoing restructuring and integration activities, we have realized Merger synergies by eliminating redundancies within our combined network 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 approximately $2.7 billion, Cost of service expense reductions of approximately $3.2 billion and avoided network expenses of approximately $1.6 billion.

2023 Workforce Reduction

In August 2023, we began implementing an initiative to reduce the size of our workforce by approximately 5,000 positions, just under 7% of our total employee base, primarily in corporate and back-office functions, and some technology roles.

We expect a decrease in operating expenses in 2024 driven by reduced personnel costs.

For more information regarding our restructuring activities, see Note 14 – Restructuring Costs of the Notes to the Condensed 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 and the payments totaling $700 million under the IP transit services agreement.

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The purchase price is variable dependent upon specified performance indicators of Ka’ena Corporation during certain periods before and after closing and consists of an upfront payment at closing of the transaction, subject to certain agreed-upon adjustments, and a variable earnout payable 24 months after closing of the transaction.

The upfront payment is estimated to be approximately $950 million, before working capital adjustments.

The acquisition is subject to certain customary closing conditions, including certain regulatory approvals, and is expected to close by the end of 2023.

Our estimate of the upfront payment is subject to Ka’ena Corporation’s underlying business performance and the timing of transaction close, and has been updated to $1.2 billion, before working capital adjustments.

The acquisition is subject to certain customary closing conditions, including certain regulatory approvals, and is expected to close by the end of the first quarter of 2024.

Ka’ena Corporation is currently one of our wholesale partners, offering wireless telecommunications services to customers leveraging our network.

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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 13 – Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements.

During the six months ended June 30, 2023, we recognized $50 million in reimbursements from insurance carriers for costs incurred related to the August 2021 cyberattack.

During the nine months ended September 30, 2023, we recognized $50 million in reimbursements from insurance carriers for costs incurred related to the August 2021 cyberattack.

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

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In response to the recent cyberattacks and increasing cybersecurity threats, we have significantly increased our focus on enhancing our cybersecurity practices with a substantial multi-year investment.

In the second quarter of 2023, we have hired

new security leadership, and implemented significant technology improvements to our cybersecurity controls.

In the second quarter of 2023, we have hired new security leadership, and implemented significant technology improvements to our cybersecurity controls.

Those improvements include additional authentication measures and internal systems limitations and restrictions.

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in millions) 2023 2022 $ % 2023 2022 $ %

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Selling, general and administrative 5,334 5,118 216 4 % 16,031 16,030 1 — %

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

Loss (gain) on disposal group held for sale 17 — 17 NM (25) — (25) NM

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

Loss (gain) on disposal group held for sale — 1,071 (1,071) (100) % (25) 1,071 (1,096) (102) %

Depreciation and amortization 3,187 3,313 (126) (4) % 9,500 10,389 (889) (9) %

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Interest expense, net (790) (827) 37 (4) % (2,486) (2,542) 56 (2) %

Other income (expense), net 6 (21) 27 (129) % 15 (32) 47 (147) %

Other income (expense), net 41 (3) 44 NM 56 (35) 91 (260) %

Total other expense, net (749) (830) 81 (10) % (2,430) (2,577) 147 (6) %

Income (loss) before income taxes 2,938 (163) 3,101 NM 5,509 768 4,741 617 %

Income tax (expense) benefit (717) 55 (772) NM (1,348) (163) (1,185) 727 %

Net income (loss) $ 2,221 $ (108) $ 2,329 NM $ 4,161 $ 605 $ 3,556 588 %

Income before income taxes 2,847 451 2,396 531 % 8,356 1,219 7,137 585 %

Income tax (expense) benefit (705) 57 (762) NM (2,053) (106) (1,947) NM

Net income $ 2,142 $ 508 $ 1,634 322 % $ 6,303 $ 1,113 $ 5,190 466 %

Statement of Cash Flows Data

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Net cash used in investing activities (1,393) (2,555) 1,162 (45) % (4,608) (10,206) 5,598 (55) %

Net cash used in financing activities (784) (1,744) 960 (55) % (3,057) (3,880) 823 (21) %

Net cash (used in) provided by financing activities (5,510) 1,927 (7,437) (386) % (8,567) (1,953) (6,614) 339 %

Non-GAAP Financial Measures

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NM - Not Meaningful

The following discussion and analysis is for the three and six months ended June 30, 2023, compared to the same period in 2022 unless otherwise stated.

Total revenues decreased $505 million, or 3%, for the three months ended and decreased $993 million, or 2%, for the six months ended June 30, 2023.

The following discussion and analysis is for the three and nine months ended September 30, 2023, compared to the same period in 2022 unless otherwise stated.

Total revenues decreased $225 million, or 1%, for the three months ended and decreased $1.2 billion, or 2%, for the nine months ended September 30, 2023.

The components of these changes are discussed below.

Postpaid revenues increased $625 million, or 5%, for the three months ended and increased $1.3 billion, or 6%, for the six months ended June 30, 2023, primarily from:

Postpaid revenues increased $740 million, or 6%, for the three months ended and increased $2.0 billion, or 6%, for the nine months ended September 30, 2023, primarily from:

• Higher average postpaid accounts;

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

Prepaid revenues decreased slightly for the three and six months ended June 30, 2023, primarily from:

Prepaid revenues were relatively flat for the three months ended and decreased slightly for the nine months ended September 30, 2023, primarily from:

• Lower prepaid ARPU.

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

partially offset by

mostly offset by

• Higher average prepaid customers.

Wholesale and other service revenues decreased $178 million, or 13%, for the three months ended and decreased $383 million, or 13%, for the six months ended June 30, 2023, primarily from:

Wholesale and other service revenues decreased $176 million, or 13%, for the three months ended and decreased $559 million, or 13%, for the nine months ended September 30, 2023.

The decrease for the three months ended September 30, 2023, was primarily from:

• Lower Wireline revenues due to the sale of the Wireline Business on May 1, 2023.

See Note 11 – Wireline of the Notes to the Condensed Consolidated Financial Statements for additional information;

• Lower MVNO revenues.

The decrease for the nine months ended September 30, 2023, was primarily from:

• Lower MVNO revenues;

• Lower Wireline revenues due to the sale of the Wireline Business on May 1, 2023.

See Note 11 – Wireline of the Notes to the Condensed Consolidated Financial Statements for additional information.

Equipment revenues decreased $961 million, or 23%, for the three months ended and decreased $1.9 billion, or 22%, for the six months ended June 30, 2023.

The decrease for the three months ended June 30, 2023, was primarily from:

• A decrease of $429 million in device sales revenue, excluding purchased leased devices, primarily from:

• A decrease in the number of devices sold, primarily driven by higher postpaid upgrades in the prior year period related to facilitating the migration of Sprint customers to the T-Mobile network, as well as longer device lifecycles, and lower prepaid sales;

partially offset by

• Higher average revenue per device sold, primarily driven by higher promotions in the prior year period, which included promotions for Sprint customers to facilitate the migration to the T-Mobile network;

• A decrease of $317 million in lease revenues and a decrease of $46 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.

