T-Mobile US, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview The objectives of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are to provide users of our consolidated financial statements with the following: • A narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results; • Context to the consolidated financial statements; and • 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 audited consolidated financial statements as of December 31, 2023 and 2022, and for each of the three years in the period ended December 31, 2023, included in Part II, Item 8 of this Form 10-K. Except as expressly stated, the financial condition and results of operations discussed throughout our MD&A are those of T-Mobile US, Inc. and its consolidated subsidiaries. Sprint Merger, Network Integration and Decommissioning Activities Transaction Overview On April 1, 2020, we completed the Merger with Sprint, a communications company offering a comprehensive range of wireless and wireline communications products and services. As a result, Sprint and its subsidiaries became wholly owned consolidated subsidiaries of T-Mobile. Contingent Consideration As previously reported, on February 20, 2020, T-Mobile, SoftBank and DT entered into a letter agreement (the “Letter Agreement”) concurrently with an amendment to the Business Combination Agreement. The Letter Agreement required SoftBank to cause its applicable affiliates to surrender to T-Mobile, for no additional consideration, 48,751,557 shares of T-Mobile’s common stock immediately following the effective time of the Merger. The Letter Agreement also required T-Mobile to issue to SoftBank an equivalent number of shares (the “SoftBank Specified Shares”), for no additional consideration, if the trailing 45-trading day volume-weighted average price per share (“VWAP”) of T-Mobile’s common stock on NASDAQ was equal to or greater than $150.00, as adjusted in accordance with the Letter Agreement (the “Threshold Price”), at any time during the period from April 1, 2022, through December 31, 2025 (the “Measurement Period”). As of the close of trading on December 22, 2023, the 45-trading day VWAP exceeded $149.35, the then-current Threshold Price. On December 28, 2023, T-Mobile issued the SoftBank Specified Shares to SoftBank in accordance with the Letter Agreement. 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 billing systems and the impact of legal matters assumed as part of the Merger; • Restructuring costs, including severance, store rationalization and network decommissioning; and • Transaction costs, including legal and professional services related to the completion of the transactions. Restructuring costs are disclosed in Note 18 – 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. 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. 30 Table of Contents Merger-related costs are presented below: (in millions) Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 2023 2022 2021 $ Change % Change $ Change % Change Merger-related costs Cost of services, exclusive of depreciation and amortization $ 652 $ 2,670 $ 1,015 $ (2,018) (76) % $ 1,655 163 % Cost of equipment sales, exclusive of depreciation and amortization (12) 1,524 1,018 (1,536) (101) % 506 50 % Selling, general and administrative 394 775 1,074 (381) (49) % (299) (28) % Total Merger-related costs $ 1,034 $ 4,969 $ 3,107 $ (3,935) (79) % $ 1,862 60 % Net cash payments for Merger-related costs $ 1,973 $ 3,364 $ 2,170 $ (1,391) (41) % $ 1,194 55 % We expect to incur all of the remaining restructuring and integration costs associated with the Merger by the first half of 2024, with the cash expenditure for the Merger-related costs extending beyond 2024. Cash payments extending beyond 2024 primarily relate to operating and financing leases for which we have recognized accelerated lease expense. See the “ Contractual Ob ligations ” section of this MD&A for more details on the expected amount and timing of lease payments. Network Integration To achieve Merger synergies in network costs, we performed rationalization activities to identify duplicative networks, backhaul services and other agreements, in addition to decommissioning certain small cell sites and distributed antenna systems. 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. As of December 31, 2022, we had decommissioned substantially all Sprint macro sites targeted for shut down, resulting in a significant decrease in network decommissioning costs in 2023, and we expect to incur all of the remaining restructuring costs by the first half of 2024, with the related cash outflows extending beyond the first half of 2024. 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 Upon the close of the Merger, we began implementing restructuring initiatives to realize cost efficiencies from the Merger. The major activities associated with the restructuring initiatives included: • 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; and • 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 18 – Restructuring Costs of the Notes to the Consolidated Financial Statements. 2023 Workforce Reduction In August 2023, we implemented 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. For more information regarding our restructuring activities, see Note 18 – Restructuring Costs of the Notes to the Consolidated Financial Statements. 31 Table of Contents Wireline 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 of 2022. 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. For more information regarding this non-cash impairment, see Note 14 – 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. We also committed to make payments totaling $700 million under an IP transit services agreement, consisting of (i) $350 million in equal monthly installments during the first year after the closing of the Wireline Transaction and (ii) $350 million in equal monthly installments over the subsequent 42 months (the transactions as contemplated by the Wireline Sale Agreement and the IP transit services agreement are collectively referred to as the “Wireline Transaction”). Prior to the closing of the Wireline Transaction, we recognized a pre-tax loss of $1.1 billion during the year ended December 31, 2022, which is included within (Gain) loss on disposal group held for sale on our Consolidated Statements of Comprehensive Income. On May 1, 2023, pursuant to the Wireline Sale Agreement, upon the terms and subject to the conditions thereof, we completed the Wireline Transaction. For more information regarding the Wireline Sale Agreement, see Note 14 – Wireline of the Notes to the Consolidated Financial Statements. Acquisition of Ka’ena Corporation On March 9, 2023, we entered into a Merger