UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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x
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20172021
or
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¨☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-33409
T-MOBILE US, INC.
(Exact name of registrant as specified in its charter)
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DELAWAREDelaware | | 20-0836269 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
12920 SE 38th Street, Bellevue, Washington | | 98006-1350 |
(Address of principal executive offices) | | (Zip Code) |
| | |
(425) 378-4000 |
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| | |
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12920 SE 38th Street
Bellevue,Washington
(Address of principal executive offices)
98006-1350
(Zip Code) | | | | | |
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(425) | 378-4000 |
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, par value $0.00001 per share | | TMUS | | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒ No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
Large accelerated filer x Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class | | Shares Outstanding as of October 19, 2017 | July 28, 2021 |
Common Stock, $0.00001 par value $0.00001 per share | 1,247,966,318 | 831,964,098 |
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T-Mobile US, Inc.
Form 10-Q
For the Quarter Ended SeptemberJune 30, 20172021
PART I. FINANCIAL INFORMATIONFinancial Information
Item 1. Financial Statements
T-Mobile US, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| | (in millions, except share and per share amounts) | September 30, 2017 | | December 31, 2016 | (in millions, except share and per share amounts) | June 30, 2021 | | December 31, 2020 |
Assets | | | | Assets | |
Current assets | | | | Current assets | |
| Cash and cash equivalents | $ | 739 |
| | $ | 5,500 |
| Cash and cash equivalents | $ | 7,793 | | | $ | 10,385 | |
Accounts receivable, net of allowances of $86 and $102 | 1,734 |
| | 1,896 |
| |
Equipment installment plan receivables, net | 2,136 |
| | 1,930 |
| |
Accounts receivable, net of allowance for credit losses of $123 and $194 | | Accounts receivable, net of allowance for credit losses of $123 and $194 | 4,528 | | | 4,254 | |
Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $482 and $478 | | Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $482 and $478 | 4,064 | | | 3,577 | |
Accounts receivable from affiliates | 24 |
| | 40 |
| Accounts receivable from affiliates | 18 | | | 22 | |
Inventories | 999 |
| | 1,111 |
| |
Asset purchase deposit | — |
| | 2,203 |
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Inventory | | Inventory | 1,707 | | | 2,527 | |
Prepaid expenses | | Prepaid expenses | 818 | | | 624 | |
Other current assets | 1,817 |
| | 1,537 |
| Other current assets | 1,642 | | | 2,496 | |
| Total current assets | 7,449 |
| | 14,217 |
| Total current assets | 20,570 | | | 23,885 | |
Property and equipment, net | 21,570 |
| | 20,943 |
| Property and equipment, net | 39,752 | | | 41,175 | |
Operating lease right-of-use assets | | Operating lease right-of-use assets | 27,511 | | | 28,021 | |
Financing lease right-of-use assets | | Financing lease right-of-use assets | 3,072 | | | 3,028 | |
Goodwill | 1,683 |
| | 1,683 |
| Goodwill | 11,152 | | | 11,117 | |
Spectrum licenses | 35,007 |
| | 27,014 |
| Spectrum licenses | 82,917 | | | 82,828 | |
Other intangible assets, net | 256 |
| | 376 |
| Other intangible assets, net | 4,600 | | | 5,298 | |
Equipment installment plan receivables due after one year, net | 1,100 |
| | 984 |
| |
Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $115 and $127 | | Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $115 and $127 | 2,284 | | | 2,031 | |
| Other assets | 858 |
| | 674 |
| Other assets | 12,266 | | | 2,779 | |
| Total assets | $ | 67,923 |
| | $ | 65,891 |
| Total assets | $ | 204,124 | | | $ | 200,162 | |
Liabilities and Stockholders' Equity | | | | Liabilities and Stockholders' Equity | | | |
Current liabilities | | | | Current liabilities | |
| Accounts payable and accrued liabilities | $ | 6,071 |
| | $ | 7,152 |
| Accounts payable and accrued liabilities | $ | 8,411 | | | $ | 10,196 | |
Payables to affiliates | 288 |
| | 125 |
| Payables to affiliates | 105 | | | 157 | |
Short-term debt | 558 |
| | 354 |
| Short-term debt | 4,648 | | | 4,579 | |
Short-term debt to affiliates | | Short-term debt to affiliates | 2,235 | | | 0 | |
Deferred revenue | 790 |
| | 986 |
| Deferred revenue | 939 | | | 1,030 | |
Short-term operating lease liabilities | | Short-term operating lease liabilities | 3,577 | | | 3,868 | |
Short-term financing lease liabilities | | Short-term financing lease liabilities | 1,045 | | | 1,063 | |
| Other current liabilities | 396 |
| | 405 |
| Other current liabilities | 877 | | | 810 | |
| Total current liabilities | 8,103 |
| | 9,022 |
| Total current liabilities | 21,837 | | | 21,703 | |
| Long-term debt | 13,163 |
| | 21,832 |
| Long-term debt | 65,897 | | | 61,830 | |
Long-term debt to affiliates | 14,586 |
| | 5,600 |
| Long-term debt to affiliates | 2,490 | | | 4,716 | |
Tower obligations | 2,599 |
| | 2,621 |
| Tower obligations | 2,919 | | | 3,028 | |
Deferred tax liabilities | 5,535 |
| | 4,938 |
| Deferred tax liabilities | 10,391 | | | 9,966 | |
Deferred rent expense | 2,693 |
| | 2,616 |
| |
Operating lease liabilities | | Operating lease liabilities | 26,515 | | | 26,719 | |
Financing lease liabilities | | Financing lease liabilities | 1,376 | | | 1,444 | |
| Other long-term liabilities | 967 |
| | 1,026 |
| Other long-term liabilities | 5,229 | | | 5,412 | |
| Total long-term liabilities | 39,543 |
| | 38,633 |
| Total long-term liabilities | 114,817 | | | 113,115 | |
Commitments and contingencies (Note 10) |
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| |
|
| |
Commitments and contingencies (Note 11) | | Commitments and contingencies (Note 11) | 0 | | 0 |
Stockholders' equity | | | | Stockholders' equity | |
5.50% Mandatory Convertible Preferred Stock Series A, par value $0.00001 per share, 100,000,000 shares authorized; 20,000,000 and 20,000,000 shares issued and outstanding; $1,000 and $1,000 aggregate liquidation value | — |
| | — |
| |
Common Stock, par value $0.00001 per share, 1,000,000,000 shares authorized; 833,418,809 and 827,768,818 shares issued, 831,963,343 and 826,357,331 shares outstanding | — |
| | — |
| |
| Common Stock, par value $0.00001 per share, 2,000,000,000 shares authorized; 1,249,478,357 and 1,243,345,584 shares issued, 1,247,920,536 and 1,241,805,706 shares outstanding | | Common Stock, par value $0.00001 per share, 2,000,000,000 shares authorized; 1,249,478,357 and 1,243,345,584 shares issued, 1,247,920,536 and 1,241,805,706 shares outstanding | 0 | | | 0 | |
Additional paid-in capital | 39,058 |
| | 38,846 |
| Additional paid-in capital | 72,919 | | | 72,772 | |
Treasury stock, at cost, 1,455,466 and 1,411,487 shares issued | (4 | ) | | (1 | ) | |
Accumulated other comprehensive income | 4 |
| | 1 |
| |
Treasury stock, at cost, 1,557,821 and 1,539,878 shares issued | | Treasury stock, at cost, 1,557,821 and 1,539,878 shares issued | (14) | | | (11) | |
Accumulated other comprehensive loss | | Accumulated other comprehensive loss | (1,510) | | | (1,581) | |
Accumulated deficit | (18,781 | ) | | (20,610 | ) | Accumulated deficit | (3,925) | | | (5,836) | |
| Total stockholders' equity | 20,277 |
| | 18,236 |
| Total stockholders' equity | 67,470 | | | 65,344 | |
Total liabilities and stockholders' equity | $ | 67,923 |
| | $ | 65,891 |
| Total liabilities and stockholders' equity | $ | 204,124 | | | $ | 200,162 | |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
T-Mobile US, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions, except share and per share amounts) | 2021 | | 2020 | 2021 | | 2020 | | |
Revenues | | | | | | | | | |
| | | | | | | | | |
Postpaid revenues | $ | 10,492 | | | $ | 9,959 | | | $ | 20,795 | | | $ | 15,846 | | | |
Prepaid revenues | 2,427 | | | 2,311 | | | 4,778 | | | 4,684 | | | |
Wholesale revenues | 935 | | | 408 | | | 1,832 | | | 733 | | | |
Other service revenues | 638 | | | 552 | | | 1,279 | | | 813 | | | |
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Total service revenues | 14,492 | | | 13,230 | | | 28,684 | | | 22,076 | | | |
Equipment revenues | 5,215 | | | 4,269 | | | 10,561 | | | 6,386 | | | |
Other revenues | 243 | | | 172 | | | 464 | | | 322 | | | |
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Total revenues | 19,950 | | | 17,671 | | | 39,709 | | | 28,784 | | | |
Operating expenses | | | | | | | | | |
| | | | | | | | | |
Cost of services, exclusive of depreciation and amortization shown separately below | 3,491 | | | 3,098 | | | 6,875 | | | 4,737 | | | |
Cost of equipment sales, exclusive of depreciation and amortization shown separately below | 5,453 | | | 3,667 | | | 10,595 | | | 6,196 | | | |
Selling, general and administrative | 4,823 | | | 5,604 | | | 9,628 | | | 9,292 | | | |
Impairment expense | 0 | | | 418 | | | 0 | | | 418 | | | |
Depreciation and amortization | 4,077 | | | 4,064 | | | 8,366 | | | 5,782 | | | |
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Total operating expenses | 17,844 | | | 16,851 | | | 35,464 | | | 26,425 | | | |
Operating income | 2,106 | | | 820 | | | 4,245 | | | 2,359 | | | |
Other income (expense) | | | | | | | | | |
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Interest expense | (820) | | | (776) | | | (1,612) | | | (961) | | | |
Interest expense to affiliates | (32) | | | (63) | | | (78) | | | (162) | | | |
Interest income | 2 | | | 6 | | | 5 | | | 18 | | | |
Other expense, net | (1) | | | (195) | | | (126) | | | (205) | | | |
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Total other expense, net | (851) | | | (1,028) | | | (1,811) | | | (1,310) | | | |
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Income (loss) from continuing operations before income taxes | 1,255 | | | (208) | | | 2,434 | | | 1,049 | | | |
Income tax expense | (277) | | | (2) | | | (523) | | | (308) | | | |
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Income (loss) from continuing operations | 978 | | | (210) | | | 1,911 | | | 741 | | | |
Income from discontinued operations, net of tax | 0 | | | 320 | | | 0 | | | 320 | | | |
Net income | $ | 978 | | | $ | 110 | | | $ | 1,911 | | | $ | 1,061 | | | |
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Net income | $ | 978 | | | $ | 110 | | | $ | 1,911 | | | $ | 1,061 | | | |
Other comprehensive income (loss), net of tax | | | | | | | | | |
| | | | | | | | | |
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Unrealized gain (loss) on cash flow hedges, net of tax effect of $12, $3, $24, and $(273) | 34 | | | 2 | | | 68 | | | (790) | | | |
| | | | | | | | | |
Unrealized gain on foreign currency translation adjustment, net of tax effect of $0, $0, $0, and $0 | 1 | | | 0 | | | 3 | | | 0 | | | |
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Other comprehensive income (loss) | 35 | | | 2 | | | 71 | | | (790) | | | |
Total comprehensive income | $ | 1,013 | | | $ | 112 | | | $ | 1,982 | | | $ | 271 | | | |
Earnings (loss) per share | | | | | | | | | |
Basic earnings (loss) per share: | | | | | | | | | |
Continuing operations | $ | 0.78 | | | $ | (0.17) | | | $ | 1.53 | | | $ | 0.71 | | | |
Discontinued operations | 0 | | | 0.26 | | | 0 | | | 0.30 | | | |
Basic | $ | 0.78 | | | $ | 0.09 | | | $ | 1.53 | | | $ | 1.01 | | | |
Diluted earnings (loss) per share: | | | | | | | | | |
Continuing operations | $ | 0.78 | | | $ | (0.17) | | | $ | 1.52 | | | $ | 0.70 | | | |
Discontinued operations | 0 | | | 0.26 | | | 0 | | | 0.30 | | | |
Diluted | $ | 0.78 | | | $ | 0.09 | | | $ | 1.52 | | | $ | 1.00 | | | |
Weighted average shares outstanding | | | | | | | | | |
Basic | 1,247,563,331 | | | 1,236,528,444 | | | 1,245,552,847 | | | 1,047,338,364 | | | |
Diluted | 1,253,718,122 | | | 1,236,528,444 | | | 1,254,264,464 | | | 1,057,120,389 | | | |
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
(in millions, except share and per share amounts) | | | (As Adjusted - See Note 1) | | | | (As Adjusted - See Note 1) |
Revenues | | | | | | | |
Branded postpaid revenues | $ | 4,920 |
| | $ | 4,647 |
| | $ | 14,465 |
| | $ | 13,458 |
|
Branded prepaid revenues | 2,376 |
| | 2,182 |
| | 7,009 |
| | 6,326 |
|
Wholesale revenues | 274 |
| | 238 |
| | 778 |
| | 645 |
|
Roaming and other service revenues | 59 |
| | 66 |
| | 151 |
| | 170 |
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Total service revenues | 7,629 |
| | 7,133 |
| | 22,403 |
| | 20,599 |
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Equipment revenues | 2,118 |
| | 1,948 |
| | 6,667 |
| | 5,987 |
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Other revenues | 272 |
| | 224 |
| | 775 |
| | 670 |
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Total revenues | 10,019 |
| | 9,305 |
| | 29,845 |
| | 27,256 |
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Operating expenses | | | | | | | |
Cost of services, exclusive of depreciation and amortization shown separately below | 1,594 |
| | 1,436 |
| | 4,520 |
| | 4,286 |
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Cost of equipment sales | 2,617 |
| | 2,539 |
| | 8,149 |
| | 7,532 |
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Selling, general and administrative | 3,098 |
| | 2,898 |
| | 8,968 |
| | 8,419 |
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Depreciation and amortization | 1,416 |
| | 1,568 |
| | 4,499 |
| | 4,695 |
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Cost of MetroPCS business combination | — |
| | 15 |
| | — |
| | 110 |
|
Gains on disposal of spectrum licenses | (29 | ) | | (199 | ) | | (67 | ) | | (835 | ) |
Total operating expense | 8,696 |
| | 8,257 |
| | 26,069 |
| | 24,207 |
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Operating income | 1,323 |
| | 1,048 |
| | 3,776 |
| | 3,049 |
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Other income (expense) | | | | | | | |
Interest expense | (253 | ) | | (376 | ) | | (857 | ) | | (1,083 | ) |
Interest expense to affiliates | (167 | ) | | (76 | ) | | (398 | ) | | (248 | ) |
Interest income | 2 |
| | 3 |
| | 15 |
| | 9 |
|
Other income (expense), net | 1 |
| | (1 | ) | | (89 | ) | | (6 | ) |
Total other expense, net | (417 | ) | | (450 | ) | | (1,329 | ) | | (1,328 | ) |
Income before income taxes | 906 |
| | 598 |
| | 2,447 |
| | 1,721 |
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Income tax expense | (356 | ) | | (232 | ) | | (618 | ) | | (651 | ) |
Net income | 550 |
| | 366 |
| | 1,829 |
| | 1,070 |
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Dividends on preferred stock | (13 | ) | | (13 | ) | | (41 | ) | | (41 | ) |
Net income attributable to common stockholders | $ | 537 |
| | $ | 353 |
| | $ | 1,788 |
| | $ | 1,029 |
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Net Income | $ | 550 |
| | $ | 366 |
| | $ | 1,829 |
| | $ | 1,070 |
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Other comprehensive income, net of tax | | | | | | | |
Unrealized gain on available-for-sale securities, net of tax effect $0, $1, $2 and $1 | 1 |
| | 2 |
| | 3 |
| | 2 |
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Other comprehensive income | 1 |
| | 2 |
| | 3 |
| | 2 |
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Total comprehensive income | $ | 551 |
| | $ | 368 |
| | $ | 1,832 |
| | $ | 1,072 |
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Earnings per share | | | | | | | |
Basic | $ | 0.65 |
| | $ | 0.43 |
| | $ | 2.15 |
| | $ | 1.25 |
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Diluted | $ | 0.63 |
| | $ | 0.42 |
| | $ | 2.10 |
| | $ | 1.24 |
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Weighted average shares outstanding | | | | | | | |
Basic | 831,189,779 |
| | 822,998,697 |
| | 829,974,146 |
| | 821,626,675 |
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Diluted | 871,420,065 |
| | 832,257,819 |
| | 871,735,511 |
| | 831,241,027 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
T-Mobile US, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | 2017 | | 2016 | | 2017 | | 2016 |
Operating activities | | | | | | | |
Net income | $ | 550 |
| | $ | 366 |
| | $ | 1,829 |
| | $ | 1,070 |
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Adjustments to reconcile net income to net cash provided by operating activities |
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Depreciation and amortization | 1,416 |
| | 1,568 |
| | 4,499 |
| | 4,695 |
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Stock-based compensation expense | 82 |
| | 59 |
| | 221 |
| | 171 |
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Deferred income tax expense | 347 |
| | 219 |
| | 595 |
| | 623 |
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Bad debt expense | 123 |
| | 118 |
| | 298 |
| | 358 |
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Losses from sales of receivables | 67 |
| | 59 |
| | 242 |
| | 157 |
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Deferred rent expense | 21 |
| | 32 |
| | 61 |
| | 97 |
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Gains on disposal of spectrum licenses | (29 | ) | | (199 | ) | | (67 | ) | | (835 | ) |
Changes in operating assets and liabilities | | | | | | | |
Accounts receivable | (119 | ) | | (155 | ) | | (166 | ) | | (462 | ) |
Equipment installment plan receivables | (154 | ) | | 104 |
| | (520 | ) | | 556 |
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Inventories | 113 |
| | 301 |
| | (28 | ) | | (497 | ) |
Deferred purchase price from sales of receivables | 6 |
| | (16 | ) | | (12 | ) | | (199 | ) |
Other current and long-term assets | (184 | ) | | (98 | ) | | (330 | ) | | 31 |
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Accounts payable and accrued liabilities | (12 | ) | | (731 | ) | | (607 | ) | | (1,568 | ) |
Other current and long term liabilities | 60 |
| | 112 |
| | (84 | ) | | 326 |
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Other, net | 75 |
| | 1 |
| | (27 | ) | | 10 |
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Net cash provided by operating activities | 2,362 |
| | 1,740 |
| | 5,904 |
| | 4,533 |
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Investing activities | | | | | | | |
Purchases of property and equipment, including capitalized interest of $29, $17, $111 and $71 | (1,441 | ) | | (1,159 | ) | | (4,316 | ) | | (3,843 | ) |
Purchases of spectrum licenses and other intangible assets, including deposits | (15 | ) | | (705 | ) | | (5,820 | ) | | (3,544 | ) |
Sales of short-term investments | — |
| | — |
| | — |
| | 2,998 |
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Other, net | 1 |
| | 5 |
| | (2 | ) | | 3 |
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Net cash used in investing activities | (1,455 | ) | | (1,859 | ) | | (10,138 | ) | | (4,386 | ) |
Financing activities | | | | | | | |
Proceeds from issuance of long-term debt | 500 |
| | — |
| | 10,480 |
| | 997 |
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Proceeds from borrowing on revolving credit facility | 1,055 |
| | — |
| | 2,910 |
| | — |
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Repayments of revolving credit facility | (1,735 | ) | | — |
| | (2,910 | ) | | — |
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Repayments of capital lease obligations | (141 | ) | | (54 | ) | | (350 | ) | | (133 | ) |
Repayments of short-term debt for purchases of inventory, property and equipment, net | (4 | ) | | — |
| | (296 | ) | | (150 | ) |
Repayments of long-term debt | — |
| | (5 | ) | | (10,230 | ) | | (15 | ) |
Tax withholdings on share-based awards | (6 | ) | | (3 | ) | | (101 | ) | | (52 | ) |
Dividends on preferred stock | (13 | ) | | (13 | ) | | (41 | ) | | (41 | ) |
Other, net | (5 | ) | | 8 |
| | 11 |
| | 17 |
|
Net cash (used in) provided by financing activities | (349 | ) | | (67 | ) | | (527 | ) | | 623 |
|
Change in cash and cash equivalents | 558 |
| | (186 | ) | | (4,761 | ) | | 770 |
|
Cash and cash equivalents | | | | | | | |
Beginning of period | 181 |
| | 5,538 |
| | 5,500 |
| | 4,582 |
|
End of period | $ | 739 |
| | $ | 5,352 |
| | $ | 739 |
| | $ | 5,352 |
|
Supplemental disclosure of cash flow information | | | | | | | |
Interest payments, net of amounts capitalized, $0, $0, $79 and $0 of which recorded as debt discount (Note 7) | $ | 343 |
| | $ | 478 |
| | $ | 1,565 |
| | $ | 1,292 |
|
Income tax payments | 2 |
| | 4 |
| | 23 |
| | 23 |
|
Changes in accounts payable for purchases of property and equipment | (141 | ) | | (79 | ) | | (458 | ) | | (307 | ) |
Leased devices transferred from inventory to property and equipment | 262 |
| | 234 |
| | 775 |
| | 1,175 |
|
Returned leased devices transferred from property and equipment to inventory | (165 | ) | | (186 | ) | | (635 | ) | | (422 | ) |
Issuance of short-term debt for financing of property and equipment | 1 |
| | — |
| | 291 |
| | 150 |
|
Assets acquired under capital lease obligations | 138 |
| | 384 |
| | 735 |
| | 679 |
|
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| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | 2021 | | 2020 | | |
Operating activities | | | | | | | | | |
| | | | | | | | | |
Net income | $ | 978 | | | $ | 110 | | | $ | 1,911 | | | $ | 1,061 | | | |
Adjustments to reconcile net income to net cash provided by operating activities | | | | | | | | | |
Depreciation and amortization | 4,077 | | | 4,064 | | | 8,366 | | | 5,782 | | | |
Stock-based compensation expense | 134 | | | 259 | | | 272 | | | 397 | | | |
Deferred income tax expense | 226 | | | 98 | | | 437 | | | 408 | | | |
Bad debt expense | 72 | | | 233 | | | 154 | | | 346 | | | |
(Gains) losses from sales of receivables | (12) | | | 30 | | | (30) | | | 55 | | | |
| | | | | | | | | |
Losses on redemption of debt | 28 | | | 163 | | | 129 | | | 163 | | | |
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Impairment expense | 0 | | | 418 | | | 0 | | | 418 | | | |
Changes in operating assets and liabilities | | | | | | | | | |
Accounts receivable | (1,839) | | | (498) | | | (1,743) | | | (1,246) | | | |
Equipment installment plan receivables | (568) | | | 127 | | | (1,295) | | | 196 | | | |
Inventories | 584 | | | (553) | | | 863 | | | (1,064) | | | |
Operating lease right-of-use assets | 1,272 | | | 937 | | | 2,396 | | | 1,464 | | | |
Other current and long-term assets | (154) | | | (104) | | | (100) | | | (98) | | | |
Accounts payable and accrued liabilities | 28 | | | (1,261) | | | (1,356) | | | (1,666) | | | |
Short and long-term operating lease liabilities | (996) | | | (1,077) | | | (2,365) | | | (1,802) | | | |
Other current and long-term liabilities | (47) | | | (2,190) | | | (264) | | | (2,111) | | | |
Other, net | (4) | | | 21 | | | 65 | | | 91 | | | |
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Net cash provided by operating activities | 3,779 | | | 777 | | | 7,440 | | | 2,394 | | | |
Investing activities | | | | | | | | | |
| | | | | | | | | |
Purchases of property and equipment, including capitalized interest of $57, $119, $141, and $231 | (3,270) | | | (2,257) | | | (6,453) | | | (4,010) | | | |
Purchases of spectrum licenses and other intangible assets, including deposits | (8) | | | (745) | | | (8,930) | | | (844) | | | |
Proceeds from sales of tower sites | 31 | | | 0 | | | 31 | | | 0 | | | |
Proceeds related to beneficial interests in securitization transactions | 1,137 | | | 602 | | | 2,028 | | | 1,470 | | | |
Net cash related to derivative contracts under collateral exchange arrangements | 0 | | | 1,212 | | | 0 | | | 632 | | | |
Acquisition of companies, net of cash and restricted cash acquired | (1) | | | (5,000) | | | (30) | | | (5,000) | | | |
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Other, net | 28 | | | (168) | | | 32 | | | (184) | | | |
| | | | | | | | | |
Net cash used in investing activities | (2,083) | | | (6,356) | | | (13,322) | | | (7,936) | | | |
Financing activities | | | | | | | | | |
| | | | | | | | | |
Proceeds from issuance of long-term debt | 3,006 | | | 26,694 | | | 9,769 | | | 26,694 | | | |
Payments of consent fees related to long-term debt | 0 | | | (109) | | | 0 | | | (109) | | | |
| | | | | | | | | |
| | | | | | | | | |
Repayments of financing lease obligations | (269) | | | (236) | | | (556) | | | (518) | | | |
Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities | (36) | | | (151) | | | (91) | | | (176) | | | |
Repayments of long-term debt | (3,150) | | | (10,529) | | | (5,369) | | | (10,529) | | | |
Issuance of common stock | 0 | | | 17,290 | | | 0 | | | 17,290 | | | |
Repurchases of common stock | 0 | | | (16,990) | | | 0 | | | (16,990) | | | |
Proceeds from issuance of short-term debt | 0 | | | 18,743 | | | 0 | | | 18,743 | | | |
Repayments of short-term debt | 0 | | | (18,929) | | | 0 | | | (18,929) | | | |
Tax withholdings on share-based awards | (76) | | | (138) | | | (294) | | | (279) | | | |
| | | | | | | | | |
Cash payments for debt prepayment or debt extinguishment costs | (6) | | | (24) | | | (71) | | | (24) | | | |
Other, net | (46) | | | 7 | | | (91) | | | 2 | | | |
| | | | | | | | | |
Net cash (used in) provided by financing activities | (577) | | | 15,628 | | | 3,297 | | | 15,175 | | | |
Change in cash and cash equivalents, including restricted cash | 1,119 | | | 10,049 | | | (2,585) | | | 9,633 | | | |
Cash and cash equivalents, including restricted cash | | | | | | | | | |
Beginning of period | 6,759 | | | 1,112 | | | 10,463 | | | 1,528 | | | |
End of period | $ | 7,878 | | | $ | 11,161 | | | $ | 7,878 | | | $ | 11,161 | | | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
T-Mobile US, Inc.
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions, except shares) | | | Common Stock Outstanding | | Treasury Shares at Cost | | Par Value and Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders' Equity |
Balance as of March 31, 2021 | | | 1,246,773,175 | | | $ | (14) | | | $ | 72,839 | | | $ | (1,545) | | | $ | (4,903) | | | $ | 66,377 | |
Net income | | | — | | | — | | | — | | | — | | | 978 | | | 978 | |
Other comprehensive income | | | — | | | — | | | — | | | 35 | | | — | | | 35 | |
| | | | | | | | | | | | | |
Stock-based compensation | | | — | | | — | | | 150 | | | — | | | — | | | 150 | |
Exercise of stock options | | | 100,238 | | | — | | | 6 | | | — | | | — | | | 6 | |
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Issuance of vested restricted stock units | | | 1,603,258 | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | |
Shares withheld related to net share settlement of stock awards and stock options | | | (559,630) | | | — | | | (76) | | | — | | | — | | | (76) | |
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Transfers with NQDC plan | | | 3,495 | | | — | | | — | | | — | | | — | | | 0 | |
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Balance as of June 30, 2021 | | | 1,247,920,536 | | | $ | (14) | | | $ | 72,919 | | | $ | (1,510) | | | $ | (3,925) | | | $ | 67,470 | |
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Balance as of December 31, 2020 | | | 1,241,805,706 | | | $ | (11) | | | $ | 72,772 | | | $ | (1,581) | | | $ | (5,836) | | | $ | 65,344 | |
Net income | | | — | | | — | | | — | | | — | | | 1,911 | | | 1,911 | |
Other comprehensive income | | | — | | | — | | | — | | | 71 | | | — | | | 71 | |
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Stock-based compensation | | | — | | | — | | | 304 | | | — | | | — | | | 304 | |
Exercise of stock options | | | 181,040 | | | — | | | 9 | | | — | | | — | | | 9 | |
Stock issued for employee stock purchase plan | | | 1,272,253 | | | — | | | 125 | | | — | | | — | | | 125 | |
Issuance of vested restricted stock units | | | 7,025,097 | | | — | | | — | | | — | | | — | | | — | |
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Shares withheld related to net share settlement of stock awards and stock options | | | (2,345,617) | | | — | | | (294) | | | — | | | — | | | (294) | |
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Transfers with NQDC plan | | | (17,943) | | | (3) | | | 3 | | | — | | | — | | | 0 | |
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Balance as of June 30, 2021 | | | 1,247,920,536 | | | $ | (14) | | | $ | 72,919 | | | $ | (1,510) | | | $ | (3,925) | | | $ | 67,470 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
T-Mobile US, Inc.
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions, except shares) | | | Common Stock Outstanding | | Treasury Shares at Cost | | Par Value and Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders' Equity |
Balance as of March 31, 2020 | | | 861,128,106 | | | $ | (11) | | | $ | 38,597 | | | $ | (1,660) | | | $ | (7,949) | | | $ | 28,977 | |
Net income | | | — | | | — | | | — | | | — | | | 110 | | | 110 | |
Other comprehensive income | | | — | | | — | | | — | | | 2 | | | — | | | 2 | |
Stock-based compensation | | | — | | | — | | | 272 | | | — | | | — | | | 272 | |
Exercise of stock options | | | 262,394 | | | — | | | 14 | | | — | | | — | | | 14 | |
Stock issued for employee stock purchase plan | | | (13) | | | — | | | — | | | — | | | — | | | 0 | |
Issuance of vested restricted stock units | | | 4,157,095 | | | — | | | — | | | — | | | — | | | — | |
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Shares withheld related to net share settlement of stock awards and stock options | | | (1,564,635) | | | — | | | (138) | | | — | | | — | | | (138) | |
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Transfers with NQDC plan | | | (40,263) | | | (1) | | | 1 | | | — | | | — | | | 0 | |
Shares issued in secondary offering | | | 173,564,426 | | | — | | | 17,216 | | | — | | | — | | | 17,216 | |
Shares repurchased from SoftBank (1) | | | (173,564,426) | | | — | | | (16,990) | | | — | | | — | | | (16,990) | |
Merger consideration | | | 373,396,310 | | | — | | | 33,533 | | | — | | | — | | | 33,533 | |
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Balance as of June 30, 2020 | | | 1,237,338,994 | | | $ | (12) | | | $ | 72,505 | | | $ | (1,658) | | | $ | (7,839) | | | $ | 62,996 | |
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Balance as of December 31, 2019 | | | 856,905,400 | | | $ | (8) | | | $ | 38,498 | | | $ | (868) | | | $ | (8,833) | | | $ | 28,789 | |
Net income | | | — | | | — | | | — | | | — | | | 1,061 | | | 1,061 | |
Other comprehensive loss | | | — | | | — | | | — | | | (790) | | | — | | | (790) | |
Executive put option | | | (342,000) | | | — | | | 1 | | | — | | | — | | | 1 | |
Stock-based compensation | | | — | | | — | | | 424 | | | — | | | — | | | 424 | |
Exercise of stock options | | | 311,587 | | | — | | | 15 | | | — | | | — | | | 15 | |
Stock issued for employee stock purchase plan | | | 1,246,304 | | | — | | | 83 | | | — | | | — | | | 83 | |
Issuance of vested restricted stock units | | | 8,912,304 | | | — | | | — | | | — | | | — | | | — | |
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Shares withheld related to net share settlement of stock awards and stock options | | | (3,055,034) | | | — | | | (279) | | | — | | | — | | | (279) | |
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Transfers with NQDC plan | | | (35,877) | | | (4) | | | 4 | | | — | | | — | | | 0 | |
Shares issued in secondary offering | | | 173,564,426 | | | — | | | 17,216 | | | — | | | — | | | 17,216 | |
Shares repurchased from SoftBank (1) | | | (173,564,426) | | | — | | | (16,990) | | | — | | | — | | | (16,990) | |
Merger consideration | | | 373,396,310 | | | — | | | 33,533 | | | — | | | — | | | 33,533 | |
Prior year Retained Earnings | | | — | | | — | | | — | | | — | | | (67) | | | (67) | |
Balance as of June 30, 2020 | | | 1,237,338,994 | | | $ | (12) | | | $ | 72,505 | | | $ | (1,658) | | | $ | (7,839) | | | $ | 62,996 | |
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(1) On June 22, 2020, we entered into a Master Framework Agreement and related transactions with SoftBank Group Corp. (“SoftBank”) to facilitate SoftBank’s monetization of a portion of our common stock held by SoftBank. We received a payment of $300 million from SoftBank. This amount, net of tax, was treated as a reduction of the purchase price of the shares acquired from SoftBank and was recorded as Additional paid-in capital.
The accompanying notes are an integral part of these condensed consolidated financial statements.
T-Mobile US, Inc.
Index for Notes to the Condensed Consolidated Financial Statements
T-Mobile US, Inc.
(Unaudited)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, 2016.2020.
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 (“VIE”VIEs”) where we are deemed to be the primary beneficiary and VIEs which cannot be deconsolidated, such as those related to Towerour obligations (Tower obligations are included in VIEs related to the 2012 Tower Transaction. See Note 8 - Tower Obligations included in the Annual Report on Form 10-Kpay for the year ended December 31, 2016).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 whichthat affect the financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions which ourthat management believes are reasonable under the circumstances.circumstances, including but not limited to, the valuation of assets acquired and liabilities assumed through the merger (the “Merger”) with Sprint Corporation (“Sprint”). These estimates are inherently subject to judgment and actual results could differ from those estimates.
Change in Accounting Principle
Effective January 1, 2017, the imputed discount on Equipment Installment Plan (“EIP”) receivables, which is amortized over the financed installment term using the effective interest method, and was previously presented within Interest income in our Condensed Consolidated Statements of Comprehensive Income, is now presented within Other revenues in our Condensed Consolidated Statements of Comprehensive Income. We believe this presentation is preferable because it provides a better representation of amounts earned from our major ongoing operations and aligns with industry practice thereby enhancing comparability. We have applied this change retrospectively and presented the effect on the three and nine months ended September 30, 2017 and 2016, in the tables below:
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| Three Months Ended September 30, 2017 | | Three Months Ended September 30, 2016 |
(in millions) | Unadjusted | | Change in Accounting Principle | | As Adjusted | | As Filed | | Change in Accounting Principle | | As Adjusted |
Other revenues | $ | 198 |
| | $ | 74 |
| | $ | 272 |
| | $ | 165 |
| | $ | 59 |
| | $ | 224 |
|
Total revenues | 9,945 |
| | 74 |
| | 10,019 |
| | 9,246 |
| | 59 |
| | 9,305 |
|
Operating income | 1,249 |
| | 74 |
| | 1,323 |
| | 989 |
| | 59 |
| | 1,048 |
|
Interest income | 76 |
| | (74 | ) | | 2 |
| | 62 |
| | (59 | ) | | 3 |
|
Total other expense, net | (343 | ) | | (74 | ) | | (417 | ) | | (391 | ) | | (59 | ) | | (450 | ) |
Net income | 550 |
| | — |
| | 550 |
| | 366 |
| | — |
| | 366 |
|
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| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2017 | | Nine Months Ended September 30, 2016 |
(in millions) | Unadjusted | | Change in Accounting Principle | | As Adjusted | | As Filed | | Change in Accounting Principle | | As Adjusted |
Other revenues | $ | 571 |
| | $ | 204 |
| | $ | 775 |
| | $ | 481 |
| | $ | 189 |
| | $ | 670 |
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Total revenues | 29,641 |
| | 204 |
| | 29,845 |
| | 27,067 |
| | 189 |
| | 27,256 |
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Operating income | 3,572 |
| | 204 |
| | 3,776 |
| | 2,860 |
| | 189 |
| | 3,049 |
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Interest income | 219 |
| | (204 | ) | | 15 |
| | 198 |
| | (189 | ) | | 9 |
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Total other expense, net | (1,125 | ) | | (204 | ) | | (1,329 | ) | | (1,139 | ) | | (189 | ) | | (1,328 | ) |
Net income | 1,829 |
| | — |
| | 1,829 |
| | 1,070 |
| | — |
| | 1,070 |
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The change in accounting principle did not have an impact on basic or diluted earnings per share for the three and nine months ended September 30, 2017 and 2016, or Accumulated deficit as of September 30, 2017 or December 31, 2016.
Accounting Pronouncements Not Yet Adopted
Reference Rate Reform
In May 2014,March 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with CustomersAccounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 606)848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” (“ASU 2014-09”), and has since modified the standard with several ASUs.ASU 2021-01, “Reference Rate Reform (Topic 848): Scope” (together, the “reference rate reform standard”). The reference rate reform standard provides temporary optional expedients and allows for certain exceptions to applying existing GAAP for contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. The reference rate reform standard is effectiveavailable for us,adoption through December 31, 2022, and we will adopt the standard, on January 1, 2018.
The standard requires entitiesoptional expedients for contract modifications must be elected for all arrangements within a given Accounting Standards Codification (“ASC”) Topic or Industry Subtopic. We expect to recognize revenueelect the optional expedients for eligible contract modifications accounted for under a given ASC Topic as they occur through theDecember 31, 2022. The application of a five-step model, which includes: identification of the contract; identification of the performance obligations; determination of the transaction price; allocation of the transaction pricethese expedients is not expected to the performance obligations; and recognition of revenue as the entity satisfies the performance obligations.
The guidance permits two methods of adoption, the full retrospective method applying the standard to each prior reporting period presented, or the modified retrospective method with a cumulative effect of initially applying the guidance recognized at the date of initial application. The standard also allows entities to apply certain practical expedients at their discretion. We are adopting the standard using the modified retrospective method with a cumulative catch up adjustment and will provide additional disclosures comparing results to previous GAAP.
We currently anticipate this standard will have a material impact on our consolidated financial statements. While we are continuing to assess all potential impacts
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the standard, we currently believe the most significant potential impacts include the following items:
Whether our EIP contracts contain a significant financing component, which is similar to our current practice of imputing interest, and would similarly impact the amount of revenue recognized at the time of an EIP sale and whetherSEC did not have, or not a portion of the revenue is recognized as interest and included in other revenues, rather than equipment revenues. We currently expect to recognize the financing component in our EIP contracts, including those financing components that are not consideredexpected to be significant to the contract. We believe that this application will be consistent with our current practice of imputing interest.
As we currently expense contract acquisition costs, we believe that the requirement to defer incremental contract acquisition costs and recognize them over the term of the initial contract and anticipated renewal contracts to which the costs relate will have, a significant impact toon our present or future consolidated financial statements.
Note 2 – Business Combinations
Business Combination Agreement and Amendments
On April 29, 2018, we entered into a Business Combination Agreement with Sprint and the other parties named therein (as amended, the “Business Combination Agreement”) for the Merger. The Business Combination Agreement was subsequently amended to provide that, following the closing of the Merger and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”), SoftBank would indemnify us against certain specified matters and the loss of value arising out of, or resulting from, cessation of access to spectrum under certain circumstances and subject to certain limitations and qualifications.
On February 20, 2020, T-Mobile, SoftBank and Deutsche Telekom AG (“DT”) entered into a letter agreement (the “Letter Agreement”). Pursuant to the Letter Agreement, SoftBank agreed to cause its applicable affiliates to surrender to T-Mobile, for
no additional consideration, an aggregate of 48,751,557 shares of T-Mobile common stock (such number of shares, the “SoftBank Specified Shares Amount”), effective immediately following the Effective Time (as defined in the Business Combination Agreement), making SoftBank’s exchange ratio 11.31 shares of Sprint common stock for each share of T-Mobile common stock. This resulted in an effective exchange ratio of approximately 11.00 shares of Sprint common stock for each share of T-Mobile common stock immediately following the closing of the Merger, an increase from the originally agreed 9.75 shares. Sprint stockholders, other than SoftBank, received the original fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or the equivalent of approximately 9.75 shares of Sprint common stock for each share of T-Mobile common stock.
The Letter Agreement requires T-Mobile to issue to SoftBank 48,751,557 shares of T-Mobile common stock, subject to the terms and conditions set forth in the Letter Agreement, for no additional consideration, if certain conditions are met. The issuance of these shares is contingent on the trailing 45-day volume-weighted average price per share of T-Mobile common stock on the NASDAQ Global Select Market being equal to or greater than $150.00, at any time during the period commencing on April 1, 2022 and ending on December 31, 2025. If the threshold price is not met, then NaN of the SoftBank Specified Shares Amount will be issued.
Closing of Sprint Merger
On April 1, 2020, we completed the Merger, and as a result, Sprint and its subsidiaries became wholly owned consolidated subsidiaries of T-Mobile. Sprint was the fourth-largest telecommunications company in the U.S., offering a comprehensive range of wireless and wireline communication products and services. As a combined company, we have been able to rapidly launch a broad and deep nationwide 5G network, accelerate innovation, increase competition in the U.S. wireless and broadband industries and achieve significant synergies and cost reductions by eliminating redundancies within the combined network as well as other business processes and operations.
Upon completion of the Merger, each share of Sprint common stock was exchanged for 0.10256 shares of T-Mobile common stock, or 9.75 shares of Sprint common stock for each share of T-Mobile common stock. After adjustments, including the holdback of the SoftBank Specified Shares Amount and fractional shares, we issued 373,396,310 shares of T-Mobile common stock to Sprint stockholders. The fair value of the T-Mobile common stock provided in exchange for Sprint common stock was approximately $31.3 billion.
Additional components of consideration included the repayment of certain of Sprint’s debt, replacement of equity awards attributable to pre-combination services, contingent consideration and a cash payment received from SoftBank for certain reimbursed Merger expenses.
Immediately following the closing of the Merger and the surrender of the SoftBank Specified Shares Amount, pursuant to the Letter Agreement described above, DT and SoftBank held, directly or indirectly, approximately 43.6% and 24.7%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 31.7% of the outstanding T-Mobile common stock held by other stockholders.
Consideration Transferred
The acquisition-date fair value of consideration transferred in the Merger totaled $40.8 billion, comprised of the following: | | | | | |
(in millions) | April 1, 2020 |
Fair value of T-Mobile common stock issued to Sprint stockholders (1) | $ | 31,328 | |
Fair value of T-Mobile replacement equity awards attributable to pre-combination service (2) | 323 | |
Repayment of Sprint’s debt (including accrued interest and prepayment penalties) (3) | 7,396 | |
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Fair value of contingent consideration (4) | 1,882 | |
Payment received from selling stockholder (5) | (102) | |
Total consideration exchanged | $ | 40,827 | |
(1) Represents the fair value of T-Mobile common stock issued to Sprint stockholders pursuant to the Business Combination Agreement, less shares surrendered by SoftBank pursuant to the Letter Agreement. The fair value is based on 373,396,310 shares of T-Mobile common stock issued at an exchange ratio of 0.10256 shares of T-Mobile common stock per share of Sprint common stock, less 48,751,557 T-Mobile shares surrendered by SoftBank which are treated as contingent consideration, and the closing price per share of T-Mobile common stock on NASDAQ on March 31, 2020, of $83.90, as shares were transferred to Sprint stockholders prior to the opening of markets on April 1, 2020.
(2) Equity-based awards held by Sprint employees prior to the acquisition date have been replaced with T-Mobile equity-based awards. The portion of the equity-based awards that relates to services performed by the employee prior to the acquisition date is included within consideration transferred, and includes stock options, restricted stock units and performance-based restricted stock units.
(3) Represents the cash consideration paid concurrent with the close of the Merger to retire certain Sprint debt, as required by change in control provisions of the debt, plus interest and prepayment penalties.
(4) Represents the fair value of the SoftBank Specified Shares Amount contingent consideration that may be issued as set forth in the Letter Agreement.
(5) Represents receipt of a cash payment from SoftBank for certain reimbursed Merger expenses.
The SoftBank Specified Shares Amount was determined to be contingent consideration with an acquisition-date fair value of $1.9 billion. We estimated the fair value using the income approach, a probability-weighted discounted cash flow model, whereby a Monte Carlo simulation method estimated the probability of different outcomes as the likelihood of achieving the 45-day volume-weighted average price threshold is not easily predicted. This fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement as defined in ASC 820: Fair Value Measurement. The key assumptions in applying the income approach include estimated future share-price volatility, which was based on historical market trends and estimated future performance of T-Mobile.
The maximum amount of contingent consideration that could be issued to SoftBank has an estimated value of $7.3 billion, based on SoftBank Specified Shares Amount of 48,751,557 multiplied by the defined volume-weighted average price per share of $150.00. The contingent consideration that could be delivered to SoftBank is classified within equity and is not subject to remeasurement.
Fair Value of Assets Acquired and Liabilities Assumed
We accounted for the Merger as a business combination. The identifiable assets acquired and liabilities assumed of Sprint were recorded at their fair values as of the acquisition date and consolidated with those of T-Mobile. Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires the use of significant judgment regarding estimates and assumptions. For the fair values of the assets acquired and liabilities assumed, we used the cost, income and market approaches, including market participant assumptions.
The following table summarizes the fair values for each major class of assets acquired and liabilities assumed at the acquisition date. We retained the services of certified valuation specialists to assist with assigning values to certain acquired assets and assumed liabilities.
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(in millions) | April 1, 2020 |
Cash and cash equivalents | $ | 2,084 | |
Accounts receivable | 1,775 | |
Equipment installment plan receivables | 1,088 | |
Inventory | 658 | |
Prepaid expenses | 140 | |
Assets held for sale | 1,908 | |
Other current assets | 637 | |
Property and equipment | 18,435 | |
Operating lease right-of-use assets | 6,583 | |
Financing lease right-of-use assets | 291 | |
Goodwill | 9,423 | |
Spectrum licenses | 45,400 | |
Other intangible assets | 6,280 | |
Equipment installment plan receivables due after one year, net | 247 | |
Other assets (1) | 540 | |
Total assets acquired | 95,489 | |
Accounts payable and accrued liabilities | 5,015 | |
Short-term debt | 2,760 | |
Deferred revenue | 508 | |
Short-term operating lease liabilities | 1,818 | |
Short-term financing lease liabilities | 8 | |
Liabilities held for sale | 475 | |
Other current liabilities | 681 | |
Long-term debt | 29,037 | |
Tower obligations | 950 | |
Deferred tax liabilities | 3,478 | |
Operating lease liabilities | 5,615 | |
Financing lease liabilities | 12 | |
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Other long-term liabilities | 4,305 | |
Total liabilities assumed | 54,662 | |
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Total consideration transferred | $ | 40,827 | |
(1) Included in Other assets acquired is $80 million in restricted cash.
Amounts initially disclosed for the estimated values of certain acquired assets and liabilities assumed were adjusted through March 31, 2021 (the close of the measurement period) based on information arising after the initial valuation.
Intangible Assets and Liabilities
Goodwill with an assigned value of $9.4 billion represents the excess of the consideration transferred over the fair values of assets acquired and liabilities assumed. The goodwill recognized includes synergies expected to be achieved from the operations of the combined company, the assembled workforce of Sprint and intangible assets that do not qualify for separate recognition. Expected synergies from the Merger include the cost savings from the planned integration of network infrastructure, facilities, personnel and systems. NaN of the goodwill resulting from the Merger is deductible for tax purposes. All of the goodwill acquired is allocated to the wireless reporting unit.
Other intangible assets include $4.9 billion of customer relationships with a weighted-average useful life of eight years and tradenames of $207 million with a useful life of two years. Leased spectrum arrangements that have favorable (asset) and unfavorable (liability) terms compared to current market rates were assigned fair values of $745 million and $125 million, respectively, with 18-year and 19-year weighted average useful lives, respectively.
The fair value of Spectrum licenses of $45.4 billion was estimated using the income approach, specifically a Greenfield model. This fair value measurement is based on significant inputs not observable in the market and, therefore, represents a Level 3 measurement as defined in ASC 820: Fair Value Measurement. The key assumptions in applying the income approach include the discount rate, estimated market share, estimated capital and operating expenditures, forecasted service revenue and a long-term growth rate for a hypothetical market participant that enters the wireless industry and builds a nationwide wireless network.
Acquired Receivables
The fair value of the assets acquired includes Accounts receivable of $1.8 billion and Equipment installment plan (“EIP”) receivables of $1.3 billion. The unpaid principal balance under these contracts as of April 1, 2020, the date of the Merger, was $1.8 billion and $1.6 billion, respectively. The difference between the fair value and the unpaid principal balance primarily represents amounts expected to utilizebe uncollectible.
Indemnification Assets and Contingent Liabilities
Pursuant to Amendment No 2. to the practical expedient permitting expensingBusiness Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses. As of costs to obtainthe acquisition date, we recorded a contract whencontingent liability and an offsetting indemnification asset for the expected amortization periodreimbursement by SoftBank for certain Lifeline matters. The liability is one year or lesspresented in Accounts payable and accrued liabilities, and the indemnification asset is presented in Other current assets within our acquired assets and liabilities at the acquisition date. In November 2020, we entered into a consent decree with the Federal Communications Commission (“FCC”) to resolve certain Lifeline matters, which resulted in a payment of $200 million by SoftBank. Final resolution of these matters could require making additional reimbursements and paying 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 matters would be indemnified and reimbursed by SoftBank.
Deferred Taxes
As a result of the Merger, we acquired deferred tax assets for which a valuation allowance reserve is deemed to be necessary, as well as additional uncertain tax benefit reserves. As of the date of the Merger, the amount of the valuation allowance reserve and uncertain tax benefit reserves was $851 million and $660 million, respectively. We continue to monitor positive and negative evidence related to the utilization of our deferred tax assets subject to a valuation allowance. It is possible the valuation allowance we deem to be necessary will typically resultbe reduced within the next 12 months.
Transaction Costs
There were 0 significant transaction costs recognized in expensing commissions paid to acquire branded prepaid service contracts. Currently, we believe that incremental contract acquisitionthe three months ended June 30, 2021. We recognized transaction costs of approximately $450$145 million for the three months ended June 30, 2020, and $13 million and $184 million for the six months ended June 30, 2021 and 2020, respectively. These costs were associated with legal and professional services and were recognized as Selling, general and administrative expenses in our Condensed Consolidated Statements of Comprehensive Income.
Pro Forma Information
The following unaudited pro forma financial information gives effect to $550the Transactions as if they had been completed on January 1, 2019. The unaudited pro forma information was prepared in accordance with the requirements of ASC 805: Business Combinations, which is a different basis than pro forma information prepared under Article 11 of Regulation S-X (“Article 11”). As such, they are not directly comparable with historical results for stand-alone T-Mobile prior to April 1, 2020, historical results for T-Mobile from April 1, 2020 that reflect the Transactions and are inclusive of the results and operations of Sprint, nor our previously provided pro forma financials prepared in accordance with Article 11. The pro forma results for the three and six months ended June 30, 2020 include the impact of several significant nonrecurring pro forma adjustments to previously reported operating results. The pro forma adjustments are based on historically reported transactions by the respective companies. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisition. | | | | | | | | | | | | | | | |
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(in millions) | Three Months Ended June 30, 2020 | | | | Six Months Ended June 30, 2020 | | |
Total revenues | $ | 17,665 | | | | | $ | 35,073 | | | |
(Loss) income from continuing operations | (9) | | | | | 1,102 | | | |
Income from discontinued operations, net of tax | 320 | | | | | 677 | | | |
Net income | 311 | | | | | 1,779 | | | |
Significant nonrecurring pro forma adjustments include:
•Transaction costs of $145 million and $202 million that were incurred during the ninethree and six months ended SeptemberJune 30, 2017, which consists primarily of commissions paid2020, respectively, are assumed to acquire branded postpaid service contracts, would require capitalization and amortization under the new standard. We expect that deferred contract costs will have an average amortization period of approximately 24 months, subject to being monitored and updated every period to reflect any significant change in assumptions. In addition, the deferred contract cost asset will be assessed for impairment on a periodic basis.
We expect that promotional bill credits offered to customers on equipment sales that are paid over time and are contingentoccurred on the customer maintaining a service contract will result in extended service contracts, which impacts the allocation and timingpro forma close date of revenue recognition between service revenue and equipment revenue.
Overall, with the exception of the aforementioned impacts, we do not expect that the new standard will result in a substantive change to the method of allocation of contract revenues between various services and equipment, nor to the timing of when revenues are recognized for most of our service contracts.
We are still in the process of evaluating these impacts, and our initial assessment may change due to changes in the terms and mix of the contractual arrangements we have with customers. New products or offerings, or changes to current offerings may yield significantly different impacts than currently expected.
We are in the process of implementing significant new revenue accounting systems, processes and internal controls over revenue recognition which will assist us in the application of the new standard.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The standard requires all lessees to report a right-of-use asset and a lease liability for most leases. The income statement recognition is similar to existing lease accounting and is based on lease classification. The standard requires lessees and lessors to classify most leases using principles similar to existing lease accounting. For lessors, the standard modifies the classification criteria and the accounting for sales-type and
direct financing leases. We are currently evaluating the standard, which will require recognizing and measuring leases at the beginning of the earliest period presented using a modified retrospective approach. We plan to adopt the standard when it becomes effective for us beginning January 1, 2019, and expectare recognized as if incurred in the adoptionfirst quarter of 2019;
•The Prepaid Business divested on July 1, 2020, is assumed to have been classified as discontinued operations as of January 1, 2019, and the related activities are presented in Income from discontinued operations, net of tax;
•Permanent financing issued and debt redemptions occurring in connection with the closing of the standard willMerger are assumed to have occurred on January 1, 2019, and historical interest expense associated with repaid borrowings is removed;
•Tangible and intangible assets are assumed to be recorded at their estimated fair values as of January 1, 2019 and are depreciated or amortized over their estimated useful lives; and
•Accounting policies of Sprint are conformed to those of T-Mobile including depreciation for leased devices, distribution arrangements with Brightstar US, Inc., amortization of costs to acquire a contract and certain tower lease transactions.
The selected unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations would have been had the Transactions actually occurred on January 1, 2019, nor do they purport to project the future consolidated results of operations.
Regulatory Matters
The Transactions were the subject of various legal and regulatory proceedings involving a number of state and federal agencies. In connection with those proceedings and the approval of the Transactions, we have certain commitments and other obligations to various state and federal agencies and certain nongovernmental organizations. See Note 11 - Commitments and Contingencies for further information.
Shenandoah Personal Communications Company Affiliate Relationship
Sprint PCS (specifically Sprint Spectrum L.P.) was party to a variety of publicly filed agreements with Shenandoah Personal Communications Company LLC (“Shentel”), pursuant to which Shentel was the exclusive provider of Sprint PCS’s wireless mobility communications network products in certain parts of Maryland, North Carolina, Virginia, West Virginia, Kentucky, Ohio and Pennsylvania. Pursuant to one such agreement, the Sprint PCS Management Agreement, dated November 5, 1999 (as amended, supplemented and modified from time to time, the “Management Agreement”), Sprint PCS was granted an option to purchase Shentel’s wireless telecommunications assets (the “Wireless Assets”) used to provide services pursuant to the Management Agreement. On August 26, 2020, Sprint, now our indirect subsidiary, on behalf of and as the direct or indirect owner of Sprint PCS, exercised its option by delivering a binding notice of exercise to Shentel.
On May 28, 2021, T-Mobile USA, Inc., a Delaware corporation and our direct wholly-owned subsidiary, entered into an asset purchase agreement (the “Purchase Agreement”) with Shentel, for the acquisition of the Wireless Assets for an aggregate purchase price of approximately $1.9 billion in cash, subject to certain adjustments prescribed by the Management Agreement and such additional adjustments agreed by the parties.
Subsequent to June 30, 2021 and upon the completion of certain customary conditions, including the receipt of certain regulatory approvals, on July 1, 2021, we closed on the acquisition of the Wireless Assets pursuant to the Purchase Agreement and, as a result, T-Mobile became the legal owner of the Wireless Assets. Concurrently and as agreed to through the Purchase Agreement, T-Mobile and Shentel entered into certain separate transactions, including the effective settlement of the pre-existing arrangements between T-Mobile and Shentel under the Management Agreement. In exchange, T-Mobile transferred cash of approximately $2.0 billion, approximately $1.9 billion of which was determined to be consideration transferred for the Wireless Assets and the remainder of which was determined to relate to separate transactions, primarily associated with the effective settlement of pre-existing arrangements between T-Mobile and Shentel. Accordingly, these separate transactions are not included in the recognitioncalculation of rightthe consideration transferred in exchange for the Wireless Assets. We do not currently expect any additional material adjustments to the consideration already transferred.
We have concluded that the acquired set of usethe Wireless Assets constitutes a business as defined in ASC 805, “Business Combinations,” and we therefore will account for the acquired set of Wireless Assets as a business combination. The major classes of assets acquired through the acquisition of the Wireless Assets include fixed assets and network equipment, operating lease right-of-use assets, reacquired rights and other intangible assets. The major classes of liabilities that haveassumed include operating
lease liabilities. Due to the limited time since the acquisition date and the complexity of the acquisition, the accounting for the business combination and separate transactions as agreed to through the Purchase Agreement are not previously been recorded, which will have a material impact on our condensed consolidated financial statements.
yet complete. We are innot able to provide the processallocation of implementing significant new leaseconsideration paid to the assets acquired or liabilities assumed, nor are we able to provide additional details on the accounting systems, processes and internal controls over lease recognition which will ultimately assist infor the applicationconcurrent transactions agreed to through the Purchase Agreement. The financial results of the new standard.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amountWireless Assets are not expected to be collected. The measurementmaterial to our Condensed Consolidated Statements of Comprehensive Income.
Note 3 – Receivables and Expected Credit Losses
We maintain an allowance for expected credit losses that assesses the lifetime credit losses that we expect to incur related to our receivable portfolio segments. 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 period end.
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, 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 2 portfolio segments: accounts receivable and EIP receivables.
Accounts Receivable Portfolio Segment
Our accounts receivable segment primarily consists of amounts currently due from customers, including service and leased device receivables, device insurance administrators, wholesale partners, third-party retail channels and other carriers.
We estimate expected credit losses associated with our accounts receivable portfolio using an aging schedule methodology that utilizes historical information and current conditions to develop expected credit losses by aging bucket, including for receivables that are not past due.
To determine the appropriate credit loss percentages by aging bucket, we consider a number of factors, including our overall historical credit losses, net of recoveries and timely payment experience as well as current collection trends such as write-off frequency and severity, credit quality of the customer base, and other qualitative factors such as macro-economic conditions, including the expected economic impacts of the COVID-19 pandemic (the “Pandemic”).
We consider the need to adjust our estimate of expected credit losses is based on relevant information about past events, including historical experience, current conditions andfor reasonable and supportable forecasts that affect the collectibility of the reported amount. The standard will become effectivefuture economic conditions. To do so, we monitor professional forecasts of changes in real U.S. gross domestic product and forecasts of consumer credit behavior for us beginning January 1, 2020, and will require a cumulative-effect adjustment to Accumulated deficitcomparable credit exposures. We also periodically evaluate other economic indicators such as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). Early adoption is permitted for us as of January 1, 2019. We are currently evaluating the impact this guidance will have on our condensed consolidated financial statements and the timing of adoption.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The standard is intended to reduce current diversity in practice and provides guidance on how certain cash receipts and payments are presented and classified in the statement of cash flows. The standard is effective for us, and we will adopt the standard, on January 1, 2018. The standard will require a retrospective approach. The standard will impact the presentation of cash flows related to beneficial interests in securitization transactions, which is the deferred purchase price, resulting in a reclassification of cash inflows from Operating activities to Investing activities of approximately $1.0 billion for the three months ended September 30, 2017 and 2016, and $2.8 billion for the nine months ended September 30, 2017 and 2016, in our condensed consolidated statement of cash flows. The standard will also impact the presentation of cash payments for debt prepayment or debt extinguishment costs, resulting in a reclassification of cash outflows from Operating activities to Financing activities of $188 million for the nine months ended September 30, 2017, in our condensed consolidated statement of cash flows. We had no cash payments for debt prepayment or debt extinguishment costs for the three months ended September 30, 2017.
In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory.” The standard requires that the income tax impact of intra-entity sales and transfers of property, except for inventory, be recognized when the transfer occurs. The standard will become effective for us beginning January 1, 2018, and will require any deferred taxes not yet recognized on intra-entity transfers to be recorded to retained earnings under a modified retrospective approach. Early adoption is permitted. We are currently evaluating the standard, but expect that it will not have a material impact on our condensed consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The standard requires entities to include in their cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. The ASU does not define the terms “restricted cash” and “restricted cash equivalents.” The standard will be effective for us beginning January 1, 2018, and will require a retrospective approach. Early adoption is permitted. We are currently evaluating the standard, but expect that it will not have a material impact on our condensed consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The standard eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a reporting unit to all assets and liabilities within that unit (“the Step 2 test”) from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the amount of goodwill in that reporting unit. The standard will become effective for us beginning January 1, 2020, and must be applied to any annual or interim goodwill impairment assessments after that date. Early adoption is permitted. We are currently evaluating the standard and timing of adoption, but expect that it will not have a material impact on our condensed consolidated financial statements.
Note 2 – Significant Transactions
Hurricane Impacts
During the third quarter of 2017, our operations in Texas, Florida and Puerto Rico experienced losses related to hurricanes. Based on our preliminary assessment, the negative impact to operating income and net income for both the three and nine months ended September 30, 2017, from lost revenue, assets damaged or destroyed and other hurricane related costs incurred was $148 million and $90 million, respectively. As of September 30, 2017, our loss assessment is ongoing and we expect additional expenses to be incurred and customer activity to be impacted in the fourth quarter of 2017, primarily related to our operations in Puerto Rico. We have not recognized any potential insurance recoveries related to those hurricane losses as we continueunemployment rates to assess the damage and worktheir level of correlation with our insurance carriers.historical credit loss statistics.
Purchase of Iowa WirelessEIP Receivables Portfolio Segment
On September 18, 2017, we entered into a Unit Purchase Agreement (“UPA”) to acquire the remaining equity in INS Wireless, Inc. (“INS”), a 54% owned unconsolidated subsidiary, for a purchase price of $25 million. We account for our existing investment in INS under the equity method as we have significant influence, but not control. Upon the close of the transaction, which is expected within the next six months, subject to regulatory approvals and customary closing conditions, INS will become a wholly-owned consolidated subsidiary.
Spectrum Transactions
During the nine months ended September 30, 2017, we entered into agreements with third parties for the exchange of certain spectrum licenses and were the winning bidder of 1,525 licenses in the 600 MHz spectrum auction. See Note 5 - Spectrum License Transactions for further information.
Debt
During the nine months ended September 30, 2017, we completed significant transactions with both third parties and affiliates related to the issuance, borrowing and redemption of debt. See Note 7 - Debt for further information.
Power Purchase Agreements
During the nine months ended September 30, 2017, we entered into two renewable energy purchase agreements with third parties. These agreements each consist of two components, an energy forward agreement that is net settled based on energy prices and the energy output generated by the facility and a commitment to purchase the energy credits associated with the energy output generated by the facility. See Note 10 – Commitments and Contingencies for further information.
Note 3 – Equipment Installment Plan Receivables
We offer certain retail customers the option to pay for their devices and accessories in installments over a period of up to 24 months using an EIP.
The following table summarizes the EIP receivables:
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(in millions) | September 30, 2017 | | December 31, 2016 |
EIP receivables, gross | $ | 3,599 |
| | $ | 3,230 |
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Unamortized imputed discount | (233 | ) | | (195 | ) |
EIP receivables, net of unamortized imputed discount | 3,366 |
| | 3,035 |
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Allowance for credit losses | (130 | ) | | (121 | ) |
EIP receivables, net | $ | 3,236 |
| | $ | 2,914 |
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Classified on the balance sheet as: | | | |
Equipment installment plan receivables, net | $ | 2,136 |
| | $ | 1,930 |
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Equipment installment plan receivables due after one year, net | 1,100 |
| | 984 |
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EIP receivables, net | $ | 3,236 |
| | $ | 2,914 |
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We use a proprietary credit scoring model that measures the credit quality of a customer at the time of application for mobile communications service using several factors, such as credit bureau information, consumer credit risk scores and service plan characteristics. Based upon customer credit profiles at the time of customer origination, we classify the EIP receivables segment into the credit categories2 customer classes of “Prime” and “Subprime.” Prime customer receivables are those with lower delinquencycredit risk and Subprime customer receivables are those with higher delinquencycredit risk. Subprime customersCustomers may be required to make a down payment on their equipment purchases. In addition, certain customers within the Subprime category aremay be required to pay an advancea deposit.
To determine a customer’s credit profile, we use a proprietary credit scoring model that measures the credit quality of a customer using several factors, such as credit bureau information, consumer credit risk scores and service and device plan characteristics.
Installment loans acquired in the Merger are included in EIP receivables. We applied our proprietary credit scoring model to the customers acquired in the Merger with an outstanding EIP receivable balance. Based on tenure, consumer credit risk score and credit profile, these acquired customers were classified into our customer classes of Prime or Subprime.
The following table summarizes the EIP receivables, including imputed discounts and related allowance for credit losses: | | | | | | | | | | | |
(in millions) | June 30, 2021 | | December 31, 2020 |
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EIP receivables, gross | $ | 6,945 | | | $ | 6,213 | |
Unamortized imputed discount | (342) | | | (325) | |
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EIP receivables, net of unamortized imputed discount | 6,603 | | | 5,888 | |
Allowance for credit losses | (255) | | | (280) | |
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EIP receivables, net of allowance for credit losses and imputed discount | $ | 6,348 | | | $ | 5,608 | |
Classified on the balance sheet as: | | | |
Equipment installment plan receivables, net of allowance for credit losses and imputed discount | $ | 4,064 | | | $ | 3,577 | |
Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount | 2,284 | | | 2,031 | |
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EIP receivables, net of allowance for credit losses and imputed discount | $ | 6,348 | | | $ | 5,608 | |
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We manage our EIP receivables portfolio 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 June 30, 2021:
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| Originated in 2021 | | Originated in 2020 | | Originated prior to 2020 | | Total EIP Receivables, net of unamortized imputed discounts |
(in millions) | Prime | | Subprime | | Prime | | Subprime | | Prime | | Subprime | | Prime | | Subprime | | Grand total |
Current - 30 days past due | $ | 2,177 | | | $ | 1,436 | | | $ | 1,613 | | | $ | 954 | | | $ | 221 | | | $ | 100 | | | $ | 4,011 | | | $ | 2,490 | | | $ | 6,501 | |
31 - 60 days past due | 12 | | | 18 | | | 11 | | | 17 | | | 2 | | | 3 | | | 25 | | | 38 | | | 63 | |
61 - 90 days past due | 2 | | | 5 | | | 3 | | | 7 | | | 1 | | | 1 | | | 6 | | | 13 | | | 19 | |
More than 90 days past due | 2 | | | 2 | | | 3 | | | 7 | | | 2 | | | 4 | | | 7 | | | 13 | | | 20 | |
EIP receivables, net of unamortized imputed discount | $ | 2,193 | | | $ | 1,461 | | | $ | 1,630 | | | $ | 985 | | | $ | 226 | | | $ | 108 | | | $ | 4,049 | | | $ | 2,554 | | | $ | 6,603 | |
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We estimate expected credit losses on our EIP receivables by using historical data adjusted for current conditions to calculate default probabilities for our outstanding EIP loans. We consider various risk characteristics when calculating default probabilities, such as how long such loans have been outstanding, customer credit ratings, customer tenure, delinquency status and other correlated variables identified through statistical analyses. We multiply these estimated default probabilities by our estimated loss given default, which considers recoveries.
As we do for our accounts receivable portfolio segment, we consider the need to adjust our estimate of expected losses on EIP receivables for which invoices have not yet been generated forreasonable and supportable forecasts of economic conditions through monitoring external professional forecasts and periodic internal statistical analyses, including the customer are classified as Unbilled.expected economic impacts of the Pandemic.
For EIP receivables for which invoices have been generated but which are not pastacquired in the Merger, the difference between the fair value and unpaid principal balance of the loan at the acquisition date is accreted to interest income over the contractual due date are classified as Billed – Current.life of the loan using the effective interest method. EIP receivables for which invoices have been generatedhad a combined weighted average effective interest rate of 6.3% and the payment is past the contractual due date are classified6.7% as Billed – Past Due.of June 30, 2021 and December 31, 2020, respectively.
The balance and aging of the EIP receivables on a gross basis by credit category were as follows:
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| September 30, 2017 | | December 31, 2016 |
(in millions) | Prime | | Subprime | | Total | | Prime | | Subprime | | Total |
Unbilled | $ | 1,471 |
| | $ | 1,903 |
| | $ | 3,374 |
| | $ | 1,343 |
| | $ | 1,686 |
| | $ | 3,029 |
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Billed – Current | 60 |
| | 90 |
| | 150 |
| | 51 |
| | 77 |
| | 128 |
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Billed – Past Due | 25 |
| | 50 |
| | 75 |
| | 25 |
| | 48 |
| | 73 |
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EIP receivables, gross | $ | 1,556 |
| | $ | 2,043 |
| | $ | 3,599 |
| | $ | 1,419 |
| | $ | 1,811 |
| | $ | 3,230 |
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Activity for the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, in the unamortized imputed discount and allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivables wassegments were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | June 30, 2020 | | |
(in millions) | Accounts Receivable Allowance | | EIP Receivables Allowance | | Total | Accounts Receivable Allowance | | EIP Receivables Allowance | | Total | | | | | | |
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Allowance for credit losses and imputed discount, beginning of period | $ | 194 | | | $ | 605 | | | $ | 799 | | | $ | 61 | | | $ | 399 | | | $ | 460 | | | | | | | |
Beginning balance adjustment due to implementation of the new credit loss standard | 0 | | | 0 | | | 0 | | | 0 | | | 91 | | | 91 | | | | | | | |
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Bad debt expense | 76 | | | 78 | | | 154 | | | 178 | | | 168 | | | 346 | | | | | | | |
Write-offs, net of recoveries | (147) | | | (104) | | | (251) | | | (56) | | | (96) | | | (152) | | | | | | | |
Change in imputed discount on short-term and long-term EIP receivables | N/A | | 91 | | | 91 | | | N/A | | 10 | | | 10 | | | | | | | |
Impact on the imputed discount from sales of EIP receivables | N/A | | (73) | | | (73) | | | N/A | | (81) | | | (81) | | | | | | | |
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Allowance for credit losses and imputed discount, end of period | $ | 123 | | | $ | 597 | | | $ | 720 | | | $ | 183 | | | $ | 491 | | | $ | 674 | | | | | | | |
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(in millions) | September 30, 2017 | | September 30, 2016 |
Imputed discount and allowance for credit losses, beginning of period | $ | 316 |
| | $ | 333 |
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Bad debt expense | 215 |
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Write-offs, net of recoveries | (205 | ) | | (201 | ) |
Change in imputed discount on short-term and long-term EIP receivables | 163 |
| | 103 |
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Impacts from sales of EIP receivables | (126 | ) | | (133 | ) |
Imputed discount and allowance for credit losses, end of period | $ | 363 |
| | $ | 287 |
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Off-Balance-Sheet Credit Exposures
The EIP receivables had weighted average effective imputed interest rates of 9.7% and 9.0%We do not have material, unmitigated off-balance-sheet credit exposures as of SeptemberJune 30, 20172021. In connection with the sales of certain service and December 31, 2016, respectively.
EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets included in our Condensed Consolidated Balance Sheets measured at fair value that are based on a discounted cash flow model using Level 3 inputs, including 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 have entered into transactions to sell certain service accounts receivable and EIP accounts 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 ServiceEIP Receivables
Overview of the Transaction
In 2014, we entered into an arrangement to sell certain service accounts receivables on a revolving basis and in November 2016, the arrangement was amended to increase the maximum funding commitment to $950 million (the “service receivable sale arrangement”) and extend the scheduled expiration date to March 2018. As of September 30, 2017 and December 31, 2016, the service receivable sale arrangement provided funding of $899 million and $907 million, respectively. Sales of receivables occur daily and are settled on a monthly basis. The receivables consist of service charges currently due from customers and are short-term in nature.
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 receivables (the “Service BRE”). The Service BRE does not qualify as a VIE, and due to the significant level of control we exercise over the entity, it is consolidated. Pursuant to the arrangement, certain of our wholly-owned subsidiaries transfer selected receivables to the Service BRE. The Service BRE then sells the receivables to an unaffiliated entity (the “Service VIE”), which was established to facilitate the sale of beneficial ownership interests in the receivables to certain third parties.
Variable Interest Entity
We determined that the Service VIE qualifies as a VIE as it lacks sufficient equity to finance its activities. We have a variable interest in the Service VIE, but are not the primary beneficiary as we lack the power to direct the activities that most significantly impact the Service VIE’s economic performance. Those activities include committing the Service VIE to legal agreements to purchase or sell assets, selecting which receivables are purchased in the service receivable sale arrangement, determining whether the Service VIE will sell interests in the purchased service receivables to other parties, funding of the entity and servicing of receivables. We do not hold the power to direct the key decisions underlying these activities. For example, while we act as the servicer of the sold receivables, which is considered a significant activity of the Service VIE, we are acting as an agent in our capacity as the servicer and the counterparty to the service receivable sale arrangement has the ability to remove us as the servicing agent of the receivables at will with no recourse available to us. As we have determined we are not the primary beneficiary, the results of the Service VIE are not consolidated into our condensed consolidated financial statements.
The following table summarizes the carrying amounts and classification of assets, which consists primarily of the deferred purchase price and liabilities included in our Condensed Consolidated Balance Sheets that relate to our variable interest in the Service VIE:
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(in millions) | September 30, 2017 | | December 31, 2016 |
Other current assets | $ | 225 |
| | $ | 207 |
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Accounts payable and accrued liabilities | 13 |
| | 17 |
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Other current liabilities | 155 |
| | 129 |
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Sales of EIP Receivables
Overview of the Transaction
In 2015, we entered into an arrangement to sell certain EIP accounts receivables on a revolving basis and in August 2017,(the “EIP sale arrangement”). The maximum funding commitment of the sale arrangement is $1.3 billion. The scheduled expiration date of the EIP sale arrangement was amendedis November 18, 2021.
On April 30, 2020, we agreed with the purchaser banks to reduceupdate our collection policies to temporarily allow for flexibility for modifications to the maximum funding commitment to $1.2 billion (the “EIP sale arrangement”)EIP receivables sold that are impacted by the Pandemic and extend the scheduled expiration date to November 2018. exclusion of such EIP receivables from all pool performance triggers.
As of both SeptemberJune 30, 20172021 and December 31, 2016,2020, the EIP sale arrangement provided funding of $1.2$1.3 billion. Sales of EIP receivables occur daily and are settled on a monthly basis. The receivables consist of customer EIP balances, which require monthly customer payments for up to 24 months.
In connection with this EIP sale arrangement, we formed a wholly-ownedwholly owned subsidiary, which qualifies as a bankruptcy remote entity (the “EIP BRE”). Pursuant to the EIP sale arrangement, our wholly-ownedwholly owned subsidiary transfers selected receivables to the EIP BRE. The EIP BRE then sells the receivables to a non-consolidated and unaffiliated third-party entity forover which we do not exercise any level of control, nor does the third-party entity qualify as a VIE.
Variable Interest Entity
We determined that the EIP BRE is a VIE as its equity investment at risk lacks the obligation to absorb a certain portion of its expected losses. We have a variable interest in the EIP BRE and have determined that we are the primary beneficiary based on our ability to direct the activities which most significantly impact the EIP BRE’s economic performance. Those activities include selecting which receivables are transferred into the EIP BRE and sold in the EIP sale arrangement and funding of the EIP BRE. Additionally, our equity interest in the EIP BRE obligates us to absorb losses and gives us the right to receive benefits from the EIP BRE that could potentially be significant to the EIP BRE. Accordingly, we determined that we are the primary beneficiary, and include the balances and results of operations of the EIP BRE in our condensed consolidated financial statements.
The following table summarizes the carrying amounts and classification of assets, which consistsconsist primarily of the deferred purchase price, and liabilities included in our Condensed Consolidated Balance Sheets that relate with respect to the EIP BRE: | | | | | | | | | | | |
(in millions) | June 30, 2021 | | December 31, 2020 |
Other current assets | $ | 436 | | | $ | 388 | |
Other assets | 133 | | | 120 | |
Other long-term liabilities | 4 | | | 4 | |
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(in millions) | September 30, 2017 | | December 31, 2016 |
Other current assets | $ | 357 |
| | $ | 371 |
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Other assets | 90 |
| | 83 |
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Other long-term liabilities | 2 |
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In addition, the EIP BRE is a separate legal entity with its own separate creditors who will be entitled, prior to any liquidation of the EIP BRE, to be satisfied prior to any value in the EIP BRE becoming available to us. Accordingly, the assets of the EIP BRE may not be used to settle our general obligations and creditors of the EIP BRE have limited recourse to our general credit.
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”). The maximum funding commitment of the service receivable sale arrangement is $950 million, and the facility expires in March 2022. As of June 30, 2021 and December 31, 2020, the service receivable sale arrangement provided funding of $775 million and $772 million, respectively. Sales of receivables occur daily and are settled on a monthly basis. The receivables consist of service charges currently due from customers and are short-term in nature.
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”). In March 2021, we amended the sale arrangement to conform its structure to the EIP sale arrangement (the “March 2021 Amendment”). This involved, among other things, removal of an unaffiliated special purpose entity that we did not consolidate under the original structure and changes in contractual counterparties. While the amendment simplified the structure of the arrangement making it more efficient, it did not impact the maximum funding commitment under, or the level of funding provided by, the facility.
Pursuant to the amended service receivable sale arrangement, our wholly owned subsidiary transfers selected receivables to the Service BRE. The Service BRE then sells the receivables to a non-consolidated and unaffiliated third-party entity over which we do not exercise any level of control and which does not qualify as a VIE.
Variable Interest Entity
Prior to the March 2021 Amendment, the Service BRE did not qualify as a VIE, but due to the significant level of control we exercised over the entity, it was consolidated.
The March 2021 Amendment to the service receivable sale arrangement triggered a VIE reassessment, and we determined that the Service BRE now qualifies as a VIE. We have a variable interest in the Service BRE and have determined that we are the primary beneficiary based on our ability to direct the activities that most significantly impact the Service BRE’s economic performance. Those activities include selecting which receivables are transferred into the Service BRE and sold in the service receivable sale arrangement and funding the Service BRE. Additionally, our equity interest in the Service BRE obligates us to absorb losses and gives us the right to receive benefits from the Service BRE that could potentially be significant to the Service BRE. Accordingly, we include the balances and results of operations of the Service BRE in our condensed consolidated financial statements.
The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, and liabilities included in our Condensed Consolidated Balance Sheets with respect to the Service BRE: | | | | | | | | | | | |
(in millions) | June 30, 2021 | | December 31, 2020 |
Other current assets | $ | 202 | | | $ | 378 | |
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Other current liabilities | 313 | | | 357 | |
In addition, the Service BRE is a separate legal entity with its own separate creditors who will be entitled, prior to any liquidation of the Service BRE, to be satisfied prior to any value in the Service BRE becoming available to us. Accordingly, the assets of the Service BRE may not be used to settle our general obligations, and creditors of the Service BRE have limited recourse to our general credit.
Sales of Receivables
The transfers of service receivables and EIP receivables to the non-consolidated entities are accounted for as sales of financial assets. Once identified for sale, the receivable is recorded at the lower of cost or fair value. Upon sale, we derecognize the net carrying amount of the receivables.
We recognize the net cash proceeds received upon sale in Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows.
The We recognize proceeds are net of the deferred purchase price, consisting of a receivable from the purchasers that entitles us to certain collections on the receivables. We recognize the collection of the deferred purchase price in Net cash provided by operatingused in investing activities in our Condensed Consolidated Statements of Cash Flows as it is dependent on collection of the customer receivables and is not subjectProceeds related to significant interest rate risk. beneficial interests in securitization transactions.
The deferred purchase price represents a financial asset that is primarily tied to the creditworthiness of the customers and which can be settled in such a way that we may not recover substantially all of our recorded investment, due to default by the customers on the underlying receivables. WeAt inception, we elected at inception, to measure the deferred purchase price at fair value with changes in fair value included in Selling, general and administrative expense in 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 unobservableLevel 3 inputs, (Level 3 inputs), including customer default rates. As of SeptemberJune 30, 20172021 and December 31, 2016,2020, our deferred purchase price related to the sales of service receivables and EIP receivables was $671$770 million and $659$884 million, respectively.
The following table summarizes the impactsimpact of the sale of certain service receivables and EIP receivables in our Condensed Consolidated Balance Sheets:Sheets: | | | | | | | | | | | |
(in millions) | June 30, 2021 | | December 31, 2020 |
Derecognized net service receivables and EIP receivables | $ | 2,491 | | | $ | 2,528 | |
Other current assets | 638 | | | 766 | |
of which, deferred purchase price | 637 | | | 764 | |
Other long-term assets | 133 | | | 120 | |
of which, deferred purchase price | 133 | | | 120 | |
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Other current liabilities | 313 | | | 357 | |
Other long-term liabilities | 4 | | | 4 | |
Net cash proceeds since inception | 1,755 | | | 1,715 | |
Of which: | | | |
Change in net cash proceeds during the year-to-date period | 40 | | | (229) | |
Net cash proceeds funded by reinvested collections | 1,715 | | | 1,944 | |
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(in millions) | September 30, 2017 | | December 31, 2016 |
Derecognized net service receivables and EIP receivables | $ | 2,362 |
| | $ | 2,502 |
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Other current assets | 582 |
| | 578 |
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of which, deferred purchase price | 581 |
| | 576 |
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Other long-term assets | 90 |
| | 83 |
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of which, deferred purchase price | 90 |
| | 83 |
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Accounts payable and accrued liabilities | 13 |
| | 17 |
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Other current liabilities | 155 |
| | 129 |
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Other long-term liabilities | 2 |
| | 4 |
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Net cash proceeds since inception | 1,963 |
| | 2,030 |
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Of which: | | | |
Change in net cash proceeds during the year-to-date period | (67 | ) | | 536 |
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Net cash proceeds funded by reinvested collections | 2,030 |
| | 1,494 |
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We recognized lossesa gain from sales of receivables, of $67 million and $59 million for the three months ended September 30, 2017 and 2016, respectively, and $242 million and $157 million for the nine months ended September 30, 2017 and 2016, respectively. These losses from sales of receivables were recognized in Selling, general and administrative expense in our Condensed Consolidated Statements of Comprehensive Income. Losses from sales of receivables includeincluding adjustments to the receivables’ fair values and changes in fair value of the deferred purchase price.price, of $12 million and a loss from sales of receivables of $30 million for the three months ended June 30, 2021 and 2020, respectively, and a gain of $30 million and a loss of $55 million for the six months ended June 30, 2021 and 2020, respectively, in Selling, general and administrative expense in our Condensed Consolidated Statements of Comprehensive Income.
Continuing Involvement
Pursuant to the sale arrangements described above, we have continuing involvement with the service receivables and EIP receivables we sell as we service the receivables, and are required to repurchase certain receivables, including ineligible receivables, aged receivables and receivables where write-off is imminent.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. While servicingAt the direction of the purchasers of the sold receivables, we apply the same policies and procedures towhile servicing the sold receivables as we apply to our owned receivables, and we continue to maintain normal relationships with our customers. Pursuant to the EIP sale arrangement, under certain circumstances, we are required to deposit cash or replacement EIP receivables primarily for contracts terminated by customers under our Just Upgrade My Phone (“JUMP!”) Program. program.
In addition, we have continuing involvement with the sold receivables as we may be responsible for absorbing additional credit losses pursuant to the sale arrangements. Our maximum exposure to loss related to the involvement with the service receivables and EIP receivables sold under the sale arrangements was $1.2 billion as of September 30, 2017. The maximum exposure to loss, which is a required disclosure under GAAP, represents an estimated loss that would be incurred under severe, hypothetical circumstances whereby we would not receive the deferred purchase price portion of the contractual proceeds withheld by the purchasers and would also be required to repurchase the maximum amount of receivables pursuant to the sale arrangements without consideration for any recovery. As we believe the probability of these circumstances occurring is remote, the maximum exposure to loss is not an indication of our expected loss.
Note 5 – Goodwill, Spectrum License Transactions and Other Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the six months ended June 30, 2021 and year ended December 31, 2020, are as follows: | | | | | |
(in millions) | Goodwill |
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Historical goodwill, net of accumulated impairment losses of $10,766 | $ | 1,930 | |
Goodwill from acquisitions in 2020 | 9,405 | |
Layer3 goodwill impairment | (218) | |
Balance as of December 31, 2020 | 11,117 | |
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Purchase price adjustment of goodwill from acquisitions in 2020 | 22 | |
Goodwill from acquisitions in 2021 | 13 | |
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Balance as of June 30, 2021 | $ | 11,152 | |
Accumulated impairment losses at June 30, 2021 | $ | (10,984) | |
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On April 1, 2020, we completed our Merger with Sprint, which was accounted for as a business combination resulting in $9.4 billion in goodwill. The acquired goodwill was allocated to the wireless reporting unit and will be tested for impairment at this level. See Note 2 - Business Combinations for further information.
Intangible Assets
Identifiable Intangible Assets Acquired
The following table summarizes the fair value of the intangible assets acquired in the Merger: | | | | | | | | | | | |
| Weighted Average Useful Life (in years) | | Fair Value as of April 1, 2020 (in millions) |
Spectrum licenses | Indefinite-lived | | $ | 45,400 | |
Tradenames (1) | 2 years | | 207 | |
Customer relationships | 8 years | | 4,900 | |
Favorable spectrum leases | 18 years | | 745 | |
Other intangible assets | 7 years | | 428 | |
Total intangible assets acquired | | | $ | 51,680 | |
(1) Tradenames include the Sprint brand.
Spectrum licenses are issued for a fixed period of time, typically up to 15 years; however, the FCC has granted license renewals routinely and at a nominal cost. The spectrum licenses acquired expire at various dates and we believe we will be able to meet all requirements necessary to secure renewal of our spectrum licenses at a nominal cost. Moreover, we determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our spectrum licenses. Therefore, we determined the spectrum licenses should be treated as indefinite-lived intangible assets. The fair value of spectrum licenses includes the value associated with aggregating a nationwide portfolio of owned and leased spectrum.
Favorable spectrum leases represent a contract where the market rate is higher than the future contractual lease payments. We lease this spectrum from third parties who hold the spectrum licenses. As these contracts pertain to intangible assets, they are excluded from the lease accounting guidance (ASC 842) and are accounted for as service contracts in which the expense is recognized on a straight-line basis over the lease team. Favorable spectrum leases of $745 million were recorded as an intangible asset as a result of purchase accounting and are amortized on a straight-line basis over the associated remaining lease term. Additionally, we recognized unfavorable spectrum lease liabilities of $125 million, which are also amortized over their respective remaining lease terms and are included in Other liabilities in our Condensed Consolidated Balance Sheets.
The customer relationship intangible assets represent the value associated with the acquired Sprint customers. The customer relationship intangible assets are amortized using the sum-of-the-years’ digits method over periods of up to eight years.
Other intangible assets are amortized over the remaining period that the asset is expected to provide benefit to us.
Spectrum Licenses
The following table summarizes our spectrum license activity duringfor the ninesix months ended SeptemberJune 30, 2017:2021: | | | | | | | |
(in millions) | 2021 | | |
Spectrum licenses, beginning of year | $ | 82,828 | | | |
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Spectrum license acquisitions | 87 | | | |
Costs to clear spectrum | 2 | | | |
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Spectrum licenses, end of period | $ | 82,917 | | | |
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(in millions) | Spectrum Licenses |
Balance at December 31, 2016 | $ | 27,014 |
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Spectrum license acquisitions | 8,247 |
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Spectrum licenses transferred to held for sale | (271 | ) |
Costs to clear spectrum | 17 |
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Balance at September 30, 2017 | $ | 35,007 |
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Spectrum License Exchange
In March 2017, we closed on an agreement with a third party for2021, the exchange of certain spectrum licenses. Upon closing of the transaction, we recorded the spectrum licenses received at their estimated fair value of approximately $123 million and recognized a gain of $37 million included in Gains on disposal of spectrum licenses in our Condensed Consolidated Statements of Comprehensive Income.
In September 2017, we closed on an agreement with a third party for the exchange of certain AWS and PCS spectrum licenses. Upon closing of the transaction, we recorded the spectrum licenses received at their estimated fair value of approximately $115 million and recognized a gain of $29 million included in Gains on disposal of spectrum licenses in our Condensed Consolidated Statements of Comprehensive Income.
In September 2017, we entered into an agreement with a third party for the exchange of certain AWS and PCS spectrum licenses. The transaction is expected to close during the first quarter of 2018, subject to regulatory approvals and customary closing conditions. Our spectrum licenses to be transferred as part of the exchange transaction were reclassified as assets held for sale and were included in Other current assets in our Condensed Consolidated Balance Sheetsat their carrying value of $184 million as of September 30, 2017.
Spectrum License Purchase
In September 2017, we entered into a UPA to purchase the remaining equity of INS. We expect to receive the INS spectrum licenses at the close of the transaction within the next 6 months, subject to regulatory approvals and customary closing conditions. See Note 2 - Significant Transactions for further information.
Broadcast Incentive Auction
In April 2017, the Federal Communications Commission (the “FCC”)FCC announced that we were the winning bidder of 1,525142 licenses in the 600 MHz spectrum auctionAuction 107 (C-band spectrum) for an aggregate purchase price of $8.0 billion.$9.3 billion, excluding relocation costs. At the inception of the auctionAuction 107 in June 2016,October 2020, we deposited $2.2 billion with the FCC which, based on the outcome$438 million. Upon conclusion of the auction, was sufficient to cover our down payment obligation dueAuction 107 in April 2017. In May 2017,March 2021, we paid the FCC the remaining $5.8$8.9 billion offor the purchase price using cash reserveslicenses won in the auction. Cash payments to acquire spectrum licenses and by issuing debtpayments for costs to Deutsche Telekom AG (“DT”), our majority stockholder, pursuant to existing purchase commitments. See Note 7 - Debt for further information. The licensesclear spectrum are included in SpectrumPurchases of spectrum licenses and other intangible assets, including deposits in our Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2021. We expect to incur an additional $1.2 billion in relocation costs which will be paid through 2024.
The aggregate cash payments made to the FCC are included in Other assets as of SeptemberJune 30, 2017, on2021, in our Condensed Consolidated Balance Sheets,. We began deployment as the licenses had not yet been issued. As of theseJune 30, 2021, the activities that are necessary to get the C-band spectrum ready for its intended use have not begun, as such, capitalization of the interest associated with the costs of acquiring the C-band spectrum has not begun. Subsequent to June 30, 2021, on July 23, 2021, the FCC issued to us the licenses on our networkwon in the third quarterAuction.
Other Intangible Assets
The components of 2017.Other intangible assets were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Useful Lives | | June 30, 2021 | | December 31, 2020 |
(in millions) | | Gross Amount | | Accumulated Amortization | | Net Amount | | Gross Amount | | Accumulated Amortization | | Net Amount |
| | | | | | | | | | | | | |
Customer relationships | Up to 8 years | | $ | 4,903 | | | $ | (1,398) | | | $ | 3,505 | | | $ | 4,900 | | | $ | (865) | | | $ | 4,035 | |
Tradenames and patents | Up to 19 years | | 606 | | | (486) | | | 120 | | | 598 | | | (412) | | | 186 | |
Favorable spectrum leases | Up to 27 years | | 741 | | | (54) | | | 687 | | | 790 | | | (35) | | | 755 | |
Other | Up to 10 years | | 377 | | | (89) | | | 288 | | | 377 | | | (55) | | | 322 | |
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Other intangible assets | | | $ | 6,627 | | | $ | (2,027) | | | $ | 4,600 | | | $ | 6,665 | | | $ | (1,367) | | | $ | 5,298 | |
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Amortization expense for intangible assets subject to amortization was $295 million and $387 million for the three months ended June 30, 2021 and 2020, respectively, and $661 million and $411 million for the six months ended June 30, 2021 and 2020, respectively.
The estimated aggregate future amortization expense for intangible assets subject to amortization are summarized below: | | | | | |
(in millions) | Estimated Future Amortization |
| |
Twelve Months Ending June 30, | |
2022 | $ | 1,095 | |
2023 | 903 | |
2024 | 746 | |
2025 | 588 | |
2026 | 428 | |
Thereafter | 840 | |
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Total | $ | 4,600 | |
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Substantially all of the estimated future amortization expense is associated with intangible assets acquired in the Merger.
Note 6 – Fair Value Measurements
The carrying values of cashCash and cash equivalents, short-term investments, accountsAccounts receivable, accountsAccounts receivable from affiliates, accountsAccounts payable and accrued liabilities and borrowings under vendor financing arrangements with our senior secured revolving credit facility with DTprimary network equipment suppliers approximate fair value due to the short-term maturities of these instruments.
Assets and Liabilities Measured at Fair ValueDerivative 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 (cash flow hedge) to help minimize significant, unplanned fluctuations in cash flows caused by interest rate volatility. We do not use derivatives for trading or speculative purposes.
Interest Rate Lock Derivatives
In October 2018, we entered into interest rate lock derivatives with notional amounts of $9.6 billion. In November 2019, we extended the mandatory termination date on a Recurring Basis
The carrying amounts and fair valuesour interest rate lock derivatives to June 3, 2020. For the three months ended March 31, 2020, we made net collateral transfers to certain of our assets and liabilities measured at fair valuederivative counterparties totaling $580 million, which included variation margin transfers to (or from) such derivative counterparties based on a recurring basisdaily market movements. No amounts were transferred to the derivative counterparties subsequent to March 31, 2020. These collateral transfers are included inNet cash related to derivative contracts under collateral exchange arrangements within Net cash used in investing activities in our Condensed Consolidated Statements of Cash Flows.
We recorded interest rate lock derivatives on our Condensed Consolidated Balance Sheets were as follows:
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| Level within the Fair Value Hierarchy | | September 30, 2017 | | December 31, 2016 |
(in millions) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Assets: | | | | | | | | | |
Deferred purchase price assets | 3 | | $ | 671 |
| | $ | 671 |
| | $ | 659 |
| | $ | 659 |
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Liabilities: | | | | | | | | | |
Guarantee liabilities | 3 | | 121 |
| | 121 |
| | 135 |
| | 135 |
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The principal amounts and fair values of our long-term debt included in our Condensed Consolidated Balance Sheets were as follows:
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| Level within the Fair Value Hierarchy | | September 30, 2017 | | December 31, 2016 |
(in millions) | | Principal Amount | | Fair Value | | Principal Amount | | Fair Value |
Liabilities: | | | | | | | | | |
Senior Notes to third parties | 1 | | $ | 11,850 |
| | $ | 12,605 |
| | $ | 18,600 |
| | $ | 19,584 |
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Senior Notes to affiliates | 2 | | 7,500 |
| | 7,897 |
| | — |
| | — |
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Incremental Term Loan Facility to affiliates | 2 | | 4,000 |
| | 4,020 |
| | — |
| | — |
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Senior Reset Notes to affiliates | 2 | | 3,100 |
| | 3,290 |
| | 5,600 |
| | 5,955 |
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Senior Secured Term Loans | 2 | | — |
| | — |
| | 1,980 |
| | 2,005 |
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Long-term Debt
Theat fair value of our Senior Notes to third partiesthat was determined based on quotedderived primarily from observable market prices in active markets, and therefore was classified as Level 1 within the fair value hierarchy. The fair values of the Senior Notes to affiliates, Incremental Term Loan Facility to affiliates, Senior Reset Notes to affiliates and Senior Secured Term Loans were determined based on a discounted cash flow approach using quoted prices of instruments with similar terms and maturities and an estimate for our standalone credit risk. Accordingly, our Senior Notes to affiliates, Incremental Term Loan Facility to affiliates, Senior Reset Notes to affiliates and Senior Secured Term Loansdata, including yield curves. Interest rate lock derivatives were classified as Level 2 withinin the fair value hierarchy. Cash flows associated with qualifying hedge derivative instruments are presented in the same category on the Condensed Consolidated Statements of Cash Flows as the item being hedged.
Although we have determinedAggregate changes in the estimated fair values using available market information and commonly accepted valuation methodologies, considerable judgment was required in interpreting market data to develop fair value estimates forof the Senior Notes to affiliates, Incremental Term Loan Facility to affiliates, Senior Reset Notes to affiliatesinterest rate lock derivatives, net of tax and Senior Secured Term Loans to affiliates. The fair value estimates were based on information availableamortization, of $1.5 billion and $1.6 billion are presented in Accumulated other comprehensive loss as of SeptemberJune 30, 20172021 and December 31, 2016. As such,2020, respectively.
Between April 2 and April 6, 2020, in connection with the issuance of an aggregate of $19.0 billion of Senior Secured Notes bearing interest rates ranging from 3.500% to 4.500% and maturing in 2025 through 2050, we terminated our estimatesinterest rate lock derivatives.
At the time of termination in the second quarter of 2020, the interest rate lock derivatives were a liability of $2.3 billion, of which $1.2 billion was cash-collateralized. The cash flows associated with the settlement of interest rate lock derivatives are not necessarily indicativepresented on a gross basis in our Condensed Consolidated Statements of Cash Flows, with the total cash payments to settle the swaps of $2.3 billion presented in changes in Other current and long-term liabilities within Net cash provided by operating activities and the return of cash collateral of $1.2 billion presented as an inflow in Net cash related to derivative contracts under collateral exchange arrangements within Net cash used in investing activities for the three and six months ended June 30, 2020.
Upon the issuance of debt to which the hedged interest rate risk related, we began amortizing the Accumulated other comprehensive loss related to the derivatives into Interest expense in a manner consistent with how the hedged interest payments affect earnings. For the three and six months ended June 30, 2021, $47 million and $93 million, respectively, was amortized from Accumulated other comprehensive loss into Interest expense in the Condensed Consolidated Statements of
Comprehensive Income. For both the three and six months ended June 30, 2020, $39 million was amortized from Accumulated other comprehensive loss into Interest expense. We expect to amortize $196 million of the amount we could realize in a current market exchange.Accumulated other comprehensive loss associated with the derivatives into Interest expense over the next 12 months.
Deferred Purchase Price Assets
In connection with the sales of certain service and EIP receivablesaccounts 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 customer default rates. See Note 4 – Sales of Certain Receivables for further information.information.
Guarantee LiabilitiesThe carrying amounts of our deferred purchase price assets, which are measured at fair value on a recurring basis and are included in our Condensed Consolidated Balance Sheets, were $770 million and $884 million at June 30, 2021 and December 31, 2020, respectively. Fair value was equal to carrying amount at June 30, 2021 and December 31, 2020.
We offer certain device trade-in programs, including JUMP!, which provide eligible customers a specified-price trade-in right to upgrade their device. For customers who are enrolled in a device trade-in program, we defer the portion of equipment revenues which represents the estimatedDebt
The fair value of the specified-price trade-in right guarantee incorporating the expected
probabilityour Senior Unsecured Notes and timing of the handset upgradeSenior Secured Notes to third parties was determined based on quoted market prices in active markets, and the estimated fair value of the used handset which is returned. Accordingly, our guarantee liabilitiestherefore were classified as Level 31 within the fair value hierarchy. When customers upgrade their device, the difference between the trade-inThe 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 the customer andaffiliates 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, considerable judgment was required in interpreting market data to develop fair value estimates for the Senior Notes to affiliates. The fair value estimates were based on information available as of June 30, 2021 and December 31, 2020. As such, our estimates are not necessarily indicative of the returned device is recorded against the guarantee liabilities. Guarantee liabilities areamount we could realize in a current market exchange.
The carrying amounts and fair values of our short-term and long-term debt included in Other current liabilities in our Condensed Consolidated Balance Sheets. were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Level within the Fair Value Hierarchy | | June 30, 2021 | | December 31, 2020 |
(in millions) | | Carrying Amount (1) | | Fair Value (1) | | Carrying Amount (1) | | Fair Value (1) |
Liabilities: | | | | | | | | | |
Senior Unsecured Notes to third parties | 1 | | $ | 34,768 | | | $ | 36,967 | | | $ | 29,966 | | | $ | 32,450 | |
Senior Notes to affiliates | 2 | | 4,725 | | | 4,937 | | | 4,716 | | | 4,991 | |
Senior Secured Notes to third parties | 1 | | 35,629 | | | 38,612 | | | 36,204 | | | 40,519 | |
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The total estimated remaining gross EIP receivable balances of all enrolled handset upgrade program customers, which are the remaining EIP amounts underlying the JUMP! guarantee, including EIP receivables that have been sold, was $2.2 billion(1) Excludes $148 million and $240 million as of SeptemberJune 30, 2017. This is not an indication of our expected loss exposure2021 and December 31, 2020, respectively, in vendor financing arrangements and other debt as it does not consider the expectedcarrying values approximate fair value primarily due to the short-term maturities of the used handset or the probability and timing of the trade-in.these instruments.
Note 7 – Debt
The following table sets forth the debt balances and activity as of, and for the ninesix months ended, SeptemberJune 30, 20172021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | December 31, 2020 | | Proceeds from Issuances and Borrowings (1) | | | | Note Redemptions (1) | | Repayments | | Reclassifications (1) | | Other (2) | | June 30, 2021 |
Short-term debt | $ | 4,579 | | | $ | 0 | | | | | $ | 0 | | | $ | (660) | | | $ | 786 | | | $ | (57) | | | $ | 4,648 | |
Long-term debt | 61,830 | | | 9,768 | | | | | (4,742) | | | 0 | | | (786) | | | (173) | | | 65,897 | |
Total debt to third parties | 66,409 | | | 9,768 | | | | | (4,742) | | | (660) | | | 0 | | | (230) | | | 70,545 | |
Short-term debt to affiliates | 0 | | | 0 | | | | | 0 | | | 0 | | | 2,231 | | | 4 | | | 2,235 | |
Long-term debt to affiliates | 4,716 | | | 0 | | | | | 0 | | | 0 | | | (2,231) | | | 5 | | | 2,490 | |
Total debt | $ | 71,125 | | | $ | 9,768 | | | | | $ | (4,742) | | | $ | (660) | | | $ | 0 | | | $ | (221) | | | $ | 75,270 | |
(1)Issuances and borrowings, note redemptions, and reclassifications are recorded net of related issuance costs, discounts and premiums.
(2)Other includes the amortization of premiums, discounts, debt issuance costs and consent fees.
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(in millions) | December 31, 2016 | | Issuances and Borrowings (1) | | Note Redemptions (1) | | Extinguishments (1) | | Repayments | | Other (2) | | September 30, 2017 |
Short-term debt | $ | 354 |
| | $ | — |
| | $ | — |
| | $ | (20 | ) | | $ | — |
| | $ | 224 |
| | $ | 558 |
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Long-term debt | 21,832 |
| | 1,495 |
| | (8,365 | ) | | (1,947 | ) | | — |
| | 148 |
| | 13,163 |
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Total debt to third parties | 22,186 |
| | 1,495 |
| | (8,365 | ) | | (1,967 | ) | | — |
| | 372 |
| | 13,721 |
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Short-term debt to affiliates | — |
| | 2,910 |
| | — |
| | — |
| | (2,910 | ) | | — |
| | — |
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Long-term debt to affiliates | 5,600 |
| | 8,985 |
| | — |
| | — |
| | — |
| | 1 |
| | 14,586 |
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Total debt to affiliates | 5,600 |
| | 11,895 |
| | — |
| | — |
| | (2,910 | ) | | 1 |
| | 14,586 |
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Total debt | $ | 27,786 |
| | $ | 13,390 |
| | $ | (8,365 | ) | | $ | (1,967 | ) | | $ | (2,910 | ) | | $ | 373 |
| | $ | 28,307 |
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(1) | Issuances and borrowings, note redemptions and extinguishments are recorded net of related issuance costs, discounts and premiums. Issuances and borrowings for Short-term debt to affiliates represent net outstanding borrowings on our senior secured revolving credit facility. |
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(2) | Other includes: $299 million of issuances of short-term debt related to vendor financing arrangements, of which $291 million is related to financing of property and equipment. During the nine months ended September 30, 2017, we repaid $296 million under the vendor financing arrangements. As of September 30, 2017, vendor financing arrangements totaled $3 million. Vendor financing arrangements are included in Short-term debt within Total current liabilities in our Condensed Consolidated Balance Sheets. Additional activity in Other includes capital leases and the amortization of discounts and premiums. As of September 30, 2017 and December 31, 2016, capital lease liabilities totaled $1.8 billion and $1.4 billion, respectively. |
Our effective interest rate, excluding the impact of derivatives and capitalized interest, was approximately 4.1% and 4.9% for the three months ended June 30, 2021 and 2020, respectively, and 4.2% and 4.7% for the six months ended June 30, 2021 and 2020, respectively, on weighted average debt outstanding of $75.5 billion and $66.1 billion for the three months ended June 30, 2021 and 2020, respectively, and $74.5 billion and $48.5 billion for the six months ended June 30, 2021 and 2020, 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 and short-term and long-term debt to affiliates, net of unamortized premiums, discounts, debt issuance costs and consent fees.
Debt to Third Parties
Issuances and Borrowings
During the ninesix months ended SeptemberJune 30, 2017,2021, we issued the following Senior Notes: | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Principal Issuances | | Premiums and Issuance Costs | | Net Proceeds from Issuance of Long-Term Debt | | Issue Date |
2.250% Senior Notes due 2026 | $ | 1,000 | | | $ | (7) | | | $ | 993 | | | January 14, 2021 |
2.625% Senior Notes due 2029 | 1,000 | | | (7) | | | 993 | | | January 14, 2021 |
2.875% Senior Notes due 2031 | 1,000 | | | (6) | | | 994 | | | January 14, 2021 |
2.625% Senior Notes due 2026 | 1,200 | | | (7) | | | 1,193 | | | March 23, 2021 |
3.375% Senior Notes due 2029 | 1,250 | | | (7) | | | 1,243 | | | March 23, 2021 |
3.500% Senior Notes due 2031 | 1,350 | | | (8) | | | 1,342 | | | March 23, 2021 |
2.250% Senior Notes due 2026 | 800 | | | (2) | | | 798 | | | May 13, 2021 |
3.375% Senior Notes due 2029 | 1,100 | | | 6 | | | 1,106 | | | May 13, 2021 |
3.500% Senior Notes due 2031 | 1,100 | | | 6 | | | 1,106 | | | May 13, 2021 |
Total of Senior Notes issued | $ | 9,800 | | | $ | (32) | | | $ | 9,768 | | | |
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(in millions) | Principal Issuances | | Issuance Costs | | Net Proceeds from Issuance of Long-Term Debt |
4.000% Senior Notes due 2022 | $ | 500 |
| | $ | 2 |
| | $ | 498 |
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5.125% Senior Notes due 2025 | 500 |
| | 2 |
| | 498 |
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5.375% Senior Notes due 2027 | 500 |
| | 1 |
| | 499 |
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Total of Senior Notes Issued | $ | 1,500 |
| | $ | 5 |
| | $ | 1,495 |
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Credit Facilities
On October 30, 2020, we entered into a $5.0 billion senior secured term loan commitment with certain financial institutions. On January 14, 2021, we issued an aggregate of $3.0 billion of Senior Notes. A portion of the senior secured term loan commitment was reduced by an amount equal to the aggregate gross proceeds of the Senior Notes, which reduced the commitment to $2.0 billion. On March 23, 2021, we issued an aggregate of $3.8 billion of Senior Notes. The senior secured term loan commitment was terminated upon the issuance of the $3.8 billion of Senior Notes.
Senior Notes
On January 14, 2021, we issued $1.0 billion of 2.250% Senior Notes due 2026, $1.0 billion of 2.625% Senior Notes due 2029, and $1.0 billion of 2.875% Senior Notes due 2031.
On March 16, 2017, T-Mobile USA and certain of its affiliates, as guarantors,23, 2021, we issued a total of $1.5$1.2 billion of public2.625% Senior Notes with various interest ratesdue 2026, $1.25 billion of 3.375% Senior Notes due 2029, and maturity dates. Issuance costs related$1.35 billion of 3.500% Senior Notes due 2031.
On May 13, 2021, we issued $800 million of 2.250% Senior Notes due 2026, $1.1 billion of 3.375% Senior Notes due 2029, and $1.1 billion of 3.500% Senior Notes due 2031.
Note Redemptions and Repayments
Notes Redemptions
During the ninesix months ended SeptemberJune 30, 2017,2021, we made the following note redemptions:redemptions and repayments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Principal Amount | | Write-off of Issuance Cost and Consent Fees (1) | | Redemption Premium (2) | | Redemption Date | | Redemption Price |
6.500% Senior Notes due 2026 | $ | 2,000 | | | $ | 36 | | | $ | 65 | | | March 27, 2021 | | 103.250 | % |
6.000% Senior Notes due 2023 | 1,300 | | | 10 | | | 0 | | | May 23, 2021 | | 100.000 | % |
6.000% Senior Notes due 2024 | 1,000 | | | 9 | | | 0 | | | May 23, 2021 | | 100.000 | % |
5.125% Senior Notes due 2025 | 500 | | | 3 | | | 6 | | | May 23, 2021 | | 101.281 | % |
Total Senior Notes to third parties redeemed | $ | 4,800 | | | $ | 58 | | | $ | 71 | | | | | |
| | | | | | | | | |
3.360% Secured Series 2016-1 A-1 Notes due 2021 | $ | 438 | | | $ | 0 | | | $ | 0 | | | Various | | N/A |
4.738% Secured Series 2018-1 A-1 Notes due 2025 | 131 | | | 0 | | | 0 | | | Various | | N/A |
Other debt | 91 | | | 0 | | | 0 | | | Various | | N/A |
Total Repayments | $ | 660 | | | $ | 0 | | | $ | 0 | | | | | |
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(in millions) | Principal Amount | | Write-off of Premiums, Discounts and Issuance Costs (1) | | Call Penalties (1) (2) | | Redemption Date | | Redemption Price |
6.625% Senior Notes due 2020 | $ | 1,000 |
| | $ | (45 | ) | | $ | 22 |
| | February 10, 2017 | | 102.208 | % |
5.250% Senior Notes due 2018 | 500 |
| | 1 |
| | 7 |
| | March 4, 2017 | | 101.313 | % |
6.250% Senior Notes due 2021 | 1,750 |
| | (71 | ) | | 55 |
| | April 1, 2017 | | 103.125 | % |
6.464% Senior Notes due 2019 | 1,250 |
| | — |
| | — |
| | April 28, 2017 | | 100.000 | % |
6.542% Senior Notes due 2020 | 1,250 |
| | — |
| | 21 |
| | April 28, 2017 | | 101.636 | % |
6.633% Senior Notes due 2021 | 1,250 |
| | — |
| | 41 |
| | April 28, 2017 | | 103.317 | % |
6.731% Senior Notes due 2022 | 1,250 |
| | — |
| | 42 |
| | April 28, 2017 | | 103.366 | % |
Total note redemptions | $ | 8,250 |
| | $ | (115 | ) | | $ | 188 |
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(1) | Write-off of premiums, discounts, issuance costs and call penalties are included in Other income (expense), net in our Condensed Consolidated Statements of Comprehensive Income. Write-off of premiums, discounts and issuance costs are included in Other, net within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. |
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(2) | The call penalty is the excess paid over the principal amount. Call penalties are included within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. |
(1)Write-off of issuance costs and consent fees are included in Other expense, net in our Condensed Consolidated Statements of Comprehensive Income. Write-off of issuance costs and consent fees are included in Loss on redemption of debt within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows.
Debt to Affiliates(2)The redemption premium is the excess paid over the principal amount. Redemption premiums are included within Net cash used in financing activities in our Condensed Consolidated Statements of Cash Flows.
Issuances and Borrowings
During the nine months ended September 30, 2017, we made the following borrowings:
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(in millions) | Net Proceeds from Issuance of Long-Term Debt | | Extinguishments | | Write-off of Discounts and Issuance Costs (1) |
LIBOR plus 2.00% Senior Secured Term Loan due 2022 | $ | 2,000 |
| | $ | — |
| | $ | — |
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LIBOR plus 2.00% Senior Secured Term Loan due 2024 | 2,000 |
| | — |
| | — |
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LIBOR plus 2.750% Senior Secured Term Loan (2) | — |
| | (1,980 | ) | | 13 |
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Total | $ | 4,000 |
| | $ | (1,980 | ) | | $ | 13 |
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(1) | Write-off of discounts and issuance costs are included in Other income (expense), net in our Condensed Consolidated Statements of Comprehensive Income and Other, net within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. |
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(2) | Our Senior Secured Term Loan extinguished during the nine months endedSeptember 30, 2017 was Third Party debt.
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On January 25, 2017, T-Mobile USA, Inc. (“T-Mobile USA”), and certain of its affiliates, as guarantors, entered into an agreement to borrow $4.0 billion under a secured term loan facility (“Incremental Term Loan Facility”) with DT, our majority stockholder, to refinance $1.98 billion of outstanding senior secured term loans under its Term Loan Credit Agreement dated November 9, 2015, with the remaining net proceeds from the transaction used to redeem callable high yield debt. The Incremental Term Loan Facility increased DT’s incremental term loan commitment provided to T-Mobile USA under that certain First Incremental Facility Amendment dated as of December 29, 2016, from $660 million to $2.0 billion and provided T-Mobile USA with an additional $2.0 billion incremental term loan commitment.
On January 31, 2017, the loans under the Incremental Term Loan Facility were drawn in two tranches: (i) $2.0 billion of which bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.00% and matures on November 9, 2022, and (ii) $2.0 billion of which bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.25% and matures on January 31, 2024. In July 2017, we repriced the $2.0 billion Incremental Term Loan Facility maturing on January 31, 2024, with DT by reducing the interest rate to a per annum rate of LIBOR plus a margin of 2.00%. No issuance fees were incurred related to this debt agreement for the nine months ended September 30, 2017.
On March 31, 2017, the Incremental Term Loan Facility was amended to waive all interim principal payments. The outstanding principal balance will be due at maturity.
During the nine months ended September 30, 2017,27, 2021, we issued the following Senior Notes to DT:
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(in millions) | Principal Issuances (Redemptions) | | Discounts (1) | | Net Proceeds from Issuance of Long-Term Debt |
4.000% Senior Notes due 2022 | $ | 1,000 |
| | $ | (23 | ) | | $ | 977 |
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5.125% Senior Notes due 2025 | 1,250 |
| | (28 | ) | | 1,222 |
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5.375% Senior Notes due 2027 (2) | 1,250 |
| | (28 | ) | | 1,222 |
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6.288% Senior Reset Notes due 2019 | (1,250 | ) | | — |
| | (1,250 | ) |
6.366% Senior Reset Notes due 2020 | (1,250 | ) | | — |
| | (1,250 | ) |
Total | $ | 1,000 |
| | $ | (79 | ) | | $ | 921 |
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(1) | Discounts reduce Proceeds from issuance of long-term debt and are included within Net cash (used in) provided by financing activities in our Condensed Consolidated Statements of Cash Flows. |
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(2) | In April 2017, we issued to DT $750 million in aggregate principal amount of the 5.375% Senior Notes due 2027, and in September 2017, we issued to DT the remaining $500 million in aggregate principal amount of the 5.375% Senior Notes due 2027. |
On March 13, 2017, DT agreed to purchase a total of $3.5redeemed $2.0 billion in aggregate principal amounts of Senior Notes with various interest rates and maturity dates (the “new DT Notes”).
Through net settlement in April 2017, we issued to DT a total of $3.0 billion in aggregate principal amount of the new DTour 6.500% Senior Notes anddue 2026. The notes were redeemed at a redemption price equal to 103.250% of the $2.5 billion in outstanding aggregate principal amount of Senior Reset Notes with variousthe notes (plus accrued and unpaid interest ratesthereon), and maturity dates (the “old DT Notes”).
were paid on March 26, 2021. The redemption pricespremium was $65 million and the write off of the old DT Notes were 103.144% and 103.183%, resulting in a total of $79 million in early redemption fees. These early redemption fees were recorded as discounts on the issuance of the new DT Notes.
In September 2017, we issued to DT $500 million in aggregate principal amount of 5.375% Senior Notes due 2027, which is the final tranche of the new DT Notes. We were not required to pay any underwriting fees or issuance costs in connection with the issuance of the notes.
Net proceeds from the issuance of the new DT Notes were $921and consent fees was approximately $36 million, and arewhich was included in Proceeds from issuanceOther expense, net in our Condensed Consolidated Statements of long-termComprehensive Income and Losses on redemption of debt in our Condensed Consolidated Statements of Cash Flows.
On May 9, 2017,23, 2021, we exercisedredeemed $1.3 billion aggregate principal amount of our option under existing purchase agreements and issued the following6.000% Senior Notes due 2023, $1.0 billion aggregate principal amount of our 6.000% Senior Notes due 2024 and $500 million aggregate principal amount of our 5.125% Senior Notes due 2025. The notes were redeemed at a redemption price equal to DT:
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(in millions) | Principal Issuances | | Premium | | Net Proceeds from Issuance of Long-Term Debt |
5.300% Senior Notes due 2021 | $ | 2,000 |
| | $ | — |
| | $ | 2,000 |
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6.000% Senior Notes due 2024 | 1,350 |
| | 40 |
| | 1,390 |
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6.000% Senior Notes due 2024 | 650 |
| | 24 |
| | 674 |
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Total | $ | 4,000 |
| | $ | 64 |
| | $ | 4,064 |
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The proceeds were used to fund a portion100.000%, 100.000% and 101.281% of the purchase priceprincipal amount of spectrum licenses wonthe notes (plus accrued and unpaid interest thereon), respectively, and were paid on May 21, 2021. The redemption premium of our 5.125% Senior Notes due 2025 was $6 million, and the write off of issuance costs and consent fees of our 6.000% Senior Notes due 2023, 6.000% Senior Notes due 2024 and 5.125% Senior Notes due 2025 was approximately $10 million, $9 million and $3 million, respectively, which were included in the 600 MHz spectrum auction. Net proceeds from these issuances include $64 millionOther expense, net in debt premiums. See Note 5 - Spectrum License Transactions for further information.
Revolving Credit Facility
We had no outstanding borrowings under our $1.5 billion senior secured revolving credit facility with DT asCondensed Consolidated Statements of September 30, 2017Comprehensive Income and December 31, 2016. Proceeds and borrowings from the revolving credit facility are presented in Proceeds from borrowingLosses on revolving credit facility and Repaymentsredemption of revolving credit facility within Net cash (used in) provided by financing activitiesdebt in our Condensed Consolidated Statements of Cash Flows.
Subsequent to June 30, 2021, on August 2, 2021, we delivered a notice of prepayment on the remaining aggregate principal amount of our 3.360% Secured Series 2016-1 A-1 Notes due 2021. The aggregate principal amount, plus accrued and unpaid interest, of approximately $220 million is expected to be paid on or around August 20, 2021.
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.
Note 8 – Income TaxesTower Obligations
WithinExisting 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 (the “2012 Tower Transaction”). CCI has fixed-price purchase options for the CCI Lease Sites totaling approximately $2.0 billion, exercisable at the end of the lease term. We lease back a portion of the space at certain tower sites for an initial term of 10 years, followed by optional renewals at customary terms.
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 in 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 de-recognize 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 balance sheet. We recorded long-term financial obligations in the amount of the net proceeds received and recognize interest on the tower obligations at a rate of approximately 8% using the effective interest method. 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 operation of the tower sites.
Acquired CCI Tower Lease Arrangements
Prior to 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 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 for an initial term of 10 years, followed by optional renewals at customary terms.
We considered if this arrangement resulted in the sale of the Master Lease Sites for which we would de-recognize 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 balance sheet.
As of the closing date of the Merger, we recognized Property and equipment with a fair value of $2.8 billion and tower obligations related to amounts owed to CCI under the leaseback of $1.1 billion. Additionally, we recognized $1.7 billion in Other long-term liabilities associated with contract terms that are unfavorable to current market rates, which includes unfavorable terms associated with the fixed-price purchase option in 2037.
We recognize interest expense on the tower obligations at a rate of approximately 6% using the effective interest method. The tower obligations are increased by interest expense and amortized through contractual leaseback payments made by us to CCI. The tower assets are reported in Property and equipment, net in 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.
The following table summarizes the balances associated with both of the tower arrangements in the Condensed Consolidated Balance Sheets: | | | | | | | | | | | |
(in millions) | June 30, 2021 | | December 31, 2020 |
Property and equipment, net | $ | 2,634 | | | $ | 2,838 | |
Tower obligations | 2,919 | | | 3,028 | |
Other long-term liabilities | 1,712 | | | 1,712 | |
Future minimum payments related to the tower obligations are approximately $401 million for the year ending June 30, 2022, $664 million in total for the years ending June 30, 2023 and 2024, $603 million in total for the years ending June 30, 2025 and 2026, and $473 million in total for the years 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 $282 million in our Operating lease liabilities as of June 30, 2021.
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, home internet, wearables, DIGITS (a service that allows our customers to use multiple mobile numbers on any compatible smartphone or device with internet connection), or other connected devices which includes tablets and SyncUP products;
•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.
Postpaid service revenues, including postpaid phone revenues and postpaid other revenues, were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | 2021 | | 2020 | | |
Postpaid service revenues | | | | | | | | | |
| | | | | | | | | |
Postpaid phone revenues | $ | 9,667 | | | $ | 9,341 | | | $ | 19,150 | | | $ | 14,918 | | | |
Postpaid other revenues | 825 | | | 618 | | | 1,645 | | | 928 | | | |
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Total postpaid service revenues | $ | 10,492 | | | $ | 9,959 | | | $ | 20,795 | | | $ | 15,846 | | | |
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We operate as a single operating segment. The balances presented within each revenue line item in our Condensed Consolidated Statements of Comprehensive Income we recorded an Income tax expenserepresent categories of $356revenue from contracts with customers disaggregated by type of product and service. 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 within Equipment revenues in our Condensed Consolidated Statements of Comprehensive Income.
We provide wireline communication services to domestic and international customers. Wireline service revenues were $187 million and $232$384 million for the three and six months ended June 30, 2021, respectively and were $211 million for both the three and six months ended June 30, 2020. Wireline service revenues are presented in Other service revenues in our Condensed Consolidated Statements of Comprehensive Income.
Equipment revenues from the lease of mobile communication devices were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | 2021 | | 2020 | | |
Equipment revenues from the lease of mobile communication devices | $ | 914 | | | $ | 1,421 | | | $ | 1,955 | | | $ | 1,586 | | | |
Contract Balances
The contract asset and contract liability balances from contracts with customers as of December 31, 2020 and June 30, 2021, were as follows: | | | | | | | | | | | | | |
(in millions) | Contract Assets | | Contract Liabilities | | |
| | | | | |
Balance as of December 31, 2020 | $ | 278 | | | $ | 824 | | | |
Balance as of June 30, 2021 | 267 | | | 789 | | | |
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Change | $ | (11) | | | $ | (35) | | | |
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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 $206 million and $204 million as of June 30, 2021 and December 31, 2020, respectively, was included in Other current assets in 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 revenuein our Condensed Consolidated Balance Sheets.
Revenues for the three and six months ended June 30, 2021 and 2020 include the following: | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | 2021 | | 2020 |
Amounts included in the beginning of year contract liability balance | $ | 41 | | | $ | 10 | | | $ | 724 | | | $ | 538 | |
Remaining Performance Obligations
As of June 30, 2021, 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 $1.2 billion. We expect to recognize revenue as the service is provided on these postpaid contracts over an extended contract term of 24 months.
As of June 30, 2021, the aggregate amount of transaction price allocated to remaining service and lease performance obligations associated with operating leases was $668 million and $403 million, respectively. We expect to recognize this revenue as service is provided over the lease contract term of 18 months.
Information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less have 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. This variable consideration has been excluded from the disclosure of remaining performance obligations. As of June 30, 2021, the aggregate amount of the contractual minimum consideration for wholesale, roaming and service contracts is $805 million, $1.4 billion and $1.0 billion for 2021, 2022, and 2023 and beyond, respectively. These contracts have a remaining duration ranging from less than one year to nine years.
Contract Costs
The total balance of deferred incremental costs to obtain contracts was $1.2 billion and $1.1 billion as of June 30, 2021 and December 31, 2020, respectively, and is included in Other assets in 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 is included in Selling, general and administrative expenses in our Condensed Consolidated Statements of Comprehensive Income and was $264 million and $205 million for the three months ended SeptemberJune 30, 20172021 and 2016,2020, respectively, and $618$512 million and $651$410 million for the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, respectively.
The changedeferred contract cost asset is assessed for impairment on a periodic basis. There were 0 impairment losses recognized on deferred contract cost assets for the three and six months ended SeptemberJune 30, 2017 was primarily from higher income before income taxes. The change2021 and 2020.
30, 2017 was primarily from a lower effective tax rate partially offset by higher income before income taxes. The effective tax rate was 39.3% and 38.8% for the three months ended September 30, 2017 and 2016, respectively, and 25.3% and 37.8% for the nine months ended September 30, 2017 and 2016, respectively. The change in the effective income tax rate for the nine months ended September 30, 2017, was primarily due to a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions that resulted in the recognition of $270 million in tax benefits in the first quarter of 2017 and the recognition of an additional $19 million in tax benefits through the third quarter of 2017. Total tax benefits relatedNotes to the reduction in the valuation allowance were $289 million through September 30, 2017. The effective tax rate was further decreased by the recognition of $62 million of excess tax benefits related to share-based payments for the nine months ended September 30, 2017, compared to $24 million for the same period in 2016.
During the first quarter of 2017, due to ongoing analysis of positive and negative evidence related to the utilization of the deferred tax assets, we determined that a portion of the valuation allowance was no longer necessary. Positive evidence supporting the release of a portion of the valuation allowance included reaching a position of cumulative income over a three-year period in the state jurisdictions as well as projecting sustained earnings in those jurisdictions. Due to this positive evidence, we reduced the valuation allowance which resulted in a decrease to Deferred tax liabilities in our Condensed Consolidated Balance Sheets. We will continue to monitor positive and negative evidence related to the utilization of the remaining deferred tax assets for which a valuation allowance continues to be provided. It is possible that we may release additional portions of the remaining valuation allowance within the next three months.Financial Statements
Note 910 – Earnings Per Share
The computation of basic and diluted earnings per share was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions, except shares and per share amounts) | 2021 | | 2020 | | 2021 | | 2020 | | |
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Income (loss) from continuing operations | $ | 978 | | | $ | (210) | | | $ | 1,911 | | | $ | 741 | | | |
Income from discontinued operations, net of tax | 0 | | | 320 | | | 0 | | | 320 | | | |
Net income | $ | 978 | | | $ | 110 | | | $ | 1,911 | | | $ | 1,061 | | | |
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Weighted average shares outstanding - basic | 1,247,563,331 | | | 1,236,528,444 | | | 1,245,552,847 | | | 1,047,338,364 | | | |
Effect of dilutive securities: | | | | | | | | | |
Outstanding stock options and unvested stock awards | 6,154,791 | | | 0 | | | 8,711,617 | | | 9,782,025 | | | |
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Weighted average shares outstanding - diluted | 1,253,718,122 | | | 1,236,528,444 | | | 1,254,264,464 | | | 1,057,120,389 | | | |
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Basic earnings (loss) per share: | | | | | | | | | |
Continuing operations | $ | 0.78 | | | $ | (0.17) | | | $ | 1.53 | | | $ | 0.71 | | | |
Discontinued operations | 0 | | | 0.26 | | | 0 | | | 0.30 | | | |
Earnings per share - basic | $ | 0.78 | | | $ | 0.09 | | | $ | 1.53 | | | $ | 1.01 | | | |
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Diluted earnings (loss) per share: | | | | | | | | | |
Continuing operations | $ | 0.78 | | | $ | (0.17) | | | $ | 1.52 | | | $ | 0.70 | | | |
Discontinued operations | 0 | | | 0.26 | | | 0 | | | 0.30 | | | |
Earnings per share - diluted | $ | 0.78 | | | $ | 0.09 | | | $ | 1.52 | | | $ | 1.00 | | | |
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Potentially dilutive securities: | | | | | | | | | |
Outstanding stock options and unvested stock awards | 50,873 | | | 10,234,947 | | | 26,646 | | | 443,679 | | | |
SoftBank contingent consideration (1) | 48,751,557 | | | 48,751,557 | | | 48,751,557 | | | 24,375,778 | | | |
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(1) Represents the weighted average SoftBank Specified Shares that are contingently issuable from the acquisition date of April 1, 2020. |
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except shares and per share amounts) | 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 550 |
| | $ | 366 |
| | $ | 1,829 |
| | $ | 1,070 |
|
Less: Dividends on mandatory convertible preferred stock | (13 | ) | | (13 | ) | | (41 | ) | | (41 | ) |
Net income attributable to common stockholders - basic | 537 |
| | 353 |
| | 1,788 |
| | 1,029 |
|
Add: Dividends related to mandatory convertible preferred stock | 13 |
| | — |
| | 41 |
| | — |
|
Net income attributable to common stockholders - diluted | $ | 550 |
| | $ | 353 |
| | $ | 1,829 |
| | $ | 1,029 |
|
| | | | | | | |
Weighted average shares outstanding - basic | 831,189,779 |
| | 822,998,697 |
| | 829,974,146 |
| | 821,626,675 |
|
Effect of dilutive securities: | | | | | | | |
Outstanding stock options and unvested stock awards | 7,992,286 |
| | 9,259,122 |
| | 9,523,365 |
| | 9,614,352 |
|
Mandatory convertible preferred stock | 32,238,000 |
| | — |
| | 32,238,000 |
| | — |
|
Weighted average shares outstanding - diluted | 871,420,065 |
| | 832,257,819 |
| | 871,735,511 |
| | 831,241,027 |
|
| | | | | | | |
Earnings per share - basic | $ | 0.65 |
| | $ | 0.43 |
| | $ | 2.15 |
| | $ | 1.25 |
|
Earnings per share - diluted | $ | 0.63 |
| | $ | 0.42 |
| | $ | 2.10 |
| | $ | 1.24 |
|
| | | | | | | |
Potentially dilutive securities: | | | | | | | |
Outstanding stock options and unvested stock awards | — |
| | 278,675 |
| | 4,760 |
| | 287,375 |
|
Mandatory convertible preferred stock | — |
| | 32,238,000 |
| | — |
| | 32,238,000 |
|
Unless converted earlier, each shareAs of June 30, 2021, we had authorized 100 million shares of preferred stock, will convert automatically on December 15, 2017 into between 1.6119 (the minimum conversion rate) and 1.9342 (the maximum conversion rate) shares of our common stock, subject to customary anti-dilution adjustments and depending on the applicable marketwith a par value of our common stock. Using the minimum conversion rate, we would issue 32,238,000 shares$0.00001 per share. There was 0 preferred stock outstanding as of our common stock upon conversion.
June 30, 2021 and 2020. Potentially dilutive securities were not included in the computation of diluted earnings per share if to do so would have been anti-dilutive.anti-dilutive or if there was a loss from continuing operations for the period.
The SoftBank Specified Shares Amount of 48,751,557 shares of T-Mobile common stock was determined to be contingent consideration for the Merger and is not dilutive until the defined volume-weighted average price per share is reached.
Note 1011 – Commitments and Contingencies
Commitments
Operating Leases and Purchase Commitments
DuringWe have commitments for non-dedicated transportation lines with varying expiration terms that generally extend through 2029. In addition, we have commitments to purchase wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the nine months ended September 30, 2017, we entered into a purchase commitmentordinary course of business, with a handset Original Equipment Manufacturer, resulting in a material increase to the future minimum payments for purchase commitments summarized below.various terms through 2043.
Future minimum payments for non-cancelable operating leases andOur purchase commitments are as follows:
|
| | | | | | | |
(in millions) | Operating Leases | | Purchase Commitments |
Year ending September 30, | | | |
2018 | $ | 2,397 |
| | $ | 2,477 |
|
2019 | 2,153 |
| | 1,210 |
|
2020 | 1,867 |
| | 1,015 |
|
2021 | 1,472 |
| | 759 |
|
2022 | 1,163 |
| | 661 |
|
Thereafter | 2,240 |
| | 904 |
|
Total | $ | 11,292 |
| | $ | 7,026 |
|
Renewable Energy Purchase Agreements
In January 2017, T-Mobile USA entered into a REPA with Red Dirt Wind Project, LLC. The agreement isapproximately $3.9 billion for the year ending June 30, 2022, $4.5 billion in total for the years ending June 30, 2023 and 2024, $2.3 billion in total for the years ending June 30, 2025 and 2026 and $1.6 billion in total for the years thereafter. These amounts are not reflective of our entire anticipated purchases under the related agreements but are determined based on the expected operation of a wind energy-generating facility located in Oklahoma and will remain in effect untilnon-cancelable quantities or termination amounts to which we are contractually obligated.
Spectrum Leases
In connection with the twelfth anniversaryMerger, we assumed certain spectrum lease contracts from Sprint that include service obligations to the lessors. Certain of the facility’s entry into commercial operation. Commercial operationspectrum leases provide for minimum lease payments, additional charges, renewal options and escalation clauses. Leased spectrum agreements have varying expiration terms that generally extend through 2050. We expect that all renewal periods in our spectrum leases will be exercised by us.
Our spectrum lease and service credit commitments, including renewal periods, are approximately $339 million for the year ending June 30, 2022, $624 million in total for the years ending June 30, 2023 and 2024, $582 million in total for the years ending June 30, 2025 and 2026 and $4.9 billion in total for the years thereafter.
We accrue a monthly obligation for the services and equipment based on the total estimated available service credits divided by the term of the facilitylease. The obligation is reduced by services provided and as actual invoices are presented and paid to the lessors. The maximum remaining service commitment on June 30, 2021 was $89 million and is expected to occurbe incurred over the term of the related lease agreements, which generally range from 15 to 30 years.
Merger Commitments
In connection with the regulatory proceedings and approvals of 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 Network Corporation (“DISH”) and entered by the endU.S. District Court for the District of 2017. The REPA consists of two components: (1) an energy forward agreement that is net settled based on energy pricesColumbia, and the energy output generated byFCC’s memorandum opinion and order approving our applications for approval of the facilityMerger. These commitments and (2)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. Failure to fulfill our obligations and commitments in a commitment to purchase the renewable energy credits (“RECs”)timely manner could result in substantial fines, penalties, or other legal and administrative actions.
We expect that our monetary commitments associated with these matters are approximately $9 million for the energy output generated byyear ending June 30, 2022, $13 million in total for the facility. T-Mobile USA will net settleyears ending June 30, 2023 and 2024 and $3 million in total for the forward agreementyears ending June 30, 2025 and acquire the RECs monthly by paying, or receiving, an aggregate net payment based on two variables (1) the facility’s energy output, which has an estimated maximum capacity of approximately 160 megawatts and (2) the difference between (a) an initial fixed price, subject to annual escalation, and (b) current local marginal energy prices during the monthly settlement period. We have determined that the REPA does not meet the definition of a derivative because the expected energy output of the facility may not be reliably estimated (the arrangement lacks a notional amount). The REPA does not contain any unconditional purchase obligations because2026. These amounts under the agreement are not fixed and determinable. Our participation in the REPA did not require an upfront investment or capital commitment. We do not control the activities that most significantly impact the energy-generating facility nor dorepresent our entire anticipated costs to achieve specified network coverage and performance requirements, employment targets or commitments to provide access to affordable rate plans, but represent only those amounts for which we receive specific energy output from it. No amounts were settled under the agreement during the nine months ended September 30, 2017.are required to make a specified payment in connection with our commitments or settlements.
In August 2017, T-Mobile USA entered into a REPA with Solomon Forks Wind Project, LLC. The agreement is based on the expected operation of a wind energy-generating facility located in Kansas and will remain in effect until the fifteenth anniversary of the facility’s entry into commercial operation. Commercial operation of the facility is expected to occur by the end of 2018. The REPA consists of two components: (1) an energy forward agreement that is net settled based on energy prices and the energy output generated by the facility and (2) a commitment to purchase the environmental attributes (“EACs”) associated with the energy output generated by the facility. T-Mobile USA will net settle the forward agreement and acquire the EACs monthly by paying, or receiving, an aggregate net payment based on two variables (1) the facility’s energy output, which has an estimated maximum capacity of approximately 160 megawatts and (2) the difference between (a) an initial fixed price, subject to annual escalation, and (b) current local marginal energy prices during the monthly settlement period. We have determined that the REPA does not meet the definition of a derivative because the expected energy output of the facility may not be reliably estimated (the arrangement lacks a notional amount). The REPA does not contain any unconditional purchase obligations because amounts under the agreement are not fixed and determinable. Our participation in the REPA did not require an upfront investment or capital commitment. We do not control the activities that most significantly impact the energy-generating facility nor do we receive specific energy output from it. No amounts were settled under the agreement during the nine months ended September 30, 2017.
Contingencies and Litigation
Litigation Matters
We are involved in various lawsuits and disputes, claims, government agency investigations and enforcement actions, and other proceedings (“Litigation Matters”) that arise in the ordinary course of business, which include numerous court actions alleging that we are infringing various patents. Virtually allclaims of the patent infringement cases(most of which are broughtasserted by non-practicing entities primarily seeking monetary damages), class actions, and effectively seek only monetary damages, although they occasionally seek injunctive relief as well. Theproceedings to enforce FCC rules and regulations. Those Litigation Matters described above have progressed toare at various stages, and some of them may proceed to trial, arbitration, hearing, or other adjudication that could include an awardresult 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, which is reflected in the condensed consolidated financial statements but that we dois not consider,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 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:to, uncertainty concerning legal theories and their resolution by courts or regulators;regulators, uncertain damage theories and demands;demands, and a less than fully developed factual record. WhileFor Litigation Matters which may result in a contingent gain, we recognize such gains in the condensed consolidated financial statements when the gain is realized or realizable. We do not expect that the ultimate resolution of these proceedings,Litigation 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 these proceedingsthe specific matters identified below 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. In the first quarter of 2020, we recorded an accrual for an estimated payment amount. We maintained the accrual as of June 30, 2021, which was included in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets. Note 11 – Guarantor Financial Information
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 supplemental indentures,state government agency investigations into Sprint’s Lifeline program. In September 2019, Sprint notified the long-term debtFCC 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 affiliatesan 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 third parties, excluding Senior Secured Term Loanscertain states for excess subsidy payments.
We note that pursuant to Amendment No. 2 to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and capital leases, issuedlosses, including those relating to Lifeline matters. Resolution of these matters could require making additional reimbursements and paying 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 T-Mobile USA (“Issuer”) is fullySoftBank. See Note 2 - Business Combinations for further information.
On June 4, 2021, a putative shareholder class action and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by T-Mobile (“Parent”)derivative action 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 Issuer’s 100% owned subsidiaries (“Guarantor Subsidiaries”).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. We intend to vigorously defend this lawsuit.
In January 2017, T-Mobile USA,
Note 12 – Restructuring Costs
Upon close of the Merger, we began implementing restructuring initiatives to realize cost efficiencies and reduce redundancies. The major activities associated with the restructuring initiatives to date include contract termination costs associated with the rationalization of retail stores, distribution channels, duplicative network and backhaul services and other agreements, severance costs associated with the integration of redundant processes and functions and the decommissioning of certain small cell sites and distributed antenna systems to achieve synergies in network costs.
The following table summarizes the expenses incurred in connection with our restructuring initiatives: | | | | | | | | | | | | | | | | | |
| | | | | |
(in millions) | Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2021 | | Incurred to Date |
Contract termination costs | $ | 3 | | | $ | 9 | | | $ | 187 | |
Severance costs | 3 | | | 19 | | | 404 | |
Network decommissioning | 42 | | | 54 | | | 551 | |
Total restructuring plan expenses | $ | 48 | | | $ | 82 | | | $ | 1,142 | |
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The expenses associated with the restructuring initiatives are included in Costs of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.
Our restructuring initiatives also include the acceleration or termination of certain of its affiliates,our operating and financing leases for cell sites, switch sites, retail stores, network equipment and office facilities. Incremental expenses associated with accelerating amortization of the right-of-use assets on lease contracts were $261 million and $384 million for the three and six months ended June 30, 2021, respectively, and are included within Costs of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income. No restructuring expenses were incurred related to the acceleration or termination of leases for the three and six months ended June 30, 2020.
The changes in the liabilities associated with our restructuring initiatives, including expenses incurred and cash payments, are as guarantors, borrowed $4.0 billionfollows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | December 31, 2020 | | Expenses Incurred | | Cash Payments | | Adjustments for Non-Cash Items (1) | | June 30, 2021 |
Contract termination costs | $ | 81 | | | $ | 9 | | | $ | (65) | | | $ | 0 | | | $ | 25 | |
Severance costs | 52 | | | 19 | | | (53) | | | (4) | | | 14 | |
Network decommissioning | 30 | | | 54 | | | (29) | | | (16) | | | 39 | |
Total | $ | 163 | | | $ | 82 | | | $ | (147) | | | $ | (20) | | | $ | 78 | |
(1) Non-cash items consists of non-cash stock-based compensation included within Severance costs and the write-off of assets within Network decommissioning.
The liabilities accrued in connection with our restructuring initiatives are presented in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets.
Our restructuring activities are expected to occur over the next three years with substantially all costs incurred by the end of fiscal year 2023. We are evaluating additional restructuring initiatives, which are dependent on consultations and negotiation with certain counterparties and the expected impact on our business operations, which could affect the amount or timing of the restructuring costs and related payments.
Note 13 – Additional Financial Information
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are summarized as follows: | | | | | | | | | | | |
(in millions) | June 30, 2021 | | December 31, 2020 |
Accounts payable | $ | 3,855 | | | $ | 5,564 | |
Payroll and related benefits | 1,149 | | | 1,163 | |
Property and other taxes, including payroll | 1,589 | | | 1,540 | |
Interest | 769 | | | 771 | |
Commissions | 257 | | | 399 | |
| | | |
Toll and interconnect | 331 | | | 217 | |
Advertising | 65 | | | 135 | |
Other | 396 | | | 407 | |
Accounts payable and accrued liabilities | $ | 8,411 | | | $ | 10,196 | |
Book overdrafts included in accounts payable and accrued liabilities were $281 million and $628 million as of June 30, 2021 and December 31, 2020, respectively.
Supplemental Consolidated Statements of Cash Flows Information
The following table summarizes T-Mobile’s supplemental cash flow information:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in millions) | 2021 | | 2020 | | 2021 | | 2020 | | |
Interest payments, net of amounts capitalized | $ | 913 | | | $ | 608 | | | $ | 1,858 | | | $ | 949 | | | |
Operating lease payments | 1,263 | | | 1,269 | | | 2,914 | | | 2,144 | | | |
Income tax payments | 63 | | | 31 | | | 85 | | | 55 | | | |
Non-cash investing and financing activities | | | | | | | | | |
| | | | | | | | | |
Non-cash beneficial interest obtained in exchange for securitized receivables | 1,089 | | | 1,486 | | | 2,470 | | | 3,099 | | | |
Non-cash consideration for the acquisition of Sprint | 0 | | | 33,533 | | | 0 | | | 33,533 | | | |
Change in accounts payable and accrued liabilities for purchases of property and equipment | (367) | | | (38) | | | (540) | | | (339) | | | |
Leased devices transferred from inventory to property and equipment | 333 | | | 1,444 | | | 818 | | | 1,753 | | | |
Returned leased devices transferred from property and equipment to inventory | (416) | | | (538) | | | (861) | | | (597) | | | |
Short-term debt assumed for financing of property and equipment | 0 | | | 38 | | | 0 | | | 38 | | | |
Operating lease right-of-use assets obtained in exchange for lease obligations | 1,043 | | | 658 | | | 1,954 | | | 1,213 | | | |
Financing lease right-of-use assets obtained in exchange for lease obligations | 377 | | | 515 | | | 486 | | | 693 | | | |
Note 14 – Subsequent Events
Subsequent to June 30, 2021, on July 1, 2021, we closed on the acquisition of Shentel’s Wireless Assets pursuant to the Purchase Agreement dated May 28, 2021, and as a result, T-Mobile become the legal owner of the Wireless Assets. Concurrently and as agreed to through the Purchase Agreement, T-Mobile and Shentel entered into certain separate transactions, including the effective settlement of the pre-existing arrangement between T-Mobile and Shentel under the Incremental Term Loan FacilityManagement Agreement. See Note 2 – Business Combinations for further information.
Subsequent to June 30, 2021, on August 2, 2021, we delivered a notice of outstanding secured term loans under its Term Loan Credit Agreement dated November 9, 2015, withprepayment on the remaining net proceeds from the transaction intended to be used to redeem callable high yield debt.
In March 2017, T-Mobile USA and certain of its affiliates, as guarantors, (i) issued $500 million in aggregate principal amount of public 4.000% Seniorour 3.360% Secured Series 2016-1 A-1 Notes due 2022, (ii) issued $500 million in2021. The aggregate principal amount, plus accrued and unpaid interest, of public 5.125% Senior Notes due 2025 and (iii) issued $500approximately $220 million in aggregate principal amount of public 5.375% Senior Notes due 2027.
In April 2017, T-Mobile USA and certain of its affiliates, as guarantors, (i) issued $1.0 billion in aggregate principal amount of 4.000% Senior Notes due 2022, (ii) issued $1.25 billion in aggregate principal amount of 5.125% Senior Notes due 2025 and (iii) issued $750 million in aggregate principal amount of 5.375% Senior Notes due 2027. Additionally, T-Mobile USA and certain of its affiliates, as guarantors, redeemed through net settlement, the $1.25 billion outstanding aggregate principal amount of the 6.288% Senior Reset Notesis expected to affiliates due 2019 and $1.25 billion in aggregate principal amount of the 6.366% Senior Reset Notes to affiliates due 2020.
In May 2017, T-Mobile USA and certain of its affiliates, as guarantors, (i) issued $2.0 billion in aggregate principal amount of 5.300% Senior Notes due 2021, (ii) issued $1.35 billion in aggregate principal amount of 6.000% Senior Notes due 2024 and (iii) issued $650 million in aggregate principal amount of 6.000% Senior Notes due 2024.
In September 2017, T-Mobile USA and certain of its affiliates, as guarantors, issued the remaining $500 million in aggregate principal amount of 5.375% Senior Notes due 2027.
be paid on or around August 20, 2021. See Note 7 - Debt for further information.
The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. The indentures and credit facilities governing the long-term debt contain covenants that, among other things, limit the ability of the Issuer and the Guarantor Subsidiaries to: incur more debt; pay dividends and make distributions; make certain investments; repurchase stock; create liens or other encumbrances; enter into transactions with affiliates; enter into transactions that restrict dividends or distributions from subsidiaries; and merge, consolidate, or sell, or otherwise dispose of, substantially all of their assets. Certain provisions of each of the credit facilities, indentures and supplemental indentures relating to the long-term debt restrict the ability of the Issuer to loan funds or make payments to Parent. However, the Issuer
and Guarantor Subsidiaries are allowed to make certain permitted payments to the Parent under the terms of the indentures and the supplemental indentures.
Presented below is the condensed consolidating financial information as of September 30, 2017 and December 31, 2016, and for the three and nine months ended September 30, 2017 and 2016.
Condensed Consolidating Balance Sheet Information
September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated |
Assets | | | | | | | | | | | |
Current assets | | | | | | | | | | | |
Cash and cash equivalents | $ | 29 |
| | $ | 2 |
| | $ | 678 |
| | $ | 30 |
| | $ | — |
| | $ | 739 |
|
Accounts receivable, net | — |
| | — |
| | 1,504 |
| | 230 |
| | — |
| | 1,734 |
|
Equipment installment plan receivables, net | — |
| | — |
| | 2,136 |
| | — |
| | — |
| | 2,136 |
|
Accounts receivable from affiliates | — |
| | 6 |
| | 24 |
| | — |
| | (6 | ) | | 24 |
|
Inventories | — |
| | — |
| | 999 |
| | — |
| | — |
| | 999 |
|
Other current assets | — |
| | — |
| | 1,241 |
| | 576 |
| | — |
| | 1,817 |
|
Total current assets | 29 |
| | 8 |
| | 6,582 |
| | 836 |
| | (6 | ) | | 7,449 |
|
Property and equipment, net (1) | — |
| | — |
| | 21,248 |
| | 322 |
| | — |
| | 21,570 |
|
Goodwill | — |
| | — |
| | 1,683 |
| | — |
| | — |
| | 1,683 |
|
Spectrum licenses | — |
| | — |
| | 35,007 |
| | — |
| | — |
| | 35,007 |
|
Other intangible assets, net | — |
| | — |
| | 256 |
| | — |
| | — |
| | 256 |
|
Investments in subsidiaries, net | 19,823 |
| | 37,943 |
| | — |
| | — |
| | (57,766 | ) | | — |
|
Intercompany receivables and note receivables | 425 |
| | 8,903 |
| | — |
| | — |
| | (9,328 | ) | | — |
|
Equipment installment plan receivables due after one year, net | — |
| | — |
| | 1,100 |
| | — |
| | — |
| | 1,100 |
|
Other assets | — |
| | 3 |
| | 778 |
| | 292 |
| | (215 | ) | | 858 |
|
Total assets | $ | 20,277 |
| | $ | 46,857 |
| | $ | 66,654 |
| | $ | 1,450 |
| | $ | (67,315 | ) | | $ | 67,923 |
|
Liabilities and Stockholders' Equity | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | |
Accounts payable and accrued liabilities | $ | — |
| | $ | 201 |
| | $ | 5,626 |
| | $ | 244 |
| | $ | — |
| | $ | 6,071 |
|
Payables to affiliates | — |
| | 250 |
| | 38 |
| | — |
| | — |
| | 288 |
|
Short-term debt | — |
| | 3 |
| | 555 |
| | — |
| | — |
| | 558 |
|
Short-term debt to affiliates | — |
| | — |
| | 6 |
| | — |
| | (6 | ) | | — |
|
Deferred revenue | — |
| | — |
| | 790 |
| | — |
| | — |
| | 790 |
|
Other current liabilities | — |
| | — |
| | 219 |
| | 177 |
| | — |
| | 396 |
|
Total current liabilities | — |
| | 454 |
| | 7,234 |
| | 421 |
| | (6 | ) | | 8,103 |
|
Long-term debt | — |
| | 11,913 |
| | 1,250 |
| | — |
| | — |
| | 13,163 |
|
Long-term debt to affiliates | — |
| | 14,586 |
| | — |
| | — |
| | — |
| | 14,586 |
|
Tower obligations (1) | — |
| | — |
| | 395 |
| | 2,204 |
| | — |
| | 2,599 |
|
Deferred tax liabilities | — |
| | — |
| | 5,750 |
| | — |
| | (215 | ) | | 5,535 |
|
Deferred rent expense | — |
| | — |
| | 2,693 |
| | — |
| | — |
| | 2,693 |
|
Negative carrying value of subsidiaries, net | — |
| | — |
| | 596 |
| | — |
| | (596 | ) | | — |
|
Intercompany payables and debt | — |
| | — |
| | 9,119 |
| | 209 |
| | (9,328 | ) | | — |
|
Other long-term liabilities | — |
| | 81 |
| | 884 |
| | 2 |
| | — |
| | 967 |
|
Total long-term liabilities | — |
| | 26,580 |
| | 20,687 |
| | 2,415 |
| | (10,139 | ) | | 39,543 |
|
Total stockholders' equity (deficit) | 20,277 |
| | 19,823 |
| | 38,733 |
| | (1,386 | ) | | (57,170 | ) | | 20,277 |
|
Total liabilities and stockholders' equity | $ | 20,277 |
| | $ | 46,857 |
| | $ | 66,654 |
| | $ | 1,450 |
| | $ | (67,315 | ) | | $ | 67,923 |
|
| |
(1) | Assets and liabilities for Non-Guarantor Subsidiaries are primarily included in VIEs related to the 2012 Tower Transaction. See Note 8 – Tower Obligations included in the Annual Report on Form 10-K for the year ended December 31, 2016. |
Condensed Consolidating Balance Sheet Information
December 31, 2016
|
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated |
Assets | | | | | | | | | | | |
Current assets | | | | | | | | | | | |
Cash and cash equivalents | $ | 358 |
| | $ | 2,733 |
| | $ | 2,342 |
| | $ | 67 |
| | $ | — |
| | $ | 5,500 |
|
Accounts receivable, net | — |
| | — |
| | 1,675 |
| | 221 |
| | — |
| | 1,896 |
|
Equipment installment plan receivables, net | — |
| | — |
| | 1,930 |
| | — |
| | — |
| | 1,930 |
|
Accounts receivable from affiliates | — |
| | — |
| | 40 |
| | — |
| | — |
| | 40 |
|
Inventories | — |
| | — |
| | 1,111 |
| | — |
| | — |
| | 1,111 |
|
Asset purchase deposit | — |
| | — |
| | 2,203 |
| | — |
| | — |
| | 2,203 |
|
Other current assets | — |
| | — |
| | 972 |
| | 565 |
| | — |
| | 1,537 |
|
Total current assets | 358 |
| | 2,733 |
| | 10,273 |
| | 853 |
| | — |
| | 14,217 |
|
Property and equipment, net (1) | — |
| | — |
| | 20,568 |
| | 375 |
| | — |
| | 20,943 |
|
Goodwill | — |
| | — |
| | 1,683 |
| | — |
| | — |
| | 1,683 |
|
Spectrum licenses | — |
| | — |
| | 27,014 |
| | — |
| | — |
| | 27,014 |
|
Other intangible assets, net | — |
| | — |
| | 376 |
| | — |
| | — |
| | 376 |
|
Investments in subsidiaries, net | 17,682 |
| | 35,095 |
| | — |
| | — |
| | (52,777 | ) | | — |
|
Intercompany receivables and note receivables | 196 |
| | 6,826 |
| | — |
| | — |
| | (7,022 | ) | | — |
|
Equipment installment plan receivables due after one year, net | — |
| | — |
| | 984 |
| | — |
| | — |
| | 984 |
|
Other assets | — |
| | 7 |
| | 600 |
| | 262 |
| | (195 | ) | | 674 |
|
Total assets | $ | 18,236 |
| | $ | 44,661 |
| | $ | 61,498 |
| | $ | 1,490 |
| | $ | (59,994 | ) | | $ | 65,891 |
|
Liabilities and Stockholders' Equity | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | |
Accounts payable and accrued liabilities | $ | — |
| | $ | 423 |
| | $ | 6,474 |
| | $ | 255 |
| | $ | — |
| | $ | 7,152 |
|
Payables to affiliates | — |
| | 79 |
| | 46 |
| | — |
| | — |
| | 125 |
|
Short-term debt | — |
| | 20 |
| | 334 |
| | — |
| | — |
| | 354 |
|
Deferred revenue | — |
| | — |
| | 986 |
| | — |
| | — |
| | 986 |
|
Other current liabilities | — |
| | — |
| | 258 |
| | 147 |
| | — |
| | 405 |
|
Total current liabilities | — |
| | 522 |
| | 8,098 |
| | 402 |
| | — |
| | 9,022 |
|
Long-term debt | — |
| | 20,741 |
| | 1,091 |
| | — |
| | — |
| | 21,832 |
|
Long-term debt to affiliates | — |
| | 5,600 |
| | — |
| | — |
| | — |
| | 5,600 |
|
Tower obligations (1) | — |
| | — |
| | 400 |
| | 2,221 |
| | — |
| | 2,621 |
|
Deferred tax liabilities | — |
| | — |
| | 5,133 |
| | — |
| | (195 | ) | | 4,938 |
|
Deferred rent expense | — |
| | — |
| | 2,616 |
| | — |
| | — |
| | 2,616 |
|
Negative carrying value of subsidiaries, net | — |
| | — |
| | 568 |
| | — |
| | (568 | ) | | — |
|
Intercompany payables and debt | — |
| | — |
| | 6,785 |
| | 237 |
| | (7,022 | ) | | — |
|
Other long-term liabilities | — |
| | 116 |
| | 906 |
| | 4 |
| | — |
| | 1,026 |
|
Total long-term liabilities | — |
| | 26,457 |
| | 17,499 |
| | 2,462 |
| | (7,785 | ) | | 38,633 |
|
Total stockholders' equity (deficit) | 18,236 |
| | 17,682 |
| | 35,901 |
| | (1,374 | ) | | (52,209 | ) | | 18,236 |
|
Total liabilities and stockholders' equity | $ | 18,236 |
| | $ | 44,661 |
| | $ | 61,498 |
| | $ | 1,490 |
| | $ | (59,994 | ) | | $ | 65,891 |
|
| |
(1) | Assets and liabilities for Non-Guarantor Subsidiaries are primarily included in VIEs related to the 2012 Tower Transaction. See Note 8 – Tower Obligations included in the Annual Report on Form 10-K for the year ended December 31, 2016. |
Three Months Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated |
Revenues | | | | | | | | | | | |
Service revenues | $ | — |
| | $ | — |
| | $ | 7,312 |
| | $ | 527 |
| | $ | (210 | ) | | $ | 7,629 |
|
Equipment revenues | — |
| | — |
| | 2,160 |
| | — |
| | (42 | ) | | 2,118 |
|
Other revenues | — |
| | — |
| | 224 |
| | 55 |
| | (7 | ) | | 272 |
|
Total revenues | — |
| | — |
| | 9,696 |
| | 582 |
| | (259 | ) | | 10,019 |
|
Operating expenses | | | | | | | | | | | |
Cost of services, exclusive of depreciation and amortization shown separately below | — |
| | — |
| | 1,588 |
| | 6 |
| | — |
| | 1,594 |
|
Cost of equipment sales | — |
| | — |
| | 2,418 |
| | 241 |
| | (42 | ) | | 2,617 |
|
Selling, general and administrative | — |
| | — |
| | 3,106 |
| | 209 |
| | (217 | ) | | 3,098 |
|
Depreciation and amortization | — |
| | — |
| | 1,399 |
| | 17 |
| | — |
| | 1,416 |
|
Gains on disposal of spectrum licenses | — |
| | — |
| | (29 | ) | | — |
| | — |
| | (29 | ) |
Total operating expense | — |
| | — |
| | 8,482 |
| | 473 |
| | (259 | ) | | 8,696 |
|
Operating income | — |
| | — |
| | 1,214 |
| | 109 |
| | — |
| | 1,323 |
|
Other income (expense) | | | | | | | | | | | |
Interest expense | — |
| | (176 | ) | | (30 | ) | | (47 | ) | | — |
| | (253 | ) |
Interest expense to affiliates | — |
| | (167 | ) | | (6 | ) | | — |
| | 6 |
| | (167 | ) |
Interest income | — |
| | 7 |
| | 1 |
| | — |
| | (6 | ) | | 2 |
|
Other expense, net | — |
| | 1 |
| | 1 |
| | (1 | ) | | — |
| | 1 |
|
Total other expense, net | — |
| | (335 | ) | | (34 | ) | | (48 | ) | | — |
| | (417 | ) |
Income (loss) before income taxes | — |
| | (335 | ) | | 1,180 |
| | 61 |
| | — |
| | 906 |
|
Income tax expense | — |
| | — |
| | (335 | ) | | (21 | ) | | — |
| | (356 | ) |
Earnings of subsidiaries | 550 |
| | 885 |
| | — |
| | — |
| | (1,435 | ) | | — |
|
Net income | 550 |
| | 550 |
| | 845 |
| | 40 |
| | (1,435 | ) | | 550 |
|
Dividends on preferred stock | (13 | ) | | — |
| | — |
| | — |
| | — |
| | (13 | ) |
Net income attributable to common stockholders | $ | 537 |
| | $ | 550 |
| | $ | 845 |
| | $ | 40 |
| | $ | (1,435 | ) | | $ | 537 |
|
| | | | | | | | | | | |
Net Income | $ | 550 |
| | $ | 550 |
| | $ | 845 |
| | $ | 40 |
| | $ | (1,435 | ) | | $ | 550 |
|
Other comprehensive income (loss), net of tax | | | | | | | | | | | |
Other comprehensive income (loss), net of tax | 1 |
| | 1 |
| | 1 |
| | — |
| | (2 | ) | | 1 |
|
Total comprehensive income | $ | 551 |
| | $ | 551 |
| | $ | 846 |
| | $ | 40 |
| | $ | (1,437 | ) | | $ | 551 |
|
Condensed Consolidating Statement of Comprehensive Income Information
Three Months Ended September 30, 2016
|
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries (As adjusted - See Note 1) | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated (As adjusted - See Note 1) |
Revenues | | | | | | | | | | | |
Service revenues | $ | — |
| | $ | — |
| | $ | 6,822 |
| | $ | 520 |
| | $ | (209 | ) | | $ | 7,133 |
|
Equipment revenues | — |
| | — |
| | 2,049 |
| | — |
| | (101 | ) | | 1,948 |
|
Other revenues | — |
| | — |
| | 180 |
| (1) | 48 |
| | (4 | ) | | 224 |
|
Total revenues | — |
| | — |
| | 9,051 |
| (1) | 568 |
| | (314 | ) | | 9,305 |
|
Operating expenses | | | | | | | | | | | |
Cost of services, exclusive of depreciation and amortization shown separately below | — |
| | — |
| | 1,430 |
| | 6 |
| | — |
| | 1,436 |
|
Cost of equipment sales | — |
| | — |
| | 2,340 |
| | 300 |
| | (101 | ) | | 2,539 |
|
Selling, general and administrative | — |
| | — |
| | 2,884 |
| | 227 |
| | (213 | ) | | 2,898 |
|
Depreciation and amortization | — |
| | — |
| | 1,549 |
| | 19 |
| | — |
| | 1,568 |
|
Cost of MetroPCS business combination | — |
| | — |
| | 15 |
| | — |
| | — |
| | 15 |
|
Gains on disposal of spectrum licenses | — |
| | — |
| | (199 | ) | | — |
| | — |
| | (199 | ) |
Total operating expense | — |
| | — |
| | 8,019 |
| | 552 |
| | (314 | ) | | 8,257 |
|
Operating income | — |
| | — |
| | 1,032 |
| (1) | 16 |
| | — |
| | 1,048 |
|
Other income (expense) | | | | | | | | | | | |
Interest expense | — |
| | (303 | ) | | (26 | ) | | (47 | ) | | — |
| | (376 | ) |
Interest expense to affiliates | — |
| | (76 | ) | | — |
| | — |
| | — |
| | (76 | ) |
Interest income | — |
| | 7 |
| | (4 | ) | (1) | — |
| | — |
| | 3 |
|
Other expense, net | — |
| | — |
| | (1 | ) | | — |
| | — |
| | (1 | ) |
Total other expense, net | — |
| | (372 | ) | | (31 | ) | (1) | (47 | ) | | — |
| | (450 | ) |
Income (loss) before income taxes | — |
| | (372 | ) | | 1,001 |
| | (31 | ) | | — |
| | 598 |
|
Income tax (expense) benefit | — |
| | — |
| | (242 | ) | | 10 |
| | — |
| | (232 | ) |
Earnings (loss) of subsidiaries | 366 |
| | 738 |
| | (4 | ) | | — |
| | (1,100 | ) | | — |
|
Net income (loss) | 366 |
| | 366 |
| | 755 |
| | (21 | ) | | (1,100 | ) | | 366 |
|
Dividends on preferred stock | (13 | ) | | — |
| | — |
| | — |
| | — |
| | (13 | ) |
Net income attributable to common stockholders | $ | 353 |
| | $ | 366 |
| | $ | 755 |
| | $ | (21 | ) | | $ | (1,100 | ) | | $ | 353 |
|
| | | | | | | | | | | |
Net Income (loss) | $ | 366 |
| | $ | 366 |
| | $ | 755 |
| | $ | (21 | ) | | $ | (1,100 | ) | | $ | 366 |
|
Other comprehensive income, net of tax | | | | | | | | | | | |
Other comprehensive income, net of tax | 2 |
| | 2 |
| | 2 |
| | 2 |
| | (6 | ) | | 2 |
|
Total comprehensive income (loss) | $ | 368 |
| | $ | 368 |
| | $ | 757 |
| | $ | (19 | ) | | $ | (1,106 | ) | | $ | 368 |
|
| |
(1)
| The amortized imputed discount on EIP receivables previously recognized as Interest income has been retrospectively reclassified as Other revenues. See Note 1 - Basis of Presentation for further detail. |
Condensed Consolidating Statement of Comprehensive Income Information
Nine Months Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated |
Revenues | | | | | | | | | | | |
Service revenues | $ | — |
| | $ | — |
| | $ | 21,457 |
| | $ | 1,580 |
| | $ | (634 | ) | | $ | 22,403 |
|
Equipment revenues | — |
| | — |
| | 6,878 |
| | — |
| | (211 | ) | | 6,667 |
|
Other revenues | — |
| | — |
| | 634 |
| | 158 |
| | (17 | ) | | 775 |
|
Total revenues | — |
| | — |
| | 28,969 |
| | 1,738 |
| | (862 | ) | | 29,845 |
|
Operating expenses | | | | | | | | | | | |
Cost of services, exclusive of depreciation and amortization shown separately below | — |
| | — |
| | 4,502 |
| | 18 |
| | — |
| | 4,520 |
|
Cost of equipment sales | — |
| | — |
| | 7,622 |
| | 738 |
| | (211 | ) | | 8,149 |
|
Selling, general and administrative | — |
| | — |
| | 8,967 |
| | 652 |
| | (651 | ) | | 8,968 |
|
Depreciation and amortization | — |
| | — |
| | 4,446 |
| | 53 |
| | — |
| | 4,499 |
|
Gains on disposal of spectrum licenses | — |
| | — |
| | (67 | ) | | — |
| | — |
| | (67 | ) |
Total operating expenses | — |
| | — |
| | 25,470 |
| | 1,461 |
| | (862 | ) | | 26,069 |
|
Operating income | — |
| | — |
| | 3,499 |
| | 277 |
| | — |
| | 3,776 |
|
Other income (expense) | | | | | | | | | | | |
Interest expense | — |
| | (634 | ) | | (80 | ) | | (143 | ) | | — |
| | (857 | ) |
Interest expense to affiliates | — |
| | (398 | ) | | (18 | ) | | — |
| | 18 |
| | (398 | ) |
Interest income | — |
| | 24 |
| | 9 |
| | — |
| | (18 | ) | | 15 |
|
Other expense, net | — |
| | (87 | ) | | (1 | ) | | (1 | ) | | — |
| | (89 | ) |
Total other expense, net | — |
| | (1,095 | ) | | (90 | ) | | (144 | ) | | — |
| | (1,329 | ) |
Income (loss) before income taxes | — |
| | (1,095 | ) | | 3,409 |
| | 133 |
| | — |
| | 2,447 |
|
Income tax expense | — |
| | — |
| | (572 | ) | | (46 | ) | | — |
| | (618 | ) |
Earnings (loss) of subsidiaries | 1,829 |
| | 2,924 |
| | (17 | ) | | — |
| | (4,736 | ) | | — |
|
Net income | 1,829 |
| | 1,829 |
| | 2,820 |
| | 87 |
| | (4,736 | ) | | 1,829 |
|
Dividends on preferred stock | (41 | ) | | — |
| | — |
| | — |
| | — |
| | (41 | ) |
Net income attributable to common stockholders | $ | 1,788 |
| | $ | 1,829 |
| | $ | 2,820 |
| | $ | 87 |
| | $ | (4,736 | ) | | $ | 1,788 |
|
| | | | | | | | | | | |
Net Income | $ | 1,829 |
| | $ | 1,829 |
| | $ | 2,820 |
| | $ | 87 |
| | $ | (4,736 | ) | | $ | 1,829 |
|
Other comprehensive income, net of tax | | | | | | | | | | | |
Other comprehensive income, net of tax | 3 |
| | 3 |
| | 3 |
| | — |
| | (6 | ) | | 3 |
|
Total comprehensive income | $ | 1,832 |
| | $ | 1,832 |
| | $ | 2,823 |
| | $ | 87 |
| | $ | (4,742 | ) | | $ | 1,832 |
|
Condensed Consolidating Statement of Comprehensive Income Information
Nine Months Ended September 30, 2016
|
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries (As adjusted - See Note 1) | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated (As adjusted - See Note 1) |
Revenues | | | | | | | | | | | |
Service revenues | $ | — |
| | $ | — |
| | $ | 19,683 |
| | $ | 1,500 |
| | $ | (584 | ) | | $ | 20,599 |
|
Equipment revenues | — |
| | — |
| | 6,328 |
| | — |
| | (341 | ) | | 5,987 |
|
Other revenues | — |
| | — |
| | 538 |
| (1) | 145 |
| | (13 | ) | | 670 |
|
Total revenues | — |
| | — |
| | 26,549 |
| (1) | 1,645 |
| | (938 | ) | | 27,256 |
|
Operating expenses | | | | | | | | | | | |
Cost of services, exclusive of depreciation and amortization shown separately below | — |
| | — |
| | 4,268 |
| | 18 |
| | — |
| | 4,286 |
|
Cost of equipment sales | — |
| | — |
| | 7,104 |
| | 768 |
| | (340 | ) | | 7,532 |
|
Selling, general and administrative | — |
| | — |
| | 8,372 |
| | 645 |
| | (598 | ) | | 8,419 |
|
Depreciation and amortization | — |
| | — |
| | 4,636 |
| | 59 |
| | — |
| | 4,695 |
|
Cost of MetroPCS business combination | — |
| | — |
| | 110 |
| | — |
| | — |
| | 110 |
|
Gains on disposal of spectrum licenses | — |
| | — |
| | (835 | ) | | — |
| | — |
| | (835 | ) |
Total operating expenses | — |
| | — |
| | 23,655 |
| | 1,490 |
| | (938 | ) | | 24,207 |
|
Operating income | — |
| | — |
| | 2,894 |
| (1) | 155 |
| | — |
| | 3,049 |
|
Other income (expense) | | | | | | | | | | | |
Interest expense | — |
| | (881 | ) | | (61 | ) | | (141 | ) | | — |
| | (1,083 | ) |
Interest expense to affiliates | — |
| | (248 | ) | | — |
| | — |
| | — |
| | (248 | ) |
Interest income | — |
| | 23 |
| | (14 | ) | (1) | — |
| | — |
| | 9 |
|
Other expense, net | — |
| | — |
| | (6 | ) | | — |
| | — |
| | (6 | ) |
Total other expense, net | — |
| | (1,106 | ) | | (81 | ) | (1) | (141 | ) | | — |
| | (1,328 | ) |
Income (loss) before income taxes | — |
| | (1,106 | ) | | 2,813 |
| | 14 |
| | — |
| | 1,721 |
|
Income tax expense | — |
| | — |
| | (643 | ) | | (8 | ) | | — |
| | (651 | ) |
Earnings (loss) of subsidiaries | 1,070 |
| | 2,176 |
| | (15 | ) | | — |
| | (3,231 | ) | | — |
|
Net income | 1,070 |
| | 1,070 |
| | 2,155 |
| | 6 |
| | (3,231 | ) | | 1,070 |
|
Dividends on preferred stock | (41 | ) | | — |
| | — |
| | — |
| | — |
| | (41 | ) |
Net income attributable to common stockholders | $ | 1,029 |
| | $ | 1,070 |
| | $ | 2,155 |
| | $ | 6 |
| | $ | (3,231 | ) | | $ | 1,029 |
|
| | | | | | | | | | | |
Net income | $ | 1,070 |
| | $ | 1,070 |
| | $ | 2,155 |
| | $ | 6 |
| | $ | (3,231 | ) | | $ | 1,070 |
|
Other comprehensive income, net of tax | | | | | | | | | | | |
Other comprehensive income, net of tax | 2 |
| | 2 |
| | 2 |
| | 2 |
| | (6 | ) | | 2 |
|
Total comprehensive income | $ | 1,072 |
| | $ | 1,072 |
| | $ | 2,157 |
| | $ | 8 |
| | $ | (3,237 | ) | | $ | 1,072 |
|
| |
(1)
| The amortized imputed discount on EIP receivables previously recognized as Interest income has been retrospectively reclassified as Other revenues. See Note 1 - Basis of Presentation for further detail. |
Condensed Consolidating Statement of Cash Flows Information
Three Months Ended September 30, 2017 |
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated |
Operating activities | | | | | | | | | | | |
Net cash provided by (used in) operating activities | $ | (2 | ) | | $ | (1,554 | ) | | $ | 3,904 |
| | $ | 14 |
| | $ | — |
| | $ | 2,362 |
|
| | | | | | | | | | | |
Investing activities | | | | | | | | | | | |
Purchases of property and equipment | — |
| | — |
| | (1,441 | ) | | — |
| | — |
| | (1,441 | ) |
Purchases of spectrum licenses and other intangible assets, including deposits | — |
| | — |
| | (15 | ) | | — |
| | — |
| | (15 | ) |
Other, net | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
|
Net cash used in investing activities | — |
| | — |
| | (1,455 | ) | | — |
| | — |
| | (1,455 | ) |
| | | | | | | | | | | |
Financing activities | | | | | | | | | | | |
Proceeds from issuance of long-term debt | — |
| | 500 |
| | — |
| | — |
| | — |
| | 500 |
|
Proceeds from borrowing on revolving credit facility, net | — |
| | 1,055 |
| | — |
| | — |
| | — |
| | 1,055 |
|
Repayments of revolving credit facility | — |
| | — |
| | (1,735 | ) | | — |
| | — |
| | (1,735 | ) |
Repayments of capital lease obligations | — |
| | — |
| | (141 | ) | | — |
| | — |
| | (141 | ) |
Repayments of short-term debt for purchases of inventory, property and equipment, net | — |
| | — |
| | (4 | ) | | — |
| | — |
| | (4 | ) |
Tax withholdings on share-based awards | — |
| | — |
| | (6 | ) | | — |
| | — |
| | (6 | ) |
Dividends on preferred stock | (13 | ) | | — |
| | — |
| | — |
| | — |
| | (13 | ) |
Other, net | 1 |
| | — |
| | (6 | ) | | — |
| | — |
| | (5 | ) |
Net cash (used in) provided by financing activities | (12 | ) | | 1,555 |
| | (1,892 | ) | | — |
| | — |
| | (349 | ) |
Change in cash and cash equivalents | (14 | ) | | 1 |
| | 557 |
| | 14 |
| | — |
| | 558 |
|
Cash and cash equivalents | | | | | | | | | | | |
Beginning of period | 43 |
| | 1 |
| | 121 |
| | 16 |
| | — |
| | 181 |
|
End of period | $ | 29 |
| | $ | 2 |
| | $ | 678 |
| | $ | 30 |
| | $ | — |
| | $ | 739 |
|
Condensed Consolidating Statement of Cash Flows Information
Three Months Ended September 30, 2016
|
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated |
Operating activities | | | | | | | | | | | |
Net cash provided by (used in) operating activities | $ | 1 |
| | $ | (84 | ) | | $ | 1,850 |
| | $ | 8 |
| | $ | (35 | ) | | $ | 1,740 |
|
| | | | | | | | | | | |
Investing activities | | | | | | | | | | | |
Purchases of property and equipment | — |
| | — |
| | (1,159 | ) | | — |
| | — |
| | (1,159 | ) |
Purchases of spectrum licenses and other intangible assets, including deposits | — |
| | — |
| | (705 | ) | | — |
| | — |
| | (705 | ) |
Other, net | — |
| | — |
| | 5 |
| | — |
| | — |
| | 5 |
|
Net cash used in investing activities | — |
| | — |
| | (1,859 | ) | | — |
| | — |
| | (1,859 | ) |
| | | | | | | | | | | |
Financing activities | | | | | | | | | | | |
Repayments of capital lease obligations | — |
| | — |
| | (54 | ) | | — |
| | — |
| | (54 | ) |
Repayments of long-term debt | — |
| | — |
| | (5 | ) | | — |
| | — |
| | (5 | ) |
Tax withholdings on share-based awards | — |
| | — |
| | (3 | ) | | — |
| | — |
| | (3 | ) |
Intercompany dividend paid | — |
| | — |
| | — |
| | (35 | ) | | 35 |
| | — |
|
Dividends on preferred stock | (13 | ) | | — |
| | — |
| | — |
| | — |
| | (13 | ) |
Other, net | 11 |
| | — |
| | (3 | ) | | — |
| | — |
| | 8 |
|
Net cash used in financing activities | (2 | ) | | — |
| | (65 | ) | | (35 | ) | | 35 |
| | (67 | ) |
Change in cash and cash equivalents | (1 | ) | | (84 | ) | | (74 | ) | | (27 | ) | | — |
| | (186 | ) |
Cash and cash equivalents | | | | | | | | | | | |
Beginning of period | 367 |
| | 2,683 |
| | 2,439 |
| | 49 |
| | — |
| | 5,538 |
|
End of period | $ | 366 |
| | $ | 2,599 |
| | $ | 2,365 |
| | $ | 22 |
| | $ | — |
| | $ | 5,352 |
|
Condensed Consolidating Statement of Cash Flows Information
Nine Months Ended September 30, 2017 |
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated |
Operating activities | | | | | | | | | | | |
Net cash provided by (used in) operating activities | $ | — |
| | $ | (16,429 | ) | | $ | 22,370 |
| | $ | 43 |
| | $ | (80 | ) | | $ | 5,904 |
|
| | | | | | | | | | | |
Investing activities | | | | | | | | | | | |
Purchases of property and equipment | — |
| | — |
| | (4,316 | ) | | — |
| | — |
| | (4,316 | ) |
Purchases of spectrum licenses and other intangible assets, including deposits | — |
| | — |
| | (5,820 | ) | | — |
| | — |
| | (5,820 | ) |
Equity investment in subsidiary | (308 | ) | | — |
| | — |
| | — |
| | 308 |
| | — |
|
Other, net | — |
| | — |
| | (2 | ) | | — |
| | — |
| | (2 | ) |
Net cash used in investing activities | (308 | ) | | — |
| | (10,138 | ) | | — |
| | 308 |
| | (10,138 | ) |
| | | | | | | | | | | |
Financing activities | | | | | | | | | | | |
Proceeds from issuance of long-term debt | — |
| | 10,480 |
| | — |
| | — |
| | — |
| | 10,480 |
|
Proceeds from borrowing on revolving credit facility, net | — |
| | 2,910 |
| | — |
| | — |
| | — |
| | 2,910 |
|
Repayments of revolving credit facility | — |
| | — |
| | (2,910 | ) | | — |
| | — |
| | (2,910 | ) |
Repayments of capital lease obligations | — |
| | — |
| | (350 | ) | | — |
| | — |
| | (350 | ) |
Repayments of short-term debt for purchases of inventory, property and equipment, net | — |
| | — |
| | (296 | ) | | — |
| | — |
| | (296 | ) |
Repayments of long-term debt | — |
| | — |
| | (10,230 | ) | | — |
| | — |
| | (10,230 | ) |
Equity investment from parent | — |
| | 308 |
| | — |
| | — |
| | (308 | ) | | — |
|
Tax withholdings on share-based awards | — |
| | — |
| | (101 | ) | | — |
| | — |
| | (101 | ) |
Intercompany dividend paid | — |
| | — |
| | — |
| | (80 | ) | | 80 |
| | — |
|
Dividends on preferred stock | (41 | ) | | — |
| | — |
| | — |
| | — |
| | (41 | ) |
Other, net | 20 |
| | — |
| | (9 | ) | | — |
| | — |
| | 11 |
|
Net cash (used in) provided by financing activities | (21 | ) | | 13,698 |
| | (13,896 | ) | | (80 | ) | | (228 | ) | | (527 | ) |
Change in cash and cash equivalents | (329 | ) | | (2,731 | ) | | (1,664 | ) | | (37 | ) | | — |
| | (4,761 | ) |
Cash and cash equivalents | | | | | | | | | | | |
Beginning of period | 358 |
| | 2,733 |
| | 2,342 |
| | 67 |
| | — |
| | 5,500 |
|
End of period | $ | 29 |
| | $ | 2 |
| | $ | 678 |
| | $ | 30 |
| | $ | — |
| | $ | 739 |
|
Condensed Consolidating Statement of Cash Flows Information
Nine Months Ended September 30, 2016 |
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Parent | | Issuer | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Consolidating and Eliminating Adjustments | | Consolidated |
Operating activities | | | | | | | | | | | |
Net cash provided by (used in) operating activities | $ | 4 |
| | $ | (2,165 | ) | | $ | 6,745 |
| | $ | 59 |
| | $ | (110 | ) | | $ | 4,533 |
|
| | | | | | | | | | | |
Investing activities | | | | | | | | | | | |
Purchases of property and equipment | — |
| | — |
| | (3,843 | ) | | — |
| | — |
| | (3,843 | ) |
Purchases of spectrum licenses and other intangible assets, including deposits | — |
| | — |
| | (3,544 | ) | | — |
| | — |
| | (3,544 | ) |
Sales of short-term investments | — |
| | 2,000 |
| | 998 |
| | — |
| | — |
| | 2,998 |
|
Other, net | — |
| | — |
| | 3 |
| | — |
| | — |
| | 3 |
|
Net cash provided by (used in) investing activities | — |
| | 2,000 |
| | (6,386 | ) | | — |
| | — |
| | (4,386 | ) |
| | | | | | | | | | | |
Financing activities | | | | | | | | | | | |
Proceeds from issuance of long-term debt | — |
| | 997 |
| | — |
| | — |
| | — |
| | 997 |
|
Repayments of capital lease obligations | — |
| | — |
| | (133 | ) | | — |
| | — |
| | (133 | ) |
Repayments of short-term debt for purchases of inventory, property and equipment, net | — |
| | — |
| | (150 | ) | | — |
| | — |
| | (150 | ) |
Repayments of long-term debt | — |
| | — |
| | (15 | ) | | — |
| | — |
| | (15 | ) |
Tax withholdings on share-based awards | — |
| | — |
| | (52 | ) | | — |
| | — |
| | (52 | ) |
Intercompany dividend paid | — |
| | — |
| | — |
| | (110 | ) | | 110 |
| | — |
|
Dividends on preferred stock | (41 | ) | | — |
| | — |
| | — |
| | — |
| | (41 | ) |
Other, net | 25 |
| | — |
| | (8 | ) | | — |
| | — |
| | 17 |
|
Net cash (used in) provided by financing activities | (16 | ) | | 997 |
| | (358 | ) | | (110 | ) | | 110 |
| | 623 |
|
Change in cash and cash equivalents | (12 | ) | | 832 |
| | 1 |
| | (51 | ) | | — |
| | 770 |
|
Cash and cash equivalents | | | | | | | | | | | |
Beginning of period | 378 |
| | 1,767 |
| | 2,364 |
| | 73 |
| | — |
| | 4,582 |
|
End of period | $ | 366 |
| | $ | 2,599 |
| | $ | 2,365 |
| | $ | 22 |
| | $ | — |
| | $ | 5,352 |
|
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”) 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 andthat 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,II, Item 1A of our Annual Report onthis Form 10-K for the year ended December 31, 2016,10-Q, could affect future results and cause those results to differ materially from those expressed in the forward-looking statements:
•natural disasters, public health crises, including the COVID-19 pandemic (the “Pandemic”), terrorist attacks or similar incidents;
•adverse economic, political or politicalmarket conditions in the U.S. and international markets;markets, including those caused by the Pandemic;
•competition, industry consolidation and changes in the market condition for wireless services;
•data loss or other security breaches;
•the scarcity and cost of additional wireless spectrum, and regulations relating to spectrum use;
•our inability to retain or motivate key personnel, hire qualified personnel or maintain our corporate culture;
•our inability to take advantage of technological developments on a timely basis;
•system failures and business disruptions, allowing for unauthorized use of or interference with our network and other systems;
•the impacts of the actions we have taken and conditions we have agreed to in connection with the regulatory proceedings and approvals of the Transactions (as defined below), 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 (the “Prepaid Business”), and the assumption of certain related liabilities (the “Prepaid Transaction”), the complaint and proposed final judgment (the “Consent Decree”) agreed to by us, Deutsche Telekom AG (“DT”), Sprint Corporation (“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, 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 cost incurred in tracking, monitoring and complying with them;
•our inability to manage the ongoing commercial and transition services market, including new competitors enteringarrangements that we entered into with DISH in connection with the industry as technologies converge;Prepaid Transaction, which we completed on July 1, 2020 (collectively, the “Divestiture Transaction”), and known or unknown liabilities arising in connection therewith;
•the effects of any future acquisition, investment, or merger or acquisition involving us, as well as the effects of mergers or acquisitions in the technology, media and telecommunications industry;us;
challenges in implementing our business strategies or funding our wireless operations, including payment for additional spectrum or network upgrades;
the possibility that we may be unable to renew our spectrum licenses on attractive terms or acquire new spectrum licenses at reasonable costs and terms;
difficulties in managing growth in wireless data services, including network quality;
material changes in available technology;
the timing, scope and financial impact of our deployment of advanced network and business technologies;
the impact on our networks and business from major technology equipment failures;
breaches of our and/or our third party vendors’ networks, information technology and data security;
natural disasters, terrorist attacks or similar incidents;
existing or future litigation;
any changes in the regulatory environments in which we operate, including any increase in restrictions on the ability to operate our networks;
•any disruption or failure of our third parties’ orparties (including key suppliers’ provisioning ofsuppliers) to provide products or services;services for the operation of our business;
material adverse changes in labor matters, including labor campaigns, negotiations•the occurrence of high fraud rates or additional organizing activity,volumes related to device financing, customer payment cards, third-party dealers, employees, subscriptions, identities or account takeover fraud;
•our substantial level of indebtedness and any resulting financial, operational and/or reputational impact;
the abilityour inability to make payments onservice our debt obligations in accordance with their terms or to repay our existing indebtedness when due;comply with the restrictive covenants contained therein;
•adverse changechanges in the ratings of our debt securities or adverse conditions in the credit markets;
•the risk of future material weaknesses we may identify while we work to integrate and align policies, principles and practices of the two companies following the Merger (as defined below), or any other failure by us to maintain effective internal controls, and the resulting significant costs and reputational damage;
•any changes in accounting assumptions thatregulations or in the regulatory agencies, includingframework under which we operate;
•laws and regulations relating to the Securitieshandling of privacy and Exchange Commission (“SEC”), may require, which could result in an impact on earnings;data protection;
•unfavorable outcomes of existing or future legal proceedings;
•our offering of regulated financial services products and exposure to a wide variety of state and federal regulations;
changes in•new or amended tax laws or regulations or administrative interpretations and judicial decisions affecting the scope or application of tax laws or regulations;
•the possibility that we may be unable to renew our spectrum leases on attractive terms or the possible revocation of our existing standardslicenses in the event that we violate applicable laws;
•interests of our significant stockholders that may differ from the interests of other stockholders;
•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;
•the volatility of our stock price and our lack of plan to pay cash dividends in the foreseeable future;
•failure to realize the expected benefits and synergies of the merger (the “Merger”) with Sprint, pursuant to the Business Combination Agreement with Sprint and the resolutionother parties named therein (as amended, the “Business Combination Agreement”) and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”) in the expected time frames or in the amounts anticipated;
•any delay and costs of, disputesor difficulties in, integrating our business and Sprint’s business and operations, and unexpected additional operating costs, customer loss and business disruptions, including challenges in maintaining relationships with any taxing jurisdictions.employees, customers, suppliers or vendors;
•unanticipated difficulties, disruption, or significant delays in our long-term strategy to migrate Sprint’s legacy customers onto T-Mobile’s existing billing platforms; and
•changes to existing or the issuance of new accounting standards by the Financial Accounting Standards Board or other regulatory agencies.
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. In this Form 10-Q, unless the context indicates otherwise, references to “T-Mobile,” “T-Mobile US,” “our Company,” “the Company,” “we,” “our,” and “us” refer to T-Mobile US, Inc., as a Delaware corporation,stand-alone company prior to April 1, 2020, the date we completed the Merger with Sprint, and its wholly-owned subsidiaries.on and after April 1, 2020, refer to the combined company as a result of the Merger.
Investors and others should note that we announce material financial and operational information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We intend to also use thecertain 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 Twitter account (https://twitter.com/TMobileIR) and the @JohnLegere@MikeSievert Twitter account (https://twitter.com/JohnLegere)MikeSievert), Facebook and Periscope accounts, which Mr. LegereSievert also uses as a means for personal communications and observations, as means of disclosing information about the Company and its services and for complying with its disclosure obligations under Regulation FD.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 the Company’sour 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 the Company’s investor relationsour 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 financial statements; and
•Information that allows assessment of the likelihood that past performance is indicative of future performance.
Our MD&A is performed on a consolidated basis and is inclusive of the results and operations of Sprint prospectively from the close of the Merger on April 1, 2020. The Merger enhanced our spectrum portfolio, increased our customer base, altered our product mix and created opportunities for synergies in our operations. We anticipate an initial increase in our combined operating costs, which we expect to decrease as we realize synergies. We expect the trends and results of operations of the combined company to be materially different than those of the standalone entities.
Our MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021, included in Part I, Item 1 of this Form 10-Q and audited Consolidated Financial Statementsconsolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016.2020. 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.
BusinessSprint Merger
Transaction Overview
Effective JanuaryOn April 1, 2017,2020, we completed the imputed discount on EIP receivables, which is amortized overMerger with Sprint, a communications company offering a comprehensive range of wireless and wireline communications products and services. As a result, Sprint and its subsidiaries became wholly owned consolidated subsidiaries of T-Mobile.
The Merger has altered the financed installment term usingsize and scope of our operations, impacting our assets, liabilities, obligations, capital requirements and performance measures. We expect the effective interest methodtrends and was previously recognizedresults of operations of the combined company to be materially different than those of the standalone entities. As a combined company, we have been able to enhance the breadth and depth of our nationwide 5G network, accelerate innovation, increase competition in the U.S. wireless and broadband industries and achieve significant synergies and cost reductions by eliminating redundancies within Interest income in our Consolidated Statements of Comprehensive Income, is recognized within Other revenues in our Condensed Consolidated Statements of Comprehensive Income. We believe this presentation is preferable because it provides a better representation of amounts earned from the Company’s major ongoing operationscombined network as well as other business processes and aligns with industry practice thereby enhancing comparability. We have applied this change retrospectively andoperations.
For more information regarding the effect of this change for the three and nine months ended September 30, 2016, was a reclassification of $59 million and $189 million, respectively, from Interest income to Other revenues. The amortization of imputed discount on our EIP receivables for the three and nine months ended September 30, 2017, was $74 million and $204 million, respectively. For additional information,Merger, see Note 1 - Basis of Presentation2 – Business Combinations of the Notes to the Condensed Consolidated Financial Statements.
In January 2017,Merger-Related Costs
Merger-related costs generally include:
•Integration costs to achieve efficiencies in network, retail, information technology and back office operations;
•Restructuring costs, including severance, store rationalization and network decommissioning; and
•Transaction costs, including legal and professional services related to the completion of the Merger and acquisitions of affiliates.
Transaction and restructuring costs are disclosed in Note 2 – Business Combinations and Note 12 - Restructuring Costs, respectively. Merger-related costs have been excluded from our calculations of Adjusted EBITDA and Core Adjusted EBITDA, which are non-GAAP financial measures, as we introduced, Un-carrier Next, where monthly wireless service feesdo not consider these costs to be reflective of our ongoing operating performance. See “Adjusted EBITDA and sales taxesCore Adjusted EBITDA” in the “Performance Measures” section of this MD&A. Cash payments for Merger-related costs, including payments related to our restructuring plan, are included in the advertised monthly recurring charge for T-Mobile ONE. We also unveiled Kickback on T-Mobile ONE, where participating customers who use 2 GB or less of data in a month, will get up to a $10 credit per qualifying line on their next month’s bill. In addition, we introduced the Un-contract for T-Mobile ONE with the first-ever price guarantee on an unlimited 4G LTE plan which allows current T-Mobile ONE customers to keep their price for service until they decide to change it.
In September 2017, we introduced, Un-carrier Next: Netflix On Us, through an exclusive new partnership with Netflix where a standard monthly Netflix service plan is included at no charge to qualifying T-Mobile ONE customers on family plans.
During the third quarter of 2017, our operations in Texas, Florida and Puerto Rico experienced losses related to hurricanes. Based on our preliminary assessment, the approximate impacts for the three and nine months ended September 30, 2017, from lost revenue, assets damaged or destroyed and other hurricane related costs incurred are included in the table below. As of September 30, 2017, our loss assessment is ongoing and we expect additional expenses to be incurred and customer activity to be impacted in the fourth quarter of 2017, primarily related to our operations in Puerto Rico. We have not recognized any potential insurance recoveries related to those hurricane losses as we continue to assess the damage and work with our insurance carriers.
|
| | | | | | | |
(in millions, except per share amounts, ARPU, ABPU, and bad debt expense and losses from sales of receivables as a percentage of total revenues) | Three Months Ended September 30, | | Nine Months Ended September 30, |
2017 | | 2017 |
Increase (Decrease) | | | |
Revenues | | | |
Branded postpaid revenues | $ | (20 | ) | | $ | (20 | ) |
Of which, branded postpaid phone revenues | (19 | ) | | (19 | ) |
Branded prepaid revenues | (11 | ) | | (11 | ) |
Total service revenues | (31 | ) | | (31 | ) |
Equipment revenues | (8 | ) | | (8 | ) |
Total revenues | $ | (39 | ) | | $ | (39 | ) |
| | | |
Operating expenses | | | |
Cost of services | $ | 69 |
| | $ | 69 |
|
Cost of equipment sales | 4 |
| | 4 |
|
Selling, general and administrative | 36 |
| | 36 |
|
Of which, bad debt expense | 20 |
| | 20 |
|
Total operating expense | $ | 109 |
| | $ | 109 |
|
| | | |
Operating income | $ | (148 | ) | | $ | (148 | ) |
Net income | $ | (90 | ) | | $ | (90 | ) |
| | | |
Earnings per share - basic | $ | (0.11 | ) | | $ | (0.11 | ) |
Earnings per share - diluted | $ | (0.10 | ) | | $ | (0.10 | ) |
| | | |
Operating measures | | | |
Bad debt expense and losses from sales of receivables as a percentage of total revenues | 0.20 | % | | 0.07 | % |
Branded postpaid phone ARPU | $ | (0.19 | ) | | $ | (0.07 | ) |
Branded postpaid ABPU | $ | (0.18 | ) | | $ | (0.06 | ) |
Branded prepaid ARPU | $ | (0.18 | ) | | $ | (0.06 | ) |
| | | |
Non-GAAP financial measures | | | |
Adjusted EBITDA | $ | (148 | ) | | $ | (148 | ) |
Results of Operations
Highlights for the three months ended September 30, 2017, compared to the same period in 2016
Total revenues of $10.0 billion for the three months ended September 30, 2017, increased $714 million, or 8%. The increase was primarily driven by growth in service and equipment revenues as further discussed below. On September 1, 2016, we sold our marketing and distribution rights to certain existing T-Mobile co-branded customers to a current Mobile Virtual Network Operator (“MVNO”) partner for nominal consideration (the “MVNO Transaction”). The MVNO Transaction shifted Branded postpaid revenues to Wholesale revenues, but did not materially impact total revenues.
Service revenues of $7.6 billion for the three months ended September 30, 2017, increased $496 million, or 7%. The increase was primarily due to growth in our average branded customer base as a result of strong customer response to our Un-carrier initiatives, promotions and the success of our MetroPCS brand.
Equipment revenues of $2.1 billion for the three months ended September 30, 2017, increased $170 million, or 9%. The increase was primarily due to an increase from customer purchases of leased devices at the end of the lease term, the liquidation of returned customer handsets and a higher average revenue per device sold, partially offset by lower lease revenues.
Operating income of $1.3 billion for the three months ended September 30, 2017, increased $275 million, or 26%. The increase was primarily due to an increase in total service revenues and lower Depreciation and amortization, partially offset by higher Selling, general and administrative expenses, higher Cost of services expense and a decrease in Gains on disposal of spectrum licenses.
Net income of $550 million for the three months ended September 30, 2017, increased $184 million, or 50%. The increase was primarily due to higher operating income driven by the factors described above and a net decrease in interest expense, partially offset by higher income tax expense primarily due to an increase in income before income taxes and the negative impact from hurricanes. Net incomeincluded net, after-tax gains of $18 million and $122 million, for the three months ended September 30, 2017 and 2016, respectively.
Adjusted EBITDA (see “Performance Measures”), a non-GAAP financial measure, of $2.8 billion for the three months ended September 30, 2017, increased $133 million, or 5%. The increase was primarily due to higher operating income driven by the factors described above, partially offset by lower Gains on disposal of spectrum licenses. Adjusted EBITDA included pre-tax spectrum gains of $29 million and $199 million for the three months ended September 30, 2017 and 2016, respectively.
Net cash provided by operating activities in our Condensed Consolidated Statements of $2.4 billion forCash Flows.
Merger-related costs during the three and six months ended SeptemberJune 30, 2017, increased $622 million, or 36% (see “Liquidity2021 and Capital Resources”).2020, are presented below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change | | |
2021 | | 2020 | | $ | | % | | 2021 | | 2020 | | | | $ | | % | | | | |
Merger-related costs | | | | | | | | | | | | | | | | | | | | | |
Cost of services, exclusive of depreciation and amortization | $ | 273 | | | $ | 40 | | | $ | 233 | | | 583 | % | | $ | 409 | | | $ | 40 | | | | | $ | 369 | | | 923 | % | | | | |
Cost of equipment sales | 87 | | | — | | | 87 | | | NM | | 104 | | | — | | | | | 104 | | | NM | | | | |
Selling, general and administrative | 251 | | | 758 | | | (507) | | | (67) | % | | 396 | | | 901 | | | | | (505) | | | (56) | % | | | | |
Total Merger-related costs | $ | 611 | | | $ | 798 | | | $ | (187) | | | (23) | % | | $ | 909 | | | $ | 941 | | | | | $ | (32) | | | (3) | % | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Cash payments for Merger-related costs | $ | 190 | | | $ | 370 | | | $ | (180) | | | (49) | % | | $ | 467 | | | $ | 531 | | | | | $ | (64) | | | (12) | % | | | | |
NM - Not Meaningful
Free Cash Flow, a non-GAAP financial measure,
Merger-related costs will be impacted by restructuring and integration activities expected to occur over the next three years as we implement initiatives to realize cost efficiencies from the Merger. Transaction costs, including legal and professional service
Highlights for the nine months ended September 30, 2017, comparedfees related to the same periodcompletion of the Merger and acquisitions of affiliates, are expected to continue to decrease in 2016periods subsequent to the close of the Merger.
Total revenuesRestructuring
Upon the close of $29.8 billion for the nine months ended September 30, 2017, increased $2.6 billion,Merger, we began implementing restructuring initiatives to realize cost efficiencies from the Merger. The major activities associated with the restructuring initiatives to date include:
•Contract termination costs associated with rationalization of retail stores, distribution channels, duplicative network and backhaul services and other agreements;
•Severance costs associated with the reduction of redundant processes and functions; and
•The decommissioning of certain small cell sites and distributed antenna systems to achieve synergies in network costs.
Anticipated Impacts
Our restructuring activities are expected to occur over the next three years with substantially all costs incurred by the end of fiscal year 2023. We are evaluating additional restructuring initiatives which are dependent on consultations and negotiation with certain counterparties and the expected impact on our business operations, which could affect the amount or 9%. The increase was primarily driven by growth in servicetiming of the restructuring costs and equipment revenues as further discussed below. On September 1, 2016, we soldrelated payments. We expect our marketingprincipal sources of funding to be sufficient to meet our liquidity requirements and distribution rights to certain existing T-Mobile co-branded customers to a current Mobile Virtual Network Operator (“MVNO”) partner for nominal consideration (the “MVNO Transaction”). The MVNO Transaction shifted Branded postpaid revenues to Wholesale revenues, but did not materially impact total revenues.anticipated payments associated with the restructuring initiatives.
Service revenues of $22.4 billion for the nine months ended September 30, 2017, increased $1.8 billion, or 9%. The increase was primarily due to growth in our average branded customer base asAs a result of strong customer responseour ongoing restructuring activities, we expect to realize cost efficiencies by eliminating redundancies within our Un-carrier initiatives, promotionscombined network as well as other business processes and the successoperations. We expect these activities to result in a reduction of our MetroPCS brand.
Equipment revenuesexpenses withinCost of $6.7 billion for the nine months ended September 30, 2017, increased $680 million, or 11%. The increase was primarily due to higher average revenue per device soldservices and an increase from customer purchases of leased devices at the end of the lease term, partially offset by lower lease revenues.
Operating income of $3.8 billion for the nine months ended September 30, 2017, increased $727 million, or 24%. The increase was primarily due to higher Total service revenues and lower Depreciation and amortization, partially offset by lower Gains on disposal of spectrum licenses and higher Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.
For more information regarding our restructuring activities, see Note 12 – Restructuring Costs of the Notes to the Condensed Consolidated Financial Statements.
COVID-19 Pandemic
The Pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and Costfinancial markets worldwide, and has caused significant volatility in the U.S. and international debt and equity markets. The impact of the Pandemic has been wide-ranging, including, but not limited to, the temporary closures of many businesses and schools, “shelter in place” orders, travel restrictions, social distancing guidelines and other governmental, business and individual actions taken in response to the Pandemic. These restrictions have impacted, and will continue to impact, our business, including the demand for our products and services expenses.and the ways in which our customers purchase and use them. In addition, the Pandemic has resulted in economic uncertainty and a significant increase in unemployment in the United States, which could affect our customers’ purchasing decisions and ability to make timely payments. Beginning in the first quarter of 2020, the Pandemic has peaked, subsided and seen a resurgence, leading to phased re-openings, as well as continuing or renewed containment measures. The availability of vaccines, as well as our continued social distancing measures and incremental cleaning efforts, have facilitated the continued operation of our retail stores, after certain closures during 2020. We will continue to monitor the Pandemic and its impacts and may adjust our actions as needed to continue to provide our products and services to our communities and employees.
Net income of $1.8 billion for the nine months ended September 30, 2017, increased $759 million, or 71%. The increase was primarily due to higher operating income drivenAs a critical communications infrastructure provider as designated by the factors described above, a lower tax rate primarily duegovernment, our focus has been on providing crucial connectivity to a reduction inour customers and impacted communities while ensuring the valuation allowance against deferred tax assetssafety and a net decrease in interest expense, partially offset by the negative impact from hurricanes. Net income included net, after-tax gainswell-being of $41 million and $511 million, for the nine months ended September 30, 2017 and 2016, respectively.our employees.
Adjusted EBITDA, a non-GAAP financial measure,Table of $8.5 billion for the nine months ended September 30, 2017, increased $470 million, or 6%. The increase was primarily due to higher operating income driven by the factors described above, partially offset by lower Gains on disposal of spectrum licenses. Adjusted EBITDA included pre-tax spectrum gains of $67 million and $835 million for the nine months ended September 30, 2017 and 2016, respectively.Contents
Results of Operations
Net cash provided by operating activities of $5.9 billion for the nine months ended September 30, 2017, increased $1.4 billion, or 30% (see “Liquidity and Capital Resources”).
Free Cash Flow, a non-GAAP financial measure, of $1.6 billion for the nine months ended September 30, 2017, increased $898 million, or 130% (see “Liquidity and Capital Resources”).
Set forth below is a summary of our consolidated financial results:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| 2017 | | 2016 | | $ | | % | | 2017 | | 2016 | | $ | | % |
(in millions) | | | (As Adjusted - See Note 1) | | | | | | (As Adjusted - See Note 1) | | |
Revenues | | | | | | | | | | | | | | | |
Branded postpaid revenues | $ | 4,920 |
| | $ | 4,647 |
| | $ | 273 |
| | 6 | % | | $ | 14,465 |
| | $ | 13,458 |
| | $ | 1,007 |
| | 7 | % |
Branded prepaid revenues | 2,376 |
| | 2,182 |
| | 194 |
| | 9 | % | | 7,009 |
| | 6,326 |
| | 683 |
| | 11 | % |
Wholesale revenues | 274 |
| | 238 |
| | 36 |
| | 15 | % | | 778 |
| | 645 |
| | 133 |
| | 21 | % |
Roaming and other service revenues | 59 |
| | 66 |
| | (7 | ) | | (11 | )% | | 151 |
| | 170 |
| | (19 | ) | | (11 | )% |
Total service revenues | 7,629 |
| | 7,133 |
| | 496 |
| | 7 | % | | 22,403 |
| | 20,599 |
| | 1,804 |
| | 9 | % |
Equipment revenues | 2,118 |
| | 1,948 |
| | 170 |
| | 9 | % | | 6,667 |
| | 5,987 |
| | 680 |
| | 11 | % |
Other revenues | 272 |
| | 224 |
| | 48 |
| | 21 | % | | 775 |
| | 670 |
| | 105 |
| | 16 | % |
Total revenues | 10,019 |
| | 9,305 |
| | 714 |
| | 8 | % | | 29,845 |
| | 27,256 |
| | 2,589 |
| | 9 | % |
Operating expenses | | | | | | | | | | | | | | | |
Cost of services, exclusive of depreciation and amortization shown separately below | 1,594 |
| | 1,436 |
| | 158 |
| | 11 | % | | 4,520 |
| | 4,286 |
| | 234 |
| | 5 | % |
Cost of equipment sales | 2,617 |
| | 2,539 |
| | 78 |
| | 3 | % | | 8,149 |
| | 7,532 |
| | 617 |
| | 8 | % |
Selling, general and administrative | 3,098 |
| | 2,898 |
| | 200 |
| | 7 | % | | 8,968 |
| | 8,419 |
| | 549 |
| | 7 | % |
Depreciation and amortization | 1,416 |
| | 1,568 |
| | (152 | ) | | (10 | )% | | 4,499 |
| | 4,695 |
| | (196 | ) | | (4 | )% |
Cost of MetroPCS business combination | — |
| | 15 |
| | (15 | ) | | NM |
| | — |
| | 110 |
| | (110 | ) | | NM |
|
Gains on disposal of spectrum licenses | (29 | ) | | (199 | ) | | 170 |
| | (85 | )% | | (67 | ) | | (835 | ) | | 768 |
| | (92 | )% |
Total operating expense | 8,696 |
| | 8,257 |
| | 439 |
| | 5 | % | | 26,069 |
| | 24,207 |
| | 1,862 |
| | 8 | % |
Operating income | 1,323 |
| | 1,048 |
| | 275 |
| | 26 | % | | 3,776 |
| | 3,049 |
| | 727 |
| | 24 | % |
Other income (expense) | | | | | | | | | | | | | | | |
Interest expense | (253 | ) | | (376 | ) | | 123 |
| | (33 | )% | | (857 | ) | | (1,083 | ) | | 226 |
| | (21 | )% |
Interest expense to affiliates | (167 | ) | | (76 | ) | | (91 | ) | | 120 | % | | (398 | ) | | (248 | ) | | (150 | ) | | 60 | % |
Interest income | 2 |
| | 3 |
| | (1 | ) | | (33 | )% | | 15 |
| | 9 |
| | 6 |
| | 67 | % |
Other income (expense), net | 1 |
| | (1 | ) | | 2 |
| | NM |
| | (89 | ) | | (6 | ) | | (83 | ) | | NM |
|
Total other expense, net | (417 | ) | | (450 | ) | | 33 |
| | (7 | )% | | (1,329 | ) | | (1,328 | ) | | (1 | ) | | — | % |
Income before income taxes | 906 |
| | 598 |
| | 308 |
| | 52 | % | | 2,447 |
| | 1,721 |
| | 726 |
| | 42 | % |
Income tax expense | (356 | ) | | (232 | ) | | (124 | ) | | 53 | % | | (618 | ) | | (651 | ) | | 33 |
| | (5 | )% |
Net income | $ | 550 |
| | $ | 366 |
| | $ | 184 |
| | 50 | % | | $ | 1,829 |
| | $ | 1,070 |
| | $ | 759 |
| | 71 | % |
| | | | | | | | | | | | | | | |
Net cash provided by operating activities | $ | 2,362 |
| | $ | 1,740 |
| | $ | 622 |
| | 36 | % | | $ | 5,904 |
| | $ | 4,533 |
| | $ | 1,371 |
| | 30 | % |
Net cash used in investing activities | (1,455 | ) | | (1,859 | ) | | 404 |
| | (22 | )% | | (10,138 | ) | | (4,386 | ) | | (5,752 | ) | | 131 | % |
Net cash (used in) provided by financing activities | (349 | ) | | (67 | ) | | (282 | ) | | 421 | % | | (527 | ) | | 623 |
| | (1,150 | ) | | (185 | )% |
| | | | | | | | | | | | | | | |
Non-GAAP Financial Measures | | | | | | | | | | | | | | | |
Adjusted EBITDA | $ | 2,822 |
| | $ | 2,689 |
| | $ | 133 |
| | 5 | % | | $ | 8,502 |
| | $ | 8,032 |
| | $ | 470 |
| | 6 | % |
Free Cash Flow | 921 |
| | 581 |
| | 340 |
| | 59 | % | | 1,588 |
| | 690 |
| | 898 |
| | 130 | % |
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| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change | | |
(in millions) | 2021 | | 2020 | | $ | | % | | 2021 | | 2020 | | | | $ | | % | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Postpaid revenues | $ | 10,492 | | | $ | 9,959 | | | $ | 533 | | | 5 | % | | $ | 20,795 | | | $ | 15,846 | | | | | $ | 4,949 | | | 31 | % | | | | |
Prepaid revenues | 2,427 | | | 2,311 | | | 116 | | | 5 | % | | 4,778 | | | 4,684 | | | | | 94 | | | 2 | % | | | | |
Wholesale revenues | 935 | | | 408 | | | 527 | | | 129 | % | | 1,832 | | | 733 | | | | | 1,099 | | | 150 | % | | | | |
Other service revenues | 638 | | | 552 | | | 86 | | | 16 | % | | 1,279 | | | 813 | | | | | 466 | | | 57 | % | | | | |
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Total service revenues | 14,492 | | | 13,230 | | | 1,262 | | | 10 | % | | 28,684 | | | 22,076 | | | | | 6,608 | | | 30 | % | | | | |
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Equipment revenues | 5,215 | | | 4,269 | | | 946 | | | 22 | % | | 10,561 | | | 6,386 | | | | | 4,175 | | | 65 | % | | | | |
Other revenues | 243 | | | 172 | | | 71 | | | 41 | % | | 464 | | | 322 | | | | | 142 | | | 44 | % | | | | |
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Total revenues | 19,950 | | | 17,671 | | | 2,279 | | | 13 | % | | 39,709 | | | 28,784 | | | | | 10,925 | | | 38 | % | | | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Cost of services, exclusive of depreciation and amortization shown separately below | 3,491 | | | 3,098 | | | 393 | | | 13 | % | | 6,875 | | | 4,737 | | | | | 2,138 | | | 45 | % | | | | |
Cost of equipment sales, exclusive of depreciation and amortization shown separately below | 5,453 | | | 3,667 | | | 1,786 | | | 49 | % | | 10,595 | | | 6,196 | | | | | 4,399 | | | 71 | % | | | | |
Selling, general and administrative | 4,823 | | | 5,604 | | | (781) | | | (14) | % | | 9,628 | | | 9,292 | | | | | 336 | | | 4 | % | | | | |
Impairment expense | — | | | 418 | | | (418) | | | (100) | % | | — | | | 418 | | | | | (418) | | | (100) | % | | | | |
Depreciation and amortization | 4,077 | | | 4,064 | | | 13 | | | — | % | | 8,366 | | | 5,782 | | | | | 2,584 | | | 45 | % | | | | |
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Total operating expenses | 17,844 | | | 16,851 | | | 993 | | | 6 | % | | 35,464 | | | 26,425 | | | | | 9,039 | | | 34 | % | | | | |
Operating income | 2,106 | | | 820 | | | 1,286 | | | 157 | % | | 4,245 | | | 2,359 | | | | | 1,886 | | | 80 | % | | | | |
Other income (expense) | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Interest expense | (820) | | | (776) | | | (44) | | | 6 | % | | (1,612) | | | (961) | | | | | (651) | | | 68 | % | | | | |
Interest expense to affiliates | (32) | | | (63) | | | 31 | | | (49) | % | | (78) | | | (162) | | | | | 84 | | | (52) | % | | | | |
Interest income | 2 | | | 6 | | | (4) | | | (67) | % | | 5 | | | 18 | | | | | (13) | | | (72) | % | | | | |
Other expense, net | (1) | | | (195) | | | 194 | | | (99) | % | | (126) | | | (205) | | | | | 79 | | | (39) | % | | | | |
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Total other expense, net | (851) | | | (1,028) | | | 177 | | | (17) | % | | (1,811) | | | (1,310) | | | | | (501) | | | 38 | % | | | | |
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Income (loss) from continuing operations before income taxes | 1,255 | | | (208) | | | 1,463 | | | (703) | % | | 2,434 | | | 1,049 | | | | | 1,385 | | | 132 | % | | | | |
Income tax expense | (277) | | | (2) | | | (275) | | | NM | | (523) | | | (308) | | | | | (215) | | | 70 | % | | | | |
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Income (loss) from continuing operations | 978 | | | (210) | | | 1,188 | | | (566) | % | | 1,911 | | | 741 | | | | | 1,170 | | | 158 | % | | | | |
Income from discontinued operations, net of tax | — | | | 320 | | | (320) | | | (100) | % | | — | | | 320 | | | | | (320) | | | (100) | % | | | | |
Net income | $ | 978 | | | $ | 110 | | | $ | 868 | | | 789 | % | | $ | 1,911 | | | $ | 1,061 | | | | | $ | 850 | | | 80 | % | | | | |
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Statement of Cash Flows Data | | | | | | | | | | | | | | | | | | | | | |
Net cash provided by operating activities | $ | 3,779 | | | $ | 777 | | | $ | 3,002 | | | 386 | % | | $ | 7,440 | | | $ | 2,394 | | | | | $ | 5,046 | | | 211 | % | | | | |
Net cash used in investing activities | (2,083) | | | (6,356) | | | 4,273 | | | (67) | % | | (13,322) | | | (7,936) | | | | | (5,386) | | | 68 | % | | | | |
Net cash (used in) provided by financing activities | (577) | | | 15,628 | | | (16,205) | | | (104) | % | | 3,297 | | | 15,175 | | | | | (11,878) | | | (78) | % | | | | |
Non-GAAP Financial Measures | | | | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA | 6,906 | | | 7,017 | | | (111) | | | (2) | % | | 13,811 | | | 10,682 | | | | | 3,129 | | | 29 | % | | | | |
Core Adjusted EBITDA | 5,992 | | | 5,596 | | | 396 | | | 7 | % | | 11,856 | | | 9,096 | | | | | 2,760 | | | 30 | % | | | | |
Free Cash Flow, excluding gross payments for the settlement of interest rate swaps | 1,671 | | | 1,441 | | 230 | | 16 | % | | 2,975 | | | 2,173 | | | | 802 | | 37 | % | | | | |
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NM - Not Meaningful
The following discussion and analysis is for the three and ninesix months ended SeptemberJune 30, 2017,2021, compared to the same periodsperiod in 20162020 unless otherwise stated.
Total revenues increased $714 million,$2.3 billion, or 8%13%, for the three months ended and $2.6increased $10.9 billion, or 9%38%, for the ninesix months ended SeptemberJune 30, 2017,2021. The components of these changes are discussed below.
Postpaid revenues increased $533 million, or 5%, for the three months ended and increased $4.9 billion, or 31%, for the six months ended June 30, 2021.
The increase for the three and six months ended June 30, 2021, was primarily from:
•Higher average postpaid accounts; and
Prepaid revenues increased $116 million, or 5%, for the three months ended and increased $94 million, or 2%, for the six months ended June 30, 2021, primarily from:
•Higher average prepaid customers; and
Wholesale revenues increased $527 million, or 129%, for the three months ended and increased $1.1 billion, or 150%, for the six months ended June 30, 2021, primarily from our Master Network Service Agreement with DISH, which went into effect on July 1, 2020, and the success of our other MVNO relationships.
Other service revenues increased $86 million, or 16%, for the three months ended and increased $466 million, or 57%, for the six months ended June 30, 2021.
The increase for the three months ended June 30, 2021, was primarily from higher advertising, roaming and Lifeline revenues.
The increase for the six months ended June 30, 2021, was primarily from:
•Inclusion of wireline operations acquired in the Merger;
•Higher Lifeline revenues, primarily due to operations acquired in the Merger; and
•Higher advertising revenues.
Equipment revenues increased $946 million, or 22%, for the three months ended and increased $4.2 billion, or 65%, for the six months ended June 30, 2021.
The increase for the three months ended June 30, 2021, was primarily from:
•An increase of $1.2 billion in device sales revenue, excluding purchased leased devices, primarily from:
•An increase in the number of devices sold due to increased retail store traffic due to closures arising from the Pandemic in the prior period; and
•Higher average revenue per device sold due to an increase in the high-end device mix;
•An increase of $150 million in sales of accessories, due to increased retail store traffic due to closures arising from the Pandemic in the prior period; and
•An increase of $97 million in liquidation revenues primarily due to a higher volume of returned devices; partially offset by
•A decrease of $507 million in lease revenues due to a lower number of customer devices under lease due to the continued planned shift in device financing from branded postpaidleasing to EIP.
The increase for the six months ended June 30, 2021, was primarily from:
•An increase of $2.9 billion in device sales revenue, excluding purchased leased devices, primarily from:
•An increase in the number of devices sold due to increased retail store traffic due to closures arising from the Pandemic in the prior period and prepaid customersa larger customer base as wella result of the Merger; and
•Higher average revenue per device sold due to an increase in the high-end device mix;
•An increase of $369 million in lease revenues due to a higher number of customer devices under lease, primarily from leases acquired in the Merger;
•An increase of $325 million in liquidation revenues primarily due to a higher volume of returned devices;
•An increase of $291 million in sales of accessories, due to increased retail store traffic due to closures arising from the Pandemic in the prior period and a larger customer base as higher equipmenta result of the Merger; and
•An increase of $227 million in sales of leased devices, primarily due to a larger base of leased devices as a result of the Merger.
Other revenues as discussed below.increased$71 million, or 41%, for the three months ended and increased $142 million, or 44%, for the six months ended June 30, 2021, primarily from:
Branded postpaid revenues •Higher interest income on our EIP receivables; and
•Higher revenue from our device recovery program.
Operating expensesincreased $273$993 million, or 6%, for the three months ended and $1.0increased $9.0 billion, or 7%34%, for the ninesix months ended SeptemberJune 30, 2017.2021. The components of this change are discussed below.
The change for the three months ended September 30, 2017 was primarily from:
Growth in the customer base driven by strong customer response to our Un-carrier initiativesCost of services, exclusive of depreciation and promotions for services and devices; and
The positive impact from a decrease in the non-cash net revenue deferral for Data Stash; partially offset by
The MVNO Transaction;
Lower branded postpaid phone average revenue per user (“ARPU”); and
The negative impact from hurricanes of $20 million.
The change for the nine months ended September 30, 2017 was primarily from:
Growth in the customer base driven by strong customer response to our Un-carrier initiatives and promotions for services and devices, including the growing success of our business channel, T-Mobile for Business; and
The positive impact from a decrease in the non-cash net revenue deferral for Data Stash; partially offset by
The MVNO Transaction; and
The negative impact from hurricanes of $20 million.
Branded prepaid revenuesamortization, increased $194$393 million, or 9%13%, for the three months ended and $683 million,increased $2.1 billion, or 11%45%, for the ninesix months ended SeptemberJune 30, 2017,2021.
The increase for the three months ended June 30, 2021, was primarily from:
Higher average branded prepaid customers•An increase of $233 million in Merger-related costs including incremental costs associated with network decommissioning and integration; and
•An increase in site costs related to network integration and the continued build-out of our nationwide 5G network.
The increase for the six months ended June 30, 2021, was primarily driven by growthfrom:
•An increase in expenses associated with leases and backhaul agreements acquired in the customer base;Merger and
Higher branded prepaid ARPU from the successcontinued build-out of our MetroPCS brand; partially offset bynationwide 5G network;
The impact from•An increase of $369 million in Merger-related costs including incremental costs associated with network decommissioning and integration; and
•Higher employee-related and benefit-related costs primarily due to increased headcount as a result of the optimizationMerger.
Cost of our third-party distribution channels;equipment sales, exclusive of depreciation and
The negative impact from hurricanes of $11 million.
Wholesale revenues amortization, increased $36 million,$1.8 billion, or 15%49%, for the three months ended and $133 million,increased $4.4 billion, or 21%71%, for the ninesix months ended SeptemberJune 30, 2017, primarily from the impact of increased Wholesale revenues resulting from the MVNO Transaction.2021.
Roaming and other service revenues decreased $7 million, or 11%,The increase for the three months ended and $19 million, or 11%, for the nine months ended SeptemberJune 30, 2017.
Equipment revenues increased$170 million, or 9%, for the three months ended and $680 million, or 11%, for the nine months ended September 30, 2017.
The change for the three months ended September 30, 20172021, was primarily from:
•An increase of $137 million from the purchase of leased devices at the end of their lease term;
An increase of $116 million primarily related to proceeds from the liquidation of returned customer handsets in the third quarter of 2017;
An increase of $78 million in device sales revenues excluding purchased leased devices, primarily due to:
Higher average revenue per device sold primarily due to an Original Equipment Manufacturer (“OEM”) recall of its smartphone devices in the third quarter of 2016 and a decrease in promotional spending; partially offset by
A 5% decrease in the number of devices sold. Device sales revenue is recognized at the time of sale; and
An increase of $22 million in SIM and upgrade revenue; partially offset by
A decrease of $194 million in lease revenues from declining JUMP! On Demand population due to shifting focus to our EIP financing option beginning in the first quarter of 2016; and
The negative impact from hurricanes of $8 million.
The change for the nine months ended September 30, 2017 was primarily from:
An increase of $413 million in device sales revenues excluding purchased leased devices, primarily due to:
Higher average revenue per device sold primarily due to an increase in high-end device mix and an OEM recall of its smartphone devices in the third quarter of 2016, partially offset by an increase in promotional spending; partially offset by
A 1% decrease in the number of devices sold. Device sales revenue is recognized at the time of sale;
An increase of $366 million from the purchase of leased devices at the end of the lease term;
An increase of $137 million primarily related to proceeds from the liquidation of returned customer handsets in the third quarter of 2017; and
An increase of $117 million in SIM and upgrade revenue; partially offset by
A decrease of $345 million in lease revenues from declining JUMP! On Demand population due to shifting focus to our EIP financing option beginning in the first quarter of 2016; and
The negative impact from hurricanes of $8 million.
Under our JUMP! On Demand program, upon device upgrade or at lease end, customers must return or purchase their device. Revenue for purchased leased devices is recorded as equipment revenues when revenue recognition criteria have been met.
Gross EIP device financing to our customers increased by $115 million for the three months ended and $303 million for the nine months ended September 30, 2017, primarily due to growth in the gross amount of equipment financed on EIP. The increase was also due to certain customers on leased devices reaching the end of lease term who financed their devices over nine-month EIP.
Operating expenses increased $439 million, or 5%, for the three months ended and $1.9$1.7 billion or 8%, for the nine months ended September 30, 2017, primarily from higher Cost of services, Cost of equipment sales, Selling, general and administrative and lower Gains on disposal of spectrum licenses, partially offset by lower Depreciation and amortization as discussed below.
Cost of services increased $158 million, or 11%, for the three months ended and $234 million, or 5%, for the nine months ended September 30, 2017.
The change for the three months ended September 30, 2017 was primarily from:
Higher lease expenses associated with our network expansion;
The negative impact from hurricanes of $69 million; partially offset by
Lower regulatory expenses.
The change for the nine months ended September 30, 2017 was primarily from:
Higher lease expenses associated with network expansion; and
The negative impact from hurricanes of $69 million; partially offset by
Lower long distance and toll costs as we continue to renegotiate contracts with vendors; and
Lower regulatory expenses.
Cost of equipment sales increased $78 million, or 3%, for the three months ended and $617 million, or 8%, for the nine months ended September 30, 2017.
The change for the three months ended September 30, 2017 was primarily from:
An increase of $66 million in device cost of equipment sales, excluding purchased leased devices, primarily due to:
from:A higher average cost per device sold primarily from an OEM recall of its smartphone devices in the third quarter of 2016; partially offset by
A 5% decrease•An increase in the number of devices sold; and
An increase of $58 million in lease device cost of equipment sales, primarilysold due to:
An increase in lease buyouts as leases began reaching their term dates in 2017; partially offset by
A decrease in device upgradesto increased retail store traffic due to closures arising from fewer customersthe Pandemic in the handset lease program.
prior period; andThese increases are partially offset by a decrease of $31 million in cost of equipment related•Higher average costs per device sold due to an increase in proceedsthe high-end device mix; and
•An increase in cost of accessories, due to increased retail store traffic due to closures arising from the liquidationPandemic in the prior period.
The negative impact from hurricanes of $4 million.Contents
The changeincrease for the ninesix months ended SeptemberJune 30, 20172021, was primarily from:
•An increase of $483 million $3.8 billionin device cost of equipment sales, excluding purchased leased devices, primarily due to:
from:A higher average cost per device sold primarily from an•An increase in high-end device mix and an OEM recall of its smartphone devices in the third quarter of 2016; partially offset by
A 1% decrease in the number of devices sold;sold due to increased retail store traffic due to closures arising from the Pandemic in the prior period and
a larger customer base as a result of the Merger; and•Higher average costs per device sold due to an increase in the high-end device mix;
•An increase of $245$196 million in leasecosts related to the liquidation of a higher volume of returned devices primarily driven by a larger customer base as a result of the Merger;
•An increase of $196 million in leased device cost of equipment sales, primarily due to:
to a larger base of leased devices as a result of the Merger; and•An increase of $129 million in lease buyouts as leases began reaching their term dates in 2017; partially offset by
A decrease in device upgradescost of accessories, due to increased retail store traffic due to closures arising from fewer customersthe Pandemic in the handset lease program.
These increases are partially offset byprior period and a decrease of $69 million primarily due to inventory adjustments related to obsolete inventory; and
The negative impact from hurricanes of $4 million.
Under our JUMP! On Demand program, upon device upgrade or at the endlarger customer base as a result of the lease term, customers must return or purchase their device. The cost of purchased leased devices is recorded as Cost of equipment sales. Returned devices transferred from Property and equipment, net are recorded as inventory and are valued at the lower of cost or market with any write-down to market recognized as Cost of equipment sales.Merger.
Selling, general and administrative increased $200 expenses decreased $781 million, or 7%14%, for the three months ended and $549increased $336 million, or 7%4%, for the ninesix months ended SeptemberJune 30, 2017,2021.
The decrease for the three months ended June 30, 2021, was primarily from:
•Merger-related costs of $251 million primarily related to integration and restructuring, compared to $758 million of Merger-related costs in the three months ended June 30, 2020; and
•Lower bad debt expense; partially offset by
•Higher employee-related costs due to increased staffing and distribution to support growth initiatives.
•Selling, general and administrative expenses for the three months ended June 30, 2020 included $341 million of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs. There were insignificant COVID-19 costs for the three months ended June 30, 2021.
The increase for the six months ended June 30, 2021, was primarily from:
•Higher advertising, external labor and professional services and lease expense; and
•Higher employee-related costs due to an increase in the number of employees primarily from strategic investmentsthe Merger; partially offset by
•Lower bad debt expense.
•Merger-related costs of $396 million primarily related to support our growing customer base including higherintegration and restructuring, compared to $901 million of Merger-related costs in the six months ended June 30, 2020.
•Selling, general and administrative expenses for the six months ended June 30, 2020 included $458 million of supplemental employee related costs, promotional costs,payroll, third-party commissions and highercleaning-related COVID-19 costs. There were insignificant COVID-19 costs related to managed services and outsourced functions, partially offset by lower external labor costs. Additionally,for the negative impact from hurricanes of $36 million contributed to the increase.six months ended June 30, 2021.
Depreciation and amortization decreased $152 million, or 10%, was essentially flat for the three months ended and $196 million,increased $2.6 billion, or 4%45%, for the ninesix months ended SeptemberJune 30, 2017,2021.
Depreciation and amortization was essentially flat for the three months ended June 30, 2021, and was primarily from:impacted by:
•Higher depreciation expense, excluding leased devices, due to network expansion from the continued build-out of our nationwide 5G network; mostly offset by
•Lower depreciation expense related to our JUMP! On Demand programon leased devices resulting from a lower number of total customer devices under lease. Under our JUMP! On Demand program,lease;
•Lower amortization of customer relationship intangibles; and
•Certain 4G-related network assets becoming fully depreciated.
The increase for the cost of asix months ended June 30, 2021, was primarily from:
•Higher depreciation expense, excluding leased wireless device is depreciated overdevices, due to network expansion from the lease term to its estimated residual value; partially offset by
The continued build-out of our 4G LTE network.
nationwide 5G network;
Cost•Higher depreciation expense on leased devices resulting from a larger base of MetroPCS business combination decreased $15 million for the three months ended and $110 million for the nine months ended September 30, 2017. On July 1, 2015, we officially completed the shutdownleased devices as a result of the MetroPCS CDMA network. Network decommissioning costs primarily relate toMerger; and
•Higher amortization from intangible assets acquired in the acceleration of lease costs for cell sites that would have otherwise been recognized as cost of services over the remaining lease term had we not decommissioned the cell sites. We do not expect to incur significant additional network decommissioning costs in 2017.
Gains on disposal of spectrum licenses decreased $170 million, or 85%, for the three months ended and $768 million, or 92%, for the nine months ended September 30, 2017. The change for the nine months ended September 30, 2017 was primarily from a $636 million gain from a spectrum license transaction with AT&T during the first quarter of 2016.
Net Income increased $184 million, or 50%, for the three months ended and $759 million, or 71%, for the nine months ended September 30, 2017, primarily from higher operating income and a net decrease in interest expense,Merger; partially offset by the negative impact from hurricanes of approximately $90 million. Net income for the three months ended September 30, 2017 was partially offset by higher income tax expense as discussed below. Net income for the nine months ended September 30, 2017 additionally included the impact from a lower tax rate as discussed below.
•Certain 4G-related network assets becoming fully depreciated.
Operating income, the components of which are discussed above, and include the negative impact from hurricanes, increased $275 million, $1.3 billion, or 26%157%, for the three months ended and $727 million, or 24%, for the nine months ended September 30, 2017.The negative impact from the hurricanes for the three and nine months ended September 30, 2017 was approximately $148 million.
Income tax expense increased $124 million, or 53%, for the three months ended and decreased $33 million, or 5%, for the nine months ended September 30, 2017.
The change for the three months ended Septemberand increased $1.9 billion, or 80%, for the six months ended June 30, 2017 was primarily from higher income before income taxes. The effective tax rate was 39.3% and 38.8%2021.
Interest expense increased $44 million, or 6%, for the three months ended September 30, 2017 and 2016, respectively.
The changeincreased $651 million, or 68%, for the ninesix months ended SeptemberJune 30, 2017 was primarily from:
A lower effective tax rate which was 25.3% and 37.8% for the nine months ended September 30, 2017 and 2016, respectively,2021, primarily due to a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions that resulted in the recognition of $270higher average debt outstanding, partially offset by lower interest rates.
Interest expense to affiliates decreased $31 million, in tax benefits in the first quarter of 2017 and the recognition of an additional $19 million in tax benefits through the third quarter of 2017. Total tax benefits related to the reduction in the valuation allowance were $289 million through September 30, 2017. The effective tax rate was further decreased by the recognition of $62 million of excess tax benefits related to share-based payments or 49%, for the nine months ended September 30, 2017, compared to $24 million for the same period in 2016; partially offset by
Higher income before income taxes.
Interest expensedecreased $123 million, or 33%, for the three months ended and $226decreased $84 million,, or 21%52%, for the ninesix months ended SeptemberJune 30, 2017,2021, primarily from:
The early extinguishment of our LIBOR plus 2.750% Senior Secured Term Loan andfrom the redemption of $8.3 billionan aggregate principal amount of Senior Notes; partially offset by
The issuance of $1.5$5.25 billion of Senior Notes in March 2017.
The decrease for the nine months ended September 30, 2017 was also impacted by the issuance of $1.0 billion of Senior Notes in April 2016.
Interest expense to affiliates increased $91 in 2020.
Other expense, net decreased $194 million,, or 120%99%, for the three months ended and $150decreased $79 million,, or 60%39%, for the ninesix months ended SeptemberJune 30, 20172021, primarily from lower losses on the extinguishment of debt.
Income (loss) from continuing operations before income taxes, primarily from:
the components of which are discussed above, was income of $1.3 billion and a loss of $208 million for the three months ended June 30, 2021 and 2020, respectively, and was income of $2.4 billion and $1.0 billion for the six months ended June 30, 2021 and 2020, respectively.
An increase in interest associated with a $4.0 billion secured Incremental Term Loan Facility with DT entered into in January 2017;
Income tax expense increased $275 million for the three months ended and increased $215 million, or 70%, for the six months ended June 30, 2021.The issuance of $4.0 billion in Senior Notes to DT in May 2017; and
Draws on our Revolving Credit Facility; partially offset by
Lower interest rates achieved through refinancing $2.5 billion of Senior Reset Notes in April 2017.
The increase for the three months ended SeptemberJune 30, 2017,2021, was alsoprimarily from:
•Higher income from continuing operations before income taxes; partially offset by
•A reduction in expenses that were not deductible for tax purposes including our Layer3 goodwill impairment and certain merger-related costs in the prior year. The effective tax rate was 22.0% and (0.7)% for the three months ended June 30, 2021 and 2020, respectively.
The increase for the six months ended June 30, 2021, was primarily from:
•Higher income from continuing operations before income taxes; partially offset by
•A reduction in expenses that were not deductible for tax purposes including our Layer3 goodwill impairment and certain merger-related costs in the prior year and an increase in excess tax benefits on stock compensation in the current year. The effective tax rate was 21.5% and 29.4% for the six months ended June 30, 2021 and 2020, respectively.
Income (loss) from continuing operations was income of $978 millionanda loss of$210 millionfor the three months ended June 30, 2021 and 2020, respectively, and was income of $1.9 billion and income of $741 million for the six months ended June 30, 2021 and 2020, respectively.
The increase for the three months ended June 30, 2021, was primarily from:
•Higher Operating income; and
•Lower Other expense, net; partially offset by
•Higher Income tax expense.
The increase for the six months ended June 30, 2021, was primarily from:
•Higher Operating income; and
•Lower Other expense, net; partially offset by
•Higher Interest expense; and
•Higher Income tax expense.
Income from discontinued operations, net issuance of $500tax, was $320 million in Senior Notes in April 2017.
See Note 7 – Debtfor the three and six months ended June 30, 2020, and consisted of the Notes toresults of the Condensed Consolidated Financial Statements for additional details.
Other income (expense), net remained flatPrepaid Business that was divested on July 1, 2020. There were no discontinued operations for the three and six months ended June 30, 2021.
Net income, the components of which are discussed above, increased $868 million, or 789%, for the three months ended and increased $83$850 million, or 80%, for the ninesix months ended SeptemberJune 30, 2017. The change2021.
Net income for the ninethree months ended SeptemberJune 30, 2017 was primarily from:
2021, included the following:
A $73 million•Merger-related costs, net loss recognized from the early redemption of certain Senior Notes; and
A $13 million net loss recognized from the refinancingtax, of our outstanding Senior Secured Term Loans.
See Note 7 – Debt of the Notes to the Condensed Consolidated Financial Statements.
Net income included net, after-tax gains on disposal of spectrum licenses of $18 million and $122$453 million for the three months ended SeptemberJune 30, 2017 and 2016, respectively, and $41 million and $5112021, compared to $635 million for the ninethree months ended SeptemberJune 30, 20172020.
•Impairment expense of $366 million, net of tax, for the three months ended June 30, 2020, compared to no impairment expense for the three months ended June 30, 2021.
•The negative impact of supplemental employee payroll, third-party commissions and 2016, respectively.cleaning-related COVID-19 costs, net of tax, of $253 million for the three months ended June 30, 2020, compared to no impact for the three months ended June 30, 2021.
Net income for the six months ended June 30, 2021, included the following:
•Merger-related costs, net of tax, of $673 million for the six months ended June 30, 2021, compared to $752 million for the six months ended June 30, 2020.
•Impairment expense of $366 million, net of tax, for the six months ended June 30, 2020, compared to no impairment expense for the six months ended June 30, 2021.
•The negative impact of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs, net of tax, of $339 million for the six months ended June 30, 2020, compared to no impact for the six months ended June 30, 2021.
Guarantor SubsidiariesFinancial Information
On April 1, 2020, in connection with the closing of the Merger, we assumed certain registered debt to third parties issued by Sprint, Sprint Communications, Inc. and Sprint Capital Corporation (collectively, the “Sprint Issuers”). Amounts previously disclosed for the estimated values of certain acquired assets and liabilities assumed have been adjusted based on additional information arising subsequent to the initial valuation. These revisions to the estimated values did not have a significant impact on our summarized financial information for the consolidated obligor group.
Pursuant to the applicable indentures and supplemental indentures, the Senior Notes to affiliates and third parties issued by T-Mobile USA, Inc. and the Sprint Issuers (collectively, the “Issuers”) are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by T-Mobile (“Parent”) and certain of Parent’s 100% owned subsidiaries (“Guarantor Subsidiaries”).
Pursuant to the applicable indentures and supplemental indentures, the Senior Secured Notes to third parties issued by T-Mobile USA, Inc. are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Parent and the Guarantor Subsidiaries, except for the Unsecured Guarantees of Sprint Corporation, Sprint Communications, Inc., and Sprint Capital Corporation, which are provided on a senior unsecured basis.
The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. The indentures, supplemental indentures and credit agreements governing the long-term debt contain covenants that, among other things, limit the ability of the Issuers or borrowers and the Guarantor Subsidiaries to incur more
debt, pay dividends and make distributions, make certain investments, repurchase stock, create liens or other encumbrances, enter into transactions with affiliates, enter into transactions that restrict dividends or distributions from subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. Certain provisions of each of the credit agreements, indentures and supplemental indentures relating to the long-term debt restrict the ability of the Issuers or borrowers to loan funds or make payments to Parent. However, the Issuers or borrowers and Guarantor Subsidiaries are allowed to make certain permitted payments to Parent under the terms of the indentures, supplemental indentures and credit agreements.
Basis of Presentation
The following tables include summarized financial conditioninformation of the obligor groups of debt issued by T-Mobile USA, Inc., Sprint, Sprint Communications, Inc., and Sprint Capital Corporation. The summarized financial information of each obligor group is presented on a combined basis with balances and transactions within the obligor group eliminated. Investments in and the equity in earnings of non-guarantor subsidiaries, which would otherwise be consolidated in accordance with U.S. GAAP, are excluded from the below summarized financial information pursuant to SEC Regulation S-X Rule 13-01.
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) | June 30, 2021 | | December 31, 2020 | | | | |
Current assets | $ | 19,176 | | | $ | 22,638 | | | | | |
Noncurrent assets | 172,751 | | | 165,294 | | | | | |
Current liabilities | 20,202 | | | 19,982 | | | | | |
Noncurrent liabilities | 115,213 | | | 112,930 | | | | | |
Due to non-guarantors | 7,730 | | | 7,433 | | | | | |
| | | | | | | |
Due to related parties | 4,830 | | | 4,873 | | | | | |
Due from related parties | 18 | | | 22 | | | | | |
The summarized results of operations information for the consolidated obligor group of debt issued by T-Mobile USA, Inc. is presented in the table below: | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2021 | | | | | | | | Year Ended December 31, 2020 |
(in millions) | | | | |
Total revenues | $ | 39,018 | | | | | | | | | $ | 67,112 | |
Operating income | 2,789 | | | | | | | | | 4,335 | |
Net income | 673 | | | | | | | | | 1,148 | |
Revenue from non-guarantors | 802 | | | | | | | | | 1,496 | |
Operating expenses to non-guarantors | 1,324 | | | | | | | | | 2,127 | |
Other expense to non-guarantors | (72) | | | | | | | | | (114) | |
| | | | | | | | | |
The summarized balance sheet information for the consolidated obligor group of debt issued by Sprint and Sprint Communications, Inc. is presented in the table below: | | | | | | | | | | | | | |
(in millions) | June 30, 2021 | | December 31, 2020 | | |
Current assets | $ | 652 | | | $ | 2,646 | | | |
Noncurrent assets | 30,151 | | | 26,278 | | | |
Current liabilities | 6,949 | | | 4,209 | | | |
Noncurrent liabilities | 66,762 | | | 65,161 | | | |
| | | | | |
Due from non-guarantors | 29,889 | | | 25,993 | | | |
Due to related parties | 4,796 | | | 4,786 | | | |
| | | | | |
The summarized results of operations information for the consolidated obligor group of debt issued by Sprint and Sprint Communications, Inc., since the acquisition of Sprint on April 1, 2020, is presented in the table below: | | | | | | | | | | | |
| Six Months Ended June 30, 2021 | | Nine Months Ended December 31, 2020 |
(in millions) |
Total revenues | $ | 1 | | | $ | 10 | |
Operating loss | (2) | | | (15) | |
Net loss | (646) | | | (2,229) | |
Revenue from non-guarantors | 2 | | | 6 | |
| | | |
Other income, net, from non-guarantors | 1,045 | | | 1,084 | |
| | | |
The summarized balance sheet information for the consolidated obligor group of debt issued by Sprint Capital Corporation is presented in the table below: | | | | | | | | | | | |
(in millions) | June 30, 2021 | | December 31, 2020 |
Current assets | $ | 652 | | | $ | 2,646 | |
Noncurrent assets | 39,206 | | | 35,330 | |
Current liabilities | 7,021 | | | 4,281 | |
Noncurrent liabilities | 71,813 | | | 70,253 | |
| | | |
Due from non-guarantors | 38,944 | | | 35,046 | |
Due to related parties | 4,796 | | | 4,786 | |
| | | |
The summarized results of operations information for the consolidated obligor group of debt issued by Sprint Capital Corporation, since the acquisition of Sprint on April 1, 2020, is presented in the table below: | | | | | | | | | | | |
| Six Months Ended June 30, 2021 | | Nine Months Ended December 31, 2020 |
(in millions) | |
Total revenues | $ | 1 | | | $ | 10 | |
Operating loss | (2) | | | (15) | |
Net loss | (606) | | | (2,165) | |
Revenue from non-guarantors | 2 | | | 6 | |
| | | |
Other income, net, from non-guarantors | 1,231 | | | 1,085 | |
| | | |
Affiliates Whose Securities Collateralize Securities Registered or Being Registered
For a description of the collateral arrangements relating to securities of affiliates that collateralize the Senior Secured Notes, please refer to the section entitled “Affiliates Whose Securities Collateralize the Notes and the Guarantees” in the Company’s Registration Statement on Form S-4/A filed with the SEC on April 21, 2021, which section is incorporated herein by reference.
The assets, liabilities and results of operations of the Parent, Issuer and Guarantor Subsidiaries is substantially similar to ourcombined affiliates whose securities are pledged as Collateral are not materially different than the corresponding amounts presented in the condensed consolidated financial condition. The most significant componentsstatements of the financial condition of our Non-Guarantor Subsidiaries were as follows:Company.
|
| | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 | | Change |
(in millions) | | | $ | | % |
Other current assets | $ | 576 |
| | $ | 565 |
| | $ | 11 |
| | 2 | % |
Property and equipment, net | 322 |
| | 375 |
| | (53 | ) | | (14 | )% |
Tower obligations | 2,204 |
| | 2,221 |
| | (17 | ) | | (1 | )% |
Total stockholders' deficit | (1,386 | ) | | (1,374 | ) | | (12 | ) | | 1 | % |
The most significant components of the results of operations of our Non-Guarantor Subsidiaries were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(in millions) | 2017 | | 2016 | $ | | % | 2017 | | 2016 | $ | | % |
Service revenues | $ | 527 |
| | $ | 520 |
| | $ | 7 |
| | 1 | % | | $ | 1,580 |
| | $ | 1,500 |
| | $ | 80 |
| | 5 | % |
Cost of equipment sales | 241 |
| | 300 |
| | (59 | ) | | (20 | )% | | 738 |
| | 768 |
| | (30 | ) | | (4 | )% |
Selling, general and administrative | 209 |
| | 227 |
| | (18 | ) | | (8 | )% | | 652 |
| | 645 |
| | 7 |
| | 1 | % |
Total comprehensive income (loss) | 40 |
| | (19 | ) | | 59 |
| | (311 | )% | | 87 |
| | 8 |
| | 79 |
| | 988 | % |
The change to the results of operations of our Non-Guarantor Subsidiaries for the three months ended September 30, 2017 was primarily from:
Higher Service revenues primarily due to the result of an increase in activity of the non-guarantor subsidiary that provides device insurance, primarily driven by growth in our customer base;
Lower Cost of equipment sales expenses primarily due to decrease in claims activity and lower device costs used; and
Lower Selling, general and administrative expenses primarily due to a decrease in program service fees, partially offset by higher costs to support our growing customer base.
The change to the results of operations of our Non-Guarantor Subsidiaries for the nine months ended September 30, 2017 was primarily from:
Higher Service revenues primarily due to the result of an increase in activity of the non-guarantor subsidiary that provides device insurance, primarily driven by growth in our customer base;
Lower Cost of equipment sales expenses primarily due to lower non-return fees charged to the customer; and
Higher Selling, general and administrative expenses primarily due to higher costs to support our growing customer base, partially offset by a decrease in program service fees.
All other results of operations of the Parent, Issuer and Guarantor Subsidiaries are substantially similar to the Company’s consolidated results of operations. See Note 11 – Guarantor Financial Information of the Notes to the Condensed Consolidated Financial Statements.
Performance Measures
In managing our business and assessing financial performance, we supplement the information provided by our 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.
Total The performance measures presented below include the impact of the Merger on a prospective basis from the close date of April 1, 2020. Historical results prior to April 1, 2020 have not been retroactively adjusted.
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. Branded customers generally include customers thatCustomers are qualified either for postpaid service utilizing phones, mobile broadbandhome internet, wearables, DIGITS or other connected devices, (including tablets), or DIGITS,which include tablets and SyncUp products, where they generally pay after receiving service, or prepaid service, where they generally pay in advance. Wholesale customers include Machine to Machine (“M2M”) and MVNO customers that operate on our network, but are managed by wholesale partners.advance of receiving service.
The following table sets forth the number of ending customers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, | | Change | | | | | | |
(in thousands) | 2021 | | 2020 | | # | | % | | | | | | | | | | | | | | |
Customers, end of period | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Postpaid phone customers (1)(2) | 68,029 | | | 65,105 | | | 2,924 | | | 4 | % | | | | | | | | | | | | | | |
Postpaid other customers (1)(2) | 15,819 | | | 12,648 | | | 3,171 | | | 25 | % | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Total postpaid customers | 83,848 | | | 77,753 | | | 6,095 | | | 8 | % | | | | | | | | | | | | | | |
Prepaid customers (1) | 20,941 | | | 20,574 | | | 367 | | | 2 | % | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Total customers | 104,789 | | | 98,327 | | | 6,462 | | | 7 | % | | | | | | | | | | | | | | |
Acquired customers, net of base adjustments (2) | 12 | | | 29,228 | | | (29,216) | | | NM | | | | | | | | | | | | | | |
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| September 30, 2017 | | September 30, 2016 | | Change |
(in thousands) | # | | % |
Customers, end of period | | | | | | | |
Branded postpaid phone customers (1) | 33,223 |
| | 30,364 |
| | 2,859 |
| | 9 | % |
Branded postpaid other customers (1) | 3,752 |
| | 2,866 |
| | 886 |
| | 31 | % |
Total branded postpaid customers | 36,975 |
| | 33,230 |
| | 3,745 |
| | 11 | % |
Branded prepaid customers | 20,519 |
| | 19,272 |
| | 1,247 |
| | 6 | % |
Total branded customers | 57,494 |
| | 52,502 |
| | 4,992 |
| | 10 | % |
Wholesale customers | 13,237 |
| | 16,852 |
| | (3,615 | ) | | (21 | )% |
Total customers, end of period | 70,731 |
| | 69,354 |
| | 1,377 |
| | 2 | % |
Adjustments to branded postpaid phone customers (2) | — |
| | (1,365 | ) | | 1,365 |
| |
|
Adjustments to branded prepaid customers (2) | — |
| | (326 | ) | | 326 |
| |
|
Adjustments to wholesale customers (2) (3) | (160 | ) | | 1,691 |
| | (1,851 | ) | |
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(1) | During the third quarter of 2017, we retitled our “Branded postpaid mobile broadband customers” category to “Branded postpaid other customers” and reclassified 253,000 DIGITS customers from our “Branded postpaid phone customers” category for the second quarter of 2017, when the DIGITS product was released. |
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(2) | The MVNO Transaction resulted in a transfer of branded postpaid phone customers and branded prepaid customers to wholesale customers on September 1, 2016. Prospectively from September 1, 2016, net customer additions for these customers are included within Wholesale customers. |
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(3) | We believe current and future regulatory changes have made the Lifeline program offered by our wholesale partners uneconomical. We will continue to support our wholesale partners offering the Lifeline program, but have excluded the Lifeline customers from our reported wholesale subscriber base resulting in the removal of 160,000 and 4,368,000 reported wholesale customers as of the beginning of the third quarter of 2017 and the beginning of the second quarter of 2017, respectively. No further Lifeline adjustments are expected in future periods. |
(1) Includes customers acquired in connection with the Merger and certain customer base adjustments. See Customer Base Adjustments and Net Customer Additions tables below.
Branded Customers
Total branded customers increased 4,992,000, or 10%, primarily from:
Higher branded(2) In the first quarter of 2021, we acquired 11,000 postpaid phone customers driven by strong customer responseand 1,000 postpaid other customers through our acquisition of an affiliate.
Total customers increased 6,462,000, or 7%, primarily from:
•Higher postpaid other customers, primarily due to our Un-carrier initiativesgrowth in other connected devices, primarily related to public and promotional activitieseducational sector customers and wearable products;
•Higher postpaid phone customers, primarily due to the growing success of our business channel, T-Mobile for Business, partially offset bynew customer segments and rate plans and continued growth in existing and new markets, along with promotional activity and increased competitive activityretail store traffic due to closures arising from the Pandemic in the marketplaceprior period; and less reliance on add a line promotions;
•Higher branded prepaid customers, driven byprimarily due to the continued success of our MetroPCS brand and continued growth from our distribution expansion, partially offset by the optimization of our third-party distribution channels; and
| |
• | Higher branded postpaid other customers primarily due to the launch of SyncUP DRIVETM and DIGITS.
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Wholesale
Wholesale customers decreased 3,615,000, or 21%, primarilyprepaid business due to Lifeline subscribers,promotional activity and rate plan offers.
Customer Base Adjustments
Certain adjustments were made to align the customer reporting policies of T-Mobile and Sprint.
The adjustments made to the reported T-Mobile and Sprint ending customer base as of March 31, 2020, are presented below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Postpaid phone customers | | Postpaid other customers | | Total postpaid customers | | Prepaid customers | | Total customers |
Reconciliation to beginning customers | | | | | | | | | |
T-Mobile customers as reported, end of period March 31, 2020 | 40,797 | | | 7,014 | | | 47,811 | | | 20,732 | | | 68,543 | |
Sprint customers as reported, end of period March 31, 2020 | 25,916 | | | 8,428 | | | 34,344 | | | 8,256 | | | 42,600 | |
Total combined customers, end of period March 31, 2020 | 66,713 | | | 15,442 | | | 82,155 | | | 28,988 | | | 111,143 | |
Adjustments | | | | | | | | | |
Reseller reclassification to wholesale customers (1) | (199) | | | (2,872) | | | (3,071) | | | — | | | (3,071) | |
EIP reclassification from postpaid to prepaid (2) | (963) | | | — | | | (963) | | | 963 | | | — | |
Divested prepaid customers (3) | — | | | — | | | — | | | (9,207) | | | (9,207) | |
Rate plan threshold (4) | (182) | | | (918) | | | (1,100) | | | — | | | (1,100) | |
Customers with non-phone devices (5) | (226) | | | 226 | | | — | | | — | | | — | |
Collection policy alignment (6) | (150) | | | (46) | | | (196) | | | — | | | (196) | |
Miscellaneous adjustments (7) | (141) | | | (43) | | | (184) | | | (302) | | | (486) | |
Total Adjustments | (1,861) | | | (3,653) | | | (5,514) | | | (8,546) | | | (14,060) | |
Adjusted beginning customers as of April 1, 2020 | 64,852 | | | 11,789 | | | 76,641 | | | 20,442 | | | 97,083 | |
(1) In connection with the closing of the Merger, we refined our definition of wholesale customers, resulting in the reclassification of certain postpaid and prepaid reseller customers to wholesale customers. Starting with the three months ended March 31, 2020, we discontinued reporting wholesale customers to focus on postpaid and prepaid customers and wholesale revenues, which we consider more relevant than the number of wholesale customers given the expansion of M2M and IoT products.
(2) Prepaid customers with a device installment billing plan historically included as Sprint postpaid customers have been reclassified to prepaid customers to align with T-Mobile policy.
(3) Customers associated with the Sprint wireless prepaid and Boost Mobile brands that were divested on July 1, 2020, have been excluded from our reported wholesale subscriber base ascustomers.
(4) Customers who have rate plans with monthly recurring charges which are considered insignificant have been excluded from our reported customers.
(5) Customers with postpaid phone rate plans without a phone (e.g., non-phone devices) have been reclassified from postpaid phone to postpaid other customers to align with T-Mobile policy.
(6) Certain Sprint customers subject to collection activity for an extended period of the second quarter of 2017. This decrease was partially offset by the continued success oftime have been excluded from our M2M partnerships.reported customers to align with T-Mobile policy.
(7) Miscellaneous insignificant adjustments to align with T-Mobile policy.
Net Customer Additions
The following table sets forth the number of net customer additions (losses):additions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | | | Change | | |
(in thousands) | 2021 | | 2020 | # | | % | 2021 | | 2020 | | | | # | | % | | | | |
Net customer additions | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Postpaid phone customers | 627 | | | 253 | | | 374 | | | 148 | % | | 1,400 | | | 705 | | | | | 695 | | | 99 | % | | | | |
Postpaid other customers | 649 | | | 859 | | | (210) | | | (24) | % | | 1,086 | | | 1,184 | | | | | (98) | | | (8) | % | | | | |
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Total postpaid customers | 1,276 | | | 1,112 | | | 164 | | | 15 | % | | 2,486 | | | 1,889 | | | | | 597 | | | 32 | % | | | | |
Prepaid customers | 76 | | | 133 | | | (57) | | | (43) | % | | 227 | | | 5 | | | | | 222 | | | NM | | | | |
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Total customers | 1,352 | | | 1,245 | | | 107 | | | 9 | % | | 2,713 | | | 1,894 | | | | | 819 | | | 43 | % | | | | |
Acquired customers, net of base adjustments | — | | | 29,228 | | | (29,228) | | | (100) | % | | 12 | | | 29,228 | | | | | (29,216) | | | (100) | % | | | | |
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| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(in thousands) | 2017 | | 2016 | # | | % | 2017 | | 2016 | # | | % |
Net customer additions (losses) | | | | | | | | | | | | | | | |
Branded postpaid phone customers (1) | 595 |
| | 851 |
| | (256 | ) | | (30 | )% | | 1,926 |
| | 2,374 |
| | (448 | ) | | (19 | )% |
Branded postpaid other customers (1) | 222 |
| | 118 |
| | 104 |
| | 88 | % | | 622 |
| | 526 |
| | 96 |
| | 18 | % |
Total branded postpaid customers | 817 |
| | 969 |
| | (152 | ) | | (16 | )% | | 2,548 |
| | 2,900 |
| | (352 | ) | | (12 | )% |
Branded prepaid customers | 226 |
| | 684 |
| | (458 | ) | | (67 | )% | | 706 |
| | 1,967 |
| | (1,261 | ) | | (64 | )% |
Total branded customers | 1,043 |
| | 1,653 |
| | (610 | ) | | (37 | )% | | 3,254 |
| | 4,867 |
| | (1,613 | ) | | (33 | )% |
Wholesale customers (2) | 286 |
| | 317 |
| | (31 | ) | | (10 | )% | | 550 |
| | 1,205 |
| | (655 | ) | | (54 | )% |
Total net customer additions | 1,329 |
| | 1,970 |
| | (641 | ) | | (33 | )% | | 3,804 |
| | 6,072 |
| | (2,268 | ) | | (37 | )% |
Adjustments to branded postpaid phone customers (1) | — |
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| | (253 | ) | | — |
| | (253 | ) | |
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Adjustments to branded postpaid other customers (1) | — |
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| | 253 |
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| | 253 |
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(1) | During the third quarter of 2017, we retitled our “Branded postpaid mobile broadband customers” category to “Branded postpaid other customers” and reclassified 253,000 DIGITS customer net additions from our “Branded postpaid phone customers” category for the second quarter of 2017, when the DIGITS product was released. |
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(2) | Net customer activity for Lifeline was excluded beginning in the second quarter of 2017 due to our determination based upon changes in the applicable government regulations that the Lifeline program offered by our wholesale partners is uneconomical. |
Branded Customers
Total branded net customer additions decreased 610,000,increased 107,000, or 37%9%, for the three months ended and 1,613,000,increased 819,000, or 33%43%, for the ninesix months ended SeptemberJune 30, 2017.2021.
The decreaseincrease for the three months ended SeptemberJune 30, 20172021, was primarily from:
Lower branded prepaid net customer additions primarily due to higher MetroPCS deactivations from a growing customer base and increased competitive activity in the marketplace, and
Lower branded•Higher postpaid phone net customer additions, primarily due to lower gross customer additionsincreased retail store traffic due to closures arising from increased competitive activitythe Pandemic in the marketplace, the split and shift in iPhone launch timing, and the negative impactprior period, as well as increased growth from hurricanes;T-Mobile for Business, partially offset by higher churn; partially offset by
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• | Higher branded•Lower postpaid other net customer additions primarily driven by strength of SyncUP DRIVETM launched in the fourth quarter of 2016 as well as the launch of DIGITS in the second quarter of 2017. |
The decrease for the nine months ended September 30, 2017 was primarily from:
Lower branded prepaid net customer additions, primarily due to higher MetroPCS deactivations from a growing customer base and increased competitive activityelevated gross additions in the marketplace. Additional decreases resultedprior period related to the public and educational sector resulting from the optimization of our third party distribution channels,Pandemic; and
•Lower brandedprepaid net customer additions, primarily driven by higher migrations to postpaid plans, partially offset by lower churn.
The increase for the six months ended June 30, 2021, was primarily from:
•Higher postpaid phone net customer additions, primarily due to lower gross customer additionsincreased retail store traffic due to closures arising from increased competitive activitythe Pandemic in the marketplace and lower customer migrations,prior period, partially offset by higher churn; and
•Higher prepaid net customer additions, primarily due to lower deactivations;churn; partially offset by
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• | Higher branded•Lower postpaid other net customer additions primarily driven by strength of SyncUP DRIVETM launched in the fourth quarter of 2016 as well as the launch of DIGITS in the second quarter of 2017, partially offset by overall market softness of tablets. |
Wholesale
Wholesale net customer additions, decreased 31,000, or 10%, for the three months ended and 655,000, or 54%, for the nine months ended September 30, 2017primarily due to higher disconnect volumes from lower grossan increased customer additions, partially offset by lower customer deactivations. We believe current and future regulatory changes have made the Lifeline program offered by our wholesale partners uneconomical.base.
We will continue to support our wholesale partners offering the Lifeline program, but have excluded the Lifeline customers from our reported wholesale subscriber base resulting in the removal of 160,000 and 4,368,000 reported wholesale customers as of the beginning of the third quarter of 2017 and beginning of the second quarter of 2017, respectively. No further Lifeline adjustments are expected in future periods.
Customers Per Account
Customers per account is calculated by dividing the number of branded postpaid customers as of the end of the period by the number of branded postpaid accounts as of the end of the period. An account may include branded postpaid phone, mobile broadband, and DIGITS customers. We believe branded postpaid customers per account provides management, investors and analysts with useful information to evaluate our branded postpaid customer base on a per account basis.
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| September 30, 2017 | | September 30, 2016 | | Change |
| | # | | % |
Branded postpaid customers per account | 2.92 |
| | 2.78 |
| | 0.14 |
| | 5 | % |
Branded postpaid customers per account increased 0.14 points, or 5%, primarily from growth of customers on family plan promotions.
Churn
Churn represents the number of customers whose service was disconnected as a percentage of the average number of customers during the specified period further divided by the number of months in the period. The number of customers whose service was disconnected is presented net of customers that subsequently have their service restored within a certain period of time. We believe that churn provides management, investors and analysts with useful information to evaluate customer retention and loyalty.
The following table sets forth the churn: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | | | Change | | |
2021 | | 2020 | 2021 | | 2020 | | | | |
Postpaid phone churn | 0.87 | % | | 0.80 | % | | 7 bps | | 0.92 | % | | 0.82 | % | | | | 10 bps | | |
Prepaid churn | 2.62 | % | | 2.81 | % | | -19 bps | | 2.70 | % | | 3.17 | % | | | | -47 bps | | |
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| Three Months Ended September 30, | | Bps Change | | Nine Months Ended September 30, | | Bps Change |
2017 | | 2016 | 2017 | | 2016 |
Branded postpaid phone churn | 1.23 | % | | 1.32 | % | | -9 bps | | 1.18 | % | | 1.30 | % | | -12 bps |
Branded prepaid churn | 4.25 | % | | 3.82 | % | | 43 bps | | 4.06 | % | | 3.86 | % | | 20 bps |
Branded postpaidPostpaid phone churn decreased 9increased 7 basis points for the three months ended and 12increased 10 basis points for the ninesix months ended SeptemberJune 30, 2017,2021.
The increase for the three months ended June 30, 2021, was primarily duefrom:
•More normal switching activity relative to the MVNO Transaction asmuted Pandemic-driven conditions a year ago; partially offset by
•Better customer payment performance.
The increase for the six months ended June 30, 2021, was primarily from:
•More normal switching activity relative to the muted Pandemic-driven conditions a year ago; and
•Higher churn from customers transferred had a higher rate of churn.acquired in the Merger; partially offset by
•Better customer payment performance.
Branded prepaid
Prepaid churn increased 43decreased 19 basis points for the three months ended and 20decreased 47 basis points for the ninesix months ended SeptemberJune 30, 2017,2021.
The decrease for the three months ended June 30, 2021, was primarily from:
•Improved quality of recently acquired customers; and
•Continued network improvement.
The decrease for the six months ended June 30, 2021, was primarily from:
•The impact of stimulus programs and accelerated tax refund timing;
•Improved quality of recently acquired customers; and
•Promotional activity.
Total Postpaid Accounts
A postpaid account is generally defined as a billing account number that generates revenue. Postpaid accounts are generally comprised of customers that are qualified for postpaid service utilizing phones, home internet, wearables, DIGITS or other connected devices which include tablets and SyncUp products, where they generally pay after receiving service.
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| As of June 30, 2021 | | Change | | | | | | | |
(in thousands) | 2021 | | 2020 | | # | | % | | | | | | | | | | | | | | | |
Accounts, end of period | | | | | | | | | | | | | | | | | | | | | | |
Total postpaid customer accounts(1) | 26,363 | | | 25,486 | | | 877 | | | 3 | % | | | | | | | | | | | | | | | |
(1) Includes accounts acquired in connection with the Merger and certain account base adjustments. See Account Base Adjustments table below.
Total postpaid customer accounts increased 877,000, or 3%, primarily due to higher MetroPCS churnthe success of new customer segments and rate plans, continued growth in existing and new markets, including our home internet product, along with promotional activity and increased retail store traffic due to closures arising from increased competitive activitythe Pandemic in the marketplace.prior period.
Account Base Adjustments
Certain adjustments were made to align the account reporting policies of T-Mobile and Sprint.
The adjustments made to the reported T-Mobile and Sprint ending account base as of March 31, 2020 are presented below: | | | | | | | | |
(in thousands) | | Postpaid Accounts |
Reconciliation to beginning accounts | | |
T-Mobile accounts as reported, end of period March 31, 2020 | | 15,244 | |
Sprint accounts, end of period March 31, 2020 | | 11,246 | |
Total combined accounts, end of period March 31, 2020 | | 26,490 | |
Adjustments | | |
Reseller reclassification to wholesale accounts (1) | | (1) | |
EIP reclassification from postpaid to prepaid (2) | | (963) | |
Rate plan threshold (3) | | (18) | |
Collection policy alignment (4) | | (76) | |
Miscellaneous adjustments (5) | | (47) | |
Total Adjustments | | (1,105) | |
Adjusted beginning accounts as of April 1, 2020 | | 25,385 | |
(1) In connection with the closing of the Merger, we refined our definition of wholesale accounts resulting in the reclassification of certain postpaid and prepaid reseller accounts to wholesale accounts.
(2) Prepaid accounts with a customer with a device installment billing plan historically included as Sprint postpaid accounts have been reclassified to prepaid accounts to align with T-Mobile policy.
(3) Accounts with customers who have rate plans with monthly recurring charges which are considered insignificant have been excluded from our reported accounts.
(4) Certain Sprint accounts subject to collection activity for an extended period of time have been excluded from our reported accounts to align with T-Mobile policy.
(5) Miscellaneous insignificant adjustments to align with T-Mobile policy.
Average Revenue Per User Average Billings Per User
ARPU represents the average monthly service revenue earned from customers. We believe ARPU provides management, investors and analysts with useful information to assess and evaluate our service revenue realization per customer and assist in forecasting our future service revenues generated from our customer base. Branded postpaidPostpaid phone ARPU excludes mobile broadband and DIGITSpostpaid other customers and related revenues.revenues, which include home internet, wearables, DIGITS and other connected devices such as tablets and SyncUp products.
The following table illustrates the calculation of our operating measure ARPU and reconciles this measure to the related service revenues:
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(in millions, except average number of customers and ARPU) | Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | | | Change | | |
2021 | | 2020 | | $ | | % | | 2021 | | 2020 | | | $ | | % | | | |
Calculation of Postpaid Phone ARPU | | | | | | | | | | | | | | | | | | | | | |
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Postpaid service revenues | $ | 10,492 | | | $ | 9,959 | | | $ | 533 | | | 5 | % | | $ | 20,795 | | | $ | 15,846 | | | | | $ | 4,949 | | | 31 | % | | | | |
Less: Postpaid other revenues | (825) | | | (618) | | | (207) | | | 33 | % | | (1,645) | | | (928) | | | | | (717) | | | 77 | % | | | | |
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Postpaid phone service revenues | 9,667 | | | 9,341 | | | 326 | | | 3 | % | | 19,150 | | | 14,918 | | | | | 4,232 | | | 28 | % | | | | |
Divided by: Average number of postpaid phone customers (in thousands) and number of months in period | 67,680 | | | 64,889 | | | 2,791 | | | 4 | % | | 67,257 | | | 52,737 | | | | | 14,520 | | | 28 | % | | | | |
Postpaid phone ARPU | $ | 47.61 | | | $ | 47.99 | | | $ | (0.38) | | | (1) | % | | $ | 47.45 | | | $ | 47.15 | | | | | $ | 0.30 | | | 1 | % | | | | |
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Calculation of Prepaid ARPU | | | | | | | | | | | | | | | | | | | | | |
Prepaid service revenues | $ | 2,427 | | | $ | 2,311 | | | $ | 116 | | | 5 | % | | $ | 4,778 | | | $ | 4,684 | | | | | $ | 94 | | | 2 | % | | | | |
Divided by: Average number of prepaid customers (in thousands) and number of months in period | 20,994 | | | 20,380 | | | 614 | | | 3 | % | | 20,861 | | | 20,570 | | | | | 291 | | | 1 | % | | | | |
Prepaid ARPU | $ | 38.53 | | | $ | 37.80 | | | $ | 0.73 | | | 2 | % | | $ | 38.17 | | | $ | 37.95 | | | | | $ | 0.22 | | | 1 | % | | | | |
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Postpaid Phone ARPU
Postpaid phone ARPU decreased $0.38, or 1%, for the three months ended and increased $0.30, or 1%, for the six months ended June 30, 2021.
The decrease for the three months ended June 30, 2021, was primarily from:
•Promotional activity, including an increase in customers per account; and
•The impact of Sprint rate plan migrations; partially offset by
•Higher premium services, including Magenta MAX.
The increase for the six months ended June 30, 2021, was primarily from:
•The net impact of customers acquired in the Merger, which have higher ARPU (net of changes arising from the reduction in base due to policy adjustments and reclassification of certain ARPU components from the acquired customers being moved to other revenue lines); and
•Higher premium services, including Magenta MAX; partially offset by
•Promotional activity, including an increase in customers per account.
Prepaid ARPU
Prepaid ARPU increased $0.73, or 2%, for the three months ended and increased $0.22, or 1%, for the six months ended June 30, 2021.
The increase for the three months ended June 30, 2021, was primarily from:
•Higher revenues due to improved rate plan mix; and
•Higher premium services; partially offset by
•A reduction in certain non-recurring charges.
The increase for the six months ended June 30, 2021, was primarily from:
•The impacts of certain adjustments to our customer base in April 2020; and
•Higher premium services; partially offset by
•A reduction in certain non-recurring charges.
Average BillingsRevenue Per UserAccount
Average Revenue per Account (“ABPU”ARPA”) represents the average monthly customer billings, including monthly lease revenues and EIP billings before securitization,postpaid service revenue earned per customer.account. We believe branded postpaid ABPUARPA provides management, investors and analysts with useful information to assess and evaluate average brandedour postpaid customer billings as it isservice revenue realization and assist in forecasting our future postpaid service revenues on a per account basis. We consider postpaid ARPA to be indicative of estimated cash collections,our revenue growth potential given the increase in the average number of postpaid phone customers per account and increases in postpaid other customers, including device financing payments, from our customers each month.home internet, wearables, DIGITS or other connected devices, which include tablets and SyncUp products.
The following tables illustratetable illustrates the calculation of our operating measures ARPUmeasure ARPA and ABPU and reconcile these measuresreconciles this measure to the related service revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions, except average number of accounts, ARPA) | Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change | | |
2021 | | 2020 | | $ | | % | | 2021 | | 2020 | | | $ | | % | | | |
Calculation of Postpaid ARPA | | | | | | | | | | | | | | | | | | | | | |
Postpaid service revenues | $ | 10,492 | | | $ | 9,959 | | | $ | 533 | | | 5 | % | | $ | 20,795 | | | $ | 15,846 | | | | | $ | 4,949 | | | 31 | % | | | | |
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Divided by: Average number of postpaid accounts (in thousands) and number of months in period | 26,188 | | | 25,424 | | | 764 | | | 3 | % | | 26,014 | | | 20,289 | | | | | 5,725 | | | 28 | % | | | | |
Postpaid ARPA | $ | 133.55 | | | $ | 130.57 | | | $ | 2.98 | | | 2 | % | | $ | 133.23 | | | $ | 130.16 | | | | | $ | 3.07 | | | 2 | % | | | | |
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(in millions, except average number of customers, ARPU and ABPU) | Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
2017 | | 2016 | | $ | | % | | 2017 | | 2016 | | $ | | % |
Calculation of Branded Postpaid Phone ARPU | | | | | | | | | | | | | | | |
Branded postpaid service revenues | $ | 4,920 |
| | $ | 4,647 |
| | $ | 273 |
| | 6 | % | | $ | 14,465 |
| | $ | 13,458 |
| | $ | 1,007 |
| | 7 | % |
Less: Branded postpaid other revenues | (294 | ) | | (193 | ) | | (101 | ) | | 52 | % | | (774 | ) | | (568 | ) | | (206 | ) | | 36 | % |
Branded postpaid phone service revenues | $ | 4,626 |
| | $ | 4,454 |
| | $ | 172 |
| | 4 | % | | $ | 13,691 |
| | $ | 12,890 |
| | $ | 801 |
| | 6 | % |
Divided by: Average number of branded postpaid phone customers (in thousands) and number of months in period | 32,852 |
| | 30,836 |
| | 2,016 |
| | 7 | % | | 32,248 |
| | 30,364 |
| | 1,884 |
| | 6 | % |
Branded postpaid phone ARPU (1) | $ | 46.93 |
| | $ | 48.15 |
| | $ | (1.22 | ) | | (3 | )% | | $ | 47.17 |
| | $ | 47.17 |
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Branded postpaid service revenues | $ | 4,920 |
| | $ | 4,647 |
| | $ | 273 |
| | 6 | % | | $ | 14,465 |
| | $ | 13,458 |
| | $ | 1,007 |
| | 7 | % |
EIP billings | 1,481 |
| | 1,394 |
| | 87 |
| | 6 | % | | 4,285 |
| | 4,062 |
| | 223 |
| | 5 | % |
Lease revenues | 159 |
| | 353 |
| | (194 | ) | | (55 | )% | | 717 |
| | 1,062 |
| | (345 | ) | | (32 | )% |
Total billings for branded postpaid customers | $ | 6,560 |
| | $ | 6,394 |
| | $ | 166 |
| | 3 | % | | $ | 19,467 |
| | $ | 18,582 |
| | $ | 885 |
| | 5 | % |
Divided by: Average number of branded postpaid customers (in thousands) and number of months in period | 36,505 |
| | 33,632 |
| | 2,873 |
| | 9 | % | | 35,627 |
| | 32,966 |
| | 2,661 |
| | 8 | % |
Branded postpaid ABPU | $ | 59.89 |
| | $ | 63.38 |
| | $ | (3.49 | ) | | (6 | )% | | $ | 60.71 |
| | $ | 62.63 |
| | $ | (1.92 | ) | | (3 | )% |
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Branded prepaid service revenues | $ | 2,376 |
| | $ | 2,182 |
| | $ | 194 |
| | 9 | % | | $ | 7,009 |
| | $ | 6,326 |
| | $ | 683 |
| | 11 | % |
Divided by: Average number of branded prepaid customers (in thousands) and number of months in period | 20,336 |
| | 19,134 |
| | 1,202 |
| | 6 | % | | 20,119 |
| | 18,586 |
| | 1,533 |
| | 8 | % |
Branded prepaid ARPU | $ | 38.93 |
| | $ | 38.01 |
| | $ | 0.92 |
| | 2 | % | | $ | 38.71 |
| | $ | 37.82 |
| | $ | 0.89 |
| | 2 | % |
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(1) | Branded postpaid phone ARPU includes the reclassification of 43,000 DIGITS average customers and related revenue to the “Branded postpaid other customers” category for the second quarter of 2017. |
Postpaid ARPA
Branded
Postpaid Phone ARPU
Branded postpaid phone ARPU decreased $1.22, or 3%, for the three months ended and remained flat for the nine months ended September 30, 2017.
The change for the three months ended September 30, 2017 was primarily from:
The continued adoption of T-Mobile ONE including taxes and fees and dilution from promotional activities; and
The negative impact from hurricanes of $0.19; partially offset by
The transfer of customers as part of the MVNO transaction as those customers had lower ARPU; and
A decrease in the non-cash net revenue deferral for Data Stash.
Flat for the nine months ended September 30, 2017 primarily from:
A decrease in the non-cash net revenue deferral for Data Stash;
The transfer of customers as part of the MVNO transaction as those customers had lower ARPU; offset by
The continued adoption of T-Mobile ONE including taxes and fees and dilution from promotional activities; and
The negative impact from hurricanes of $0.07.
T-Mobile continues to expect that Branded postpaid phone ARPU in full-year 2017 will be generally stable compared to full-year 2016, with some quarterly variations driven by the actual migrations to T-Mobile ONE rate plans, inclusive of Un-carrier Next promotions.
Branded Postpaid ABPU
Branded postpaid ABPU decreased $3.49, or 6%, for the three months ended and $1.92, or 3%, for the nine months ended September 30, 2017.
The change for the three months ended September 30, 2017 was primarily from:
Lower lease revenues;
Lower branded postpaid phone ARPU;
Growth in the branded postpaid other customer base with lower ARPU; and
The negative impact from hurricanes of $0.18.
The change for the nine months ended September 30, 2017 was primarily from:
Lower lease revenues;
Growth in the branded postpaid other customer base with lower ARPU; and
The negative impact from hurricanes of $0.06.
Branded Prepaid ARPU
Branded prepaid ARPUARPA increased $0.92,$2.98, or 2%, for the three months ended and $0.89,increased $3.07, or 2%, for the ninesix months ended SeptemberJune 30, 2017, compared to the same periods2021, primarily due to:
•An increase in 2016, primarily from continued growth of MetroPCS customers who generate higher ARPU. These increases wereper account; and
•Higher premium services, including Magenta MAX; partially offset by the negative impact from hurricanes of $0.18 and $0.06 for the three and nine months ended September 30, 2017, respectively.
•Promotional activity.
Adjusted EBITDA and Core Adjusted EBITDA
Beginning in the first quarter of 2021, we began disclosing Core Adjusted EBITDA as a financial measure to improve comparability as we de-emphasize device leasing programs as part of our value proposition.
Adjusted EBITDA represents earnings before Interest expense, net of Interest income, Income tax expense, Depreciation and amortization, non-cash Stock-basedstock-based compensation and certain income and expenses not reflective of T-Mobile’sour ongoing operating performance. Net income marginCore Adjusted EBITDA represents Net income divided by ServiceAdjusted 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, is aAdjusted EBITDA margin, Core Adjusted EBITDA and Core Adjusted EBITDA margin are non-GAAP financial measuremeasures utilized by our management to monitor the financial performance of our operations. We use Adjusted EBITDA internally as a metricmeasure to evaluate and compensate our personnel and management for their performance,performance. We use Adjusted EBITDA and Core Adjusted EBITDA as a benchmarkbenchmarks to evaluate our operating performance in comparison to our competitors. Management believes analysts and investors use Adjusted EBITDA and Core Adjusted EBITDA as a supplemental measuremeasures to evaluate overall operating performance and facilitate comparisons with other wireless communications services companies because it isthey 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, Merger-related costs including network decommissioning costs and incremental costs directly attributable to the Pandemic, as they are not indicative of our ongoing operating performance, andas well as certain other nonrecurring income and expenses. Management believes analysts and investors use Core Adjusted EBITDA hasbecause 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 an analytical tooltools and should not be considered in isolation or as a substitutesubstitutes for income from operations, net income or any other measure of financial performance reported in accordance with GAAP.U.S. Generally Accepted Accounting Principles (“GAAP”).
The following table illustrates the calculation of Adjusted EBITDA and Core Adjusted EBITDA and reconciles Adjusted EBITDA and Core Adjusted EBITDA to Net income, which we consider to be the most directly comparable GAAP financial measure:
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| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change | | |
(in millions) | 2021 | | 2020 | $ | | % | 2021 | | 2020 | | | $ | | % | | | |
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Net income | $ | 978 | | | $ | 110 | | | $ | 868 | | | 789 | % | | $ | 1,911 | | | $ | 1,061 | | | | | $ | 850 | | | 80 | % | | | | |
Adjustments: | | | | | | | | | | | | | | | | | | | | | |
Income from discontinued operations, net of tax | — | | | (320) | | | 320 | | | (100) | % | | — | | | (320) | | | | | 320 | | | (100) | % | | | | |
Income from continuing operations | 978 | | | (210) | | | 1,188 | | | (566) | % | | 1,911 | | | 741 | | | | | 1,170 | | | 158 | % | | | | |
Interest expense | 820 | | | 776 | | | 44 | | | 6 | % | | 1,612 | | | 961 | | | | | 651 | | | 68 | % | | | | |
Interest expense to affiliates | 32 | | | 63 | | | (31) | | | (49) | % | | 78 | | | 162 | | | | | (84) | | | (52) | % | | | | |
Interest income | (2) | | | (6) | | | 4 | | | (67) | % | | (5) | | | (18) | | | | | 13 | | | (72) | % | | | | |
Other expense, net | 1 | | | 195 | | | (194) | | | (99) | % | | 126 | | | 205 | | | | | (79) | | | (39) | % | | | | |
Income tax expense | 277 | | | 2 | | | 275 | | | NM | | 523 | | | 308 | | | | | 215 | | | 70 | % | | | | |
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Operating income | 2,106 | | | 820 | | | 1,286 | | | 157 | % | | 4,245 | | | 2,359 | | | | | 1,886 | | | 80 | % | | | | |
Depreciation and amortization | 4,077 | | | 4,064 | | | 13 | | | — | % | | 8,366 | | | 5,782 | | | | | 2,584 | | | 45 | % | | | | |
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Operating income from discontinued operations (1) | — | | | 432 | | | (432) | | | (100) | % | | — | | | 432 | | | | | (432) | | | (100) | % | | | | |
Stock-based compensation (1) | 129 | | | 139 | | | (10) | | | (7) | % | | 259 | | | 262 | | | | | (3) | | | (1) | % | | | | |
Merger-related costs | 611 | | | 798 | | | (187) | | | (23) | % | | 909 | | | 941 | | | | | (32) | | | (3) | % | | | | |
COVID-19-related costs | — | | | 341 | | | (341) | | | (100) | % | | — | | | 458 | | | | | (458) | | | (100) | % | | | | |
Impairment expense | — | | | 418 | | | (418) | | | (100) | % | | — | | | 418 | | | | | (418) | | | (100) | % | | | | |
Other, net (2) | (17) | | | 5 | | | (22) | | | (440) | % | | 32 | | | 30 | | | | | 2 | | | 7 | % | | | | |
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Adjusted EBITDA | 6,906 | | | 7,017 | | | (111) | | | (2) | % | | 13,811 | | | 10,682 | | | | | 3,129 | | | 29 | % | | | | |
Lease revenues | (914) | | | (1,421) | | | 507 | | | (36) | % | | (1,955) | | | (1,586) | | | | | (369) | | | 23 | % | | | | |
Core Adjusted EBITDA | $ | 5,992 | | | $ | 5,596 | | | $ | 396 | | | 7 | % | | $ | 11,856 | | | $ | 9,096 | | | | | $ | 2,760 | | | 30 | % | | | | |
Net income margin (Net income divided by Service revenues) | 7 | % | | 1 | % | | | | 600 bps | | 7 | % | | 5 | % | | | | | | 200 bps | | | | |
Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues) | 48 | % | | 53 | % | | | | -500 bps | | 48 | % | | 48 | % | | | | | | — bps | | | | |
Core Adjusted EBITDA margin (Core Adjusted EBITDA divided by Service revenues) | 41 | % | | 42 | % | | | | -100 bps | | 41 | % | | 41 | % | | | | | | — bps | | | | |
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| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(in millions) | 2017 | | 2016 | | $ | | % | | 2017 | | 2016 | | $ | | % |
Net income | $ | 550 |
| | $ | 366 |
| | $ | 184 |
| | 50 | % | | $ | 1,829 |
| | $ | 1,070 |
| | $ | 759 |
| | 71 | % |
Adjustments: | | | | |
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Interest expense | 253 |
| | 376 |
| | (123 | ) | | (33 | )% | | 857 |
| | 1,083 |
| | (226 | ) | | (21 | )% |
Interest expense to affiliates | 167 |
| | 76 |
| | 91 |
| | 120 | % | | 398 |
| | 248 |
| | 150 |
| | 60 | % |
Interest income (1) | (2 | ) | | (3 | ) | | 1 |
| | (33 | )% | | (15 | ) | | (9 | ) | | (6 | ) | | 67 | % |
Other (income) expense, net | (1 | ) | | 1 |
| | (2 | ) | | (200 | )% | | 89 |
| | 6 |
| | 83 |
| | 1,383 | % |
Income tax expense | 356 |
| | 232 |
| | 124 |
| | 53 | % | | 618 |
| | 651 |
| | (33 | ) | | (5 | )% |
Operating income (1) | 1,323 |
| | 1,048 |
| | 275 |
| | 26 | % | | 3,776 |
| | 3,049 |
| | 727 |
| | 24 | % |
Depreciation and amortization | 1,416 |
| | 1,568 |
| | (152 | ) | | (10 | )% | | 4,499 |
| | 4,695 |
| | (196 | ) | | (4 | )% |
Cost of MetroPCS business combination (2) | — |
| | 15 |
| | (15 | ) | | (100 | )% | | — |
| | 110 |
| | (110 | ) | | (100 | )% |
Stock-based compensation (3) | 83 |
| | 57 |
| | 26 |
| | 46 | % | | 222 |
| | 171 |
| | 51 |
| | 30 | % |
Other, net (3) | — |
| | 1 |
| | (1 | ) | | (100 | )% | | 5 |
| | 7 |
| | (2 | ) | | (29 | )% |
Adjusted EBITDA (1) | $ | 2,822 |
| | $ | 2,689 |
| | $ | 133 |
| | 5 | % | | $ | 8,502 |
| | $ | 8,032 |
| | $ | 470 |
| | 6 | % |
Net income margin (Net income divided by service revenues) | 7 | % | | 5 | % | |
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| | 200 bps |
| | 8 | % | | 5 | % | |
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| | 300 bps |
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Adjusted EBITDA margin (Adjusted EBITDA divided by service revenues) (1) | 37 | % | | 38 | % | |
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| | -100 bps |
| | 38 | % | | 39 | % | |
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| | -100 bps |
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(1) | The amortized imputed discount on EIP receivables previously recognized as Interest income has been retrospectively re-classified as Other revenues. See Note 1 - Basis of Presentation of the Notes to the Condensed Consolidated Financial Statements and table below for further detail. |
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(2) | Beginning in the first quarter of 2017, the Company will no longer separately present Cost of MetroPCS business combination as it is insignificant. |
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(3) | Stock-based compensation includes payroll tax impacts and may not agree to stock-based compensation expense in the consolidated financial statements. Other, net may not agree to the Condensed Consolidated Statements of Comprehensive Income primarily due to certain non-routine operating activities, such as other special items that would not be expected to reoccur, and are therefore excluded in Adjusted EBITDA. |
NM - Not Meaningful
(1)Stock-based compensation includes payroll tax impacts and may not agree with stock-based compensation expense in the condensed consolidated financial statements. Additionally, certain stock-based compensation expenses associated with the Transactions have been included in Merger-related costs.
(2)Other, net may not agree with the Condensed Consolidated Statements of Comprehensive Income primarily due to certain non-routine operating activities, such as other special items that would not be expected to reoccur or are not reflective of T-Mobile’s ongoing operating performance, and are therefore excluded from Adjusted EBITDA and Core Adjusted EBITDA.
Core Adjusted EBITDA increased $133$396 million, or 5%7%, for the three months ended and $470 million,increased $2.8 billion, or 6%30%, for the ninesix months ended SeptemberJune 30, 2017.2021. The components comprising Core Adjusted EBITDA are discussed further above.
The changeincrease for the three months ended SeptemberJune 30, 20172021 was primarily from:due to:
•Higher Equipment revenues, excluding Lease revenues;
•Higher Total service revenues; and
•Lower Selling, general and administrative expenses, excluding Merger-related costs and supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs; partially offset by
•Higher Cost of equipment sales, excluding Merger-related costs; and
•Higher Cost of services, excluding Merger-related costs.
The increase in branded postpaidfor the six months ended June 30, 2021, was primarily due to:
•Higher Total service revenues; and prepaid service
•Higher Equipment revenues, excluding Lease revenues; partially offset by
•Higher Cost of equipment sales, excluding Merger-related costs;
•Higher Cost of services expenses, excluding Merger-related costs; and
•Higher Selling, general and administrative expenses, excluding Merger-related costs and supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs.
Adjusted EBITDA decreased $111 million, or 2%, for the three months ended and increased $3.1 billion, or 29%, for the six months ended June 30, 2021. The changes were primarily due to strong customer response to our Un-carrier initiatives, the ongoing success of our promotional activities, and the continued strength of our MetroPCS brand; and
Lower losses on equipment; partially offset by
Higher selling, general and administrative expenses;
Higher cost of services expense;
Lower gains on disposal of spectrum licenses of $170fluctuations in Core Adjusted EBITDA, discussed above, including changes in Lease revenues. Lease revenues decreased $507 million; gains on disposal were $29 million for the three months ended September 30, 2017, compared to $199and increased $369 million in the same period in 2016; and
The negative impact from hurricanes of $148 million.
The change for the ninesix months ended SeptemberJune 30, 2017 was primarily from:2021.
An increase in branded postpaid and prepaid service revenues primarily due to strong customer response to our Un-carrier initiatives, the ongoing success of our promotional activities, and the continued strength of our MetroPCS brand; and
Higher wholesale revenues; partially offset by
Lower gains on disposal of spectrum licenses of $768 million; gains on disposal were $67 million for the nine months ended September 30, 2017, compared to $835 million in the same period in 2016;
Higher selling, general and administrative expenses;
Higher cost of services expense; and
The negative impact from hurricanes of $148 million.
Effective January 1, 2017, the imputed discount on EIP receivables, which was previously recognized within Interest income in our Condensed Consolidated Statements of Comprehensive Income, is recognized within Other revenues in our Condensed Consolidated Statements of Comprehensive Income. Due to this presentation, the imputed discount on EIP receivables is included in Adjusted EBITDA. See Note 1 - Basis of Presentation of Notes to the Condensed Consolidated Financial Statements for additional details.
We have applied this change retrospectively and presented the effect on the three and nine months ended September 30, 2016, in the table below.
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| Three Months Ended September 30, 2016 | | Nine Months Ended September 30, 2016 |
(in millions) | As Filed | | Change in Accounting Principle | | As Adjusted | | As Filed | | Change in Accounting Principle | | As Adjusted |
Operating income | $ | 989 |
| | $ | 59 |
| | $ | 1,048 |
| | $ | 2,860 |
| | $ | 189 |
| | $ | 3,049 |
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Interest income | 62 |
| | (59 | ) | | 3 |
| | 198 |
| | (189 | ) | | 9 |
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Net income | 366 |
| | — |
| | 366 |
| | 1,070 |
| | — |
| | 1,070 |
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Net income as a percentage of service revenue | 5 | % | | — | % | | 5 | % | | 5 | % | | — | % | | 5 | % |
Adjusted EBITDA | 2,630 |
| | 59 |
| | 2,689 |
| | 7,843 |
| | 189 |
| | 8,032 |
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Adjusted EBITDA margin (Adjusted EBITDA divided by service revenues) | 37 | % | | 1 | % | | 38 | % | | 38 | % | | 1 | % | | 39 | % |
Liquidity and Capital Resources
Our principal sources of liquidity are our cash and cash equivalents and cash generated from operations, proceeds from issuance of long-term debt capitaland common stock, financing leases, common and preferred stock, the sale of certain receivables, financing arrangements of vendor payables which effectively extend payment terms and securedthe Revolving Credit Facility (as defined below). Further, the incurrence of additional indebtedness may inhibit our ability to incur new debt under the terms governing our existing and unsecured revolving credit facilities with DT.future indebtedness, which may make it more difficult for us to incur new debt in the future to finance our business strategy.
Cash Flows
The following is an analysisa condensed schedule of our cash flows for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016:2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | | | Change | | |
(in millions) | 2021 | | 2020 | | $ | | % | | 2021 | | 2020 | | | | $ | | % | | | | |
Net cash provided by operating activities | $ | 3,779 | | | $ | 777 | | | $ | 3,002 | | | 386 | % | | $ | 7,440 | | | $ | 2,394 | | | | | $ | 5,046 | | | 211 | % | | | | |
Net cash used in investing activities | (2,083) | | | (6,356) | | | 4,273 | | | (67) | % | | (13,322) | | | (7,936) | | | | | (5,386) | | | 68 | % | | | | |
Net cash (used in) provided by financing activities | (577) | | | 15,628 | | | (16,205) | | | NM | | 3,297 | | | 15,175 | | | | | (11,878) | | | (78) | % | | | | |
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| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(in millions) | 2017 | | 2016 | | $ | | % | | 2017 | | 2016 | | $ | | % |
Net cash provided by operating activities | $ | 2,362 |
| | $ | 1,740 |
| | $ | 622 |
| | 36 | % | | $ | 5,904 |
| | $ | 4,533 |
| | $ | 1,371 |
| | 30 | % |
Net cash used in investing activities | (1,455 | ) | | (1,859 | ) | | 404 |
| | (22 | )% | | (10,138 | ) | | (4,386 | ) | | (5,752 | ) | | 131 | % |
Net cash (used in) provided by financing activities | (349 | ) | | (67 | ) | | (282 | ) | | 421 | % | | (527 | ) | | 623 |
| | (1,150 | ) | | (185 | )% |
Operating Activities
Net cash provided by operating activities increased $622 million,$3.0 billion, or 36%386%, for the three months ended and $1.4increased $5.0 billion, or 30%211%, for the ninesix months ended SeptemberJune 30, 2017, compared to the same periods in 2016.2021.
The changeincrease for the three months ended SeptemberJune 30, 2017 was primarily from:
Higher net income and higher non-cash adjustments to net incomeanda lower net use from working capital changes.
The change for the nine months ended September 30, 20172021, was primarily from:
Higher Net income and higher non-cash adjustments to•A $2.9 billion decrease in net income includingcash outflows from lower Gains on disposal of spectrum licenses and Depreciation and amortization. In total, changes in working capital, were relatively flatprimarily due to the one-time impact of $2.3 billion in gross payments for the settlement of interest rate swaps related to Merger financing for the three months ended June 30, 2020, included in the use of cash from Other current and long-term liabilities, as improvements in well as lower use of cash from Accounts payable and accrued liabilities and Inventories, were partially offset by changes inhigher use of cash from Accounts receivable and Equipment installment plan receivables.
•Net cash provided by operating activities includes $190 million and $370 million in payments for Merger-related costs for the three months ended June 30, 2021 and 2020, respectively.
The change in EIP receivablesincrease for the six months ended June 30, 2021, was primarily due to afrom:
•A $2.6 billion increase in Net income, adjusted for non-cash income and expense; and
•A $2.5 billion decrease in net cash proceedsoutflows from changes in working capital, primarily due to the saleone-time impact of EIP receivables as$2.3 billion in gross payments for the nine settlement of interest rate swaps related to Merger financing for the six months ended SeptemberJune 30, 2016 benefited2020, included in the use of cash from net cash proceeds of $366 million primarily related to upsizing of the EIP securitization facilityOther current and long-term liabilities, as well as an increaselower use of cash from Inventories and Accounts payable and accrued liabilities, partially offset by higher use of cash from Equipment installment plan receivables and Accounts receivable.
•Net cash provided by operating activities includes $467 million and $531 million in devices financed on EIP.
payments for Merger-related costs for the six months ended June 30, 2021 and 2020, respectively.
Investing Activities
Net cash used in investing activities decreased $404 million$4.3 billion, or 67%, for the three months ended and increased $5.8$5.4 billion, or 68%, for the ninesix months ended SeptemberJune 30, 2017.2021.
The changeuse of cash for the three months ended SeptemberJune 30, 20172021, was primarily from:
•$3.3 billion in Purchases of property and equipment, including capitalized interest, from network integration related to the Merger and the continued build-out of our nationwide 5G network; partially offset by
A $690 million decrease•$1.1 billion in Proceeds related to beneficial interests in securitization transactions.
The use of cash for the six months ended June 30, 2021, was primarily from:
•$8.9 billion in Purchases of spectrum licenses and other intangible assets, including deposits; partially offset by
deposits, primarily due to $8.9 billion paid for spectrum licenses won at the conclusion of Auction 107 in March 2021; andA $282 million increase•$6.5 billion in Purchases of property and equipment, including capitalized interest.
interest, from network integration related to the Merger and the continued build-out of our nationwide 5G network; partially offset by
•$2.0 billion in Proceeds related to beneficial interests in securitization transactions.
The change for the nine months ended September 30, 2017 was primarily from:
A $3.0 billion decrease in Sales of short-term investments;
A $2.3 billion increase in Purchases of spectrum licenses and other intangible assets, including deposits, primarily driven by our winning bid for 1,525 licenses in the 600 MHz spectrum auction during the second quarter of 2017; and
A $473 million increase in Purchases of property and equipment, including capitalized interest.
Financing Activities
Net cash (used in) provided by and used in financing activities increased $282 million to a use of $349 million indecreased $16.2 billion for the three months ended and increased $1.2decreased $11.9 billion to a use of $527 million infor the ninesix months ended SeptemberJune 30, 2017.2021.
The use of cash infor the three months ended SeptemberJune 30, 20172021, was primarily from:
•$1.73.2 billion for Repayments of our revolving credit facility; partially offset by
$1.1 billion in Proceeds from borrowing on our revolving credit facility; and
$500 million in Proceeds from issuance of long-term debt.
The use of cash in the nine months ended September 30, 2017 was primarily from:
$10.2 billion for Repayments of long-term debt;
debt driven by the redemption of $1.3 billion aggregate principal amount of our 6.000% Senior Notes due 2023, $1.0 billion aggregate principal amount of our 6.000% Senior Notes due 2024 and $500 million aggregate principal amount of our 5.125% Senior Notes due 2025, and repayments of $219 million aggregate principal amount of our 3.360% Senior Secured Series 2016-1 A-1 Notes due 2021 and $131 million aggregate principal amount of our 4.738% Senior Secured Series 2018-1 A-1 Notes due 2025; and•$2.9 billion for269 million in Repayments of our revolving credit facility;
$350 million for Repayments of capitalfinancing lease obligations; and
$296 million for Repayments of short-term debt for purchases of inventory, property and equipment, net;obligations; partially offset by
•$10.53.0 billion in Proceeds from issuance of long-term debt,; and
net of issuance costs.
The source of cash for the six months ended June 30, 2021, was primarily from:
•$2.99.8 billion in Proceeds from borrowingissuance of long-term debt, net of issuance costs; partially offset by
•$5.4 billion in Repayments of long-term debt driven by the redemption of $2.0 billion aggregate principal amount of our 6.500% Senior Notes due 2026, $1.3 billion aggregate principal amount of our 6.000% Senior Notes due 2023, $1.0 billion aggregate principal amount of our 6.000% Senior Notes due 2024 and $500 million aggregate principal amount of our 5.125% Senior Notes due 2025, and repayments of $438 million aggregate principal amount of our 3.360% Senior Secured Series 2016-1 A-1 Notes due 2021 and $131 million aggregate principal amount of our 4.738% Senior Secured Series 2018-1 A-1 Notes due 2025;
•$556 million in Repayments of financing lease obligations; and
•$294 million in Tax withholdings on our revolving credit facility.
share-based awards.
Cash and Cash Equivalents
As of SeptemberJune 30, 2017,2021, our Cash and cash equivalents were $739 million.$7.8 billion compared to $10.4 billion at December 31, 2020.
Free Cash Flow
Free Cash Flow represents netNet cash provided by operating activities less cash payments for purchasesPurchases of property and equipment.equipment, including Proceeds from sales of tower sites and Proceeds related to beneficial interests in securitization transactions, less Cash payments for debt prepayment or debt extinguishment. Free Cash Flow is aand Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, are non-GAAP financial measuremeasures utilized by our management, investors and analysts of T-Mobile’sour financial information to evaluate cash available to pay debt and provide further investment in the business.
In 2021, we sold tower sites for proceeds of $31 million, which are included in Proceeds from sales of tower sites within Net
The following table illustratescash used in investing activities in our Condensed Consolidated Statements of Cash Flows. As these proceeds were from the sale of fixed assets and are used by management to assess cash available for capital expenditures during the year, we determined the proceeds are relevant for the calculation of Free Cash Flow and included them in the table below. Other proceeds from the sale of fixed assets for the periods presented are not significant. We have presented the impact of the sales in the table below, which reconciles Free Cash Flow and Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, to Net cash provided by operating activities, which we consider to be the most directly comparable GAAP financial measure:measure.
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| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | | | Change | | |
(in millions) | 2021 | | 2020 | $ | | % | 2021 | | 2020 | | | | $ | | % | | | |
| | | | | | | | | | | | | | | | | | | | | |
Net cash provided by operating activities | $ | 3,779 | | | $ | 777 | | | $ | 3,002 | | | 386 | % | | $ | 7,440 | | | $ | 2,394 | | | | | $ | 5,046 | | | 211 | % | | | | |
Cash purchases of property and equipment | (3,270) | | | (2,257) | | | (1,013) | | | 45 | % | | (6,453) | | | (4,010) | | | | | (2,443) | | | 61 | % | | | | |
Proceeds from sales of tower sites | 31 | | | — | | | 31 | | | NM | | 31 | | | — | | | | | 31 | | | NM | | | | |
Proceeds related to beneficial interests in securitization transactions | 1,137 | | | 602 | | | 535 | | | 89 | % | | 2,028 | | | 1,470 | | | | | 558 | | | 38 | % | | | | |
Cash payments for debt prepayment or debt extinguishment costs | (6) | | | (24) | | | 18 | | | (75) | % | | (71) | | | (24) | | | | | (47) | | | 196 | % | | | | |
Free Cash Flow | 1,671 | | | (902) | | | 2,573 | | | (285) | % | | 2,975 | | | (170) | | | | | 3,145 | | | NM | | | | |
Gross cash paid for the settlement of interest rate swaps | — | | | 2,343 | | | (2,343) | | | (100) | % | | — | | | 2,343 | | | | | (2,343) | | | (100) | % | | | | |
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Free Cash Flow, excluding gross payments for the settlement of interest rate swaps | $ | 1,671 | | | $ | 1,441 | | | $ | 230 | | | 16 | % | | $ | 2,975 | | | $ | 2,173 | | | | | $ | 802 | | | 37 | % | | | | |
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| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(in millions) | 2017 | | 2016 | | $ | | % | | 2017 | | 2016 | | $ | | % |
Net cash provided by operating activities | $ | 2,362 |
| | $ | 1,740 |
| | $ | 622 |
| | 36 | % | | $ | 5,904 |
| | $ | 4,533 |
| | $ | 1,371 |
| | 30 | % |
Cash purchases of property and equipment | (1,441 | ) | | (1,159 | ) | | (282 | ) | | 24 | % | | (4,316 | ) | | (3,843 | ) | | (473 | ) | | 12 | % |
Free Cash Flow | $ | 921 |
| | $ | 581 |
| | $ | 340 |
| | 59 | % | | $ | 1,588 |
| | $ | 690 |
| | $ | 898 |
| | 130 | % |
NM - Not Meaningful
Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, increased $340$230 million, or 16%, for the three months ended and increased $802 million, or 37%, for the six months ended June 30, 2021.
The increase for the three months ended June 30, 2021, was impacted by the following:
•Higher Net cash provided by operating activities, as described above; and
•Higher Proceeds related to beneficial interests in securitization transactions; partially offset by
•Higher Cash purchases of property and equipment, including capitalized interest of $57 million and $119 million for the three months ended June 30, 2021 and $8982020, respectively, from network integration related to the Merger and the continued build-out of our nationwide 5G network.
•Free Cash Flow includes $190 million and $370 million in payments for Merger-related costs for the ninethree months ended SeptemberJune 30, 2017 primarily from higher net2021 and 2020, respectively.
•The calculation of Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, excludes the one-time impact of gross payments for the settlement of interest rate swaps related to Merger financing of $2.3 billion for the three months ended June 30, 2020.
The increase for the six months ended June 30, 2021, was impacted by the following:
•Higher Net cash provided by operating activities, due to working capital changes, as described above,above; and
•Higher Proceeds related to beneficial interests in securitization transactions; partially offset by higher
•Higher Cash purchases of property and equipment, including capitalized interest of $141 million and $231 million for the six months ended June 30, 2021 and 2020, respectively, from network integration related to the Merger and the continued build-out of our nationwide 5G network.
•Free Cash Flow includes $467 million and $531 million in payments for Merger-related costs for the six months ended June 30, 2021 and 2020, respectively.
•The calculation of Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, excludes the one-time impact of gross payments for the settlement of interest rate swaps related to Merger financing of $2.3 billion for the six months ended June 30, 2020.
Borrowing Capacity
We maintain a financing arrangement with Deutsche Bank AG, which allows for up to $108 million in borrowings. Under the financing arrangement, we can effectively extend payment terms for invoices payable to certain vendors. As of June 30, 2021, there were no outstanding balances under such financing arrangement.
We also maintain vendor financing arrangements primarily duewith our main network equipment suppliers. Under the respective agreements, we can obtain extended financing terms. During the three and six months ended June 30, 2021, we repaid $36 million and $91 million, respectively, associated with the vendor financing arrangements and other financial liabilities. These payments are included in Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities, in our Condensed Consolidated Statements of Cash Flows. As of June 30, 2021 and December 31, 2020, the outstanding balance under the vendor financing arrangements and other financial liabilities was $148 million and $240 million, respectively, of which $77 million and $122 million, respectively, was assumed in connection with the closing of the Merger. As of June 30, 2021, the outstanding borrowings was $77 million under the vendor financing agreements.
We maintain a revolving credit facility (the “Revolving Credit Facility”) with an aggregate commitment amount of $5.5 billion. As of June 30, 2021, there was no outstanding balance under the Revolving Credit Facility.
On October 30, 2020, we entered into a $5.0 billion senior secured term loan commitment with certain financial institutions. On January 14, 2021, we issued an aggregate of $3.0 billion of senior notes. The senior secured term loan commitment was reduced by an amount equal to new site development and capacity expansion.the aggregate gross proceeds of the Senior Notes, which reduced the commitment to $2.0 billion. On March 23, 2021, we issued an aggregate of $3.8 billion of Senior Notes. The senior secured term loan commitment was terminated upon the issuance of the $3.8 billion of Senior Notes.
Debt Financing
As of SeptemberJune 30, 2017,2021, our total debt was $28.3and financing lease liabilities were $77.7 billion, excluding our tower obligations, of which $27.7$68.4 billion was classified as long-term debt.debt and $1.4 billion was classified as long-term financing lease liabilities.
The following table sets forth the debt balances and activity as of, and for the nine months ended, September 30, 2017:
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(in millions) | December 31, 2016 | �� | Issuances and Borrowings (1) | | Note Redemptions (1) | | Extinguishments (1) | | Repayments | | Other (2) | | September 30, 2017 |
Short-term debt | $ | 354 |
| | $ | — |
| | $ | — |
| | $ | (20 | ) | | $ | — |
| | $ | 224 |
| | $ | 558 |
|
Long-term debt | 21,832 |
| | 1,495 |
| | (8,365 | ) | | (1,947 | ) | | — |
| | 148 |
| | 13,163 |
|
Total debt to third parties | 22,186 |
| | 1,495 |
| | (8,365 | ) | | (1,967 | ) | | — |
| | 372 |
| | 13,721 |
|
Short-term debt to affiliates | — |
| | 2,910 |
| | — |
| | — |
| | (2,910 | ) | | — |
| | — |
|
Long-term debt to affiliates | 5,600 |
| | 8,985 |
| | — |
| | — |
| | — |
| | 1 |
| | 14,586 |
|
Total debt to affiliates | 5,600 |
| | 11,895 |
| | — |
| | — |
| | (2,910 | ) | | 1 |
| | 14,586 |
|
Total debt | $ | 27,786 |
| | $ | 13,390 |
| | $ | (8,365 | ) | | $ | (1,967 | ) | | $ | (2,910 | ) | | $ | 373 |
| | $ | 28,307 |
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(1) | Issuances and borrowings, note redemptions and extinguishments are recorded net of related issuance costs, discounts and premiums. Issuances and borrowings for Short-term debt to affiliates represent net outstanding borrowings on our senior secured revolving credit facility. |
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(2) | Other includes: $299 million issuances of short-term debt related to vendor financing arrangements, of which $291 million is related to financing of property and equipment. During the nine months ended September 30, 2017, we repaid $296 million under the vendor financing arrangements. As of September 30, 2017, vendor financing arrangements totaled $3 million. Vendor financing arrangements are included in Short-term debt within Total current liabilities in our Condensed Consolidated Balance Sheets. Additional activity in Other includes capital leases and the amortization of discounts and premiums. As of September 30, 2017 and December 31, 2016, capital lease liabilities totaled $1.8 billion and $1.4 billion, respectively. |
Debt to Third Parties
Issuances and Borrowings
During the ninesix months ended SeptemberJune 30, 2017,2021, we issued the following Senior Notes:
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| | | | | | | | | | | |
(in millions) | Principal Issuances | | Issuance Costs | | Net Proceeds from Issuance of Long-Term Debt |
4.000% Senior Notes due 2022 | $ | 500 |
| | $ | 2 |
| | $ | 498 |
|
5.125% Senior Notes due 2025 | 500 |
| | 2 |
| | 498 |
|
5.375% Senior Notes due 2027 | 500 |
| | 1 |
| | 499 |
|
Total of Senior Notes Issued | $ | 1,500 |
| | $ | 5 |
| | $ | 1,495 |
|
On March 16, 2017, T-Mobile USA and certain of its affiliates, as guarantors, issued a total of $1.5 billion of public Senior Notes with various interest rates and maturity dates. Issuance costs related to the publiclong-term debt issuance totaled $5 million for the nine months ended September 30, 2017. We used the net proceeds of $1.495 billion from the transaction to redeem callable high yield debt.
Notes Redemptions
During the nine months ended September 30, 2017, we made the following note redemptions:
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| | | | | | | | | | | | | | | | |
(in millions) | Principal Amount | | Write-off of Premiums, Discounts and Issuance Costs (1) | | Call Penalties (1) (2) | | Redemption Date | | Redemption Price |
6.625% Senior Notes due 2020 | $ | 1,000 |
| | $ | (45 | ) | | $ | 22 |
| | February 10, 2017 | | 102.208 | % |
5.250% Senior Notes due 2018 | 500 |
| | 1 |
| | 7 |
| | March 4, 2017 | | 101.313 | % |
6.250% Senior Notes due 2021 | 1,750 |
| | (71 | ) | | 55 |
| | April 1, 2017 | | 103.125 | % |
6.464% Senior Notes due 2019 | 1,250 |
| | — |
| | — |
| | April 28, 2017 | | 100.000 | % |
6.542% Senior Notes due 2020 | 1,250 |
| | — |
| | 21 |
| | April 28, 2017 | | 101.636 | % |
6.633% Senior Notes due 2021 | 1,250 |
| | — |
| | 41 |
| | April 28, 2017 | | 103.317 | % |
6.731% Senior Notes due 2022 | 1,250 |
| | — |
| | 42 |
| | April 28, 2017 | | 103.366 | % |
Total note redemptions | $ | 8,250 |
| | $ | (115 | ) | | $ | 188 |
| | | | |
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(1) | Write-off of premiums, discounts, issuance costs and call penalties are included in Other income (expense), net in our Condensed Consolidated Statements of Comprehensive Income. Write-off of premiums, discounts and issuance costs are included in Other, net within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. |
| |
(2) | The call penalty is the excess paid over the principal amount. Call penalties are included within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. |
Debt to Affiliates
Issuances and Borrowings
During the nine months ended September 30, 2017, we made the following borrowings:
|
| | | | | | | | | | | |
(in millions) | Net Proceeds From Issuance of Long-Term Debt | | Extinguishments | | Write-off of Discounts and Issuance Costs (1) |
LIBOR plus 2.00% Senior Secured Term Loan due 2022 | $ | 2,000 |
| | $ | — |
| | $ | — |
|
LIBOR plus 2.00% Senior Secured Term Loan due 2024 | 2,000 |
| | — |
| | — |
|
LIBOR plus 2.750% Senior Secured Term Loan (2) | — |
| | (1,980 | ) | | 13 |
|
Total | $ | 4,000 |
| | $ | (1,980 | ) | | $ | 13 |
|
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(1) | Write-off of discounts and issuance costs are included in Other income (expense), net in our Condensed Consolidated Statements of Comprehensive Income and Other, net within Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. |
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(2) | Our Senior Secured Term Loan extinguished during the nine months endedSeptember 30, 2017 was Third Party debt.
|
On January 25, 2017, T-Mobile USA, Inc. (“T-Mobile USA”), and certain of its affiliates, as guarantors, entered into an agreement to borrow $4.0 billion under a secured term loan facility (“Incremental Term Loan Facility”) with DT, our majority stockholder, to refinance $1.98 billion of outstanding senior secured term loans under its Term Loan Credit Agreement dated November 9, 2015, with the remaining net proceeds from the transaction used to redeem callable high yield debt. The Incremental Term Loan Facility increased DT’s incremental term loan commitment provided to T-Mobile USA under that certain First Incremental Facility Amendment dated as of December 29, 2016, from $660 million to $2.0$9.8 billion and provided T-Mobile USAredeemed and repaid short- and long-term debt with an additional $2.0 billion incremental term loan commitment.
On January 31, 2017, the loans under the Incremental Term Loan Facility were drawn in two tranches: (i) $2.0 billion of which bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.00% and matures on November 9, 2022, and (ii) $2.0 billion of which bears interest at a rate equal to a per annum rate of LIBOR plus a margin of 2.25% and matures on January 31, 2024. In July 2017, we repriced the $2.0 billion Incremental Term Loan Facility maturing on January 31, 2024, with DT by reducing the interest rate to a per annum rate of LIBOR plus a margin of 2.00%. No issuance fees were incurred related to this debt agreement for the nine months ended September 30, 2017.
On March 31, 2017, the Incremental Term Loan Facility was amended to waive all interim principal payments. The outstanding principal balance will be due at maturity.
During the nine months ended September 30, 2017, we issued the following Senior Notes to DT:
|
| | | | | | | | | | | |
(in millions) | Principal Issuances (Redemptions) | | Discounts (1) | | Net proceeds from issuance of long-term debt |
4.000% Senior Notes due 2022 | $ | 1,000 |
| | $ | (23 | ) | | $ | 977 |
|
5.125% Senior Notes due 2025 | 1,250 |
| | (28 | ) | | 1,222 |
|
5.375% Senior Notes due 2027 (2) | 1,250 |
| | (28 | ) | | 1,222 |
|
6.288% Senior Reset Notes due 2019 | (1,250 | ) | | — |
| | (1,250 | ) |
6.366% Senior Reset Notes due 2020 | (1,250 | ) | | — |
| | (1,250 | ) |
Total | $ | 1,000 |
| | $ | (79 | ) | | $ | 921 |
|
| |
(1) | Discounts reduce Proceeds from issuance of long-term debt and are included within Net cash (used in) provided by financing activities in our Condensed Consolidated Statements of Cash Flows. |
| |
(2) | In April 2017, we issued to DT $750 million in aggregate principal amount of the 5.375% Senior Notes due 2027, and in September 2017, we issued to DT the remaining $500 million in aggregate principal amount of the 5.375% Senior Notes due 2027. |
On March 13, 2017, DT agreed to purchase a total of $3.5 billion in aggregate principal amounts of Senior Notes with various interest rates and maturity dates (the “new DT Notes”).
Through net settlement in April 2017, we issued to DT a total of $3.0 billion in aggregate principal amount of the new DT Notes and redeemed the $2.5 billion in outstanding aggregate principal amount of Senior Reset Notes with various interest rates and maturity dates (the “old DT Notes”).$5.5 billion.
The redemption pricesFor more information regarding our debt financing transactions, see Note 7 - Debt of the old DT Notes were 103.144% and 103.183%, resulting in a total of $79 million in early redemption fees. These early redemption fees were recorded as discounts onto the issuance of the new DT Notes.Condensed Consolidated Financial Statements.
Spectrum Auction
In September 2017,March 2021, the FCC announced that we issued to DT $500 millionwere the winning bidder of 142 licenses in Auction 107 (C-band spectrum) for an aggregate principal amount of 5.375% Senior Notes due 2027, which is the final tranche of the new DT Notes. We were not required to pay any underwriting fees or issuance costs in connection with the issuance of the notes.
Net proceeds from the issuance of the new DT Notes were $921 million and are included in Proceeds from issuance of long-term debt in our Condensed Consolidated Statements of Cash Flows.
On May 9, 2017, we exercised our option under existing purchase agreements and issued the following Senior Notes to DT:
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| | | | | | | | | | | |
(in millions) | Principal Issuances | | Premium | | Net proceeds from issuance of long-term debt |
5.300% Senior Notes due 2021 | $ | 2,000 |
| | $ | — |
| | $ | 2,000 |
|
6.000% Senior Notes due 2024 | 1,350 |
| | 40 |
| | 1,390 |
|
6.000% Senior Notes due 2024 | 650 |
| | 24 |
| | 674 |
|
Total | $ | 4,000 |
| | $ | 64 |
| | $ | 4,064 |
|
The proceeds were used to fund a portion of the purchase price of spectrum$9.3 billion, excluding relocation costs. At the inception of Auction 107 in October 2020, we deposited $438 million. Upon conclusion of Auction 107 in March 2021, we paid the FCC the remaining $8.9 billion for the licenses won in the 600 MHzauction. We expect to incur an additional $1.2 billion in relocation costs which will be paid through 2024.
Revolving Credit FacilityOff-Balance Sheet Arrangements
We had no outstanding borrowings under our $1.5have arrangements, as amended from time to time, to sell certain EIP accounts receivable and service accounts receivable on a revolving basis as a source of liquidity. As of June 30, 2021, we derecognized net receivables of $2.5 billion senior secured revolving credit facility with DT asupon sale through these arrangements.
Future Sources and Uses of Cash Flows.Liquidity
We couldmay seek additional sources of liquidity, including through the issuance of additional long-term debt in 2017,2021, to continue to opportunistically acquire spectrum licenses or other assets in private party transactions or for the refinancing of existing long-term debt on an opportunistic basis. Excluding liquidity that could be needed for spectrum acquisitions, or for other assets, we expect our principal sources of funding to be sufficient to meet our anticipated liquidity needs for business operations for the next 12 months.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, and redemption of high yield callable debt.debt, tower obligations, potential shareholder returns and the execution of our integration plan.
We determine future liquidity requirements, for both operations and capital expenditures, based in large part upon projected financial and operating performance, and opportunities to acquire additional spectrum. We regularly review and update these projections for changes in current and projected financial and operating results, general economic conditions, the competitive landscape and other factors. We have incurred, and will incur, substantial expenses to comply with the Government Commitments, and we are also expected to incur substantial restructuring expenses in connection with integrating and coordinating T-Mobile’s and Sprint’s businesses, operations, policies and procedures. While we have assumed that a certain level of Merger-related expenses will be incurred, factors beyond our control, including required consultation and negotiation with certain counterparties, could affect the total amount or the timing of these expenses. These expenses could exceed the costs historically borne by us and adversely affect our financial condition and results of operations. There are a number of additional risks and uncertainties, including those due to the impact of the Pandemic, that could cause our financial and operating results and capital requirements to differ materially from our projections, which could cause future liquidity to differ materially from our assessment.
The indentures, supplemental indentures and credit facilitiesagreements governing our long-term debt to affiliates and third parties, excluding capitalfinancing leases, contain covenants that, among other things, limit the ability of the IssuerIssuers or borrowers and the Guarantor Subsidiaries to:to incur more debt;debt, pay dividends and make distributions on our common stock;stock, make certain investments;investments, repurchase stock;stock, create liens or other encumbrances;encumbrances, enter into transactions with affiliates;affiliates, enter into transactions that restrict dividends or distributions from subsidiaries;subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. Certain provisions of each of the credit facilities,agreements, indentures and supplemental indentures relating to the long-term debt to affiliates and third parties restrict the ability of the IssuerIssuers or borrowers to loan funds or make payments to the Parent. However, the Issuer isIssuers or borrowers are allowed to make certain permitted payments to the Parent under the terms of each of the credit facilities,agreements, indentures and supplemental indentures relating to the long-term debt to affiliates and third parties. We were in compliance with all restrictive debt covenants as of SeptemberJune 30, 2017.2021.
CapitalShentel Wireless Assets Acquisition
Subsequent to June 30, 2021, on July 1, 2021, we closed on the acquisition of the Wireless Assets (as defined in Note 2 - Business Combinations of the Notes to the Condensed Consolidated Financial Statements) for a cash purchase price of approximately $1.9 billion. For more information regarding the acquisition of the Wireless Assets, see Note 2 – Business Combinations of the Notes to the Condensed Consolidated Financial Statements.
Financing Lease Facilities
We have entered into uncommitted capitalfinancing lease facilities with certain partners whichthat provide us with the ability to enter into capitalfinancing leases for network equipment and services. As of SeptemberJune 30, 2017,2021, we have committed to $2.0$5.6 billion of capitalfinancing leases under these capitalfinancing lease facilities, of which $138$362 million and $735$470 million was executed during the three and nine six
months ended SeptemberJune 30, 2017,2021, respectively. We expect to enter into up to an additional $165$730 million in capitalfinancing lease commitments during 2017.the year ending December 31, 2021.
Capital Expenditures
Our liquidity requirements have been driven primarily by capital expenditures for spectrum licenses, and the construction, expansion and upgrading of our network infrastructure.infrastructure and the integration of the networks, spectrum, technology, personnel, customer base and business practices of T-Mobile and Sprint. Property and equipment capital expenditures primarily relate to the integration of our network transformation,spectrum licenses, including the build outpending acquisition of 700 MHz A-BlockC-band licenses won in Auction 107, acquired Sprint 2.5 GHz spectrum licenses. We expect cash purchases of propertylicenses and equipment to be in the range of $4.8 billion to $5.1 billion in 2017, excluding capitalized interest. We expect to be at the high end of the range. This does not include property and equipment obtained through capital lease agreements, leased wireless devices transferred from inventory or any additional purchases of spectrum licenses.
In April 2017, the Federal Communications Commission (the “FCC”) announced that we were the winning bidder of 1,525 licenses in theexisting 600 MHz spectrum auction for an aggregate pricelicenses as we build out our nationwide 5G network. We expect the majority of $8.0 billion. At the inception our remaining capital expenditures related to these efforts to occur in 2021 and 2022, after which we expect a reduction in capital expenditure requirements.
For more information regarding our spectrum licenses, see Note 5 - Goodwill, Spectrum License Transactions and Other Intangible Assetsof the auction in June 2016, we deposited $2.2 billion with the FCC which, based on the outcome of the auction, was sufficient to cover our down payment obligation due in April 2017. In May 2017, we paid the FCC the remaining $5.8 billion of the purchase price using cash reserves and by issuing debt to Deutsche Telekom AG (“DT”), our majority stockholder, pursuant to existing debt purchase commitments. See Note 7 - Debt of the Notes to the Condensed Consolidated Financial Statements for further information.Statements.
The $5.8 billion payment of the purchase price is included in Purchases of spectrum licenses and other intangible assets, including deposits within NetDividends
We have never paid or declared any cash
used in investing activities in our Condensed Consolidated Statements of Cash Flows. The licenses are included in Spectrum licenses as of September 30, 2017,dividends on our Condensed Consolidated Balance Sheets. We began deployment of these licensescommon stock, and we do not intend to declare or pay any cash dividends on our networkcommon stock in the foreseeable future. Our credit facilities and the indentures and supplemental indentures governing our long-term debt to affiliates and third quarter of 2017. See Note 5 - Spectrum License Transactions of the Notesparties, excluding financing leases, contain covenants that, among other things, restrict our ability to the Condensed Consolidated Financial Statements for additional details.declare or pay dividends on our common stock.
Off-Balance Sheet Arrangements
In 2015, we entered into an arrangement, as amended, to sell certain EIP accounts receivable on a revolving basis through November 2017 as an additional source of liquidity. In August 2017, the arrangement was amended to reduce the maximum funding commitment to $1.2 billion and extend the scheduled expiration date to November 2018. In 2014, we entered into an arrangement, as amended, to sell certain service accounts receivable on a revolving basis through March 2017 as an additional source of liquidity. In November 2016, the arrangement was amended to increase the maximum funding commitment to $950 million and extend the scheduled expiration date to March 2018. As of September 30, 2017, T-Mobile derecognized net receivables of $2.4 billion upon sale through these arrangements. See Note 4 – Sales of Certain Receivables of the Notes to the Condensed Consolidated Financial Statements.
Related-PartyRelated Party Transactions
During the nine months ended September 30, 2017, we entered into certain debt related transactions with affiliates. See Note 7 – Debt of the Notes to the Condensed Consolidated Financial Statements for additional details.
We also have related party transactions associated with DT, SoftBank or itstheir affiliates in the ordinary course of business, including intercompany servicing and licensing.
Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act of 1934, as amended (“Exchange Act”). 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 SeptemberJune 30, 2017,2021, 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 DT.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: Gostaresh Ertebatat Taliya, Irancell Telecommunications Services Company, (“MTN Irancell”), Telecommunication Kish Company, Mobile Telecommunication Company of Iran, and Telecommunication Infrastructure Company of Iran. In addition, during the three months ended June 30, 2021, DT, through certain of its non-U.S. subsidiaries, provided basic telecommunications services to two customers in Germany identified on the Specially Designated Nationals and Blocked Persons List maintained by the U.S. Department of Treasury’s Office of Foreign Assets Control: Bank Melli and Europäisch-Iranische Handelsbank. These services have been terminated or are in the process of being terminated.For the three months ended SeptemberJune 30, 2017,2021, gross revenues of all DT affiliates generated by roaming and interconnection traffic and telecommunications services with Iranthe Iranian parties identified herein were less than $1.0$0.1 million, and the estimated net profits were less than $1.0$0.1 million.
In addition, DT, through certain of its non-U.S. subsidiaries operatingthat operate a fixed linefixed-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 SeptemberJune 30, 20172021 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 June 30, 2021, SoftBank had no gross revenues from such services and no net profit was generated. We understand that the SoftBank subsidiary intends to continue such services. This subsidiary also provides telecommunications services in the ordinary course of business to accounts affiliated with the Embassy of Iran in Japan. During the three months ended June 30, 2021, 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 revenue and net profit generated by such services during the three months ended June 30, 2021, were both under $0.1 million. We understand that the SoftBank subsidiary intends to continue such activities.
Critical Accounting Policies and Estimates
Preparation of our condensed consolidated financial statements in accordance with U.S. 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, 2016.2020, and which are hereby incorporated by reference herein.
Accounting Pronouncements Not Yet Adopted
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, 2016.2020.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure information required to be disclosed in our periodic reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls include the use of a Disclosure Committee which is comprised of representatives from our Accounting, Legal, Treasury, Technology, Risk Management, Government Affairs and Investor Relations functions and are also designed to ensure that information required to be disclosed in
the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Form 10-Q.
The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) are filed as exhibits 31.1 and 31.2,, respectively, to this Form 10-Q.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, during our most recently completed fiscal quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See For more information regarding the legal proceedings in which we are involved, see Note 102 - Business Combinations and Note 11 – Commitments and Contingenciesof the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for information regarding certain legal proceedings in which we are involved.Statements.
Item 1A. Risk Factors
ThereOther than the updated risk factors below, there have been no material changes in our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Our Fifth Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain actions and proceedings, which could limit the ability of our stockholders to obtain a judicial forum of their choice for disputes with the Company or its directors, officers or employees.
Our Fifth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or employee of the Company to the Company or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or the Company's bylaws or (iv) any other action asserting a claim arising under, in connection with, and governed by the internal affairs doctrine. This choice of forum provision does not waive our compliance with our obligations under the federal securities laws and the rules and regulations thereunder. Moreover, the provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act or by the Securities Act of 1933, as amended.
This choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder's ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with the Company or its directors, officers or employees, which may discourage such lawsuits against the Company and its directors, officers and employees, even though an action, if successful, might benefit our stockholders. Alternatively, if a court were to find the choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such matters in other jurisdictions, which could increase our costs of litigation and adversely affect our business and financial condition.
Our business and Sprint’s business may not be integrated successfully or such integration may be more difficult, time consuming or costly than expected. Operating costs, customer loss and business disruptions, including challenges in maintaining relationships with employees, customers, suppliers or vendors, may be greater than expected.
The combination of two independent businesses is complex, costly and time-consuming, and may divert significant management attention and resources. This process may disrupt our business or otherwise impact our ability to compete. The overall combination of our and Sprint’s businesses may also result in material unanticipated problems, expenses, liabilities, competitive responses and impacts, and loss of customers and other business relationships. The difficulties of combining the operations of the companies include, among others:
•diversion of management attention to integration matters;
•difficulties in integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure, and supplier and vendor arrangements;
•challenges in conforming standards, controls, procedures and accounting and other policies;
•alignment of key performance measurements may result in a greater need to communicate and manage clear expectations while we work to integrate and align policies and practices;
•difficulties in integrating employees;
•the transition of management to the combined company management team, and the need to address possible differences in corporate cultures, management philosophies, and compensation structures;
•challenges in retaining existing customers and obtaining new customers;
•difficulties in managing the expanded operations of a significantly larger and more complex company;
•any disruptions to the operations and business in the Shentel service area following the Company’s acquisition of Wireless Assets (as defined in Note 2 - Business Combinations of the Notes to the Condensed Consolidated Financial Statements) as a result of the transition of such assets to the Company;
•compliance with Government Commitments relating to national security;
•known or potential unknown liabilities of Sprint that are larger than expected;
•other potential adverse consequences and unforeseen increased expenses or liabilities associated with the Transactions.
Additionally, uncertainties over the integration process could cause customers, suppliers, distributors, dealers, retailers and others to seek to change or cancel our existing business relationships or to refuse to renew existing relationships. Suppliers, distributors and content and application providers may also delay or cease developing new products for us that are necessary for the operations of our business due to uncertainties. Competitors may also target our existing customers by highlighting potential uncertainties and integration difficulties.
Some of these factors are outside our control, and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could adversely impact our business, financial condition and operating results. In addition, even if the integration is successful, the full benefits of the Transactions including, among others, the synergies, cost savings or sales or growth opportunities may not be realized within the anticipated time frames or at all.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
INDEX TO EXHIBITS
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| | | | Incorporated by Reference | | |
Exhibit No. | | Exhibit Description | | Form | | Date of First Filing | | Exhibit Number | | Filed/Furnished Herewith |
| | Fourth Amendment, dated as of July 25, 2017, to the Term Loan Credit Agreement, dated as of November 9, 2015, as amended, among T-Mobile USA, Inc., the lenders party thereto and Deutsche Bank AG New York Branch, as administrative agent and collateral agent. | | 8-K | | 7/27/2017 | | 10.1 | |
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| | Second Amended and Restated Receivables Purchase and Administration Agreement, dated as of August 21, 2017, by and among T-Mobile Handset Funding LLC, as transferor, T-Mobile Financial LLC, as servicer, T-Mobile US, Inc. as performance guarantor, Royal Bank of Canada, as administrative agent, and certain financial institutions party thereto from time to time. | |
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101.INS | | XBRL Instance Document. | |
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101.SCH | | XBRL Taxonomy Extension Schema Document. | |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. | |
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101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. | |
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101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. | |
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101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. | |
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| | | | Incorporated by Reference | | |
Exhibit No. | | Exhibit Description | | Form | | Date of First Filing | | Exhibit Number | | Filed Herein |
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2.1 | | | | 8-K | | 6/1/2021 | | 2.1 | | |
2.2 | | | | | | | | | | X |
4.1 | | | | 8-K | | 5/13/2021 | | 4.5 | | |
4.2 | | | | S-4 | | 3/30/2021 | | 4.19 | | |
4.3 | | | | | | | | | | X |
10.1* | | | | | | | | | | X |
10.2* | | | | | | | | | | X |
10.3 | | | | | | | | | | X |
10.4 | | First Amendment to Fifth Amended and Restated Master Receivables Purchase Agreement, dated as of June 18, 2021, by and among T-Mobile Airtime Funding LLC, as transferor, T-Mobile PCS Holdings LLC, as servicer, T-Mobile US, Inc. and T-Mobile USA, Inc., as performance guarantors, The Toronto-Dominion Bank, as administrative agent, and certain financial institutions party thereto. | | | | | | | | X |
22.1 | | | | | | | | | | X |
31.1 | | | | | | | | | | X |
31.2 | | | | | | | | | | X |
32.1** | | | | | | | | | | X |
32.2** | | | | | | | | | | X |
101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | | | | | | | |
101.SCH | | XBRL Taxonomy Extension Schema Document. | | | | | | | | X |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. | | | | | | | | X |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. | | | | | | | | X |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. | | | | | | | | X |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase. | | | | | | | | X |
104 | | Cover Page Interactive Data File (the cover page XBRL tags) | | | | | | | | |
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* | | Indicates a management contract or compensatory plan or arrangement. |
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** | | Furnished herewith.herein. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | T-MOBILE US, INC. | |
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August 3, 2021 | | T-MOBILE US, INC./s/ Peter Osvaldik | |
| | Peter Osvaldik | |
October 23, 2017 | | /s/ J. Braxton Carter | |
| | J. Braxton Carter
Executive Vice President and Chief Financial Officer | |
| | (Principal Financial Officer and Authorized Signatory) | |