The decrease for the six months ended June 30, 2023, was primarily from:

Equipment revenues decreased $779 million, or 20%, for the three months ended and decreased $2.7 billion, or 21%, for the nine months ended September 30, 2023.

The decrease for the three months ended September 30, 2023, was primarily from:

• A decrease of $486 million in device sales revenue, excluding purchased leased devices, primarily from:

• A decrease in the number of devices sold, primarily due to lower postpaid upgrades and prepaid sales driven by longer device lifecycles, as well as higher postpaid upgrades in the prior year period related to facilitating the migration of Sprint customers to the T-Mobile network;

• A decrease of $258 million in lease revenues, 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 $74 million in accessory revenue, primarily due to a decrease in the number of associated devices sold.

The decrease for the nine months ended September 30, 2023, was primarily from:

• A decrease of $1.3 billion in device sales revenue, excluding purchased leased devices, primarily from:

partially offset by

• Slightly higher average revenue per device sold, primarily driven by higher promotions in the prior year period, which included promotions for Sprint customers to facilitate the migration to the T-Mobile network, partially offset by a decrease in the high-end phone mix;

• A decrease of $915 million in lease revenues and a decrease of $180 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;

Other revenues increased $34 million, or 13%, for the three months ended and increased $103 million, or 19%, for the six months ended June 30, 2023.

The increase for the three months ended June 30, 2023, was primarily from higher interest income driven by higher imputed interest rates on EIP, which is recognized over the device financing term.

The increase for the six months ended June 30, 2023, was primarily from:

• A decrease of $228 million in accessory revenue, primarily due to a decrease in the number of associated devices sold.

Other revenues were relatively flat for the three months ended and increased $104 million, or 13%, for the nine months ended September 30, 2023.

The increase for the nine months ended September 30, 2023, was primarily from:

• Higher interest income driven by higher imputed interest rates on EIP, which is recognized over the device financing term;

• Higher revenue from our device recovery program.

Total operating expenses decreased $3.6 billion, or 19%, for the three months ended and decreased $5.7 billion, or 15%, for the six months ended June 30, 2023.

Total operating expenses decreased $2.5 billion, or 14%, for the three months ended and decreased $8.2 billion, or 15%, for the nine months ended September 30, 2023.

The components of this change are discussed below.

Cost of services , exclusive of depreciation and amortization, decreased $1.1 billion, or 28%, for the three months ended and decreased $1.8 billion, or 23%, for the six months ended June 30, 2023.

The decrease for the three months ended June 30, 2023, was primarily from:

Cost of services , exclusive of depreciation and amortization, decreased $826 million, or 22%, for the three months ended and decreased $2.6 billion, or 23%, for the nine months ended September 30, 2023.

The decrease for the three months ended September 30, 2023, was primarily from:

• A decrease of $692 million in Merger-related costs related to network decommissioning and integration as the majority of our decommissioning efforts were completed in 2022;

• Higher realized Merger synergies;

• Lower costs due to the sale of the Wireline Business on May 1, 2023.

See Note 11 - Wireline of the Notes to the Condensed Consolidated Financial Statements for additional information;

• Higher realized Merger synergies;

partially offset by

• $140 million of severance and related costs associated with the August 2023 workforce reduction;

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

The decrease for the six months ended June 30, 2023, was primarily from:

The decrease for the nine months ended September 30, 2023, was primarily from:

• A decrease of $1.9 billion in Merger-related costs related to network decommissioning and integration as the majority of our decommissioning efforts were completed in 2022;

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partially offset by

• $140 million of severance and related costs associated with the August 2023 workforce reduction;

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

Cost of equipment sales , exclusive of depreciation and amortization, decreased $1.0 billion, or 20%, for the three months ended and decreased $2.4 billion, or 22%, for the six months ended June 30, 2023.

The decrease for the three months ended June 30, 2023, was primarily from:

Cost of equipment sales , exclusive of depreciation and amortization, decreased $733 million, or 15%, for the three months ended and decreased $3.1 billion, or 19%, for the nine months ended September 30, 2023.

The decrease for the three months ended September 30, 2023, was primarily from:

• A decrease of $638 million in device cost of equipment sales, excluding purchased leased devices, primarily from:

• Cost of equipment sales for the three months ended June 30, 2022, included $459 million of Merger-related costs, compared to no Merger-related costs for the three months ended June 30, 2023.

The decrease for the six months ended June 30, 2023, was primarily from:

• A decrease of $41 million in accessory costs, primarily due to a decrease in the number of associated devices sold.

• Cost of equipment sales for the three months ended September 30, 2023, included $3 million of Merger-related recoveries, compared to $258 million of Merger-related costs for the three months ended September 30, 2022.

The decrease for the nine months ended September 30, 2023, was primarily from:

• A decrease of $2.8 billion in device cost of equipment sales, excluding purchased leased devices, primarily from:

• Lower average cost per device sold driven by a decrease in the high-end phone mix.

• Cost of equipment sales for the six months ended June 30, 2023, included $9 million of Merger-related recoveries, compared to $1.2 billion of Merger-related costs for the six months ended June 30, 2022.

Selling, general and administrative expenses decreased $584 million, or 10%, for the three months ended and decreased $215 million, or 2%, for the six months ended June 30, 2023.

The decrease for the three months ended June 30, 2023, was primarily from:

• Lower legal-related expenses, primarily driven by the settlement of certain litigation associated with the August 2021 cyberattack of $400 million during the three months ended June 30, 2022;

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

• Lower severance and restructuring expenses;

• Lower bad debt expense;

partially offset by

• Higher advertising expense;

• Higher commission amortization expense.

• Selling, general and administrative expenses for the three months ended June 30, 2023, included $98 million of Merger-related costs, which were net of legal settlement gains of $65 million, compared to $248 million of Merger-related costs for the three months ended June 30, 2022.

The decrease for the six months ended June 30, 2023, was primarily from:

• Lower legal-related expenses, primarily driven by the settlement of certain litigation associated with the August 2021 cyberattack of $400 million during the six months ended June 30, 2022;

• Lower bad debt expense;

• Slightly lower average cost per device sold driven by a decrease in the high-end phone mix.

• A decrease of $101 million in accessory costs, primarily due to a decrease in the number of associated devices sold.

• Cost of equipment sales for the nine months ended September 30, 2023, included $12 million of Merger-related recoveries, compared to $1.5 billion of Merger-related costs for the nine months ended September 30, 2022.

Selling, general and administrative expenses increased $216 million, or 4%, for the three months ended and was relatively flat for the nine months ended September 30, 2023.

The increase for the three months ended September 30, 2023, was primarily from:

• $331 million of severance and related costs associated with the August 2023 workforce reduction;

• Gains from the sale of certain IP addresses held by the Wireline Business of $121 million recognized during the three months ended September 30, 2022;

partially offset by

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

• Lower costs related to outsourced functions.

• Selling, general and administrative expenses for the three months ended September 30, 2023, included $35 million of Merger-related costs, which were net of legal settlement gains of $69 million, compared to $226 million of Merger-related costs for the three months ended September 30, 2022.

The slight increase for the nine months ended September 30, 2023, was primarily from:

• $331 million of severance and related costs associated with the August 2023 workforce reduction;

• Higher commission amortization expense;

• Higher advertising expense;

• Selling, general and administrative expenses for the six months ended June 30, 2023, included $257 million of Merger-related costs, which were net of legal settlement gains of $65 million, compared to $303 million of Merger-related costs for the six months ended June 30, 2022, which were net of legal settlement gains of $220 million.

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

There was no impairment expense for the three and six months ended June 30, 2023.

Loss (gain) on disposal group held for sale was a loss of $17 million for the three months ended June 30, 2023, and a gain of $25 million for the six months ended June 30, 2023.

• Gains from the sale of certain IP addresses held by the Wireline Business of $121 million recognized during the three months ended September 30, 2022;

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

• Lower legal-related expenses, including $400 million recognized in June 2022 associated with the settlement of certain litigation resulting from the August 2021 cyberattack;

• Lower bad debt expense.

• Selling, general and administrative expenses for the nine months ended September 30, 2023, included $292 million of Merger-related costs, which were net of legal settlement gains of $134 million, compared to $529 million of Merger-related costs for the nine months ended September 30, 2022, which were net of legal settlement gains of $220 million.

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

There was no impairment expense for the three and nine months ended September 30, 2023 and the three months ended September 30, 2022.

Loss (gain) on disposal group held for sale was a gain of $25 million for the nine months ended September 30, 2023 and a loss of $1.1 billion for the three and nine months ended September 30, 2022.

See Note 11 - Wireline of the Notes to the Condensed Consolidated Financial Statements for additional information.

There was no gain or loss on disposal group held for sale for the three and six months ended June 30, 2022.

Depreciation and amortization decreased $381 million, or 11%, for the three months ended and decreased $763 million, or 11%, for the six months ended June 30, 2023.

The decrease for the three and six months ended June 30, 2023, was primarily from:

There was no gain or loss on disposal group held for sale for the three months ended September 30, 2023.

Depreciation and amortization decreased $126 million, or 4%, for the three months ended and decreased $889 million, or 9%, for the nine months ended September 30, 2023.

The decrease for the three and nine months ended September 30, 2023, was primarily from:

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

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• 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, increased $3.1 billion, or 435%, for the three months ended and increased $4.7 billion, or 186%, for the six months ended June 30, 2023.

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

• Higher interest expense, primarily due to higher average debt outstanding and a higher average effective interest rate;

• Higher amortization of capitalized software driven by increased in-service internally developed and purchased software.

Operating income , the components of which are discussed above, increased $2.3 billion, or 181%, for the three months ended and increased $7.0 billion, or 184%, for the nine months ended September 30, 2023.

Interest expense, net decreased $37 million, or 4%, for the three months ended and decreased $56 million, or 2%, for the nine months ended September 30, 2023, primarily from:

• Higher interest income, primarily due to higher average interest rates on short-term cash equivalents;

• Higher capitalized interest, primarily driven by deployment activities associated with our C-band spectrum licenses;

partially offset by

• Higher interest expense, primarily due to higher average debt outstanding and a higher average effective interest rate.

Other income (expense), net was insignificant for all periods.

Income (loss) before income taxes , the components of which are discussed above, was income of $2.9 billion and a loss of $163 million for the three months ended June 30, 2023 and 2022, respectively, and was income of $5.5 billion and $768 million for the six months ended June 30, 2023 and 2022, respectively.

Income tax expense increased $772 million for the three months ended and increased $1.2 billion for the six months ended June 30, 2023, primarily from higher income before income taxes.

Our effective tax rate was 24.4% and 33.6% for the three months ended June 30, 2023 and 2022, respectively, and 24.5% and 21.2% for the six months ended June 30, 2023 and 2022, respectively.

Net income (loss) , the components of which are discussed above, was income of $2.2 billion and a loss of $108 million for the three months ended June 30, 2023 and 2022, respectively, and was income of $4.2 billion and $605 million for the six months ended June 30, 2023 and 2022, respectively.

Net income (loss) included:

• Merger-related costs, net of tax, of $207 million and $475 million for the three and six months ended June 30, 2023, respectively, compared to $1.3 billion and $2.3 billion for the three and six months ended June 30, 2022, respectively.

• Impairment expense of $358 million for the three and six months ended June 30, 2022, compared to no impairment expense for the three and six months ended June 30, 2023.

• Legal-related expenses, net, including the impact of the settlement of certain litigation associated with the August 2021 cyberattack, of $300 million for the three and six months ended June 30, 2022, compared to Legal-related recoveries, net, of $32 million for the six months ended June 30, 2023.

Income before income taxes , the components of which are discussed above, was $2.8 billion and $451 million for the three months ended September 30, 2023 and 2022, respectively, and was $8.4 billion and $1.2 billion for the nine months ended September 30, 2023 and 2022, respectively.

Income tax expense increased $762 million for the three months ended and increased $1.9 billion for the nine months ended September 30, 2023, primarily from:

• Higher income before income taxes;

• Tax benefits recognized during the three months ended September 30, 2022, associated with certain entity restructuring, that did not impact 2023.

Our effective tax rate was 24.8% and (12.4)% for the three months ended September 30, 2023 and 2022, respectively, and 24.6% and 8.7% for the nine months ended September 30, 2023 and 2022, respectively.

Net income , the components of which are discussed above, was $2.1 billion and $508 million for the three months ended September 30, 2023 and 2022, respectively, and was $6.3 billion and $1.1 billion for the nine months ended September 30, 2023 and 2022, respectively.

Net income included:

• Merger-related costs, net of tax, of $114 million and $589 million for the three and nine months ended September 30, 2023, respectively, compared to $972 million and $3.3 billion for the three and nine months ended September 30, 2022, respectively.

• Gain on disposal group held for sale of $19 million, net of tax, for the nine months ended September 30, 2023, compared to a loss on disposal group held for sale of $803 million, net of tax, for the three and nine months ended September 30, 2022.

There was no gain or loss on disposal group held for sale for the three months ended September 30, 2023.

• Impairment expense of $358 million, net of tax, for the nine months ended September 30, 2022, compared to no impairment expense for the three and nine months ended September 30, 2023 and the three months ended September 30, 2022.

• Severance and related costs associated with the August 2023 workforce reduction of $353 million, net of tax, for the three and nine months ended September 30, 2023.

• Legal-related recoveries, net, associated with the settlement of certain litigation resulting from the August 2021 cyberattack, of $32 million for the nine months ended September 30, 2023, compared to $14 million in Legal-related recoveries, net, and $286 million in Legal-related expenses, net, for the three and nine months ended September 30, 2022, respectively.

There was no Legal-related expenses or recoveries for the three months ended September 30, 2023, associated with the August 2021 cyberattack.

Guarantor Financial Information

11 unchanged sentences

is presented in the table below:

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

Current assets $ 17,290 $ 17,661

6 unchanged sentences

is presented in the table below:

(in millions) Six Months Ended

June 30, 2023 Year Ended

(in millions) Nine Months Ended

September 30, 2023 Year Ended

December 31, 2022

6 unchanged sentences

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

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

Current assets $ 10,861 $ 9,319

5 unchanged sentences

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

(in millions) Six Months Ended

June 30, 2023 Year Ended

(in millions) Nine Months Ended

September 30, 2023 Year Ended

December 31, 2022

4 unchanged sentences

Other (expense) income, net, (to) from non-guarantors (1,460) 525

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

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

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

(in millions) June 30, 2023 December 31, 2022

(in millions) September 30, 2023 December 31, 2022

Current assets $ 10,861 $ 9,320

6 unchanged sentences

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

(in millions) Six Months Ended

June 30, 2023 Year Ended

(in millions) Nine Months Ended

September 30, 2023 Year Ended

December 31, 2022

4 unchanged sentences

Other (expense) income, net, (to) from non-guarantors (1,075) 941

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

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

Performance Measures

6 unchanged sentences

The following table sets forth the number of ending postpaid accounts:

As of June 30, Change

As of September 30, Change

(in thousands) 2023 2022 # %

5 unchanged sentences

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 # % 2023 2022 # %

Postpaid net account additions 386 394 (8) (2) % 972 1,122 (150) (13) %

Postpaid net account additions decreased 81,000, or 21%, for the three months ended and decreased 142,000, or 20%, for the six months ended June 30, 2023, primarily from:

Postpaid net account additions decreased 8,000, or 2%, for the three months ended and decreased 150,000, or 13%, for the nine months ended September 30, 2023.

The decrease for the three months ended September 30, 2023, was primarily from fewer High Speed Internet only net account additions.

The decrease for the nine months ended September 30, 2023, was primarily from:

• Continued moderation of industry growth;

3 unchanged sentences

The following table sets forth the number of ending customers:

As of June 30, Change

As of September 30, Change

(in thousands) 2023 2022 # %

10 unchanged sentences

— (1,878) 1,878 (100) %

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

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

1 unchanged sentence

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.

High Speed Internet customers included in Postpaid other customers were 3,302,000 and 1,472,000 as of June 30, 2023 and 2022, respectively.

High Speed Internet customers included in Prepaid customers were 376,000 and 72,000 as of June 30, 2023 and 2022, respectively.

High Speed Internet customers included in Postpaid other customers were 3,807,000 and 1,960,000 as of September 30, 2023 and 2022, respectively.

High Speed Internet customers included in Prepaid customers were 428,000 and 162,000 as of September 30, 2023 and 2022, respectively.

Net Customer Additions

1 unchanged sentence

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 # % 2023 2022 # %

4 unchanged sentences

Prepaid customers 79 105 (26) (25) % 229 313 (84) (27) %

Total customers 1,685 1,802 (117) (6) % 3,004 3,182 (178) (6) %

Adjustments to customers — (1,320) 1,320 (100) % — (1,878) 1,878 (100) %

Total net customer additions decreased 117,000, or 6%, for the three months ended and decreased 178,000, or 6%, for the six months ended June 30, 2023.

The decrease for the three months ended June 30, 2023, was primarily from:

• Lower postpaid other net customer additions, primarily due to

• Lower net additions from mobile internet devices;

• Lower High Speed Internet net customer additions, primarily due to increased deactivations from a growing customer base, mostly offset by continued growth in gross additions driven by increasing customer demand;

• Lower prepaid net customer additions, primarily due to continued moderation of industry growth and continued industry migration of prepaid to postpaid;

partially offset by

• Higher postpaid phone net customer additions, primarily due to higher gross additions and lower churn.

• High Speed Internet net customer additions included in postpaid other net customer additions were 447,000 and 497,000 for the three months ended June 30, 2023 and 2022, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 62,000 and 63,000 for the three months ended June 30, 2023 and 2022, respectively.

The decrease for the six months ended June 30, 2023, was primarily from:

Total net customer additions 1,305 1,732 (427) (25) % 4,309 4,914 (605) (12) %

Adjustments to customers — — — NM — (1,878) 1,878 (100) %

NM - Not meaningful

Total net customer additions decreased 427,000, or 25%, for the three months ended and decreased 605,000, or 12%, for the nine months ended September 30, 2023.

The decrease for the three months ended September 30, 2023, was primarily from:

• Lower postpaid other net customer additions, primarily due to deactivations from mobile internet devices in the educational sector that were originally activated during the COVID-19 pandemic (“Pandemic”) and no longer needed;

• Lower prepaid net customer additions, primarily due to continued moderation of industry growth and fewer High Speed Internet net additions, partially offset by lower churn.

• Postpaid phone net customer additions were relatively flat, primarily due to increased deactivations from a growing customer base despite slightly lower churn, offset by higher gross additions.

• High Speed Internet net customer additions included in postpaid other net customer additions were 505,000 and 488,000 for the three months ended September 30, 2023 and 2022, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 52,000 and 90,000 for the three months ended September 30, 2023 and 2022, respectively.

The decrease for the nine months ended September 30, 2023, was primarily from:

• Lower postpaid other net customer additions, primarily due to

• Lower net additions from mobile internet devices;

• Deactivations from mobile internet devices in the educational sector that were originally activated during the Pandemic and no longer needed;

• Lower net additions from other connected devices;

partially offset by

1 unchanged sentence

• Lower prepaid net customer additions, primarily due to continued moderation of industry growth and continued industry migration of prepaid to postpaid, partially offset by growth in High Speed Internet;

• High Speed Internet net customer additions included in postpaid other net customer additions were 892,000 and 826,000 for the six months ended June 30, 2023 and 2022, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 140,000 and 72,000 for the six months ended June 30, 2023 and 2022, respectively.

• Slightly lower postpaid phone net customer additions, primarily due to increased deactivations from a growing customer base despite slightly lower churn, mostly offset by higher gross additions.

• High Speed Internet net customer additions included in postpaid other net customer additions were 1,397,000 and 1,314,000 for the nine months ended September 30, 2023 and 2022, respectively.

High Speed Internet net customer additions included in prepaid net customer additions were 192,000 and 162,000 for the nine months ended September 30, 2023 and 2022, respectively.

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.

3 unchanged sentences

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 2023 2022

1 unchanged sentence

Prepaid churn 2.81 % 2.88 % -7 bps 2.73 % 2.71 % 2 bps

Postpaid phone churn decreased 3 basis points for the three months ended and decreased 3 basis points for the six months ended June 30, 2023, primarily from improved customer retention driven by a differentiated value proposition and network experience.

Prepaid churn increased 4 basis points for the three months ended and increased 7 basis points for the six months ended June 30, 2023, primarily from continued industry migration of prepaid to postpaid.

Postpaid phone churn decreased 1 basis point for the three months ended and decreased 3 basis points for the nine months ended September 30, 2023, primarily from improved customer retention driven by a differentiated value proposition and network experience.

Prepaid churn decreased 7 basis points for the three months ended and increased 2 basis points for the nine months ended September 30, 2023.

The decrease for the three months ended September 30, 2023, was primarily from improved customer retention.

The increase for the nine months ended September 30, 2023, was primarily from continued industry migration of prepaid to postpaid.

Postpaid Average Revenue Per Account

5 unchanged sentences

(in dollars) Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 $ % 2023 2022 $ %

Postpaid ARPA $ 139.83 $ 137.49 $ 2.34 2 % $ 138.94 $ 137.32 $ 1.62 1 %

Postpaid ARPA increased $1.02, or 1%, for the three months ended and increased $1.26, or 1%, for the six months ended June 30, 2023.

The increase for the three months ended June 30, 2023, was primarily from:

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

• Higher premium services, primarily high-end rate plans;

Postpaid ARPA increased $2.34, or 2%, for the three months ended and increased $1.62, or 1%, for the nine months ended September 30, 2023.

The increase for the three months ended September 30, 2023, was primarily from:

• An increase in customers per account, including growth in business and continued adoption of High Speed Internet;

• Higher premium services, primarily high-end rate plans, net of contra-revenue for content included in such plans and discounts for specific affinity groups, such as 55+, Military and First Responder;

partially offset by

1 unchanged sentence

• An increase in High Speed Internet only accounts.

• Growth in rate plans for specific customer cohorts, such as Business, Military and First Responder.

The increase for the six months ended June 30, 2023, was primarily from:

• Higher premium services, primarily high-end rate plans;

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

The slight increase for the nine months ended September 30, 2023, was primarily from:

• An increase in customers per account, including growth in business and continued adoption of High Speed Internet;

partially offset by

1 unchanged sentence

• An increase in High Speed Internet only accounts.

• Growth in rate plans for specific customer cohorts, such as Business, Military and First Responder.

Average Revenue Per User

5 unchanged sentences

(in dollars) Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 $ % 2023 2022 $ %

2 unchanged sentences

Postpaid Phone ARPU

Postpaid phone ARPU was relatively flat for the three and six months ended June 30, 2023.

The slight decrease for the three months ended June 30, 2023, was primarily from:

• Increased promotional activity;

• Growth in rate plans for specific customer cohorts, such as Business, Military and First Responder;

mostly offset by

• Higher premium services, primarily high-end rate plans.

The slight increase for the six months ended June 30, 2023, was primarily from:

• Higher premium services, primarily high-end rate plans;

mostly offset by

Postpaid phone ARPU was relatively flat for the three and nine months ended September 30, 2023, primarily from:

• Increased promotional activity;

• Growth in rate plans for specific customer cohorts, such as Business, Military and First Responder.

Prepaid ARPU decreased $0.73, or 2%, for the three months ended and decreased $0.97, or 2%, for the six months ended June 30, 2023, primarily from:

• Dilution from promotional rate plan mix;

partially offset by

• Higher non-recurring charges.

• Growth in business with lower ARPU given larger account sizes.

Prepaid ARPU decreased $0.68, or 2%, for the three months ended and decreased $0.87, or 2%, for the nine months ended September 30, 2023, primarily from dilution from promotional rate plan mix.

Adjusted EBITDA and Core Adjusted EBITDA

6 unchanged sentences

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 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, gain 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.

costs, impairment expense, gain on disposal groups held for sale and certain legal-related recoveries and expenses, as well as other special income and expenses, including the August 2023 workforce reduction, 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 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 (loss), which we consider to be the most directly comparable GAAP financial measure:

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

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in millions, except percentages) 2023 2022 $ % 2023 2022 $ %

Net income (loss) $ 2,221 $ (108) $ 2,329 NM $ 4,161 $ 605 $ 3,556 588 %

Net income $ 2,142 $ 508 $ 1,634 322 % $ 6,303 $ 1,113 $ 5,190 466 %

Interest expense, net 790 827 (37) (4) % 2,486 2,542 (56) (2) %

Other (income) expense, net (6) 21 (27) (129) % (15) 32 (47) (147) %

Income tax expense (benefit) 717 (55) 772 NM 1,348 163 1,185 727 %

Other (income) expense, net (41) 3 (44) NM (56) 35 (91) (260) %

Income tax expense (benefit) 705 (57) 762 NM 2,053 106 1,947 NM

Operating income 3,596 1,281 2,315 181 % 10,786 3,796 6,990 184 %

3 unchanged sentences

Merger-related costs 152 1,296 (1,144) (88) % 786 4,377 (3,591) (82) %

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

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

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

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

— (19) 19 (100) % (43) 381 (424) (111) %

Loss (gain) on disposal group held for sale 17 — 17 NM (25) — (25) NM

Loss (gain) on disposal group held for sale — 1,071 (1,071) (100) % (25) 1,071 (1,096) (102) %

Other, net (3)

54 110 (56) (51) % 207 120 87 73 %

513 (48) 561 NM 720 72 648 NM

Adjusted EBITDA 7,600 7,039 561 8 % 22,204 20,993 1,211 6 %

2 unchanged sentences

$ 7,547 $ 6,728 $ 819 12 % $ 21,935 $ 19,809 $ 2,126 11 %

Net income (loss) margin (Net income (loss) divided by Service revenues) 14 % (1) % 1,500 bps 13 % 2 % 1,100 bps

Net income margin (Net income divided by Service revenues) 13 % 3 % 1,000 bps 13 % 2 % 1,100 bps

Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues) 48 % 46 % 200 bps 47 % 46 % 100 bps

3 unchanged sentences

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

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

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

(3) Other, net, primarily consists of certain severance, restructuring and other expenses and income 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.

Other, net, for the three and nine months ended September 30, 2023, includes $471 million of severance and related costs associated with the August 2023 workforce reduction.

NM - Not meaningful

Core Adjusted EBITDA increased $718 million, or 11%, for the three months ended and increased $1.3 billion, or 10%, for the six months ended June 30, 2023.

Core Adjusted EBITDA increased $819 million, or 12%, for the three months ended and increased $2.1 billion, or 11%, for the nine months ended September 30, 2023.

The components comprising Core Adjusted EBITDA are discussed further above.

The increase for the three months ended June 30, 2023, was primarily from:

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

The increase for the three months ended September 30, 2023, was primarily from:

• Higher Total service revenues;

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

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

• Lower Cost of services, excluding Merger-related costs and other special items, such as severance and related costs associated with the August 2023 workforce reduction;

partially offset by

• Lower Equipment revenues, excluding lease revenues.

The increase for the six months ended June 30, 2023, was primarily from:

The increase for the nine months ended September 30, 2023, was primarily from:

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

• Higher Total service revenues;

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

• Lower Cost of services, excluding Merger-related costs and other special items, such as severance and related costs associated with the August 2023 workforce reduction;

partially offset by

• Lower Equipment revenues, excluding lease revenues.

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

Adjusted EBITDA increased $401 million, or 6%, for the three months ended and increased $650 million, or 5%, for the six months ended June 30, 2023, primarily due to the fluctuations in Core Adjusted EBITDA, discussed above, partially offset by lower lease revenues, which decreased $317 million for the three months ended and decreased $657 million for the six months ended June 30, 2023.

Adjusted EBITDA increased $561 million, or 8%, for the three months ended and increased $1.2 billion, or 6%, for the nine months ended September 30, 2023, primarily due to the fluctuations in Core Adjusted EBITDA, discussed above, partially offset by lower lease revenues, which decreased $258 million for the three months ended and decreased $915 million for the nine months ended September 30, 2023.

Liquidity and Capital Resources

3 unchanged sentences

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in millions) 2023 2022 $ % 2023 2022 $ %

1 unchanged sentence

Net cash used in investing activities (1,393) (2,555) 1,162 (45) % (4,608) (10,206) 5,598 (55) %

Net cash used in financing activities (784) (1,744) 960 (55) % (3,057) (3,880) 823 (21) %

Net cash (used in) provided by financing activities (5,510) 1,927 (7,437) (386) % (8,567) (1,953) (6,614) 339 %

Operating Activities

Net cash provided by operating activities increased $146 million, or 3%, for the three months ended and increased $352 million, or 4%, for the six months ended June 30, 2023.

The increase for the three months ended June 30, 2023, was primarily from:

Net cash provided by operating activities increased $903 million, or 21%, for the three months ended and increased $1.3 billion, or 10%, for the nine months ended September 30, 2023.

The increase for the three months ended September 30, 2023, was primarily from:

• A $1.7 billion increase in Net income, adjusted for non-cash income and expense;

partially offset by

• A $1.9 billion increase in net cash outflows from changes in working capital, primarily due to higher use of cash from Accounts payable and accrued liabilities, Operating lease right-of-use assets, Other current and long-term liabilities, Short- and long-term operating lease liabilities and Inventory, partially offset by lower use of cash from Other current and long-term assets and Equipment installment plan receivables.

• Net cash provided by operating activities includes the impact of $728 million and $907 million in net payments for Merger-related costs for the three months ended June 30, 2023 and 2022, respectively.

The increase for the six months ended June 30, 2023, was primarily from:

• An $846 million increase in net cash outflows from changes in working capital, primarily due to higher use of cash from Other current and long-term liabilities, Inventory, Operating lease right-of-use assets and Accounts payable and accrued liabilities, partially offset by lower use of cash from Equipment installment plan receivables, Other current and long-term assets and Accounts receivable.

• Net cash provided by operating activities includes the impact of $345 million and $942 million in net payments for Merger-related costs for the three months ended September 30, 2023 and 2022, respectively.

The increase for the nine months ended September 30, 2023, was primarily from:

• A $5.1 billion increase in Net income, adjusted for non-cash income and expense;

partially offset by

• A $3.0 billion increase in net cash outflows from changes in working capital, primarily due to higher use of cash from Accounts payable and accrued liabilities, Operating lease right-of-use assets, Other current and long-term liabilities, Short- and long-term operating lease liabilities and Accounts receivable, partially offset by lower use of cash from Equipment installment plan receivables, Other current and long-term assets and Inventory.

• Net cash provided by operating activities includes the impact of $1.2 billion and $1.8 billion in net payments for Merger-related costs for the six months ended June 30, 2023 and 2022, respectively.

• A $3.8 billion increase in net cash outflows from changes in working capital, primarily due to higher use of cash from Accounts payable and accrued liabilities, Other current and long-term liabilities, Operating lease right-of-use assets and Short- and long-term operating lease liabilities, partially offset by lower use of cash from Equipment installment plan receivables and Other current and long-term assets.

• Net cash provided by operating activities includes the impact of $1.6 billion and $2.7 billion in net payments for Merger-related costs for the nine months ended September 30, 2023 and 2022, respectively.

Investing Activities

Net cash used in investing activities decreased $1.1 billion, or 42%, for the three months ended and decreased $4.4 billion, or 58%, for the six months ended June 30, 2023.

The use of cash for the three months ended June 30, 2023, was primarily from:

Net cash used in investing activities decreased $1.2 billion, or 45%, for the three months ended and decreased $5.6 billion, or 55%, for the nine months ended September 30, 2023.

The use of cash for the three months ended September 30, 2023, was primarily from:

• $2.4 billion in Purchases of property and equipment, including capitalized interest, from the accelerated build-out of our nationwide 5G network;

1 unchanged sentence

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

The use of cash for the six months ended June 30, 2023, was primarily from:

The use of cash for the nine months ended September 30, 2023, was primarily from:

• $8.2 billion in Purchases of property and equipment, including capitalized interest, from the accelerated build-out of our nationwide 5G network;

2 unchanged sentences

Financing Activities

Net cash used in financing activities decreased $960 million, or 55%, for the three months ended and decreased $823 million, or 21%, for the six months ended June 30, 2023.

The use of cash for the three months ended June 30, 2023, was primarily from:

Net cash used in financing activities increased $7.4 billion, or 386%, for the three months ended and increased $6.6 billion, or 339%, for the nine months ended September 30, 2023.

The use of cash for the three months ended September 30, 2023, was primarily from:

• $4.5 billion in Repayments of long-term debt;

• $2.7 billion in Repurchases of common stock;

• $304 million in Repayments of financing lease obligations;

• $223 million in Repayments of long-term debt;

partially offset by

• $2.0 billion in Proceeds from issuance of long-term debt.

The use of cash for the six months ended June 30, 2023, was primarily from:

The use of cash for the nine months ended September 30, 2023, was primarily from:

• $10.9 billion in Repurchases of common stock;

• $4.8 billion in Repayments of long-term debt;

• $914 million in Repayments of financing lease obligations;

• $354 million in Repayments of long-term debt;

• $267 million in Tax withholdings on share-based awards;

2 unchanged sentences

Cash and Cash Equivalents

As of June 30, 2023, our Cash and cash equivalents were $6.6 billion compared to $4.5 billion at December 31, 2022.

As of September 30, 2023, our Cash and cash equivalents were $5.0 billion compared to $4.5 billion at December 31, 2022.

Adjusted Free Cash Flow

Adjusted 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.

Adjusted 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.

Adjusted Free Cash Flow represents Net cash provided by operating activities less cash payments for Purchases of property and equipment, plus 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.

Starting in the first quarter of 2023, we renamed Free Cash Flow to Adjusted Free Cash Flow.

1 unchanged sentence

Adjusted Free Cash Flow margin is calculated as Adjusted Free Cash Flow divided by Service Revenues.

Adjusted Free Cash Flow Margin is utilized by management, investors, and analysts to evaluate the company’s ability to convert service revenue efficiently into cash available to pay debt, repurchase shares and provide further investment in the business.

Adjusted Free Cash Flow margin is utilized by management, investors, and analysts to evaluate the company’s ability to convert service revenue efficiently into cash available to pay debt, repurchase shares, pay dividends and provide further investment in the business.

The table below provides a reconciliation of Adjusted Free Cash Flow to Net cash provided by operating activities, which we consider to be the most directly comparable GAAP financial measure:

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in millions, except percentages) 2023 2022 $ % 2023 2022 $ %

7 unchanged sentences

NM - Not Meaningful

Adjusted Free Cash Flow increased $1.1 billion, or 64%, for the three months ended and increased $1.9 billion, or 55%, for the six months ended June 30, 2023.

The increase for the three months ended June 30, 2023, was primarily impacted by the following:

Adjusted Free Cash Flow increased $1.9 billion, or 94%, for the three months ended and increased $3.8 billion, or 70%, for the nine months ended September 30, 2023.

The increase for the three months ended September 30, 2023, was primarily impacted by the following:

• Lower Cash purchases of property and equipment, including capitalized interest, driven by increased capital efficiencies from accelerated investments in our nationwide 5G network in 2022;

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

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

• Adjusted Free Cash Flow includes the impact of $728 million and $907 million in net payments for Merger-related costs for the three months ended June 30, 2023 and 2022, respectively.

The increase for the six months ended June 30, 2023, was primarily impacted by the following:

partially offset by

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

• Adjusted Free Cash Flow includes the impact of $345 million and $942 million in net payments for Merger-related costs for the three months ended September 30, 2023 and 2022, respectively.

The increase for the nine months ended September 30, 2023, was primarily impacted by the following:

• Lower Cash purchases of property and equipment, including capitalized interest, driven by increased capital efficiencies from accelerated investments in our nationwide 5G network in 2022;

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

• Adjusted Free Cash Flow includes the impact of $1.2 billion and $1.8 billion in net payments for Merger-related costs for the six months ended June 30, 2023 and 2022, respectively.

During the six months ended June 30, 2023 and 2022, there were no significant net cash proceeds from securitization.

• Adjusted Free Cash Flow includes the impact of $1.6 billion and $2.7 billion in net payments for Merger-related costs for the nine months ended September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023 and 2022, there were no significant net cash proceeds from securitization.

Borrowing Capacity

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

As of June 30, 2023, there was no outstanding balance under the Revolving Credit Facility.

Subsequent to June 30, 2023, on July 25, 2023, we established an unsecured short-term commercial paper program with the ability to borrow up to $2.0 billion from time to time.

As of September 30, 2023, there was no outstanding balance under the Revolving Credit Facility.

On July 25, 2023, we established an unsecured short-term commercial paper program with the ability to borrow up to $2.0 billion from time to time.

This program will supplement our other available external financing arrangements and proceeds are expected to be used for general corporate purposes.

As of July 27, 2023, we have not issued any amount under this program.

As of September 30, 2023, there was no outstanding balance under this program.

Debt Financing

As of June 30, 2023, our total debt and financing lease liabilities were $80.3 billion, excluding our tower obligations, of which $70.1 billion was classified as long-term debt and $1.3 billion was classified as long-term financing lease liabilities.

During the six months ended June 30, 2023, we issued long-term debt for net proceeds of $6.5 billion and repaid short-term debt with an aggregate principal amount of $354 million.

As of September 30, 2023, our total debt and financing lease liabilities were $77.9 billion, excluding our tower obligations, of which $71.9 billion was classified as long-term debt and $1.3 billion was classified as long-term financing lease liabilities.

During the nine months ended September 30, 2023, we issued long-term debt for net proceeds of $8.4 billion and redeemed and repaid short-term debt with an aggregate principal amount of $4.8 billion.

For more information regarding our debt financing transactions, see Note 7 - Debt of the Notes to the Condensed Consolidated Financial Statements.

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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.

On March 30, 2023, we and the Sellers entered into Amended and Restated License Purchase Agreements pursuant to which we and the Sellers agreed to bifurcate the transaction into two tranches of licenses, with the closings on the acquisitions of certain licenses in Chicago, Dallas and New Orleans (together representing $492 million of the aggregate $3.5 billion cash consideration) being deferred in order to potentially expedite the regulatory approval process for the remainder of the licenses.

We anticipate that the first closing will occur in late 2023 and that the second closing (on the deferred licenses) will occur in 2024.

On March 30, 2023, we and the Sellers entered into Amended and Restated License Purchase Agreements pursuant to which we and the Sellers agreed to bifurcate the transaction into two tranches of licenses, with the closings on the acquisitions of certain licenses in Chicago, Dallas and New Orleans being deferred in order to potentially expedite the regulatory approval process for the remainder of the licenses.

Subsequently, on August 25, 2023, we and the Sellers entered into Amendments No.

1 to the Amended and Restated License Purchase Agreements whereby we deferred the closings of certain additional licenses in Chicago and Dallas into the second closing tranche.

Together, the licenses with closings deferred into the second closing tranche represent approximately $1.1 billion of the aggregate $3.5 billion cash consideration.

We anticipate that the first closing will occur no earlier than the first half of 2024 and that the second closing (on the deferred licenses) will occur in late 2024 or early 2025.

The parties have agreed that each of the closings will occur within 180 days after the receipt of the applicable required regulatory approvals, and payment of each portion of the aggregate $3.5 billion purchase price will occur no later than 40 days after the date of each respective closing.

On September 12, 2023, we entered into a License Purchase Agreement with Comcast pursuant to which we will acquire spectrum in the 600 MHz band from Comcast in exchange for total cash consideration of between $1.2 billion and $3.3 billion, subject to an application for FCC approval.

We anticipate the closing will occur in the first half of 2028.

For more information regarding our License Purchase Agreements, see Note 5 – Spectrum License Transactions of the Notes to the Condensed Consolidated Financial Statements.

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The upfront payment is estimated to be approximately $950 million, before working capital adjustments.

The acquisition is subject to certain customary closing conditions, including certain regulatory approvals, and is expected to close by the end of 2023.

The acquisition is subject to certain customary closing conditions, including certain regulatory approvals, and is expected to close by the end of the first quarter of 2024.

Off-Balance Sheet Arrangements

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

As of June 30, 2023, we derecognized net receivables of $2.4 billion upon sale through these arrangements.

As of September 30, 2023, we derecognized net receivables of $2.4 billion upon sale through these arrangements.

For more information regarding these off-balance sheet arrangements, see Note 4 – Sales of Certain Receivables of the Notes to the Condensed Consolidated Financial Statements.

Future Sources and Uses of Liquidity

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

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, pay dividends or for the refinancing of existing long-term debt on an opportunistic basis.

Excluding liquidity that could be needed for acquisitions of businesses, spectrum and 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.

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, share repurchases and the execution of our integration plan.

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.

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, workforce restructuring, share repurchases, dividend payments and the execution of our integration plan.

We determine future liquidity requirements for operations, capital expenditures, share repurchases and dividend payments 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.

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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, create liens or other encumbrances, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets.

We were in compliance with all restrictive debt covenants as of June 30, 2023.

We were in compliance with all restrictive debt covenants as of September 30, 2023.

Financing Lease Facilities

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

As of June 30, 2023, we have entered into $8.1 billion of financing leases under these financing lease facilities, of which $314 million and $552 million was executed during the three and six months ended June 30, 2023, respectively.

As of September 30, 2023, we have entered into $8.5 billion of financing leases under these financing lease facilities, of which $388 million and $940 million was executed during the three and nine months ended September 30, 2023, respectively.

We expect to enter into up to a total of $1.2 billion in financing lease commitments during the year ending December 31, 2023.

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Stockholder Returns

We have never declared or paid any cash dividends on our common stock.

However, we continue to evaluate alternatives for returning value to stockholders, and we could elect to declare dividends in the future.

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 three and six months ended June 30, 2023, we repurchased shares of our common stock for a total purchase price of $3.5 billion and $8.3 billion, respectively, all of which were purchased under the 2022 Stock Repurchase Program.

As of June 30, 2023, we had up to $2.7 billion remaining under the 2022 Stock Repurchase Program.

Subsequent to June 30, 2023, from July 1, 2023, through July 21, 2023, we repurchased additional shares of our common stock for a total purchase price of $552 million.

As of July 21, 2023, we had up to $2.2 billion remaining under the 2022 Stock Repurchase Program.

For additional information regarding the 2022 Stock Repurchase Program, see Note 10 – Repurchases of Common Stock of the Notes to the Condensed Consolidated Financial Statements.

During the three and nine months ended September 30, 2023, we repurchased shares of our common stock for a total purchase price of $2.7 billion and $11.0 billion, respectively, all of which were purchased under the 2022 Stock Repurchase Program.

On September 6, 2023, our Board of Directors authorized our 2023-2024 Stockholder Return Program for up to $19.0 billion that will run through December 31, 2024.

The 2023-2024 Stockholder Return Program is expected to consist of additional repurchases of shares of our common stock and the payment of cash dividends.

On September 25, 2023, our Board of Directors declared a cash dividend of $0.65 per share on our issued and outstanding shares of common stock, which will be paid in the fourth quarter of 2023.

As of September 30, 2023, $745 million for dividends payable is presented within Other current liabilities on our Condensed Consolidated Balance Sheets.

We intend to declare and pay approximately $3.0 billion in total additional dividends in 2024, with payments occurring each quarter during the year.

The dividend amount paid per share is expected to grow by around 10% annually with the first increase expected in the fourth quarter of 2024;

however, the declaration and payment of future dividends is subject to the discretion of our Board of Directors and will depend on financial and legal requirements and other considerations.

The amount available under the 2023-2024 Stockholder Return Program for share repurchases will be reduced by the amount of any cash dividends declared by us.

Subsequent to September 30, 2023, from October 1, 2023, through October 20, 2023, we repurchased 5,515,568 shares of our common stock for a total purchase price of $771 million.

As of October 20, 2023, we had up to $17.5 billion remaining under the 2023-2024 Stockholder Return Program.

For additional information regarding the 2022 Stock Repurchase Program and the 2023-2024 Stockholder Return Program, see Note 10 – Stockholder Return Programs of the Notes to the Condensed Consolidated Financial Statements.

Related Party Transactions

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

As of July 21, 2023, DT held, directly or indirectly, approximately 51.4% of the outstanding T-Mobile common stock, with the remaining approximately 48.6% of the outstanding T-Mobile common stock held by SoftBank and other stockholders.

As a result of the Proxy, Lock-Up and ROFR Agreement, dated April 1, 2020, by and between DT and SoftBank and the Proxy, Lock-Up and ROFR Agreement, dated June 22, 2020, by and among DT, Claure Mobile LLC, and Marcelo Claure, DT has voting control, as of July 21, 2023, over approximately 55.2% of the outstanding T-Mobile common stock.

As of October 20, 2023, DT held, directly or indirectly, approximately 52.3% of the outstanding T-Mobile common stock, with the remaining approximately 47.7% of the outstanding T-Mobile common stock held by SoftBank and other stockholders.

As a result of the Proxy, Lock-Up and ROFR Agreement, dated April 1, 2020, by and between DT and SoftBank and the Proxy, Lock-Up and ROFR Agreement, dated June 22, 2020, by and among DT, Claure Mobile LLC, and Marcelo Claure, DT has voting control, as of October 20, 2023, over approximately 56.2% of the outstanding T-Mobile common stock.

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

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

As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the three months ended June 30, 2023, that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below with respect to affiliates that we do not control and that are our affiliates solely due to their common control with either DT or SoftBank.

As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the three months ended September 30, 2023, that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below with respect to affiliates that we do not control and that are our affiliates solely due to their common control with either DT or SoftBank.

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

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

In addition, during the three months ended June 30, 2023, DT, through certain of its non-U.S.

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

In addition, during the three months ended September 30, 2023, DT, through certain of its non-U.S.

subsidiaries, provided basic telecommunications services to five 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:

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subsidiary has with International Trade and Technology ITRITEC GmbH.

For the three months ended June 30, 2023, gross revenues of all DT affiliates generated by roaming and interconnection traffic and telecommunications services with the Iranian parties identified herein were less than $0.1 million, and the estimated net profits were less than $0.1 million.

For the three months ended September 30, 2023, gross revenues of all DT affiliates generated by roaming and interconnection traffic and telecommunications services with the Iranian parties identified herein were less than $0.1 million, and the estimated net profits were less than $0.1 million.

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

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

Gross revenues and net profits recorded from these activities for the three months ended June 30, 2023, were less than $0.1 million.

Gross revenues and net profits recorded from these activities for the three months ended September 30, 2023, were less than $0.1 million.

We understand that DT intends to continue these activities.

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

During the three months ended June 30, 2023, SoftBank had no gross revenues from such services and no net profit was generated.

During the three months ended September 30, 2023, SoftBank had no gross revenues from such services and no net profit was generated.

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

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

During the three months ended June 30, 2023, SoftBank estimates that gross revenues and net profit generated by such services were both under $0.1 million.

During the three months ended September 30, 2023, SoftBank estimates that gross revenues and net profit generated by such services were both under $0.1 million.

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

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

SoftBank estimates that gross revenue and net profit generated by such services during the three months ended June 30, 2023, were both under $0.1 million.

SoftBank estimates that gross revenue and net profit generated by such services during the three months ended September 30, 2023, were both under $0.1 million.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis