T-Mobile US, Inc. 10-Q

Item 1. Financial Statements T-Mobile US, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in millions, except share and per share amounts) March 31, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 6,708 $ 5,135 Accounts receivable, net of allowance for credit losses of $ 161 and $ 161 4,253 4,692 Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $ 614 and $ 623 4,059 4,456 Inventory 1,521 1,678 Prepaid expenses 715 702 Other current assets 2,039 2,352 Total current assets 19,295 19,015 Property and equipment, net 39,286 40,432 Operating lease right-of-use assets 26,766 27,135 Financing lease right-of-use assets 3,180 3,270 Goodwill 12,234 12,234 Spectrum licenses 97,154 96,707 Other intangible assets, net 2,445 2,618 Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $ 143 and $ 150 1,908 2,042 Other assets 4,000 4,229 Total assets $ 206,268 $ 207,682 Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued liabilities $ 7,720 $ 10,373 Short-term debt 5,356 3,619 Deferred revenue 846 825 Short-term operating lease liabilities 3,443 3,555 Short-term financing lease liabilities 1,265 1,260 Other current liabilities 1,933 1,296 Total current liabilities 20,563 20,928 Long-term debt 71,361 69,903 Long-term debt to affiliates 1,496 1,496 Tower obligations 3,751 3,777 Deferred tax liabilities 14,187 13,458 Operating lease liabilities 27,827 28,240 Financing lease liabilities 1,163 1,236 Other long-term liabilities 3,846 3,929 Total long-term liabilities 123,631 122,039 Commitments and contingencies (Note 12) Stockholders' equity Common stock, par value $ 0.00001 per share, 2,000,000,000 shares authorized; 1,266,294,032 and 1,262,904,154 shares issued, 1,177,240,110 and 1,195,807,331 shares outstanding — — Additional paid-in capital 67,786 67,705 Treasury stock, at cost, 89,053,922 and 67,096,823 shares ( 12,982 ) ( 9,373 ) Accumulated other comprehensive loss ( 926 ) ( 964 ) Retained earnings 8,196 7,347 Total stockholders' equity 62,074 64,715 Total liabilities and stockholders' equity $ 206,268 $ 207,682 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, (in millions, except share and per share amounts) 2024 2023 Revenues Postpaid revenues $ 12,631 $ 11,862 Prepaid revenues 2,403 2,417 Wholesale and other service revenues 1,062 1,267 Total service revenues 16,096 15,546 Equipment revenues 3,251 3,719 Other revenues 247 367 Total revenues 19,594 19,632 Operating expenses Cost of services, exclusive of depreciation and amortization shown separately below 2,688 3,061 Cost of equipment sales, exclusive of depreciation and amortization shown separately below 4,399 4,588 Selling, general and administrative 5,138 5,425 Gain on disposal group held for sale — ( 42 ) Depreciation and amortization 3,371 3,203 Total operating expenses 15,596 16,235 Operating income 3,998 3,397 Other expense, net Interest expense, net ( 880 ) ( 835 ) Other income, net 20 9 Total other expense, net ( 860 ) ( 826 ) Income before income taxes 3,138 2,571 Income tax expense ( 764 ) ( 631 ) Net income $ 2,374 $ 1,940 Net income $ 2,374 $ 1,940 Other comprehensive income, net of tax Reclassification of loss from cash flow hedges, net of tax effect of $ 15 and $ 14 43 40 Unrealized gain on foreign currency translation adjustment, net of tax effect of $ 0 , and $ 0 — 2 Amortization of actuarial gain, net of tax effect of $( 2 ) and $ 0 ( 5 ) — Other comprehensive income 38 42 Total comprehensive income $ 2,412 $ 1,982 Earnings per share Basic $ 2.00 $ 1.59 Diluted $ 2.00 $ 1.58 Weighted-average shares outstanding Basic 1,185,298,497 1,219,608,362 Diluted 1,189,092,019 1,224,604,698 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (in millions) 2024 2023 Operating activities Net income $ 2,374 $ 1,940 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 3,371 3,203 Stock-based compensation expense 140 177 Deferred income tax expense 715 611 Bad debt expense 282 222 Losses from sales of receivables 21 38 Gain on remeasurement of disposal group held for sale — ( 13 ) Changes in operating assets and liabilities Accounts receivable ( 416 ) ( 1,268 ) Equipment installment plan receivables 277 152 Inventory 170 129 Operating lease right-of-use assets 856 1,008 Other current and long-term assets 160 ( 142 ) Accounts payable and accrued liabilities ( 1,734 ) ( 882 ) Short- and long-term operating lease liabilities ( 1,017 ) ( 1,009 ) Other current and long-term liabilities ( 172 ) ( 183 ) Other, net 57 68 Net cash provided by operating activities 5,084 4,051 Investing activities Purchases of property and equipment, including capitalized interest of $( 9 ) and $( 14 ) ( 2,627 ) ( 3,001 ) Purchases of spectrum licenses and other intangible assets, including deposits ( 61 ) ( 73 ) Proceeds from sales of tower sites — 6 Proceeds related to beneficial interests in securitization transactions 890 1,345 Other, net 11 ( 5 ) Net cash used in investing activities ( 1,787 ) ( 1,728 ) Financing activities Proceeds from issuance of long-term debt 3,473 3,013 Repayments of financing lease obligations ( 327 ) ( 306 ) Repayments of long-term debt ( 223 ) ( 131 ) Repurchases of common stock ( 3,594 ) ( 4,619 ) Dividends on common stock ( 769 ) — Tax withholdings on share-based awards ( 192 ) ( 187 ) Other, net ( 34 ) ( 43 ) Net cash used in financing activities ( 1,666 ) ( 2,273 ) Change in cash and cash equivalents, including restricted cash and cash held for sale 1,631 50 Cash and cash equivalents, including restricted cash and cash held for sale Beginning of period 5,307 4,674 End of period $ 6,938 $ 4,724 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) (in millions, except share and per share amounts) Common Stock Outstanding Treasury Stock Outstanding Treasury Shares at Cost Par Value and Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Total Stockholders' Equity Balance as of December 31, 2023 1,195,807,331 67,096,823 $ ( 9,373 ) $ 67,705 $ ( 964 ) $ 7,347 $ 64,715 Net income — — — — — 2,374 2,374 Dividends declared ($ 1.30 per share) — — — — — ( 1,525 ) ( 1,525 ) Other comprehensive income — — — — 38 — 38 Stock-based compensation — — — 152 — — 152 Stock issued for employee stock purchase plan 950,082 — — 112 — — 112 Issuance of vested restricted stock units 3,525,790 — — — — — — Shares withheld related to net share settlement of stock awards and stock options ( 1,171,055 ) — — ( 192 ) — — ( 192 ) Repurchases of common stock ( 21,933,790 ) 21,933,790 ( 3,604 ) — — — ( 3,604 ) Other, net 61,752 23,309 ( 5 ) 9 — — 4 Balance as of March 31, 2024 1,177,240,110 89,053,922 $ ( 12,982 ) $ 67,786 $ ( 926 ) $ 8,196 $ 62,074 Balance as of December 31, 2022 1,233,960,078 22,916,449 $ ( 3,016 ) $ 73,941 $ ( 1,046 ) $ ( 223 ) $ 69,656 Net income — — — — — 1,940 1,940 Other comprehensive income — — — — 42 — 42 Stock-based compensation — — — 155 — — 155 Stock issued for employee stock purchase plan 1,063,426 — — 126 — — 126 Issuance of vested restricted stock units 3,844,801 — — — — — — Shares withheld related to net share settlement of stock awards and stock options ( 1,263,356 ) — — ( 187 ) — — ( 187 ) Repurchases of common stock ( 32,963,940 ) 32,963,940 ( 4,810 ) — — — ( 4,810 ) Other, net 55,316 30,275 ( 5 ) 8 — — 3 Balance as of March 31, 2023 1,204,696,325 55,910,664 $ ( 7,831 ) $ 74,043 $ ( 1,004 ) $ 1,717 $ 66,925 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Index for Notes to the Condensed Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies 8 Note 2 Business Combination 8 Note 3 Receivables and Related Allowance for Credit Losses 9 Note 4 Sales of Certain Receivables 11 Note 5 Spectrum License Transactions 13 Note 6 Fair Value Measurements 14 Note 7 Debt 15 Note 8 Tower Obligations 17 Note 9 Revenue from Contracts with Customers 18 Note 10 Stockholder Return Program 20 Note 11 Earnings Per Share 21 Note 12 Commitments and Contingencies 21 Note 13 Additional Financial Information 24 Note 14 Subsequent Events 24 7 Index for Notes to the Condensed Consolidated Financial Statements T-Mobile US, Inc. Notes to the Condensed Consolidated Financial Statements Note 1 – Summary of Significant Accounting Policies Basis of Presentation The unaudited condensed consolidated financial statements of T-Mobile US, Inc. (“T-Mobile,” “we,” “our,” “us” or the “Company”) include all adjustments of a normal recurring nature necessary for the fair presentation of the results for the interim periods presented. The results for the interim periods are not necessarily indicative of those for the full year. The condensed consolidated financial statements should be read in conjunction with our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. The condensed consolidated financial statements include the balances and results of operations of T-Mobile and our consolidated subsidiaries. We consolidate majority-owned subsidiaries over which we exercise control, as well as variable interest entities (“VIEs”) for which we are deemed to be the primary beneficiary and VIEs, which cannot be deconsolidated, such as those related to our obligations to pay for the management and operation of certain of our wireless communications tower sites. Intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires our management to make estimates and assumptions that affect the financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances. Estimates are inherently subject to judgment and actual results could differ from those estimates. Accounting Pronouncements Not Yet Adopted Segment Reporting Disclosures In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The standard expands reportable segment disclosure requirements for public business entities primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit (referred to as the “significant expense principle”). The standard will become effective for us for our fiscal year 2024 annual financial statements and interim financial statements thereafter and will be applied retrospectively for all prior periods presented in the financial statements, with early adoption permitted. We plan to adopt the standard when it becomes effective for us beginning in our fiscal year 2024 annual financial statements. We are currently evaluating the impact this guidance will have on the disclosures included in the Notes to the Consolidated Financial Statements. Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The standard enhances income tax disclosure requirements for all entities by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction, and providing clarification on uncertain tax positions and related financial statement impacts. The standard will be effective for us for our fiscal year 2025 annual financial statements with early adoption permitted. We plan to adopt the standard when it becomes effective for us beginning in our fiscal year 2025 annual financial statements, and we expect the adoption of the standard will impact certain of our income tax disclosures. Note 2 – Business Combination Acquisition of Ka’ena Corporation On March 9, 2023, we entered into a Merger and Unit Purchase Agreement (the “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 “Ka’ena Acquisition”). On March 13, 2024, we entered into Amendment No. 1 to the Merger and Unit Purchase Agreement, which amended, among other things, certain mechanics of the payment of the purchase 8 Index for Notes to the Condensed Consolidated Financial Statements consideration for the Ka’ena Acquisition, which will result in a nominal increase in the percentage of cash compared to shares of T-Mobile common stock to be paid out as part of the total purchase price. 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 is currently estimated to be $ 1.2 billion, before working capital and other adjustments, which we currently estimate will result in a net upfront payment of approximately $ 950 million, with approximately 45 % to be paid in cash. Subsequent to March 31, 2024, on April 25, 2024, we received all necessary regulatory approvals and the Ka’ena Acquisition is expected to close on May 1, 2024. Note 3 – Receivables and Related Allowance for Credit Losses We maintain an allowance for credit losses by applying an expected credit loss model. Each period, management assesses the appropriateness of the level of allowance for credit losses by considering credit risk inherent within each portfolio segment as of the end of the period. We consider a receivable past due when a customer has not paid us by the contractually specified payment due date. Account balances are written off against the allowance for credit losses if collection efforts are unsuccessful and the receivable balance is deemed uncollectible (customer default), based on factors such as customer credit ratings as well as the length of time the amounts are past due. Our portfolio of receivables is comprised of two portfolio segments: accounts receivable and equipment installment plan (“EIP”) receivables. Accounts Receivable Portfolio Segment Accounts receivable balances are predominately comprised of amounts currently due from customers (e.g., for wireless communications services), device insurance administrators, wholesale partners, other carriers and third-party retail channels. We estimate credit losses associated with our accounts receivable portfolio segment using an expected credit loss model, which utilizes an aging schedule methodology based on historical information and is adjusted for asset-specific considerations, current economic conditions and reasonable and supportable forecasts. Our approach considers a number of factors, including our overall historical credit losses and payment experience, as well as current collection trends such as write-off frequency and severity. We also consider other qualitative factors such as current and forecasted macroeconomic conditions. We consider the need to adjust our estimate of credit losses for reasonable and supportable forecasts of future macroeconomic conditions. To do so, we monitor external forecasts of changes in real U.S. gross domestic product and forecasts of consumer credit behavior for comparable credit exposures. EIP Receivables Portfolio Segment Based upon customer credit profiles at the time of customer origination, as well as subsequent credit performance, we classify the EIP receivables segment into two customer classes of “Prime” and “Subprime.” Prime customer receivables are those with lower credit risk, and Subprime customer receivables are those with higher credit risk. Customers may be required to make a down payment on their equipment purchases if their assessed credit risk exceeds established underwriting thresholds. In addition, certain customers within the Subprime category may be required to pay a deposit. To determine a customer’s credit profile and assist in determining their credit class, we use a proprietary credit scoring model that measures the credit quality of a customer leveraging several factors, such as credit bureau information and consumer credit risk scores, as well as service and device plan characteristics. EIP receivables had a combined weighted-average effective interest rate of 11.1 % and 10.6 % as of March 31, 2024, and December 31, 2023, respectively. 9 Index for Notes to the Condensed Consolidated Financial Statements The following table summarizes the EIP receivables, including imputed discounts and related allowance for credit losses: (in millions) March 31, 2024 December 31, 2023 EIP receivables, gross $ 6,724 $ 7,271 Unamortized imputed discount ( 489 ) ( 505 ) EIP receivables, net of unamortized imputed discount 6,235 6,766 Allowance for credit losses ( 268 ) ( 268 ) EIP receivables, net of allowance for credit losses and imputed discount $ 5,967 $ 6,498 Classified on our condensed consolidated balance sheets as: Equipment installment plan receivables, net of allowance for credit losses and imputed discount $ 4,059 $ 4,456 Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount 1,908 2,042 EIP receivables, net of allowance for credit losses and imputed discount $ 5,967 $ 6,498 Many of our loss estimation techniques rely on delinquency-based models; therefore, delinquency is an important indicator of credit quality in the establishment of our allowance for credit losses for EIP receivables. We manage our EIP receivables portfolio segment using delinquency and customer credit class as key credit quality indicators. The following table presents the amortized cost of our EIP receivables by delinquency status, customer credit class and year of origination as of March 31, 2024: Originated in 2024 Originated in 2023 Originated prior to 2023 Total EIP Receivables, Net of Unamortized Imputed Discount (in millions) Prime Subprime Prime Subprime Prime Subprime Prime Subprime Total Current - 30 days past due $ 1,188 $ 360 $ 2,923 $ 730 $ 721 $ 203 $ 4,832 $ 1,293 $ 6,125 31 - 60 days past due 3 4 12 16 4 4 19 24 43 61 - 90 days past due — 1 10 15 4 3 14 19 33 More than 90 days past due — — 9 15 6 4 15 19 34 EIP receivables, net of unamortized imputed discount $ 1,191 $ 365 $ 2,954 $ 776 $ 735 $ 214 $ 4,880 $ 1,355 $ 6,235 We estimate credit losses on our EIP receivables segment by applying an expected credit loss model, which relies on historical loss data adjusted for current conditions to calculate default probabilities or an estimate for the frequency of customer default. Our assessment of default probabilities or frequency includes receivables delinquency status, historical loss experience, how long the receivables have been outstanding and customer credit ratings, as well as customer tenure. We multiply these estimated default probabilities by our estimated loss given default, which is the estimated amount of default or the severity of loss. As we do for our accounts receivable portfolio segment, we consider the need to adjust our estimate of credit losses on EIP receivables for reasonable and supportable forecasts of economic conditions through monitoring external forecasts and periodic internal statistical analyses. The following table presents write-offs of our EIP receivables by year of origination for the three months ended March 31, 2024: (in millions) Originated in 2024 Originated in 2023 Originated prior to 2023 Total Write-offs Write-offs $ 2 $ 114 $ 34 $ 150 10 Index for Notes to the Condensed Consolidated Financial Statements Activity for the three months ended March 31, 2024 and 2023, in the allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivables segments were as follows: March 31, 2024 March 31, 2023 (in millions) Accounts Receivable Allowance EIP Receivables Allowance Total Accounts Receivable Allowance EIP Receivables Allowance Total Allowance for credit losses and imputed discount, beginning of period $ 161 $ 773 $ 934 $ 167 $ 811 $ 978 Bad debt expense 132 150 282 107 115 222 Write-offs ( 132 ) ( 150 ) ( 282 ) ( 122 ) ( 140 ) ( 262 ) Change in imputed discount on short-term and long-term EIP receivables N/A 31 31 N/A 54 54 Impact on the imputed discount from sales of EIP receivables N/A ( 47 ) ( 47 ) N/A ( 54 ) ( 54 ) Allowance for credit losses and imputed discount, end of period $ 161 $ 757 $ 918 $ 152 $ 786 $ 938 Off-Balance-Sheet Credit Exposures We do not have material off-balance-sheet credit exposures as of March 31, 2024. In connection with the sales of certain service accounts receivable and EIP receivables pursuant to the sale arrangements, we have deferred purchase price assets included on our Condensed Consolidated Balance Sheets measured at fair value that are based on a discounted cash flow model using Level 3 inputs, including estimated customer default rates and credit worthiness, dilutions and recoveries. See Note 4 – Sales of Certain Receivables for further information. Note 4 – Sales of Certain Receivables We regularly enter into transactions to sell certain service accounts receivable and EIP receivables. The transactions, including our continuing involvement with the sold receivables and the respective impacts to our condensed consolidated financial statements, are described below. Sales of EIP Receivables Overview of the Transaction In 2015, we entered into an arrangement to sell certain EIP receivables on a revolving basis (the “EIP Sale Arrangement”), which has been revised and extended from time to time. As of both March 31, 2024, and December 31, 2023, the EIP Sale Arrangement provided funding of $ 1.3 billion. In connection with this EIP Sale Arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity (the “EIP BRE”). We consolidate the EIP BRE under the VIE model. The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, included on our Condensed Consolidated Balance Sheets with respect to the EIP BRE: (in millions) March 31, 2024 December 31, 2023 Other current assets $ 330 $ 348 Other assets 95 103 Sales of Service Accounts Receivable Overview of the Transaction In 2014, we entered into an arrangement to sell certain service accounts receivable on a revolving basis (the “Service Receivable Sale Arrangement”). On February 27, 2024, we extended the scheduled expiration date of the Service Receivable Sale Arrangement to February 25, 2025. As of both March 31, 2024, and December 31, 2023, the Service Receivable Sale Arrangement provided funding of $ 775 million. 11 Index for Notes to the Condensed Consolidated Financial Statements In connection with the Service Receivable Sale Arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity, to sell service accounts receivable (the “Service BRE”). We consolidate the Service BRE under the VIE model. The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, and liabilities included on our Condensed Consolidated Balance Sheets with respect to the Service BRE: (in millions) March 31, 2024 December 31, 2023 Other current assets $ 164 $ 209 Other current liabilities 423 373 Sales of Receivables The following table summarizes the impact of the sale of certain service accounts receivable and EIP receivables on our Condensed Consolidated Balance Sheets: (in millions) March 31, 2024 December 31, 2023 Derecognized net service accounts receivable and EIP receivables $ 2,249 $ 2,388 Other current assets 494 557 of which, deferred purchase price 491 555 Other long-term assets 95 103 of which, deferred purchase price 95 103 Other current liabilities 423 373 Net cash proceeds since inception 1,554 1,583 Of which: Change in net cash proceeds during the year-to-date period ( 29 ) ( 114 ) Net cash proceeds funded by reinvested collections 1,583 1,697 At inception, we elected to measure the deferred purchase price at fair value with changes in fair value included in Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income. The fair value of the deferred purchase price is determined based on a discounted cash flow model which uses primarily Level 3 inputs, including estimated customer default rates and credit worthiness, dilutions and recoveries. As of March 31, 2024, and December 31, 2023, our deferred purchase price related to the sales of service accounts receivable and EIP receivables was $ 586 million and $ 658 million, respectively. We recognized losses from sales of receivables, including changes in fair value of the deferred purchase price, of $ 21 million and $ 38 million for the three months ended March 31, 2024 and 2023, respectively, in Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income. Continuing Involvement Pursuant to the sale arrangements described above, we have continuing involvement with the service accounts receivable and EIP receivables we sell as we service the receivables, are required to repurchase certain receivables, including ineligible receivables, aged receivables and receivables where a write-off is imminent, and may be responsible for absorbing credit losses through reduced collections on our deferred purchase price assets. We continue to service the customers and their related receivables, including facilitating customer payment collection, in exchange for a monthly servicing fee. As the receivables are sold on a revolving basis, the customer payment collections on sold receivables may be reinvested in new receivable sales. At the direction of the purchasers of the sold receivables, we apply the same policies and procedures while servicing the sold receivables as we apply to our owned receivables, and we continue to maintain normal relationships with our customers. 12 Index for Notes to the Condensed Consolidated Financial Statements Note 5 – Spectrum License Transactions The following table summarizes our spectrum license activity for the three months ended March 31, 2024: (in millions) 2024 Spectrum licenses, beginning of year $ 96,707 Spectrum license acquisitions 411 Spectrum licenses transferred to held for sale ( 17 ) Costs to clear spectrum 53 Spectrum licenses, end of period $ 97,154 Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in Purchases of spectrum licenses and other intangible assets, including deposits, on our Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024. Spectrum Transactions In September 2022, the Federal Communications Commission (“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. On February 29, 2024, the FCC issued to us the licenses won in Auction 108, and substantially all of these licenses were deployed in March 2024. The licenses are included in Spectrum licenses on our Condensed Consolidated Balance Sheets as of March 31, 2024. License Purchase Agreements DISH Network Corporation On July 1, 2020, we and DISH Network Corporation (“DISH”) entered into a license purchase agreement (the “DISH License Purchase Agreement”) pursuant to which DISH agreed to purchase certain 800 MHz spectrum licenses for a total of approximately $ 3.6 billion. The closing of the sale of spectrum under the DISH License Purchase Agreement remains subject to FCC approval. On October 15, 2023, we and DISH entered into an amendment (the “LPA Amendment”) to the DISH License Purchase Agreement pursuant to which, among other things, the parties agreed that (1) DISH will pay us a $ 100 million non-refundable extension fee (in lieu of the approximately $ 72 million termination fee that had previously been agreed to), (2) the closing for the purchase of the spectrum licenses by DISH will occur no later than April 1, 2024, (3) if DISH has not purchased the spectrum licenses by such date for any reason (including failure to receive the required FCC approval prior to such date), then the DISH License Purchase Agreement will automatically terminate, and we will retain the $ 100 million extension fee, (4) if DISH does purchase the spectrum by April 1, 2024, the $ 100 million extension fee will be credited against the $ 3.6 billion purchase price, and (5) we are permitted to commence auction of the spectrum prior to April 1, 2024 at our discretion (and subject to DISH’s purchase right). The LPA Amendment was approved by the Court and became effective on October 23, 2023. On October 25, 2023, we received a payment of $ 100 million from DISH for the extension fee and recorded a corresponding liability within Other current liabilities on our Condensed Consolidated Balance Sheets. Subsequent to March 31, 2024, DISH did not purchase the 800 MHz spectrum by April 1, 2024. As such, we will recognize a gain for the $ 100 million extension fee previously paid by DISH in the second quarter of 2024 within Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income and relieve the liability that was initially recorded upon receipt of the payment. Additionally, we have commenced an auction process for the disposition of the spectrum as required under the final judgment agreed to by us, Deutsche Telekom AG (“DT”), Sprint LLC, SoftBank Group Corp. (“SoftBank”) and DISH with the U.S. District Court for the District of Columbia, which was approved by the Court on April 1, 2020. If the specified minimum price of $ 3.6 billion is not met in the auction, we would be relieved of the obligation to sell the licenses. Channel 51 License Co LLC and LB License Co, LLC On August 8, 2022, we, Channel 51 License Co LLC and LB License Co, LLC (together with Channel 51 License Co LLC, the “Sellers”) entered into License Purchase Agreements pursuant to which we will acquire spectrum in the 600 MHz band from the Sellers in exchange for total cash consideration of $ 3.5 billion. The licenses will be acquired without any associated networks and are currently being utilized by us through exclusive leasing arrangements with the Sellers. 13 Index for Notes to the Condensed Consolidated Financial Statements 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 separate 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, which 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 $ 1.1 billion of the aggregate $ 3.5 billion cash consideration. The licenses being acquired by us, and the total consideration being paid for the licenses, remain the same under the original License Purchase Agreements and subsequent amendments. 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, with the associated cash payment expected to occur in the third 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. Note 6 – Fair Value Measurements The carrying values of Cash and cash equivalents, Accounts receivable and Accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. The carrying values of EIP receivables approximate fair value as the receivables are recorded at their present value using an imputed interest rate. Derivative Financial Instruments Periodically, we use derivatives to manage exposure to market risk, such as interest rate risk. We designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship to help minimize significant, unplanned fluctuations in cash flows or fair values caused by designated market risks, such as interest rate volatility. We do not use derivatives for trading or speculative purposes. Cash flows associated with qualifying hedge derivative instruments are presented in the same category on our Condensed Consolidated Statements of Cash Flows as the item being hedged. For fair value hedges, the change in the fair value of the derivative instruments is recognized in earnings through the same income statement line item as the change in the fair value of the hedged item. For cash flow hedges, the change in the fair value of the derivative instruments is reported in Other comprehensive income and recognized in earnings when the hedged item is recognized in earnings, again, through the same income statement line item. We did not have any significant derivative instruments outstanding as of March 31, 2024, and December 31, 2023. Interest Rate Lock Derivatives In April 2020, we terminated our interest rate lock derivatives entered into in October 2018. Aggregate changes in the fair value of the interest rate lock derivatives, net of tax and amortization, of $ 1.1 billion are presented in Accumulated other comprehensive loss on our Condensed Consolidated Balance Sheets as of both March 31, 2024, and December 31, 2023. For the three months ended March 31, 2024 and 2023, $ 57 million and $ 53 million, respectively, were amortized from Accumulated other comprehensive loss into Interest expense, net, on our Condensed Consolidated Statements of Comprehensive Income. We expect to amortize $ 241 million of the Accumulated other comprehensive loss associated with the derivatives into Interest expense, net, over the 12 months ending March 31, 2025. Deferred Purchase Price Assets In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets measured at fair value that are based on a discounted cash flow model using unobservable Level 3 inputs, including estimated customer default rates and credit worthiness, dilutions and recoveries. See Note 4 – Sales of Certain Receivables for further information. 14 Index for Notes to the Condensed Consolidated Financial Statements The carrying amounts of our deferred purchase price assets, which are measured at fair value on a recurring basis and are included on our Condensed Consolidated Balance Sheets, were $ 586 million and $ 658 million as of March 31, 2024, and December 31, 2023, respectively. Debt The fair value of our Senior Notes and spectrum-backed Senior Secured Notes to third parties was determined based on quoted market prices in active markets, and therefore were classified as Level 1 within the fair value hierarchy. The fair value of our Senior Notes to affiliates was determined based on a discounted cash flow approach using market interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk. Accordingly, our Senior Notes to affiliates were classified as Level 2 within the fair value hierarchy. The fair value of our asset-backed notes (“ABS Notes”) was primarily based on quoted prices in inactive markets for identical instruments and observable changes in market interest rates, both of which are Level 2 inputs. Accordingly, our ABS Notes were classified as Level 2 within the fair value hierarchy. Although we have determined the estimated fair values using available market information and commonly accepted valuation methodologies, judgment was required in interpreting market data to develop fair value estimates for the Senior Notes to affiliates and ABS Notes. The fair value estimates were based on information available as of March 31, 2024, and December 31, 2023. As such, our estimates are not necessarily indicative of the amount we could realize in a current market exchange. The carrying amounts and fair values of our short-term and long-term debt included on our Condensed Consolidated Balance Sheets were as follows: (in millions) Level within the Fair Value Hierarchy March 31, 2024 December 31, 2023 Carrying Amount Fair Value Carrying Amount Fair Value Liabilities: Senior Notes to third parties 1 $ 73,421 $ 67,914 $ 70,493 $ 65,962 Senior Notes to affiliates 2 1,496 1,464 1,496 1,499 Senior Secured Notes to third parties 1 2,050 1,994 2,281 2,207 ABS Notes to third parties 2 1,246 1,244 748 748 Note 7 – Debt The following table sets forth the debt balances and activity as of, and for the three months ended, March 31, 2024 : (in millions) December 31, 2023 Proceeds from Issuances and Borrowings (1) Repayments Reclassifications (1) Other (2) March 31, 2024 Short-term debt $ 3,619 $ — $ ( 223 ) $ 1,983 $ ( 23 ) $ 5,356 Long-term debt 69,903 3,473 — ( 1,983 ) ( 32 ) 71,361 Total debt to third parties 73,522 3,473 ( 223 ) — ( 55 ) 76,717 Long-term debt to affiliates 1,496 — — — — 1,496 Total debt $ 75,018 $ 3,473 $ ( 223 ) $ — $ ( 55 ) $ 78,213 (1) Issuances and borrowings and reclassifications are recorded net of accrued or paid issuance costs and discounts. (2) Other includes the amortization of premiums, discounts, debt issuance costs and consent fees. Our effective interest rate, excluding the impact of derivatives and capitalized interest, was approximately 4.1 % and 4.0 % on weighted-average debt outstanding of $ 77.4 billion and $ 73.4 billion for the three months ended March 31, 2024 and 2023, respectively. The weighted-average debt outstanding was calculated by applying an average of the monthly ending balances of total short-term and long-term debt to third parties and short-term and long-term debt to affiliates, net of unamortized premiums, discounts, debt issuance costs and consent fees. 15 Index for Notes to the Condensed Consolidated Financial Statements Issuances and Borrowings During the three months ended March 31, 2024, we issued the following Senior Notes: (in millions) Principal Issuances Discounts and Issuance Costs, Net Net Proceeds from Issuance of Long-Term Debt Issue Date 4.850 % Senior Notes due 2029 $ 1,000 $ ( 6 ) $ 994 January 12, 2024 5.150 % Senior Notes due 2034 1,250 ( 11 ) 1,239 January 12, 2024 5.500 % Senior Notes due 2055 750 ( 7 ) 743 January 12, 2024 Total of Senior Notes issued $ 3,000 $ ( 24 ) $ 2,976 5.050 % Class A Senior ABS Notes due 2029 $ 500 $ ( 3 ) $ 497 February 14, 2024 Total of ABS Notes issued $ 500 $ ( 3 ) $ 497 Note Repayments During the three months ended March 31, 2024, we made the following repayments: (in millions) Principal Amount Repayment Date 4.738 % Secured Series 2018-1 A-1 Notes due 2025 $ 131 Various 5.152 % Series 2018-1 A-2 Notes due 2028 92 Various Total Repayments $ 223 Asset-backed Notes On February 14, 2024, we issued $ 500 million of 5.050 % Class A Senior ABS Notes to third parties in a private placement transaction. These ABS Notes are secured by $ 667 million of gross EIP receivables and future collections on such receivables. Net proceeds of $ 497 million from these ABS Notes are presented in Proceeds from issuance of long-term debt on our Condensed Consolidated Statements of Cash Flows in the three months ended March 31, 2024. As of March 31, 2024, $ 1.3 billion of our ABS Notes were secured in total by $ 1.7 billion of gross EIP receivables and future collections on such receivables. Our ABS Notes and the assets securing this debt are included on our Condensed Consolidated Balance Sheets. The expected maturities of our ABS Notes as of March 31, 2024, were as follows: (in millions) Expected Maturities 2024 $ 198 2025 552 2026 459 2027 41 Total $ 1,250 Variable Interest Entities In connection with our ABS Notes issuances, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity (the “ABS BRE”), and a trust (the “ABS Trust” and together with the ABS BRE, the “ABS Entities”), in which the ABS BRE holds a residual interest. Each of the ABS Entities meet the definition of a VIE for which we have determined that we are the primary beneficiary, as we have the power to direct the activities of the ABS Entities that most significantly impact their performance. Accordingly, we include the balances and results of operations of the ABS Entities in our condensed consolidated financial statements. 16 Index for Notes to the Condensed Consolidated Financial Statements The following table summarizes the carrying amounts and classification of assets and liabilities included in our Condensed Consolidated Balance Sheets with respect to the ABS Entities: (in millions) March 31, 2024 December 31, 2023 Assets Equipment installment plan receivables, net $ 1,123 $ 739 Equipment installment plan receivables due after one year, net 376 168 Other current assets 154 101 Liabilities Accounts payable and accrued liabilities $ 2 $ 1 Short-term debt 413 198 Long-term debt 833 550 See Note 3 – Receivables and Related Allowance for Credit Losses for additional information on the EIP receivables used to secure the ABS Notes. Restricted Cash Certain provisions of our debt agreements require us to maintain specified cash collateral balances. Amounts associated with these balances are considered to be restricted cash. See Note 1 3 - Additional Financial Information for our reconciliation of Cash and cash equivalents, including restricted cash. Note 8 – Tower Obligations Existing CCI Tower Lease Arrangements In 2012, we conveyed to Crown Castle International Corp. (“CCI”) the exclusive right to manage and operate approximately 6,200 tower sites (“CCI Lease Sites”) via a master prepaid lease with site lease terms ranging from 23 to 37 years. CCI has fixed-price purchase options for the CCI Lease Sites totaling approximately $ 2.0 billion, exercisable annually on a per-tranche basis at the end of the lease term during the period from December 31, 2035, through December 31, 2049. If CCI exercises its purchase option for any tranche, it must purchase all the towers in the tranche. We lease back a portion of the space at certain tower sites. Assets and liabilities associated with the operation of the tower sites were transferred to special purpose entities (“SPEs”). Assets included ground lease agreements or deeds for the land on which the towers are situated, the towers themselves and existing subleasing agreements with other mobile network operator tenants that lease space at the tower sites. Liabilities included the obligation to pay ground lease rentals, property taxes and other executory costs. We determined the SPEs containing the CCI Lease Sites (“Lease Site SPEs”) are VIEs as they lack sufficient equity to finance their activities. We have a variable interest in the Lease Site SPEs but are not the primary beneficiary as we lack the power to direct the activities that most significantly impact the Lease Site SPEs’ economic performance. These activities include managing tenants and underlying ground leases, performing repair and maintenance on the towers, the obligation to absorb expected losses and the right to receive the expected future residual returns from the purchase option to acquire the CCI Lease Sites. As we determined that we are not the primary beneficiary and do not have a controlling financial interest in the Lease Site SPEs, the Lease Site SPEs are not included on our condensed consolidated financial statements. However, we also considered if this arrangement resulted in the sale of the CCI Lease Sites for which we would derecognize the tower assets. By assessing whether control had transferred, we concluded that transfer of control criteria, as discussed in the revenue standard, were not met. Accordingly, we recorded this arrangement as a financing whereby we recorded debt, a financial obligation, and the CCI Lease Sites tower assets remained on our Condensed Consolidated Balance Sheets. We recorded long-term financial obligations in the amount of the net proceeds received and recognize interest on the tower obligations. The tower obligations are increased by interest expense and amortized through contractual leaseback payments made by us to CCI and through net cash flows generated and retained by CCI from the operation of the tower sites. Acquired CCI Tower Lease Arrangements Prior to our merger with Sprint (the “Merger”), Sprint entered into a lease-out and leaseback arrangement with Global Signal Inc., a third party that was subsequently acquired by CCI, that conveyed to CCI the exclusive right to manage and operate approximately 6,400 tower sites (“Master Lease Sites”) via a master prepaid lease. These agreements were assumed upon the 17 Index for Notes to the Condensed Consolidated Financial Statements close of the Merger, at which point the remaining term of the lease-out was approximately 17 years with no renewal options. CCI has a fixed price purchase option for all (but not less than all) of the leased or subleased sites for approximately $ 2.3 billion, exercisable one year prior to the expiration of the agreement and ending 120 days prior to the expiration of the agreement. We lease back a portion of the space at certain tower sites. We considered if this arrangement resulted in the sale of the Master Lease Sites for which we would derecognize the tower assets. By assessing whether control had transferred, we concluded that transfer of control criteria, as discussed in the revenue standard, were not met. Accordingly, we recorded this arrangement as a financing whereby we recorded debt, a financial obligation, and the Master Lease Sites tower assets remained on our Condensed Consolidated Balance Sheets. We recognize interest expense on the tower obligations. The tower obligations are increased by the interest expense and amortized through contractual leaseback payments made by us to CCI. The tower assets are reported in Property and equipment, net on our Condensed Consolidated Balance Sheets and are depreciated to their estimated residual values over the expected useful life of the towers, which is 20 years. Leaseback Arrangement On January 3, 2022, we entered into an agreement (the “Crown Agreement”) with CCI. The Crown Agreement extends the current term of the leasebacks by up to 12 years and modifies the leaseback payments for both the Existing CCI Tower Lease Arrangements and the Acquired CCI Tower Lease Arrangements. As a result of the Crown Agreement, there was an increase in our financing obligation as of the effective date of the Crown Agreement of approximately $ 1.2 billion, with a corresponding decrease to Other long-term liabilities associated with unfavorable contract terms. The modification resulted in a revised interest rate under the effective interest method for the tower obligations: 11.6 % for the Existing CCI Tower Lease Arrangements and 5.3 % for the Acquired CCI Tower Lease Arrangements. There were no changes made to either of our master prepaid leases with CCI. The following table summarizes the balances associated with both of the tower arrangements on our Condensed Consolidated Balance Sheets: (in millions) March 31, 2024 December 31, 2023 Property and equipment, net $ 2,182 $ 2,220 Tower obligations 3,751 3,777 Other long-term liabilities 554 554 Future minimum payments related to the tower obligations are approximately $ 421 million for the 12-month period ending March 31, 2025, $ 774 million in total for both of the 12-month periods ending March 31, 2026 and 2027, $ 816 million in total for both of the 12-month periods ending March 31, 2028 and 2029, and $ 4.0 billion in total thereafter. We are contingently liable for future ground lease payments through the remaining term of the CCI Lease Sites and the Master Lease Sites. These contingent obligations are not included in Operating lease liabilities, as any amount due is contractually owed by CCI based on the subleasing arrangement. Under the arrangement, we remain primarily liable for ground lease payments on approximately 900 sites and have included lease liabilities of $ 241 million in our Operating lease liabilities as of March 31, 2024. Note 9 – Revenue from Contracts with Customers Disaggregation of Revenue We provide wireless communications services to three primary categories of customers: • Postpaid customers generally include customers who are qualified to pay after receiving wireless communications services utilizing phones, High Speed Internet, mobile internet devices (including tablets and hotspots), wearables, DIGITS and other connected devices (including SyncUP and IoT); • Prepaid customers generally include customers who pay for wireless communications services in advance; and • Wholesale customers include Machine-to-Machine and Mobile Virtual Network Operator customers that operate on our network but are managed by wholesale partners. 18 Index for Notes to the Condensed Consolidated Financial Statements Postpaid service revenues, including postpaid phone revenues and postpaid other revenues, were as follows: Three Months Ended March 31, (in millions) 2024 2023 Postpaid service revenues Postpaid phone revenues $ 11,145 $ 10,652 Postpaid other revenues 1,486 1,210 Total postpaid service revenues $ 12,631 $ 11,862 We operate as a single operating segment. The balances presented in each revenue line item on our Condensed Consolidated Statements of Comprehensive Income represent categories of revenue from contracts with customers disaggregated by type of product and service. Postpaid and prepaid service revenues also include revenues earned for providing premium services to customers, such as device insurance services. Revenue generated from the lease of mobile communication devices is included in Equipment revenues on our Condensed Consolidated Statements of Comprehensive Income. Contract Balances The contract asset and contract liability balances from contracts with customers as of March 31, 2024, and December 31, 2023, were as follows: (in millions) Contract Assets Contract Liabilities Balance as of December 31, 2023 $ 607 $ 812 Balance as of March 31, 2024 548 836 Change $ ( 59 ) $ 24 Contract assets primarily represent revenue recognized for equipment sales with promotional bill credits offered to customers that are paid over time and are contingent on the customer maintaining a service contract. The change in the contract asset balance includes customer activity related to new promotions, offset by billings on existing contracts and impairment, which is recognized as bad debt expense. The current portion of our contract assets of approximately $ 449 million and $ 495 million as of March 31, 2024, and December 31, 2023, respectively, was included in Other current assets on our Condensed Consolidated Balance Sheets. Contract liabilities are recorded when fees are collected, or we have an unconditional right to consideration (a receivable) in advance of delivery of goods or services. Changes in contract liabilities are primarily related to the activity of prepaid customers. Contract liabilities are primarily included in Deferred revenue on our Condensed Consolidated Balance Sheets. Revenues for the three months ended March 31, 2024 and 2023 include the following: Three Months Ended March 31, (in millions) 2024 2023 Amounts included in the beginning of year contract liability balance $ 698 $ 667 Remaining Performance Obligations As of March 31, 2024, the aggregate amount of transaction price allocated to remaining service performance obligations for postpaid contracts with subsidized devices and promotional bill credits that result in an extended service contract is $ 1.3 billion. We expect to recognize revenue as the service is provided on these postpaid contracts over an extended contract term of 24 months from the time of origination. Information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less has been excluded from the above, which primarily consists of monthly service contracts. Certain of our wholesale, roaming and service contracts include variable consideration based on usage and performance. This variable consideration has been excluded from the disclosure of remaining performance obligations. As of March 31, 2024, the aggregate amount of the contractual minimum consideration for wholesale, roaming and service contracts is $ 1.3 billion, $ 1.6 billion and $ 2.8 billion for the remainder of 2024, 2025, and 2026 and beyond, respectively. These contracts have a remaining duration ranging from less than one year to eight years . 19 Index for Notes to the Condensed Consolidated Financial Statements Contract Costs The balance of deferred incremental costs to obtain contracts with customers was $ 2.1 billion as of both March 31, 2024, and December 31, 2023, and is included in Other assets on our Condensed Consolidated Balance Sheets. Deferred contract costs incurred to obtain postpaid service contracts are amortized over a period of 24 months. The amortization period is monitored to reflect any significant change in assumptions. Amortization of deferred contract costs included in Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income were $ 489 million and $ 422 million for the three months ended March 31, 2024 and 2023, respectively. The deferred contract cost asset is assessed for impairment on a periodic basis. There were no impairment losses recognized on deferred contract cost assets for the three months ended March 31, 2024 and 2023. Note 10 – Stockholder Return Program 2023-2024 Stockholder Return Program On September 6, 2023, our Board of Directors authorized our 2023-2024 Stockholder Return Program of up to $ 19.0 billion that will run from October 1, 2023, through December 31, 2024 (the “2023-2024 Stockholder Return Program”). The 2023-2024 Stockholder Return Program consists of repurchases of shares of our common stock and the payment of cash dividends. 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 was paid on March 14, 2024, to stockholders of record as of the close of business on March 1, 2024. On March 15, 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 June 13, 2024, to stockholders of record as of the close of business on May 31, 2024. During the three months ended March 31, 2024, we paid an aggregate of $ 769 million in cash dividends to our stockholders, which was presented within Net cash used in financing activities on our Condensed Consolidated Statements of Cash Flows, of which $ 388 million was paid to DT. As of March 31, 2024, $ 756 million for dividends payable is presented within Other current liabilities on our Condensed Consolidated Balance Sheets, of which $ 386 million is payable to DT. During the three months ended March 31, 2024, we repurchased 21,933,790 shares of our common stock at an average price per share of $ 162.69 for a total purchase price of $ 3.6 billion under the 2023-2024 Stockholder Return Program. All shares repurchased during the three months ended March 31, 2024, were purchased at market price. As of March 31, 2024, we had up to $ 11.7 billion remaining under the 2023-2024 Stockholder Return Program for repurchases of shares and quarterly dividends through December 31, 2024. The next quarterly cash dividend will be paid on June 13, 2024. Subsequent to March 31, 2024, from April 1, 2024, through April 19, 2024, we repurchased 5,427,946 shares of our common stock at an average price per share of $ 160.97 for a total purchase price of $ 874 million. As of April 19, 2024, we had up to $ 10.8 billion remaining under the 2023-2024 Stockholder Return Program for repurchases of shares and quarterly dividends through December 31, 2024. 20 Index for Notes to the Condensed Consolidated Financial Statements Note 11 – Earnings Per Share The computation of basic and diluted earnings per share was as follows: Three Months Ended March 31, (in millions, except shares and per share amounts) 2024 2023 Net income $ 2,374 $ 1,940 Weighted-average shares outstanding – basic 1,185,298,497 1,219,608,362 Effect of dilutive securities: Outstanding stock options, unvested stock awards 3,793,522 4,996,336 Weighted-average shares outstanding – diluted 1,189,092,019 1,224,604,698 Earnings per share – basic $ 2.00 $ 1.59 Earnings per share – diluted $ 2.00 $ 1.58 Potentially dilutive securities: Outstanding stock options and unvested stock awards 6 98,175 SoftBank contingent consideration (1) — 48,751,557 (1) Represents the weighted-average number of shares (“SoftBank Specified Shares”) that were contingently issuable from the Merger date of April 1, 2020, pursuant to a letter agreement dated February 20, 2020, between T-Mobile, SoftBank and DT (the “Letter Agreement”). The SoftBank Specified Shares were determined to be contingent consideration for the Merger and was not dilutive until the defined volume-weighted average price per share was reached (the “Threshold Price”). As of the close of trading on December 22, 2023, the Threshold Price was reached. On December 28, 2023, the Company issued the SoftBank Specified Shares to SoftBank in accordance with the Letter Agreement. As of March 31, 2024, we had authorized 100 million shares of preferred stock, with a par value of $ 0.00001 per share. There was no preferred stock outstanding as of March 31, 2024 and 2023. Potentially dilutive securities were not included in the computation of diluted earnings per share if to do so would have been anti-dilutive. Note 12 – Commitments and Contingencies Merger Commitments In connection with the regulatory proceedings and approvals of the Merger pursuant to the Business Combination Agreement with Sprint and the other parties named therein (as amended, the “Business Combination Agreement”) and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”), we have commitments and other obligations to various state and federal agencies and certain nongovernmental organizations, including pursuant to the Consent Decree agreed to by us, DT, Sprint, SoftBank and DISH and entered by the U.S. District Court for the District of Columbia, and the FCC’s memorandum opinion and order approving our applications for approval of the Merger. These commitments and obligations include, among other things, extensive 5G network build-out commitments, obligations to deliver high-speed wireless services to the vast majority of Americans, including Americans residing in rural areas, and the marketing of an in-home broadband product where spectrum capacity is available. Other commitments relate to national security, pricing, service, employment and support of diversity initiatives. Many of the commitments specify time frames for compliance and reporting. Failure to fulfill our obligations and commitments in a timely manner could result in substantial fines, penalties, or other legal and administrative actions. Contingencies and Litigation Litigation and Regulatory Matters We are involved in various lawsuits and disputes, claims, government agency investigations and enforcement actions, and other proceedings (“Litigation and Regulatory Matters”) that arise in the ordinary course of business, which include claims of patent infringement (most of which are asserted by non-practicing entities primarily seeking monetary damages), class actions, and proceedings to enforce FCC or other government agency rules and regulations. Those Litigation and Regulatory Matters are at various stages, and some of them may proceed to trial, arbitration, hearing, or other adjudication that could result in fines, penalties, or awards of monetary or injunctive relief in the coming 12 months if they are not otherwise resolved. We have established an accrual with respect to certain of these matters, where appropriate. The accruals are reflected on our condensed consolidated financial statements, but they are not considered to be, individually or in the aggregate, material. An accrual is established when we believe it is both probable that a loss has been incurred and an amount can be reasonably estimated. For 21 Index for Notes to the Condensed Consolidated Financial Statements other matters, where we have not determined that a loss is probable or because the amount of loss cannot be reasonably estimated, we have not recorded an accrual due to various factors typical in contested proceedings, including, but not limited to, uncertainty concerning legal theories and their resolution by courts or regulators, uncertain damage theories and demands, and a less than fully developed factual record. For Litigation and Regulatory Matters that may result in a contingent gain, we recognize such gains on our condensed consolidated financial statements when the gain is realized or realizable. We recognize legal costs expected to be incurred in connection with Litigation and Regulatory Matters as they are incurred. Except as otherwise specified below, we do not expect that the ultimate resolution of these Litigation and Regulatory Matters, individually or in the aggregate, will have a material adverse effect on our financial position, but we note that an unfavorable outcome of some or all of the specific matters identified below or other matters that we are or may become involved in could have a material adverse impact on results of operations or cash flows for a particular period. This assessment is based on our current understanding of relevant facts and circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future. On February 28, 2020, we received a Notice of Apparent Liability for Forfeiture and Admonishment from the FCC, which proposed a penalty against us for allegedly violating section 222 of the Communications Act and the FCC’s regulations governing the privacy of customer information. We have included an accrual for the settlement amount that we believe to be probable in Accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheets as of March 31, 2024. On April 1, 2020, in connection with the closing of the Merger, we assumed the contingencies and litigation matters of Sprint. Those matters include a wide variety of disputes, claims, government agency investigations and enforcement actions, and other proceedings. These matters include, among other things, certain ongoing FCC and state government agency investigations into Sprint’s Lifeline program. In September 2019, Sprint notified the FCC that it had claimed monthly subsidies for serving subscribers, even though these subscribers may not have met usage requirements under Sprint's usage policy for the Lifeline program, due to an inadvertent coding issue in the system used to identify qualifying subscriber usage that occurred in July 2017 while the system was being updated. Sprint has made a number of payments to reimburse the federal government and certain states for excess subsidy payments. We note that, pursuant to Amendment No. 2, dated as of February 20, 2020, to the Business Combination Agreement, dated as of April 29, 2018, by and among the Company, Sprint and the other parties named therein, SoftBank agreed to indemnify us against certain specified matters and losses, including those relating to the Lifeline matters described above. Resolution of these matters could require us to make additional reimbursements and pay additional fines and penalties, which we do not expect to have a significant impact on our financial results. We expect that any additional liabilities related to these indemnified matters would be indemnified and reimbursed by SoftBank. On June 1, 2021, a putative shareholder class action and derivative lawsuit was filed in the Delaware Court of Chancery, Dinkevich v. Deutsche Telekom AG, et al. , Case No. C.A. No. 2021-0479, against DT, SoftBank and certain of our current and former officers and directors, asserting breach of fiduciary duty claims relating to the repricing amendment to the Business Combination Agreement and to SoftBank’s monetization of its T-Mobile shares. We are also named as a nominal defendant in the case. We are unable to predict the potential outcome of these claims. On August 12, 2021, we became aware of a cybersecurity issue involving unauthorized access to T-Mobile’s systems (the “August 2021 cyberattack”). We immediately began an investigation and engaged cybersecurity experts to assist with the assessment of the incident and to help determine what data was impacted. Our investigation uncovered that the perpetrator had illegally gained access to certain areas of our systems on or about March 18, 2021, but only gained access to and took data of current, former, and prospective customers beginning on or about August 3, 2021. With the assistance of our outside cybersecurity experts, we located and closed the unauthorized access to our systems and identified current, former and prospective customers whose information was impacted and notified them, consistent with state and federal requirements. We also undertook a number of other measures to demonstrate our continued support and commitment to data privacy and protection. We also coordinated with law enforcement. Our forensic investigation is complete, and we believe we have a full view of the data compromised. As a result of the August 2021 cyberattack, we have become subject to numerous lawsuits, including mass arbitration claims and multiple class action lawsuits that have been filed in numerous jurisdictions seeking, among other things, unspecified monetary damages, costs and attorneys’ fees arising out of the August 2021 cyberattack. In December 2021, the Judicial Panel on Multidistrict Litigation consolidated the federal class action lawsuits in the U.S. District Court for the Western District of Missouri under the caption In re: T-Mobile Customer Data Security Breach Litigation , Case No. 21-md-3019-BCW. On July 22, 2022, we entered into an agreement to settle the lawsuit. On June 29, 2023, the Court issued an order granting final approval of the settlement, which is subject to potential appeals. Under the terms of the settlement, we would pay an aggregate of $ 350 million to fund claims submitted by class members, the legal fees of plaintiffs’ counsel and the costs of administering the settlement. We also committed to an aggregate incremental spend of $ 150 million for data security and related technology in 22 Index for Notes to the Condensed Consolidated Financial Statements 2022 and 2023. We previously paid $ 35 million for claims administration purposes. On July 31, 2023, a class member filed an appeal to the final approval order challenging the Court’s award of attorneys’ fees to class counsel. We expect the remaining portion of the $ 350 million settlement payment to fund claims to be made once that appeal is resolved. We anticipate that, upon exhaustion of any appeals, the settlement will provide a full release of all claims arising out of the August 2021 cyberattack by class members who do not opt out, against all defendants, including us, our subsidiaries and affiliates, and our directors and officers. The settlement contains no admission of liability, wrongdoing or responsibility by any of the defendants. We have the right to terminate the settlement agreement under certain conditions. We anticipate that this settlement of the class action, along with other settlements of separate consumer claims that have been previously completed or are currently pending, will resolve substantially all of the claims brought to date by our current, former and prospective customers who were impacted by the 2021 cyberattack. In connection with the proposed class action settlement and the separate settlements, we recorded a total pre-tax charge of approximately $ 400 million in the second quarter of 2022. During the three months ended March 31, 2023, we recognized $ 50 million in reimbursements from insurance carriers for costs incurred related to the August 2021 cyberattack, which is included as a reduction to Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income. The ultimate resolution of the class action depends on the number of plaintiffs who opt out of the proposed settlement and whether the proposed settlement will be appealed. In addition, in September 2022, a purported Company shareholder filed a derivative action in the Delaware Chancery Court under the caption Harper v. Sievert et al., Case No. 2022-0819-SG, against our current directors and certain of our former directors, alleging claims for breach of fiduciary duty relating to the Company’s cybersecurity practices. We are also named as a nominal defendant in the lawsuit. We are unable at this time to predict the potential outcome of this lawsuit or whether we may be subject to further private litigation. We have also received inquiries from various government agencies, law enforcement and other governmental authorities related to the August 2021 cyberattack, which could result in substantial fines or penalties. We are cooperating fully with these agencies and regulators and working with them to resolve these matters. While we hope to resolve them in the near term, we cannot predict the timing or outcome of any of these matters or whether we may be subject to further regulatory inquiries, investigations, or enforcement actions. In light of the inherent uncertainties involved in such matters and based on the information currently available to us, in addition to the previously recorded pre-tax charge of approximately $ 400 million noted above, we believe it is reasonably possible that we could incur additional losses associated with these proceedings and inquiries, and we will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. Ongoing legal and other costs related to these proceedings and inquiries, as well as any potential future actions, may be substantial, and losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries could be material to our business, reputation, financial condition, cash flows and operating results. On June 17, 2022, plaintiffs filed a putative antitrust class action complaint in the Northern District of Illinois, Dale et al. v. Deutsche Telekom AG, et al. , Case No. 1:22-cv-03189, against DT, T-Mobile, and SoftBank, alleging that the Merger violated the antitrust laws and harmed competition in the U.S. retail cell service market. Plaintiffs seek injunctive relief and trebled monetary damages on behalf of a purported class of AT&T and Verizon customers who plaintiffs allege paid artificially inflated prices due to the Merger. We are vigorously defending this lawsuit, but we are unable to predict the potential outcome. On January 5, 2023, we identified that a bad actor was obtaining data through a single Application Programming Interface (“API”) without authorization. Based on our investigation, the impacted API is only able to provide a limited set of customer account data, including name, billing address, email, phone number, date of birth, T-Mobile account number and information such as the number of lines on the account and plan features. The result from our investigation indicates that the bad actor(s) obtained data from this API for approximately 37 million current postpaid and prepaid customer accounts, though many of these accounts did not include the full data set. We believe that the bad actor first retrieved data through the impacted API starting on or around November 25, 2022. We have notified individuals whose information was impacted consistent with state and federal requirements. In connection with the January 2023 cyberattack, we became subject to consumer class actions and regulatory inquiries, to which we will continue to respond in due course and may incur significant expenses. However, we cannot predict the timing or outcome of any of these potential matters or whether we may be subject to additional legal proceedings, claims, regulatory inquiries, investigations, or enforcement actions. In addition, we are unable to predict the full impact of this incident on customer behavior in the future, including whether a change in our customers’ behavior could negatively impact our results of operations on an ongoing basis, although we presently do not expect that it will have a material effect on our operations. 23 Index for Notes to the Condensed Consolidated Financial Statements Note 13 – Additional Financial Information Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities are summarized as follows: (in millions) March 31, 2024 December 31, 2023 Accounts payable $ 3,345 $ 5,573 Payroll and related benefits 682 1,142 Property and other taxes, including payroll 1,694 1,704 Accrued interest 887 818 Other accrued liabilities 1,112 1,136 Accounts payable and accrued liabilities $ 7,720 $ 10,373 Book overdrafts included in accounts payable were $ 702 million and $ 740 million as of March 31, 2024, and December 31, 2023, respectively. Supplemental Condensed Consolidated Statements of Cash Flows Information The following table summarizes T-Mobile’s supplemental cash flow information: Three Months Ended March 31, (in millions) 2024 2023 Interest payments, net of amounts capitalized $ 896 $ 840 Operating lease payments 1,344 1,314 Income tax payments 7 27 Non-cash investing and financing activities Non-cash beneficial interest obtained in exchange for securitized receivables $ 661 $ 1,119 Change in accounts payable and accrued liabilities for purchases of property and equipment ( 894 ) ( 329 ) Operating lease right-of-use assets obtained in exchange for lease obligations 487 439 Financing lease right-of-use assets obtained in exchange for lease obligations 263 239 Cash and cash equivalents, including restricted cash Cash and cash equivalents, including restricted cash, presented on our Condensed Consolidated Statements of Cash Flows were included on our Condensed Consolidated Balance Sheets as follows: (in millions) March 31, 2024 December 31, 2023 Cash and cash equivalents $ 6,708 $ 5,135 Restricted cash (included in Other current assets) 154 101 Restricted cash (included in Other assets) 76 71 Cash and cash equivalents, including restricted cash $ 6,938 $ 5,307 Note 14 – Subsequent Events Subsequent to March 31, 2024, from April 1, 2024, through April 19, 2024, we repurchased 5,427,946 shares of our common stock at an average price per share of $ 160.97 for a total purchase price of $ 874 million. See Note 10 - Stockholder Return Program for additional information regarding the 2023-2024 Stockholder Return Program. Subsequent to March 31, 2024, on April 24, 2024, we entered into a Merger Agreement with a fund operated by EQT Infrastructure VI fund (“Fund VI”) for the joint acquisition by us and Fund VI of Lumos, a fiber-to-the-home platform (“Lumos”), from EQT’s predecessor fund EQT Infrastructure III. The Lumos acquisition is expected to close in late 2024 or early 2025, subject to customary closing conditions and regulatory approvals. At closing, we expect to invest approximately $ 950 million in the joint venture to acquire a 50 % equity interest and all existing fiber customers. The funds invested by us will be used to fund future fiber builds. In addition, we are expected to contribute an additional commitment of approximately $ 500 million between 2027 and 2028. Subsequent to March 31, 2024, on April 25, 2024, we received all necessary regulatory approvals for the Ka’ena Acquisition, which is expected to close on May 1, 2024. See Note 2 - Business Combination for more information. 24 Table of Contents