and Unit Purchase Agreement for the acquisition of 100% of the outstanding equity of Ka’ena Corporation and its subsidiaries including, among others, Mint Mobile LLC (collectively, “Ka’ena”), for a maximum purchase price of $1.35 billion to be paid out 39% in cash and 61% in shares of T-Mobile common stock. The purchase price is variable dependent upon specified performance indicators of Ka’ena during certain periods before and after closing and consists of an upfront payment at closing of the transaction, subject to certain agreed-upon working capital and other adjustments, and a variable earnout payable 24 months after closing of the transaction. Our estimate of the upfront payment is subject to Ka’ena’s underlying business performance and the timing of transaction close, and has been updated to $1.2 billion, before working capital and other 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 is currently one of our wholesale partners, offering wireless telecommunications services to customers leveraging our network. Upon closing of the transaction, we expect to recognize customers of Ka’ena as prepaid customers and we expect to see an increase in Prepaid revenues, partially offset by a decrease in Wholesale and other service revenues. Revenue Trends In 2024, we expect Postpaid 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 also expect an increase in Prepaid revenues, partially offset by a decrease in Wholesale and other service revenues, upon the closing of our previously announced acquisition of Ka’ena. In addition, Wholesale and other service revenues are expected to continue to decline due to 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. 32 Table of Contents Operating Expense Trends In 2024, we expect Total operating expenses to increase, primarily driven by higher Depreciation and amortization from assets placed into service associated with the accelerated build-out of our nationwide 5G network and the acceleration of certain technology assets as we continue to modernize our network and technology systems and platforms, as well as higher Cost of equipment sales, driven by higher expected unit sales from a growing customer base. We expect these increases to be partially offset by the full year synergy realization from the Merger benefiting Cost of services and Selling, general and administrative expense as well as a significant decrease in Merger-related costs, as substantially all of our restructuring and integration activities have been completed. We also expect benefits to Cost of services and Selling, general and administrative expense from reduced personnel-related expenses as a result of the 2023 workforce reduction. 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 Ukraine-Russia and Israel-Hamas wars and further escalations thereof. 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. 33 Table of Contents Results of Operations Set forth below is a summary of our consolidated financial results: Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 (in millions) 2023 2022 2021 $ Change % Change $ Change % Change Revenues Postpaid revenues $ 48,692 $ 45,919 $ 42,562 $ 2,773 6 % $ 3,357 8 % Prepaid revenues 9,767 9,857 9,733 (90) (1) % 124 1 % Wholesale and other service revenues 4,782 5,547 6,074 (765) (14) % (527) (9) % Total service revenues 63,241 61,323 58,369 1,918 3 % 2,954 5 % Equipment revenues 14,138 17,130 20,727 (2,992) (17) % (3,597) (17) % Other revenues 1,179 1,118 1,022 61 5 % 96 9 % Total revenues 78,558 79,571 80,118 (1,013) (1) % (547) (1) % Operating expenses Cost of services, exclusive of depreciation and amortization shown separately below 11,655 14,666 13,934 (3,011) (21) % 732 5 % Cost of equipment sales, exclusive of depreciation and amortization shown separately below 18,533 21,540 22,671 (3,007) (14) % (1,131) (5) % Selling, general and administrative 21,311 21,607 20,238 (296) (1) % 1,369 7 % Impairment expense — 477 — (477) (100) % 477 NM (Gain) loss on disposal group held for sale (25) 1,087 — (1,112) (102) % 1,087 NM Depreciation and amortization 12,818 13,651 16,383 (833) (6) % (2,732) (17) % Total operating expenses 64,292 73,028 73,226 (8,736) (12) % (198) — % Operating income 14,266 6,543 6,892 7,723 118 % (349) (5) % Other expense, net Interest expense, net (3,335) (3,364) (3,342) 29 (1) % (22) 1 % Other income (expense), net 68 (33) (199) 101 (306) % 166 (83) % Total other expense, net (3,267) (3,397) (3,541) 130 (4) % 144 (4) % Income before income taxes 10,999 3,146 3,351 7,853 250 % (205) (6) % Income tax expense (2,682) (556) (327) (2,126) 382 % (229) 70 % Net income $ 8,317 $ 2,590 $ 3,024 $ 5,727 221 % $ (434) (14) % Statement of Cash Flows Data Net cash provided by operating activities $ 18,559 $ 16,781 $ 13,917 $ 1,778 11 % $ 2,864 21 % Net cash used in investing activities (5,829) (12,359) (19,386) 6,530 (53) % 7,027 (36) % Net cash (used in) provided by financing activities (12,097) (6,451) 1,709 (5,646) 88 % (8,160) (477) % Non-GAAP Financial Measures Adjusted EBITDA $ 29,428 $ 27,821 $ 26,924 $ 1,607 6 % $ 897 3 % Core Adjusted EBITDA 29,116 26,391 23,576 2,725 10 % 2,815 12 % Adjusted Free Cash Flow 13,586 7,656 5,646 5,930 77 % 2,010 36 % NM - Not Meaningful 34 Table of Contents The following discussion and analysis is for the year ended December 31, 2023, compared to the same period in 2022, unless otherwise stated. For a discussion and analysis of the year ended December 31, 2022, compared to the same period in 2021, 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, 2022, filed with the SEC on February 14, 2023. Total revenues decreased $1.0 billion, or 1%. The components of these changes are discussed below. Postpaid revenues increased $2.8 billion, or 6%, primarily from: • Higher average postpaid accounts; and • Higher postpaid ARPA. See “Postpaid ARPA” in the “ Performance Measures ” section of this MD&A. Prepaid revenues decreased slightly, primarily from: • Lower prepaid ARPU. See “Prepaid ARPU” in the “ Performance Measures ” section of this MD&A; mostly offset by • Higher average prepaid customers. Wholesale and other service revenues decreased $765 million, or 14%, primarily from: • Lower Wireline revenues due to the sale of the Wireline Business on May 1, 2023. See Note 14 - Wireline of the Notes to the Consolidated Financial Statements for additional information; and • Lower MVNO revenues, primarily due to the migration of legacy TracFone customers off of the T-Mobile network and as DISH services more of its Boost customers with their standalone network, partially offset by growth in other MVNO partners. Equipment revenues decreased $3.0 billion, or 17%, primarily from: • A decrease of $1.5 billion 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 and longer device lifecycles, as well as lower prepaid and Assurance Wireless device sales; partially offset by • Slightly higher average revenue per device sold, primarily driven by an increase in the high-end phone mix, including from the impact of a decrease in sales of low-end Assurance Wireless devices, and 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 $1.1 billion in lease revenues and a decrease of $228 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; and • A decrease of $286 million in accessory revenue, primarily due to a decrease in the number of associated devices sold. Other revenues increased $61 million, or 5%, primarily from: • Higher interest income driven by higher imputed interest rates on EIP, which is recognized over the device financing term. Total operating expenses decreased $8.7 billion, or 12%. The components of this change are discussed below. Cost of services , exclusive of depreciation and amortization, decreased $3.0 billion, or 21%, primarily from: • A decrease of $2.0 billion 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; and • Lower costs due to the sale of the Wireline Business on May 1, 2023. See Note 14 – Wireline of the Notes to the Consolidated Financial Statements for additional information; partially offset by • $141 million of severance and related costs associated with the August 2023 workforce reduction; and • Higher site costs related to the continued build-out of our nationwide 5G network. 35 Table of Contents Cost of equipment sales , exclusive of depreciation and amortization, decreased $3.0 billion, or 14%, primarily from: • A decrease of $2.7 billion in device cost of equipment sales, 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 and longer device lifecycles, as well as lower prepaid and Assurance Wireless device sales; partially offset by • Slightly higher average cost per device sold driven by an increase in the high-end phone mix, including from the impact of a decrease in sales of low-end Assurance Wireless devices; and • A decrease of $132 million in accessory costs, primarily due to a decrease in the number of associated devices sold. • Cost of equipment sales for the year ended December 31, 2023, included $12 million of Merger-related recoveries, compared to $1.5 billion of Merger-related costs for the year ended December 31, 2022. Selling, general and administrative expense decreased slightly, primarily from: • A decrease of $381 million in Merger-related costs and higher realized Merger synergies; • Lower legal-related expenses, including from the impact of $400 million recognized in June 2022 associated with the settlement of certain litigation resulting from the August 2021 cyberattack; • Lower costs related to outsourced functions; and • A decrease of $177 million in bad debt expense and losses from sales of receivables; mostly offset by • $321 million of severance and related costs associated with the August 2023 workforce reduction; • Higher commission amortization expense; • Higher advertising expense; and • Gains from the sale of certain IP addresses held by the Wireline Business of $121 million recognized during the year ended December 31, 2022. • Selling, general and administrative expense for the year ended December 31, 2023, included $394 million of Merger-related costs, which were net of legal settlement gains of $134 million, compared to $775 million of Merger-related costs for the year ended December 31, 2022, which were net of legal settlement gains of $333 million. 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. There was no impairment expense for the year ended December 31, 2023. See Note 14 – Wireline of the Notes to the Consolidated Financial Statements for additional information. (Gain) loss on disposal group held for sale was a gain of $25 million for the year ended December 31, 2023, and a loss of $1.1 billion for the year ended December 31, 2022. See Note 14 – Wireline of the Notes to the Consolidated Financial Statements for additional information. Depreciation and amortization decreased $833 million, or 6%, primarily from: • A decrease of $959 million in depreciation expense on leased devices, resulting from a lower number of total customer devices under lease; and • Certain 4G-related network assets becoming fully depreciated, including assets impacted by the decommissioning of the legacy Sprint CDMA and LTE networks in 2022; partially offset by • Higher depreciation expense, excluding leased devices, from the continued build-out of our nationwide 5G network and increased in-service internally developed and purchased software. Operating income , the components of which are discussed above, increased $7.7 billion, or 118%. Interest expense, net decreased slightly, primarily from: • Higher interest income, primarily due to higher average balances and higher average interest rates on short-term cash equivalents; and • Higher capitalized interest, primarily driven by deployment activities associated with our C-band spectrum licenses; mostly offset by • Higher interest expense, primarily due to higher average debt outstanding and a higher average effective interest rate. 36 Table of Contents Other income (expense), net changed $101 million, from net expense of $33 million for the year ended December 31, 2022, to net income of $68 million for the year ended December 31, 2023, primarily from: • Amortization of actuarial gains related to our Pension Plan; and • Gains on certain investments. Income before income taxes , the components of which are discussed above, was $11.0 billion and $3.1 billion for the years ended December 31, 2023 and 2022, respectively. Income tax expense increased $2.1 billion, primarily from: • Higher income before income taxes; and • Tax benefits recognized during the year ended December 31, 2022, associated with certain entity restructuring, that did not impact 2023. Our effective tax rate was 24.4% and 17.7% for the years ended December 31, 2023 and 2022, respectively. Net income , the components of which are discussed above, was $8.3 billion and $2.6 billion for the years ended December 31, 2023 and 2022, respectively. Net income included: • Merger-related costs, net of tax, of $775 million for the year ended December 31, 2023, compared to $3.7 billion for the year ended December 31, 2022. • Gain on disposal group held for sale of $19 million, net of tax, for the year ended December 31, 2023, compared to a loss on disposal group held for sale of $815 million, net of tax, for the year ended December 31, 2022. • 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, 2023. • Severance and related costs associated with the August 2023 workforce reduction of $347 million, net of tax, for the year ended December 31, 2023. • Legal-related recoveries, net, associated with the settlement of certain litigation resulting from the August 2021 cyberattack, of $32 million for the year ended December 31, 2023, compared to $293 million in Legal-related expenses, net, for the year ended December 31, 2022. Guarantor Financial Information Pursuant to the applicable indentures and supplemental indentures, the Senior Notes to affiliates and third parties issued by T-Mobile USA, Inc., Sprint and Sprint Capital Corporation (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”). The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. 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. 37 Table of Contents Basis of Presentation 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 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. is presented in the table below: (in millions) December 31, 2023 December 31, 2022 Current assets $ 17,601 $ 17,661 Noncurrent assets 178,252 181,673 Current liabilities 19,040 23,146 Noncurrent liabilities 128,197 120,385 Due to non-guarantors 10,916 9,325 Due to related parties 1,576 1,571 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: (in millions) Year Ended December 31, 2023 Year Ended December 31, 2022 Total revenues $ 75,934 $ 77,054 Operating income 10,707 2,985 Net income (loss) 4,766 (572) Revenue from non-guarantors 2,393 2,427 Operating expenses to non-guarantors 2,569 2,659 Other expense to non-guarantors (699) (327) 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, 2023 December 31, 2022 Current assets $ 11,193 $ 9,319 Noncurrent assets 11,324 11,271 Current liabilities 12,751 15,854 Noncurrent liabilities 110,688 65,118 Due to non-guarantors 41,805 3,930 Due to related parties 1,576 1,571 The summarized results of operations information for the consolidated obligor group of debt issued by Sprint is presented in the table below: (in millions) Year Ended December 31, 2023 Year Ended December 31, 2022 Total revenues $ 19 $ 7 Operating loss (3,197) (3,479) Net (loss) income (1) (7,629) 2,471 Other (expense) income, net, (to) from non-guarantors (2,005) 525 (1) Net income for the year ended December 31, 2022, includes tax benefits recognized associated with certain entity restructuring. 38 Table of Contents 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) December 31, 2023 December 31, 2022 Current assets $ 11,193 $ 9,320 Noncurrent assets 11,324 16,337 Current liabilities 12,823 15,926 Noncurrent liabilities 106,881 66,516 Due to non-guarantors 32,706 — Due from non-guarantors — 5,066 Due to related parties 1,576 1,571 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) Year Ended December 31, 2023 Year Ended December 31, 2022 Total revenues $ 19 $ 7 Operating loss (3,197) (3,479) Net (loss) income (1) (7,491) 2,604 Other (expense) income, net, (to) from non-guarantors (1,489) 941 (1) Net income for the year ended December 31, 2022, includes tax benefits recognized associated with certain entity 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. 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. 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 modems, mobile internet devices (including tablets and hotspots), wearables, DIGITS and other connected devices, including SyncUP and IoT, where they generally pay after receiving service. The following table sets forth the number of ending postpaid accounts: As of December 31, 2023 Versus 2022 2022 Versus 2021 (in thousands) 2023 2022 2021 # Change % Change # Change % Change Postpaid accounts (1) (2) 29,797 28,526 27,216 1,271 4 % 1,310 5 % (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. Postpaid Net Account Additions The following table sets forth the number of postpaid net account additions: Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 (in thousands) 2023 2022 2021 # Change % Change # Change % Change Postpaid net account additions 1,271 1,436 1,188 (165) (11) % 248 21 % 39 Table of Contents Postpaid net account additions decreased 165,000, or 11%, primarily from: • Continued moderation of industry growth; • Higher postpaid account deactivations from a growing customer base; and • Fewer High Speed Internet only net account additions. Customers 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 modems, mobile internet devices (including tablets and hotspots), wearables, DIGITS and other connected devices, including SyncUP and IoT, 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, 2023 Versus 2022 2022 Versus 2021 (in thousands) 2023 2022 2021 # Change % Change # Change % Change Customers, end of period Postpaid phone customers (1) (2) 75,936 72,834 70,262 3,102 4 % 2,572 4 % Postpaid other customers (1) (2) 22,116 19,398 17,401 2,718 14 % 1,997 11 % Total postpaid customers 98,052 92,232 87,663 5,820 6 % 4,569 5 % Prepaid customers (1) 21,648 21,366 21,056 282 1 % 310 1 % Total customers 119,700 113,598 108,719 6,102 5 % 4,879 4 % Adjustments to customers (1) (2) 170 (1,878) 818 2,048 (109) % (2,696) (330) % (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 the fourth quarter of 2023, we recognized an additional base adjustment to increase postpaid phone customers by 20,000 and increase postpaid other customers by 150,000 due to fewer customers than expected whose service was deactivated as a result of the network shut-downs. 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. High Speed Internet customers included in Postpaid other customers were 4,288,000 and 2,410,000 as of December 31, 2023 and 2022, respectively. High Speed Internet customers included in Prepaid customers were 488,000 and 236,000 as of December 31, 2023 and 2022, respectively. Net Customer Additions The following table sets forth the number of net customer additions: Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 (in thousands) 2023 2022 2021 # Change % Change # Change % Change Net customer additions Postpaid phone customers 3,082 3,093 2,917 (11) — % 176 6 % Postpaid other customers 2,568 3,326 2,578 (758) (23) % 748 29 % Total postpaid customers 5,650 6,419 5,495 (769) (12) % 924 17 % Prepaid customers 282 338 342 (56) (17) % (4) (1) % Total net customer additions 5,932 6,757 5,837 (825) (12) % 920 16 % Adjustments to customers 170 (1,878) 818 2,048 (109) % (2,696) (330) % Total net customer additions decreased 825,000, or 12%, 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 Pandemic and no longer needed, including from the impact of the expiration of the Emergency Connectivity Fund Program; and 40 Table of Contents • Lower net additions from wearables; partially offset by • Higher net additions from other connected devices; and • Higher High Speed Internet net customer additions, primarily due to continued growth in gross additions driven by increasing customer demand, partially offset by increased deactivations from a growing customer base; and • 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 1,878,000 and 1,764,000 for the years ended December 31, 2023 and 2022, respectively. High Speed Internet net customer additions included in prepaid net customer additions were 252,000 and 236,000 for the years ended December 31, 2023 and 2022, respectively. Churn Churn represents the number of customers whose service was deactivated 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 deactivated 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. The following table sets forth the churn: Year Ended December 31, Bps Change 2023 Versus 2022 Bps Change 2022 Versus 2021 2023 2022 2021 Postpaid phone churn 0.87 % 0.88 % 0.98 % -1 bps -10 bps Prepaid churn 2.76 % 2.77 % 2.83 % -1 bps -6 bps Postpaid phone churn decreased 1 basis point, primarily from improved customer retention driven by a differentiated value proposition and network experience. Prepaid churn decreased 1 basis point, primarily from improved customer retention, partially offset by the continued industry migration of prepaid to postpaid. 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 assists 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, mobile internet devices (including tablets and hotspots), wearables, DIGITS and other connected devices, including SyncUP and IoT. The following table sets forth our operating measure ARPA: (in dollars) Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 2023 2022 2021 $ Change % Change $ Change % Change Postpaid ARPA $ 139.27 $ 137.43 $ 134.03 $ 1.84 1 % $ 3.40 3 % Postpaid ARPA increased slightly, primarily from: • 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; and • An increase in customers per account, including growth in Enterprise business and continued adoption of High Speed Internet; partially offset by • Increased promotional activity; and • An increase in High Speed Internet only accounts. 41 Table of Contents 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. 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, mobile internet devices (including tablets and hotspots), wearables, DIGITS and other connected devices, including SyncUP and IoT. The following table sets forth our operating measure ARPU: (in dollars) Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 2023 2022 2021 $ Change % Change $ Change % Change Postpaid phone ARPU $ 48.83 $ 48.78 $ 47.75 $ 0.05 — % $ 1.03 2 % Prepaid ARPU 37.92 38.76 38.79 (0.84) (2) % (0.03) — % Postpaid Phone ARPU Postpaid phone ARPU was relatively flat, primarily from: • 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 Responders; offset by • Increased promotional activity; and • Growth in business with lower ARPU given larger account sizes. Prepaid ARPU Prepaid ARPU decreased $0.84, or 2%, primarily from dilution from promotional rate plan mix. Adjusted EBITDA and Core Adjusted EBITDA 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. Core Adjusted EBITDA represents Adjusted EBITDA less device lease revenues. Adjusted EBITDA margin represents Adjusted EBITDA divided by Service revenues. Core Adjusted EBITDA margin represents Core Adjusted EBITDA divided by Service revenues. 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 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 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, loss and gain on disposal groups held for sale and certain legal-related recoveries and expenses, as well as other special income and expenses, including severance and related costs associated with 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. 42 Table of Contents 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: Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 (in millions, except percentages) 2023 2022 2021 $ Change % Change $ Change % Change Net income $ 8,317 $ 2,590 $ 3,024 $ 5,727 221 % $ (434) (14) % Adjustments: Interest expense, net 3,335 3,364 3,342 (29) (1) % 22 1 % Other (income) expense, net (68) 33 199 (101) (306) % (166) (83) % Income tax expense 2,682 556 327 2,126 382 % 229 70 % Operating income 14,266 6,543 6,892 7,723 118 % (349) (5) % Depreciation and amortization 12,818 13,651 16,383 (833) (6) % (2,732) (17) % Stock-based compensation (1) 644 576 521 68 12 % 55 11 % Merger-related costs 1,034 4,969 3,107 (3,935) (79) % 1,862 60 % Impairment expense — 477 — (477) (100) % 477 NM Legal-related (recoveries) expenses, net (2) (42) 391 — (433) (111) % 391 NM (Gain) loss on disposal group held for sale (25) 1,087 — (1,112) (102) % 1,087 NM Other, net (3) 733 127 21 606 477 % 106 505 % Adjusted EBITDA 29,428 27,821 26,924 1,607 6 % 897 3 % Lease revenues (312) (1,430) (3,348) 1,118 (78) % 1,918 (57) % Core Adjusted EBITDA $ 29,116 $ 26,391 $ 23,576 $ 2,725 10 % $ 2,815 12 % Net income margin (Net income divided by Service revenues) 13 % 4 % 5 % 900 bps -100 bps Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues) 47 % 45 % 46 % 200 bps -100 bps Core Adjusted EBITDA margin (Core Adjusted EBITDA divided by Service revenues) 46 % 43 % 40 % 300 bps 300 bps (1) 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. (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 year ended December 31, 2023, includes $462 million of severance and related costs associated with the August 2023 workforce reduction. NM - Not meaningful Core Adjusted EBITDA increased $2.7 billion, or 10%, for the year ended December 31, 2023. The components comprising Core Adjusted EBITDA are discussed further above. The increase was primarily from: • Higher Total service revenues; • Lower Cost of equipment sales, excluding Merger-related costs; and • 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. Adjusted EBITDA increased $1.6 billion, or 6%, for the year ended December 31, 2023, primarily due to the fluctuations in Core Adjusted EBITDA, discussed above, partially offset by lower lease revenues, which decreased $1.1 billion for the year ended December 31, 2023. 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, financing leases, the sale of certain receivables, the Revolving Credit Facility (as defined below) and, beginning in July 2023, an unsecured short-term commercial paper program. Further, the incurrence of additional indebtedness may inhibit our 43 Table of Contents ability to incur new debt in the future to finance our business strategy under the terms governing our existing and future indebtedness. Cash Flows The following is a condensed schedule of our cash flows: Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 (in millions) 2023 2022 2021 $ Change % Change $ Change % Change Net cash provided by operating activities $ 18,559 $ 16,781 $ 13,917 $ 1,778 11 % $ 2,864 21 % Net cash used in investing activities (5,829) (12,359) (19,386) 6,530 (53) % 7,027 (36) % Net cash (used in) provided by financing activities (12,097) (6,451) 1,709 (5,646) 88 % (8,160) (477) % Operating Activities Net cash provided by operating activities increased $1.8 billion, or 11%, primarily from: • A $5.8 billion increase in Net income, adjusted for non-cash income and expense; partially offset by • A $4.0 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 Inventory, 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 $2.0 billion and $3.4 billion in net payments for Merger-related costs for the years ended December 31, 2023 and 2022, respectively. Investing Activities Net cash used in investing activities decreased $6.5 billion, or 53%. The use of cash was primarily from: • $9.8 billion in Purchases of property and equipment, including capitalized interest, from the accelerated build-out of our nationwide 5G network; and • $1.0 billion in Purchases of spectrum licenses and other intangible assets, primarily from relocation costs associated with our C-band spectrum licenses acquired in Auction 107; partially offset by • $4.8 billion in Proceeds related to beneficial interests in securitization transactions. Financing Activities Net cash used in financing activities increased $5.6 billion, or 88%. The use of cash was primarily from: • $13.1 billion in Repurchases of common stock; • $5.1 billion in Repayments of long-term debt; • $1.2 billion in Repayments of financing lease obligations; • $747 million in Dividends on common stock ; and • $297 million in Tax withholdings on share-based awards; partially offset by • $8.4 billion in Proceeds from issuance of long-term debt. Cash and Cash Equivalents As of December 31, 2023, our Cash and cash equivalents were $5.1 billion compared to $4.5 billion at December 31, 2022. 44 Table of Contents Adjusted Free Cash Flow 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. 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, pay dividends and provide further investment in the business. Starting in the first quarter of 2023, we renamed Free Cash Flow to Adjusted Free Cash Flow. This change in name did not result in any change to the definition or calculation of this non-GAAP financial measure. 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, 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: Year Ended December 31, 2023 Versus 2022 2022 Versus 2021 (in millions, except percentages) 2023 2022 2021 $ Change % Change $ Change % Change Net cash provided by operating activities $ 18,559 $ 16,781 $ 13,917 $ 1,778 11 % $ 2,864 21 % Cash purchases of property and equipment, including capitalized interest (9,801) (13,970) (12,326) 4,169 (30) % (1,644) 13 % Proceeds from sales of tower sites 12 9 40 3 33 % (31) (78) % Proceeds related to beneficial interests in securitization transactions 4,816 4,836 4,131 (20) — % 705 17 % Cash payments for debt prepayment or debt extinguishment costs — — (116) — — % 116 (100) % Adjusted Free Cash Flow $ 13,586 $ 7,656 $ 5,646 $ 5,930 77 % $ 2,010 36 % Net cash provided by operating activities margin (Net cash provided by operating activities divided by Service revenues) 29 % 27 % 24 % 200 bps 300 bps Adjusted Free Cash Flow margin (Adjusted Free Cash Flow divided by Service revenues) 21 % 12 % 10 % 900 bps 200 bps Adjusted Free Cash Flow increased $5.9 billion, or 77%, primarily impacted by the following: • Higher Net cash provided by operating activities, as described above; and • 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. • Adjusted Free Cash Flow includes the impact of $2.0 billion and $3.4 billion in net payments for Merger-related costs for the years ended December 31, 2023 and 2022, respectively. During the years ended December 31, 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 December 31, 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 supplements our other available external financing arrangements and proceeds are expected to be used for general corporate purposes. As of December 31, 2023, there was no outstanding balance under this program. For more information regarding our Revolving Credit Facility and commercial paper program, see Note 8 - Debt of the Notes to the Consolidated Financial Statements. 45 Table of Contents Debt Financing As of December 31, 2023, our total debt and financing lease liabilities were $77.5 billion, excluding our tower obligations, of which $71.4 billion was classified as long-term debt and $1.2 billion was classified as long-term financing lease liabilities. During the year ended December 31, 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 $5.1 billion. Subsequent to December 31, 2023, on January 12, 2024, we issued $1.0 billion of 4.850% Senior Notes due 2029, $1.3 billion of 5.150% Senior Notes due 2034 and $750 million of 5.500% Senior Notes due 2055. For more information regarding our debt financing transactions, see Note 8 - Debt of the Notes to the Consolidated Financial Statements. Spectrum Auctions 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. 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 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. The timing of when the licenses will be issued will be determined by the FCC after all post-auction procedures have been completed, which has been delayed due to the suspension of auction authority to the FCC by Congress. In December 2023, Congress passed the 5G Spectrum Authority Licensing Enforcement (SALE) Act, which gives the FCC temporary authority to grant licenses from previous auctions. As a result, we expect the Auction 108 licenses to be issued in the first quarter of 2024. 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. 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. 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. The FCC approved the purchase of the first tranche on December 29, 2023, and we expect the closing of the first tranche to occur in the second quarter of 2024. We anticipate 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. The licenses are subject to an exclusive leasing arrangement between us and Comcast entered into contemporaneously with the License Purchase Agreement. We anticipate the closing will occur in the first half of 2028. For more information regarding our License Purchase Agreements, see Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated Financial Statements. 46 Table of Contents Acquisition of Ka’ena Corporation On March 9, 2023, we entered into a Merger and Unit Purchase Agreement for the acquisition of 100% of the outstanding equity of Ka’ena for a maximum purchase price of $1.35 billion to be paid out 39% in cash and 61% in shares of T-Mobile common stock. The purchase price is variable dependent upon specified performance indicators of Ka’ena during certain periods before and after closing and consists of an upfront payment at closing of the transaction, subject to certain agreed-upon working capital and other adjustments, and a variable earnout payable 24 months after closing of the transaction. Our estimate of the upfront payment is subject to Ka’ena’s underlying business performance and the timing of transaction close, and has been updated to $1.2 billion, before working capital and other 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. 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 December 31, 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 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, 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, workforce restructuring, share repurchases, and dividend payments. 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. We have incurred, and will incur, substantial expenses to comply with the Government Commitments, and we also expect to incur all of the remaining restructuring and integration costs associated with the Merger by the first half of 2024, with the cash expenditures for the Merger-related costs extending beyond 2024. There are a number of additional risks and uncertainties 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, 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 December 31, 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 December 31, 2023, we have entered into $8.7 billion of financing leases under these financing lease facilities, of which $1.2 billion was executed during the year ended December 31, 2023. We expect to enter into up to a total of $1.2 billion in financing lease commitments during the year ending December 31, 2024. 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 and customer base 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, as we build out our nationwide 47 Table of Contents 5G network. We expect a reduction in capital expenditures related to these efforts in 2024 compared to 2023. 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 Intangible Assets of the Notes to the Consolidated Financial Statements. Stockholder Returns 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, which was utilized as of September 30, 2023. During the nine months ended September 30, 2023, we repurchased shares of our common stock for a total purchase price of $11.0 billion, 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 from October 1, 2023, through December 31, 2024. The 2023-2024 Stockholder Return Program consists of additional repurchases of shares of our common stock and the payment of cash dividends. During the year ended December 31, 2023, we repurchased 15,464,107 shares of our common stock at an average price per share of $144.95 for a total purchase price of $2.2 billion under the 2023-2024 Stockholder Return Program, all of which were repurchased during the three months ended December 31, 2023. As of December 31, 2023, we had up to $16.0 billion remaining under the 2023-2024 Stockholder Return Program. 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 was paid in the fourth quarter of 2023. We intend to declare and pay approximately $3.0 billion in total additional dividends in 2024, with payments occurring each quarter during the year, beginning with the dividend declared in the first quarter of 2024. 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 all 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 and paid by us. Subsequent to December 31, 2023, on January 24, 2024, our Board of Directors declared a cash dividend of $0.65 per share on our issued and outstanding common stock, which is payable on March 14, 2024, to stockholders of record as of the close of business on March 1, 2024. Subsequent to December 31, 2023, from January 1, 2024, through January 31, 2024, we repurchased 9,024,185 shares of our common stock at an average price per share of $162.98 for a total purchase price of $1.5 billion. As of January 31, 2024, we had up to $14.5 billion remaining under the 2023-2024 Stockholder Return Program, less the amount to be paid pursuant to the dividends declared in the first quarter of 2024. For additional information regarding the 2022 Stock Repurchase Program and the 2023-2024 Stockholder Return Program, see Note 13 – Stockholder Return Programs 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 and FCC. For more information regarding these commitments, see Note 17 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements. 48 Table of Contents The following table summarizes our material contractual obligations and borrowings as of December 31, 2023, and the timing and effect that such commitments are expected to have on our liquidity and capital requirements in future periods: (in millions) Less Than 1 Year 1 - 3 Years 3 - 5 Years More Than 5 Years Total Long-term debt (1) $ 3,590 $ 11,419 $ 14,084 $ 45,400 $ 74,493 Interest on long-term debt 3,123 5,495 4,620 21,532 34,770 Financing lease liabilities, including imputed interest 1,324 1,228 49 3 2,604 Tower obligations (2) 435 769 810 4,102 6,116 Operating lease liabilities, including imputed interest 4,829 8,428 7,143 18,634 39,034 Purchase obligations (3) (4) (5) 4,528 4,965 2,599 2,262 14,354 Spectrum leases and service credits (6) 303 612 682 4,334 5,931 IP transit services liability 183 200 83 — 466 Total contractual obligations $ 18,315 $ 33,116 $ 30,070 $ 96,267 $ 177,768 (1) Represents principal amounts of long-term debt to affiliates and third parties at maturity, excluding unamortized premiums, discounts, debt issuance costs, consent fees, and financing lease obligations. See Note 8 – Debt of the Notes to the Consolidated Financial Statements for further information. (2) Future minimum payments, including principal and interest payments, related to the tower obligations. See Note 9 – Tower Obligations of the Notes to the Consolidated Financial Statements for further information. (3) The minimum commitment for certain obligations is based on termination penalties that could be paid to exit the contracts. Termination penalties are included in the above table as payments due as of the earliest we could exit the contract, typically in less than one year. For certain contracts that include fixed volume purchase commitments and fixed prices for various products, the purchase obligations are calculated using fixed volumes and contractually fixed prices for the products that are expected to be purchased. This table does not include open purchase orders as of December 31, 2023 under normal business purposes. See Note 17 – 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 FCC approved the purchase of the first tranche, totaling $2.4 billion, on December 29, 2023. The closing of the second tranche remains subject to regulatory approval. Additionally, on September 12, 2023, we entered into a License Purchase Agreement to acquire spectrum in the 600 MHz band from Comcast in exchange for total cash consideration of between $1.2 billion and $3.3 billion. The agreement remains subject to an application for FCC approval. Total consideration for these License Purchase Agreements is excluded from our reported purchase obligations above. (5) On March 9, 2023, we entered into the Merger and Purchase Agreement for the acquisition of 100% of the outstanding equity of Ka’ena, for a maximum purchase price of $1.35 billion to be paid out 39% in cash and 61% in shares of T-Mobile common stock. Our estimate of the upfront payment is subject to Ka’ena’s underlying business performance and the timing of transaction close, and has been updated to $1.2 billion, before working capital adjustments. The agreement remains subject to regulatory approval, and the estimated purchase price is excluded from our reported purchase commitments above. See Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements for further information. (6) Spectrum lease agreements are typically for terms of five to 10 years with automatic renewal provisions, bringing the total term of the agreements up to 30 years. Certain commitments and obligations are included in the table based on the year of required payment or an estimate of the year of payment. Other long-term liabilities have been omitted from the table above due to the uncertainty of the timing of payments, combined with the lack of historical trends to predict future payments. The purchase obligations reflected in the table above are primarily commitments to purchase spectrum licenses, wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary course of business. These amounts do not represent our entire anticipated purchases in the future but represent only those items for which we are contractually committed. Where we are committed to make a minimum payment to the supplier regardless of whether we take delivery, we have included only that minimum payment as a purchase obligation. The acquisition of spectrum licenses is subject to regulatory approval and other customary closing conditions. Related Party Transactions We have related party transactions associated with DT, SoftBank or their respective affiliates in the ordinary course of business, including intercompany servicing and licensing. As of January 31, 2024, DT and SoftBank held, directly or indirectly, approximately 50.7% and 7.8%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 41.5% of the outstanding T-Mobile common stock held by other stockholders. As a result of the Proxy, Lock-Up and ROFR Agreement, dated April 1, 2020, by and between DT and SoftBank, DT has voting control, as of January 31, 2024, over approximately 58.1% of the outstanding T-Mobile common stock. 49 Table of Contents 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. Disclosure is required even where the activities, transactions or dealings are conducted outside the U.S. by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law. 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 year ended December 31, 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. DT, through certain of its non-U.S. 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. In addition, during the year ended December 31, 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: Bank Melli, Europäisch-Iranische Handelsbank, CPG Engineering & Commercial Services GmbH, Golgohar Trade and Technology GmbH and International Trade and Industrial Technology ITRITEC GmbH. These services have been terminated or are in the process of being terminated. For the year ended December 31, 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 year ended December 31, 2023, were less than $0.1 million. We understand that DT intends to continue these activities. Separately, SoftBank, through one of its non-U.S. subsidiaries, provides roaming services in Iran through Irancell Telecommunications Services Company. During the year ended December 31, 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 year ended December 31, 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. In addition, SoftBank, through one of its non-U.S. indirect subsidiaries, provides office supplies to the Embassy of Iran in Japan. SoftBank estimates that gross revenues and net profit generated by such services during the year ended December 31, 2023, were both under $0.1 million. We understand that the SoftBank subsidiary intends to continue such activities. Critical Accounting Estimates Our significant accounting policies are fundamental to understanding our results of operations and financial condition as they require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further information. 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 the accounting policies associated with these critical estimates. 50 Table of Contents Depreciation Our property and equipment balance represents a significant component of our consolidated assets. We record property and equipment at cost, and we generally depreciate property and equipment on a straight-line basis over the estimated useful life of the assets. If all other factors were to remain unchanged, we expect that a one-year increase in the useful lives of our in-service property and equipment, exclusive of leased devices, would have resulted in a decrease of approximately $3.0 billion in our 2023 depreciation expense and that a one-year decrease in the useful life would have resulted in an increase of approximately $4.5 billion in our 2023 depreciation expense. 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. Income Taxes 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. A valuation allowance is recorded when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of a deferred tax asset depends on the ability to generate sufficient taxable income of the appropriate character and in the appropriate taxing jurisdictions within the carryforward periods available. We account for uncertainty in income taxes recognized in the financial statements in accordance with the accounting guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. 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 For information regarding recently issued accounting standards, see Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements.