T-Mobile US, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Statement Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q (“Form 10-Q”) of T-Mobile US, Inc. (“T-Mobile,” “we,” “our,” “us” or the “Company”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including information concerning our future results of operations, are forward-looking statements. These forward-looking statements are generally identified by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “could” or similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. The following important factors, along with the Risk Factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, and Part II, Item 1A of this Form 10-Q, could affect future results and cause those results to differ materially from those expressed in the forward-looking statements: • competition, industry consolidation and changes in the market for wireless communications services and other forms of connectivity; • criminal cyberattacks, disruption, data loss or other security breaches; • our inability to take advantage of technological developments on a timely basis; • our inability to retain or motivate key personnel, hire qualified personnel or maintain our corporate culture; • system failures and business disruptions, allowing for unauthorized use of or interference with our network and other systems; • the scarcity and cost of additional wireless spectrum, and regulations relating to spectrum use; • challenges in modernizing our existing applications and systems; • the impacts of the actions we have taken and conditions we have agreed to in connection with the regulatory proceedings and approvals of our merger (the “Merger”) with Sprint Corporation (“Sprint”) pursuant to a Business Combination Agreement with Sprint and the other parties named therein (as amended, the “Business Combination Agreement”) and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”), including the acquisition by DISH Network Corporation (“DISH”) of the prepaid wireless business operated under the Boost Mobile and Sprint prepaid brands (excluding the Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Personal Communications Company LLC (“Shentel”) and Swiftel Communications, Inc.), including customer accounts, inventory, contracts, intellectual property and certain other specified assets, and the assumption of certain related liabilities (collectively, the “Prepaid Transaction”), the complaint and proposed final judgment (the “Final Judgment”) agreed to by us, Deutsche Telekom AG (“DT”), Sprint, SoftBank Group Corp. (“SoftBank”) and DISH with the U.S. District Court for the District of Columbia, which was approved by the Court on April 1, 2020, as amended on October 23, 2023, the proposed commitments filed with the Secretary of the Federal Communications Commission (“FCC”), which we announced on May 20, 2019, certain national security commitments and undertakings, and any other commitments or undertakings entered into, including, but not limited to, those we have made to certain states and nongovernmental organizations (collectively, the “Government Commitments”), and the challenges in satisfying the Government Commitments in the required time frames and the significant cumulative costs incurred in tracking and monitoring compliance over multiple years; • adverse economic, political or market conditions in the U.S. and international markets, including changes resulting from increases in inflation or interest rates, supply chain disruptions and impacts of geopolitical instability, such as the Ukraine-Russia and Israel-Hamas wars and further escalations thereof; • sociopolitical volatility and polarization; • our inability to manage the ongoing arrangements entered into in connection with the Prepaid Transaction, and known or unknown liabilities arising in connection therewith; • the timing and effects of any future acquisition, divestiture, investment, or merger involving us; • any disruption or failure of our third parties (including key suppliers) to provide products or services for the operation of our business; • our substantial level of indebtedness and our inability to service our debt obligations in accordance with their terms; • changes in the credit market conditions, credit rating downgrades or an inability to access debt markets; • the risk of future material weaknesses we may identify or any other failure by us to maintain effective internal controls, and the resulting significant costs and reputational damage; • any changes in regulations or in the regulatory framework under which we operate; 25 Table of Contents • laws and regulations relating to the handling of privacy and data protection; • unfavorable outcomes of and increased costs from existing or future regulatory or legal proceedings; • difficulties in protecting our intellectual property rights or if we infringe on the intellectual property rights of others; • our offering of regulated financial services products and exposure to a wide variety of state and federal regulations; • new or amended tax laws or regulations or administrative interpretations and judicial decisions affecting the scope or application of tax laws or regulations; • our wireless licenses, including those controlled through leasing agreements, are subject to renewal and may be revoked; • our exclusive forum provision as provided in our Fifth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”); • interests of DT, our controlling stockholder, which may differ from the interests of other stockholders; • the dollar amount authorized for our 2023-2024 Stockholder Return Program (as defined in Note 10 - Stockholder Return Program of the Notes to the Condensed Consolidated Financial Statements) may not be fully utilized, and our share repurchases and dividend payments pursuant thereto may fail to have the desired impact on stockholder value; and • future sales of our common stock by DT and SoftBank and our inability to attract additional equity financing outside the United States due to foreign ownership limitations by the FCC. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Investors and others should note that we announce material information to our investors using our investor relations website (https://investor.t-mobile.com), newsroom website (https://t-mobile.com/news), press releases, SEC filings and public conference calls and webcasts. We intend to also use certain social media accounts as means of disclosing information about us and our services and for complying with our disclosure obligations under Regulation FD (the @TMobileIR X account (https://twitter.com/TMobileIR), the @MikeSievert X account (https://twitter.com/MikeSievert), which Mr. Sievert also uses as a means for personal communications and observations, and the @TMobileCFO X account (https://twitter.com/tmobilecfo) and our Chief Financial Officer’s LinkedIn account (https://www.linkedin.com/in/peter-osvaldik-3887394), both of which Mr. Osvaldik also uses as a means for personal communication and observations). The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these social media channels in addition to following our press releases, SEC filings and public conference calls and webcasts. The social media channels that we intend to use as a means of disclosing the information described above may be updated from time to time as listed on our investor relations website. 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 condensed 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 condensed 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 unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2024, included in Part I, Item 1 of this Form 10-Q, and audited consolidated financial statements, included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023. 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. 26 Table of Contents 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. 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 Condensed Consolidated Statements of Cash Flows. Merger-related costs are presented below: (in millions) Three Months Ended March 31, Change 2024 2023 $ % Merger-related costs Cost of services, exclusive of depreciation and amortization $ 107 $ 208 $ (101) (49) % Cost of equipment sales, exclusive of depreciation and amortization — (9) 9 (100) % Selling, general and administrative 23 159 (136) (86) % Total Merger-related costs $ 130 $ 358 $ (228) (64) % Net cash payments for Merger-related costs $ 293 $ 484 $ (191) (39) % 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. In the second quarter of 2024, we will recognize a gain for the $100 million extension fee previously paid by DISH associated with the DISH License Purchase Agreement as a reduction to Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income. The gain will be presented as a reduction in Merger-related costs and excluded from our calculations of Adjusted EBITDA and Core Adjusted EBITDA. See Note 5 – Spectrum License Transactions of the Notes to the Condensed Consolidated Financial Statements for more information. 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 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. Ka’ena is currently one of our wholesale partners, offering wireless telecommunications services to customers leveraging our network. Upon closing of the Ka’ena Acquisition, 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. 27 Table of Contents Results of Operations Set forth below is a summary of our consolidated financial results: Three Months Ended March 31, Change (in millions) 2024 2023 $ % Revenues Postpaid revenues $ 12,631 $ 11,862 $ 769 6 % Prepaid revenues 2,403 2,417 (14) (1) % Wholesale and other service revenues 1,062 1,267 (205) (16) % Total service revenues 16,096 15,546 550 4 % Equipment revenues 3,251 3,719 (468) (13) % Other revenues 247 367 (120) (33) % Total revenues 19,594 19,632 (38) — % Operating expenses Cost of services, exclusive of depreciation and amortization shown separately below 2,688 3,061 (373) (12) % Cost of equipment sales, exclusive of depreciation and amortization shown separately below 4,399 4,588 (189) (4) % Selling, general and administrative 5,138 5,425 (287) (5) % Gain on disposal group held for sale — (42) 42 (100) % Depreciation and amortization 3,371 3,203 168 5 % Total operating expenses 15,596 16,235 (639) (4) % Operating income 3,998 3,397 601 18 % Other expense, net Interest expense, net (880) (835) (45) 5 % Other income, net 20 9 11 122 % Total other expense, net (860) (826) (34) 4 % Income before income taxes 3,138 2,571 567 22 % Income tax expense (764) (631) (133) 21 % Net income $ 2,374 $ 1,940 $ 434 22 % Statement of Cash Flows Data Net cash provided by operating activities $ 5,084 $ 4,051 $ 1,033 25 % Net cash used in investing activities (1,787) (1,728) (59) 3 % Net cash used in financing activities (1,666) (2,273) 607 (27) % Non-GAAP Financial Measures Adjusted EBITDA $ 7,652 $ 7,199 $ 453 6 % Core Adjusted EBITDA 7,617 7,052 565 8 % Adjusted Free Cash Flow 3,347 2,401 946 39 % 28 Table of Contents The following discussion and analysis is for the three months ended March 31, 2024, compared to the same period in 2023, unless otherwise stated. Total revenues was relatively flat. The offsetting changes impacting Total revenues are discussed below. Postpaid revenues increased $769 million, 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 $205 million, or 16%, primarily from: • Lower Wireline revenues due to the sale of the Wireline Business on May 1, 2023; • Lower Affordable Connectivity Program and Lifeline revenues; and • Lower MVNO revenues, primarily due to DISH servicing more of its Boost customers with their standalone network and the migration of legacy TracFone customers off of the T-Mobile network, partially offset by growth in other MVNO partners. Equipment revenues decreased $468 million, or 13%, primarily from: • A decrease of $503 million in device sales revenue, excluding purchased leased devices, primarily from: • A decrease in the number of postpaid and prepaid devices sold, including lower upgrades; partially offset by • Slightly higher average revenue per device sold, primarily driven by a shift in the high-end phone mix, mostly offset by an increase in promotions per postpaid device; and • A decrease of $112 million in lease revenues, primarily due to a lower number of customer devices under lease as a result of the continued strategic shift in device financing from leasing to EIP; partially offset by • An increase of $227 million in liquidation revenue, primarily due to a higher number of in-house liquidated devices, including the impact from the transition of certain device recovery programs from external sources to in-house processing. Other revenues decreased $120 million, or 33%, primarily from the transition of certain device recovery programs from external sources to in-house processing, resulting in a change in presentation from Other revenues to Equipment revenues. Total operating expenses decreased $639 million, or 4%. The components of this change are discussed below. Cost of services , exclusive of depreciation and amortization, decreased $373 million, or 12%, primarily from: • Lower costs due to the sale of the Wireline Business on May 1, 2023; • Lower employee costs, primarily due to reduced headcount; and • A decrease of $101 million in Merger-related costs related to network decommissioning and integration, as well as higher Merger synergies. Cost of equipment sales , exclusive of depreciation and amortization, decreased $189 million, or 4%, primarily from: • A decrease of $291 million in device cost of equipment sales, excluding purchased leased devices, primarily from: • A decrease in the number of postpaid and prepaid devices sold, including lower upgrades; partially offset by • Higher average cost per device sold, primarily driven by a shift in the high-end phone mix; partially offset by • An increase of $156 million in liquidation costs, primarily due to a higher number of in-house liquidated devices, including the impact from the transition of certain device recovery programs from external sources to in-house processing. 29 Table of Contents Selling, general and administrative expenses decreased $287 million, or 5%, primarily from: • A decrease of $136 million in Merger-related costs, as well as higher Merger synergies; • Lower employee costs, primarily due to reduced headcount; and • Lower severance and restructuring expenses; partially offset by • Higher legal expenses. Gain on disposal group held for sale was $42 million for the three months ended March 31, 2023, related to the sale of the Wireline Business on May 1, 2023. There was no gain or loss on disposal group held for sale for the three months ended March 31, 2024. Depreciation and amortization increased $168 million, or 5%, primarily from higher depreciation expense from the acceleration of certain technology assets as we continue to modernize our network, technology systems and platforms. Operating income , the components of which are discussed above, increased $601 million, or 18%. Interest expense, net increased $45 million, or 5%, primarily from: • Higher interest expense, primarily due to higher average debt outstanding and a slightly higher average effective interest rate; partially offset by • Higher interest income, primarily due to higher average balances and higher average interest rates on short-term cash equivalents. Other income, net was insignificant for both periods. Income before income taxes , the components of which are discussed above, was $3.1 billion and $2.6 billion for the three months ended March 31, 2024 and 2023, respectively. Income tax expense increased $133 million, or 21%, primarily from higher income before income taxes. Our effective tax rate was 24.4% and 24.5% for the three months ended March 31, 2024 and 2023, respectively. Net income , the components of which are discussed above, was $2.4 billion and $1.9 billion for the three months ended March 31, 2024 and 2023, respectively. Net income included Merger-related costs, net of tax, of $97 million for the three months ended March 31, 2024, compared to $268 million for the three months ended March 31, 2023. 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 to merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. 30 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) March 31, 2024 December 31, 2023 Current assets $ 17,865 $ 17,601 Noncurrent assets 176,591 178,252 Current liabilities 18,414 19,040 Noncurrent liabilities 130,471 128,197 Due to non-guarantors 11,647 10,916 Due to related parties 1,563 1,576 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) Three Months Ended March 31, 2024 Year Ended December 31, 2023 Total revenues $ 18,988 $ 75,934 Operating income 3,107 10,707 Net income 1,531 4,766 Revenue from non-guarantors 645 2,393 Operating expenses to non-guarantors 615 2,569 Other expense to non-guarantors (122) (699) The summarized balance sheet information for the consolidated obligor group of debt issued by Sprint is presented in the table below: (in millions) March 31, 2024 December 31, 2023 Current assets $ 12,020 $ 11,193 Noncurrent assets 11,183 11,324 Current liabilities 12,391 12,751 Noncurrent liabilities 117,826 110,688 Due to non-guarantors 46,885 41,805 Due to related parties 1,563 1,576 The summarized results of operations information for the consolidated obligor group of debt issued by Sprint is presented in the table below: (in millions) Three Months Ended March 31, 2024 Year Ended December 31, 2023 Total revenues $ 4 $ 19 Operating loss (980) (3,197) Net loss (2,259) (7,629) Other expense, net, to non-guarantors (353) (2,005) 31 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) March 31, 2024 December 31, 2023 Current assets $ 12,021 $ 11,193 Noncurrent assets 11,182 11,324 Current liabilities 12,462 12,823 Noncurrent liabilities 113,984 106,881 Due to non-guarantors 37,775 32,706 Due to related parties 1,563 1,576 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) Three Months Ended March 31, 2024 Year Ended December 31, 2023 Total revenues $ 4 $ 19 Operating loss (980) (3,197) Net loss (2,221) (7,491) Other expense, net, to non-guarantors (242) (1,489) Performance Measures In managing our business and assessing financial performance, we supplement the information provided by our condensed 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 March 31, Change (in thousands) 2024 2023 # % Postpaid accounts 30,015 28,813 1,202 4 % Postpaid Net Account Additions The following table sets forth the number of postpaid net account additions: Three Months Ended March 31, Change (in thousands) 2024 2023 # % Postpaid net account additions 218 287 (69) (24) % Postpaid net account additions decreased 69,000, or 24%, primarily from 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. 32 Table of Contents The following table sets forth the number of ending customers: As of March 31, Change (in thousands) 2024 2023 # % Customers, end of period Postpaid phone customers 76,468 73,372 3,096 4 % Postpaid other customers 22,804 20,153 2,651 13 % Total postpaid customers 99,272 93,525 5,747 6 % Prepaid customers 21,600 21,392 208 1 % Total customers 120,872 114,917 5,955 5 % High Speed Internet customers included in Postpaid other customers were 4,634,000 and 2,855,000 as of March 31, 2024 and 2023, respectively. High Speed Internet customers included in Prepaid customers were 547,000 and 314,000 as of March 31, 2024 and 2023, respectively. Net Customer Additions (Losses) The following table sets forth the number of net customer additions (losses): Three Months Ended March 31, Change (in thousands) 2024 2023 # % Net customer additions (losses) Postpaid phone customers 532 538 (6) (1) % Postpaid other customers 688 755 (67) (9) % Total postpaid customers 1,220 1,293 (73) (6) % Prepaid customers (48) 26 (74) (285) % Total net customer additions 1,172 1,319 (147) (11) % Total net customer additions decreased 147,000, or 11%, primarily from: • Prepaid net customer losses, primarily due to lower gross additions driven by continued moderation of prepaid industry growth and lower net additions from High Speed Internet; • Lower postpaid other net customer additions, primarily due to • Lower net additions from High Speed Internet, primarily driven by increased deactivations from a growing customer base and lower gross additions driven by sunsetting of promotional pricing in order to maximize long-term value creation, partially offset by a lower churn rate; • Lower net additions from wearables; partially offset by • Higher net additions from other connected devices; and • Slightly lower postpaid phone net customer additions, primarily due to increased deactivations from a growing customer base, mostly offset by lower churn and higher gross additions. • High Speed Internet net customer additions included in postpaid other net customer additions were 346,000 and 445,000 for the three months ended March 31, 2024 and 2023, respectively. High Speed Internet net customer additions included in prepaid net customer (losses) additions were 59,000 and 78,000 for the three months ended March 31, 2024 and 2023, 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. 33 Table of Contents The following table sets forth the churn: Three Months Ended March 31, Change 2024 2023 Postpaid phone churn 0.86 % 0.89 % -3 bps Prepaid churn 2.75 % 2.76 % -1 bps Postpaid phone churn decreased 3 basis points, primarily from improved customer retention driven by value and network leadership. Prepaid churn was relatively flat. Postpaid Average Revenue Per Account Postpaid Average Revenue per Account (“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) Three Months Ended March 31, Change 2024 2023 $ % Postpaid ARPA $ 140.88 $ 138.04 $ 2.84 2 % Postpaid ARPA increased $2.84, or 2%, 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 continued adoption of High Speed Internet; partially offset by • Increased promotional activity; and • An increase in High Speed Internet only accounts. 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) Three Months Ended March 31, Change 2024 2023 $ % Postpaid phone ARPU $ 48.79 $ 48.63 $ 0.16 — % Prepaid ARPU 37.18 37.98 (0.80) (2) % 34 Table of Contents 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 customers with lower ARPU given larger account sizes. Prepaid ARPU Prepaid ARPU decreased $0.80, or 2%, primarily from dilution from 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 expenses, gains and losses, which are not reflective of our ongoing operating performance (“Special Items”). Special Items include Merger-related costs, gain on disposal groups held for sale, certain legal-related recoveries and expenses, restructuring costs not directly attributable to the Merger (including severance), and other non-core gains and losses. 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, non-cash stock-based compensation, and Special Items. 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. 35 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: Three Months Ended March 31, Change (in millions, except percentages) 2024 2023 $ % Net income $ 2,374 $ 1,940 $ 434 22 % Adjustments: Interest expense, net 880 835 45 5 % Other income, net (20) (9) (11) 122 % Income tax expense 764 631 133 21 % Operating income 3,998 3,397 601 18 % Depreciation and amortization 3,371 3,203 168 5 % Stock-based compensation (1) 140 173 (33) (19) % Merger-related costs 130 358 (228) (64) % Legal-related recoveries, net (2) — (43) 43 (100) % Gain on disposal group held for sale — (42) 42 (100) % Other, net (3) 13 153 (140) (92) % Adjusted EBITDA 7,652 7,199 453 6 % Lease revenues (35) (147) 112 (76) % Core Adjusted EBITDA $ 7,617 $ 7,052 $ 565 8 % Net income margin (Net income divided by Service revenues) 15 % 12 % 300 bps Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues) 48 % 46 % 200 bps Core Adjusted EBITDA margin (Core Adjusted EBITDA divided by Service revenues) 47 % 45 % 200 bps (1) Stock-based compensation includes payroll tax impacts and may not agree with stock-based compensation expense on the condensed consolidated financial statements. Additionally, certain stock-based compensation expenses associated with the Transactions have been included in Merger-related costs. (2) Legal-related recoveries, 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, gains and losses, not directly attributable to the Merger which are not reflective of T-Mobile’s core business activities and are, therefore, excluded from Adjusted EBITDA and Core Adjusted EBITDA. Core Adjusted EBITDA increased $565 million, or 8%. The components comprising Core Adjusted EBITDA are discussed further above. The increase was primarily from: • Higher Total service revenues; • Lower Cost of services, excluding Special Items; and • Lower Cost of equipment sales, excluding Special Items; partially offset by • Lower Equipment revenues, excluding lease revenues; and • Lower Other revenues. Adjusted EBITDA increased $453 million, or 6%, primarily due to the fluctuations in Core Adjusted EBITDA, discussed above, partially offset by lower lease revenues, which decreased $112 million. 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 an unsecured short-term commercial paper program. Further, the incurrence of additional indebtedness may inhibit our ability to incur new debt in the future to finance our business strategy under the terms governing our existing and future indebtedness. 36 Table of Contents Cash Flows The following is a condensed schedule of our cash flows: Three Months Ended March 31, Change (in millions) 2024 2023 $ % Net cash provided by operating activities $ 5,084 $ 4,051 $ 1,033 25 % Net cash used in investing activities (1,787) (1,728) (59) 3 % Net cash used in financing activities (1,666) (2,273) 607 (27) % Operating Activities Net cash provided by operating activities increased $1.0 billion, or 25%, primarily from: • A $714 million increase in Net income, adjusted for non-cash income and expense; and • A $319 million decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Accounts receivable, Other current and long-term assets and Equipment installment plan receivables, partially offset by higher use of cash from Accounts payable and accrued liabilities and Operating lease right-of-use assets. • Net cash provided by operating activities includes the impact of $293 million and $484 million in net payments for Merger-related costs for the three months ended March 31, 2024 and 2023, respectively. Investing Activities Net cash used in investing activities increased $59 million, or 3%. The use of cash was primarily from: • $2.6 billion in Purchases of property and equipment, including capitalized interest, from the continued build-out of our nationwide 5G network; partially offset by • $890 million in Proceeds related to beneficial interests in securitization transactions. Financing Activities Net cash used in financing activities decreased $607 million, or 27%. The use of cash was primarily from: • $3.6 billion in Repurchases of common stock; • $769 million in Dividends on common stock ; • $327 million in Repayments of financing lease obligations; • $223 million in Repayments of long-term debt; and • $192 million in Tax withholdings on share-based awards; partially offset by • $3.5 billion in Proceeds from issuance of long-term debt. Cash and Cash Equivalents As of March 31, 2024, our Cash and cash equivalents were $6.7 billion compared to $5.1 billion at December 31, 2023. 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. 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. 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. 37 Table of Contents The table below provides a reconciliation of Adjusted Free Cash Flow to Net cash provided by operating activities, which we consider to be the most directly comparable GAAP financial measure: Three Months Ended March 31, Change (in millions, except percentages) 2024 2023 $ % Net cash provided by operating activities $ 5,084 $ 4,051 $ 1,033 25 % Cash purchases of property and equipment, including capitalized interest (2,627) (3,001) 374 (12) % Proceeds from sales of tower sites — 6 (6) (100) % Proceeds related to beneficial interests in securitization transactions 890 1,345 (455) (34) % Adjusted Free Cash Flow $ 3,347 $ 2,401 $ 946 39 % Net cash provided by operating activities margin (Net cash provided by operating activities divided by Service revenues) 32 % 26 % 600 bps Adjusted Free Cash Flow margin (Adjusted Free Cash Flow divided by Service revenues) 21 % 15 % 600 bps Adjusted Free Cash Flow increased $946 million, or 39%, primarily from: • 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 previous years; partially offset by • Lower Proceeds related to beneficial interests in securitization transactions, which were offset in Net cash provided by operating activities. • Adjusted Free Cash Flow includes the impact of $293 million and $484 million in net payments for Merger-related costs for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, 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 March 31, 2024, there was no outstanding balance under the Revolving Credit Facility. We maintain 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 March 31, 2024, there was no outstanding balance under this program. Debt Financing As of March 31, 2024, our total debt and financing lease liabilities were $80.6 billion, excluding our tower obligations, of which $72.9 billion was classified as long-term debt and $1.2 billion was classified as long-term financing lease liabilities. During the three months ended March 31, 2024, we issued long-term debt for net proceeds of $3.5 billion and repaid short-term debt with an aggregate principal amount of $223 million. For more information regarding our debt financing transactions, see Note 7 - Debt of the Notes to the Condensed Consolidated Financial Statements. License Purchase Agreements On August 8, 2022, we entered into License Purchase Agreements to acquire spectrum in the 600 MHz band from Channel 51 License Co LLC and LB License Co, LLC in exchange for total cash consideration of $3.5 billion. 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. 38 Table of Contents 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. 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. Acquisition of Ka’ena Corporation On March 9, 2023, we entered into a Merger and Unit Purchase Agreement for 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 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. Lumos Acquisition 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. 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 March 31, 2024, we derecognized net receivables of $2.2 billion upon sale through these arrangements. For more information regarding these off-balance sheet arrangements, see Note 4 – Sales of Certain Receivables of the Notes to the Condensed Consolidated Financial Statements. Future Sources and Uses of Liquidity We may seek additional sources of liquidity, including through the issuance of additional debt, to continue to opportunistically acquire spectrum licenses or other long-lived assets in private party transactions, repurchase shares, pay dividends or for the refinancing of existing long-term debt on an opportunistic basis. Excluding liquidity that could be needed for acquisitions of businesses, spectrum and other long-lived assets, or for any potential stockholder returns, we expect our principal sources of funding to be sufficient to meet our anticipated liquidity needs for business operations for the next 12 months, as well as our longer-term liquidity needs. Our intended use of any such funds is for general corporate purposes, including for capital expenditures, spectrum purchases, opportunistic investments and acquisitions, redemption of debt, tower obligations, share repurchases, and dividend payments. 39 Table of Contents 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 March 31, 2024. 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 March 31, 2024, we have entered into $9.0 billion of financing leases under these financing lease facilities, of which $258 million was executed during the three months ended March 31, 2024. 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 5G network. We expect a reduction in capital expenditures related to these efforts in 2024 compared to 2023 given the substantial deployment of the 5G network completed in the preceding years. 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 5 - Spectrum License Transactions of the Notes to the Condensed Consolidated Financial Statements. Stockholder Returns 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 repurchases of shares of our common stock and the payment of cash dividends. We intend to declare and pay approximately $3.0 billion in total dividends in 2024, with payments occurring each quarter during the year. The dividend amount paid per share is expected to grow by around 10% annually with the first increase expected in the fourth quarter of 2024; however, the declaration and payment of 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. 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 shares of 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. As of March 31, 2024, $756 million for dividends payable is presented within Other current liabilities on our Condensed Consolidated Balance Sheets. 40 Table of Contents 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. 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. For additional information regarding the 2023-2024 Stockholder Return Program, see Note 10 – Stockholder Return Program of the Notes to the Condensed Consolidated Financial Statements. 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 April 19, 2024, DT and SoftBank held, directly or indirectly, approximately 50.4% and 7.9%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 41.7% 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 April 19, 2024, over approximately 58.0% of the outstanding T-Mobile common stock. Disclosure of Iranian Activities under Section 13(r) of the Exchange Act Section 219 of the Iran Threat Reduction and the Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction. 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 three months ended March 31, 2024, 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 three months ended March 31, 2024, 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 three months ended March 31, 2024, gross revenues of all DT affiliates generated by roaming and interconnection traffic and telecommunications services with the Iranian parties identified herein were less than $0.1 million, and the estimated net profits were less than $0.1 million. In addition, DT, through certain of its non-U.S. subsidiaries that operate a fixed-line network in their respective European home countries (in particular, Germany), provides telecommunications services in the ordinary course of business to the Embassy of Iran in those European countries. Gross revenues and net profits recorded from these activities for the three months ended March 31, 2024, 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 three months ended March 31, 2024, 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. 41 Table of Contents This subsidiary also provides telecommunications services in the ordinary course of business to accounts affiliated with the Embassy of Iran in Japan. During the three months ended March 31, 2024, 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 three months ended March 31, 2024, were both under $0.1 million. We understand that the SoftBank subsidiary intends to continue such activities. Critical Accounting Estimates Preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. There have been no material changes to the critical accounting policies and estimates as previously disclosed in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023, and which are hereby incorporated by reference herein. 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 Condensed Consolidated Financial Statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the interest rate risk as previously disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2023.