0001283699us-gaap:RetainedEarningsMember2020-07-012020-09-30

Table of Contents

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
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172021
or
¨
☐ 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
tmuslogo.jpgtmus-20210930_g1.jpg
T-MOBILE US, INC.
(Exact name of registrant as specified in its charter)
DELAWAREDelaware20-0836269
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
12920 SE 38th Street, Bellevue, Washington98006-1350
(Address of principal executive offices)(Zip Code)
(425) 378-4000

12920 SE 38th Street
Bellevue,Washington
(Address of principal executive offices)
98006-1350
(Zip Code)
(425)378-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.00001 per shareTMUSThe 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.

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.

ClassShares Outstanding as of October 19, 2017
27, 2021
Common Stock, $0.00001 par value $0.00001 per share1,249,053,529 831,964,098




1

T-Mobile US, Inc.
Form 10-Q
For the Quarter Ended September 30, 20172021


Table of Contents
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Comprehensive Income
Condensed Consolidated Statements of Cash Flows
Condensed Consolidated Statement of Stockholders’ Equity
SIGNATURE
59




2
Index for Notes to the Condensed Consolidated Financial Statements
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)September 30,
2021		December 31,
2020
Assets   Assets
Current assets   Current assets
Cash and cash equivalents$739
 $5,500
Cash and cash equivalents$4,055 $10,385 
Accounts receivable, net of allowances of $86 and $1021,734
 1,896
Equipment installment plan receivables, net2,136
 1,930
Accounts receivable, net of allowance for credit losses of $129 and $194Accounts receivable, net of allowance for credit losses of $129 and $1944,109 4,254 
Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $469 and $478Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $469 and $4784,306 3,577 
Accounts receivable from affiliates24
 40
Accounts receivable from affiliates21 22 
Inventories999
 1,111
Asset purchase deposit—
 2,203
InventoryInventory1,762 2,527 
Prepaid expensesPrepaid expenses943 624 
Other current assets1,817
 1,537
Other current assets1,576 2,496 
Total current assets7,449
 14,217
Total current assets16,772 23,885 
Property and equipment, net21,570
 20,943
Property and equipment, net39,355 41,175 
Operating lease right-of-use assetsOperating lease right-of-use assets27,446 28,021 
Financing lease right-of-use assetsFinancing lease right-of-use assets3,396 3,028 
Goodwill1,683
 1,683
Goodwill12,188 11,117 
Spectrum licenses35,007
 27,014
Spectrum licenses92,589 82,828 
Other intangible assets, net256
 376
Other intangible assets, net5,047 5,298 
Equipment installment plan receivables due after one year, net1,100
 984
Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $109 and $127Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $109 and $1272,280 2,031 
Other assets858
 674
Other assets3,052 2,779 
Total assets$67,923
 $65,891
Total assets$202,125 $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$8,735 $10,196 
Payables to affiliates288
 125
Payables to affiliates92 157 
Short-term debt558
 354
Short-term debt2,096 4,579 
Short-term debt to affiliatesShort-term debt to affiliates2,240 — 
Deferred revenue790
 986
Deferred revenue914 1,030 
Short-term operating lease liabilitiesShort-term operating lease liabilities3,077 3,868 
Short-term financing lease liabilitiesShort-term financing lease liabilities1,154 1,063 
Other current liabilities396
 405
Other current liabilities939 810 
Total current liabilities8,103
 9,022
Total current liabilities19,247 21,703 
Long-term debt13,163
 21,832
Long-term debt66,645 61,830 
Long-term debt to affiliates14,586
 5,600
Long-term debt to affiliates1,494 4,716 
Tower obligations2,599
 2,621
Tower obligations2,862 3,028 
Deferred tax liabilities5,535
 4,938
Deferred tax liabilities10,370 9,966 
Deferred rent expense2,693
 2,616
Operating lease liabilitiesOperating lease liabilities26,279 26,719 
Financing lease liabilitiesFinancing lease liabilities1,587 1,444 
Other long-term liabilities967
 1,026
Other long-term liabilities5,214 5,412 
Total long-term liabilities39,543
 38,633
Total long-term liabilities114,451 113,115 
Commitments and contingencies (Note 10)

 

Commitments and contingencies (Note 13)Commitments and contingencies (Note 13)00
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; 1,250,573,992 and 1,243,345,584 shares issued, 1,249,035,065 and 1,241,805,706 shares outstandingCommon Stock, par value $0.00001 per share, 2,000,000,000 shares authorized; 1,250,573,992 and 1,243,345,584 shares issued, 1,249,035,065 and 1,241,805,706 shares outstanding— — 
Additional paid-in capital39,058
 38,846
Additional paid-in capital73,152 72,772 
Treasury stock, at cost, 1,455,466 and 1,411,487 shares issued(4) (1)
Accumulated other comprehensive income4
 1
Treasury stock, at cost, 1,538,927 and 1,539,878 shares issuedTreasury stock, at cost, 1,538,927 and 1,539,878 shares issued(13)(11)
Accumulated other comprehensive lossAccumulated other comprehensive loss(1,478)(1,581)
Accumulated deficit(18,781) (20,610)Accumulated deficit(3,234)(5,836)
Total stockholders' equity20,277
 18,236
Total stockholders' equity68,427 65,344 
Total liabilities and stockholders' equity$67,923
 $65,891
Total liabilities and stockholders' equity$202,125 $200,162 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3
Index for Notes to the Condensed Consolidated Financial Statements
T-Mobile US, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in millions, except share and per share amounts)2021202020212020
Revenues
Postpaid revenues$10,804 $10,209 $31,599 $26,055 
Prepaid revenues2,481 2,383 7,259 7,067 
Wholesale revenues944 930 2,776 1,663 
Other service revenues493 617 1,772 1,430 
Total service revenues14,722 14,139 43,406 36,215 
Equipment revenues4,660 4,953 15,221 11,339 
Other revenues242 180 706 502 
Total revenues19,624 19,272 59,333 48,056 
Operating expenses
Cost of services, exclusive of depreciation and amortization shown separately below3,538 3,314 10,413 8,051 
Cost of equipment sales, exclusive of depreciation and amortization shown separately below5,145 4,367 15,740 10,563 
Selling, general and administrative5,212 4,876 14,840 14,168 
Impairment expense— — — 418 
Depreciation and amortization4,145 4,150 12,511 9,932 
Total operating expenses18,040 16,707 53,504 43,132 
Operating income1,584 2,565 5,829 4,924 
Other income (expense)
Interest expense(780)(765)(2,392)(1,726)
Interest expense to affiliates(58)(44)(136)(206)
Interest income2 3 7 21 
Other expense, net(60)(99)(186)(304)
Total other expense, net(896)(905)(2,707)(2,215)
Income from continuing operations before income taxes688 1,660 3,122 2,709 
Income tax benefit (expense)3 (407)(520)(715)
Income from continuing operations691 1,253 2,602 1,994 
Income from discontinued operations, net of tax— — — 320 
Net income$691 $1,253 $2,602 $2,314 
Net income$691 $1,253 $2,602 $2,314 
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on cash flow hedges, net of tax effect of $12, $12, $36, and $(261)35 33 103 (757)
Unrealized (loss) gain on foreign currency translation adjustment, net of tax effect of $0, $1, $0, and $1(3)4 — 4 
Other comprehensive income (loss)32 37 103 (753)
Total comprehensive income$723 $1,290 $2,705 $1,561 
Earnings per share
Basic earnings per share:
Continuing operations$0.55 $1.01 $2.09 $1.79 
Discontinued operations— — — 0.29 
Basic$0.55 $1.01 $2.09 $2.08 
Diluted earnings per share:
Continuing operations$0.55 $1.00 $2.07 $1.78 
Discontinued operations— — — 0.28 
Diluted$0.55 $1.00 $2.07 $2.06 
Weighted average shares outstanding
Basic1,248,189,719 1,238,450,665 1,246,441,464 1,111,511,964 
Diluted1,253,661,245 1,249,798,740 1,254,391,787 1,122,040,528 
 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 revenues2,376
 2,182
 7,009
 6,326
Wholesale revenues274
 238
 778
 645
Roaming and other service revenues59
 66
 151
 170
Total service revenues7,629
 7,133
 22,403
 20,599
Equipment revenues2,118
 1,948
 6,667
 5,987
Other revenues272
 224
 775
 670
Total revenues10,019
 9,305
 29,845
 27,256
Operating expenses       
Cost of services, exclusive of depreciation and amortization shown separately below1,594
 1,436
 4,520
 4,286
Cost of equipment sales2,617
 2,539
 8,149
 7,532
Selling, general and administrative3,098
 2,898
 8,968
 8,419
Depreciation and amortization1,416
 1,568
 4,499
 4,695
Cost of MetroPCS business combination—
 15
 —
 110
Gains on disposal of spectrum licenses(29) (199) (67) (835)
Total operating expense8,696
 8,257
 26,069
 24,207
Operating income1,323
 1,048
 3,776
 3,049
Other income (expense)       
Interest expense(253) (376) (857) (1,083)
Interest expense to affiliates(167) (76) (398) (248)
Interest income2
 3
 15
 9
Other income (expense), net1
 (1) (89) (6)
Total other expense, net(417) (450) (1,329) (1,328)
Income before income taxes906
 598
 2,447
 1,721
Income tax expense(356) (232) (618) (651)
Net income550
 366
 1,829
 1,070
Dividends on preferred stock(13) (13) (41) (41)
Net income attributable to common stockholders$537
 $353
 $1,788
 $1,029
        
Net Income$550
 $366
 $1,829
 $1,070
Other comprehensive income, net of tax       
Unrealized gain on available-for-sale securities, net of tax effect $0, $1, $2 and $11
 2
 3
 2
Other comprehensive income1
 2
 3
 2
Total comprehensive income$551
 $368
 $1,832
 $1,072
Earnings per share       
Basic$0.65
 $0.43
 $2.15
 $1.25
Diluted$0.63
 $0.42
 $2.10
 $1.24
Weighted average shares outstanding       
Basic831,189,779
 822,998,697
 829,974,146
 821,626,675
Diluted871,420,065
 832,257,819
 871,735,511
 831,241,027


The accompanying notes are an integral part of these condensed consolidated financial statements.

4
Index for Notes to the Condensed Consolidated Financial Statements
T-Mobile US, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
(in millions)2017 2016 2017 2016
Operating activities       
Net income$550
 $366
 $1,829
 $1,070
Adjustments to reconcile net income to net cash provided by operating activities
      
Depreciation and amortization1,416
 1,568
 4,499
 4,695
Stock-based compensation expense82
 59
 221
 171
Deferred income tax expense347
 219
 595
 623
Bad debt expense123
 118
 298
 358
Losses from sales of receivables67
 59
 242
 157
Deferred rent expense21
 32
 61
 97
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
Inventories113
 301
 (28) (497)
Deferred purchase price from sales of receivables6
 (16) (12) (199)
Other current and long-term assets(184) (98) (330) 31
Accounts payable and accrued liabilities(12) (731) (607) (1,568)
Other current and long term liabilities60
 112
 (84) 326
Other, net75
 1
 (27) 10
Net cash provided by operating activities2,362
 1,740
 5,904
 4,533
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
Other, net1
 5
 (2) 3
Net cash used in investing activities(1,455) (1,859) (10,138) (4,386)
Financing activities       
Proceeds from issuance of long-term debt500
 —
 10,480
 997
Proceeds from borrowing on revolving credit facility1,055
 —
 2,910
 —
Repayments of revolving credit facility(1,735) —
 (2,910) —
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 equivalents558
 (186) (4,761) 770
Cash and cash equivalents       
Beginning of period181
 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 payments2
 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 equipment262
 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 equipment1
 —
 291
 150
Assets acquired under capital lease obligations138
 384
 735
 679
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Operating activities
Net income$691 $1,253 $2,602 $2,314 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization4,145 4,150 12,511 9,932 
Stock-based compensation expense131 161 403 558 
Deferred income tax (benefit) expense(27)335 410 743 
Bad debt expense105 143 259 489 
Losses (gains) from sales of receivables4 (18)(26)37 
Losses on redemption of debt55 108 184 271 
Impairment expense— — — 418 
Changes in operating assets and liabilities
Accounts receivable(454)(1,538)(2,197)(2,784)
Equipment installment plan receivables(530)(306)(1,825)(110)
Inventories41 (549)904 (1,613)
Operating lease right-of-use assets1,334 1,062 3,730 2,526 
Other current and long-term assets(88)(8)(188)(106)
Accounts payable and accrued liabilities111 (964)(1,245)(2,630)
Short and long-term operating lease liabilities(2,046)(1,145)(4,411)(2,947)
Other current and long-term liabilities(87)(51)(351)(2,162)
Other, net92 139 157 230 
Net cash provided by operating activities3,477 2,772 10,917 5,166 
Investing activities
Purchases of property and equipment, including capitalized interest of $(46), $(108), $(187), and $(339)(2,944)(3,217)(9,397)(7,227)
(Purchases) refunds of spectrum licenses and other intangible assets, including deposits(407)17 (9,337)(827)
Proceeds from sales of tower sites— — 31 — 
Proceeds related to beneficial interests in securitization transactions1,071 855 3,099 2,325 
Net cash related to derivative contracts under collateral exchange arrangements— — — 632 
Acquisition of companies, net of cash and restricted cash acquired(1,886)— (1,916)(5,000)
Proceeds from the divestiture of prepaid business— 1,238 — 1,238 
Other, net14 (25)46 (209)
Net cash used in investing activities(4,152)(1,132)(17,474)(9,068)
Financing activities
Proceeds from issuance of long-term debt1,989 — 11,758 26,694 
Payments of consent fees related to long-term debt— — — (109)
Repayments of financing lease obligations(266)(246)(822)(764)
Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities(76)(231)(167)(407)
Repayments of long-term debt(4,600)(5,678)(9,969)(16,207)
Issuance of common stock— 2,550 — 19,840 
Repurchases of common stock— (2,546)— (19,536)
Proceeds from issuance of short-term debt— — — 18,743 
Repayments of short-term debt— — — (18,929)
Tax withholdings on share-based awards(14)(72)(308)(351)
Cash payments for debt prepayment or debt extinguishment costs(45)(58)(116)(82)
Other, net(48)137 (139)139 
Net cash (used in) provided by financing activities(3,060)(6,144)237 9,031 
Change in cash and cash equivalents, including restricted cash(3,735)(4,504)(6,320)5,129 
Cash and cash equivalents, including restricted cash
Beginning of period7,878 11,161 10,463 1,528 
End of period$4,143 $6,657 $4,143 $6,657 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5
Index for Notes to the Condensed Consolidated Financial Statements
T-Mobile US, Inc.
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
(in millions, except shares)Common Stock OutstandingTreasury Shares at CostPar Value and Additional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Balance as of June 30, 20211,247,920,536 $(14)$72,919 $(1,510)$(3,925)$67,470 
Net income— — — — 691 691 
Other comprehensive income— — — 32 — 32 
Stock-based compensation— — 147 — — 147 
Exercise of stock options14,578 — 1 — — 1 
Stock issued for employee stock purchase plan917,444 — 100 — — 100 
Issuance of vested restricted stock units256,605 — — — — — 
Shares withheld related to net share settlement of stock awards and stock options(92,992)— (14)— — (14)
Transfers with NQDC plan18,894 1 (1)— — — 
Balance as of September 30, 20211,249,035,065 $(13)$73,152 $(1,478)$(3,234)$68,427 
Balance as of December 31, 20201,241,805,706 $(11)$72,772 $(1,581)$(5,836)$65,344 
Net income— — — — 2,602 2,602 
Other comprehensive income— — — 103 — 103 
Stock-based compensation— — 451 — — 451 
Exercise of stock options195,618 — 10 — — 10 
Stock issued for employee stock purchase plan2,189,697 — 225 — — 225 
Issuance of vested restricted stock units7,281,702 — — — — — 
Shares withheld related to net share settlement of stock awards and stock options(2,438,609)— (308)— — (308)
Transfers with NQDC plan951 (2)2 — — — 
Balance as of September 30, 20211,249,035,065 $(13)$73,152 $(1,478)$(3,234)$68,427 

The accompanying notes are an integral part of these condensed consolidated financial statements.


6
Index for Notes to the Condensed Consolidated Financial Statements
T-Mobile US, Inc.
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
(in millions, except shares)Common Stock OutstandingTreasury Shares at CostPar Value and Additional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Balance as of June 30, 20201,237,338,994 $(12)$72,505 $(1,658)$(7,839)$62,996 
Net income— — — — 1,253 1,253 
Other comprehensive income— — — 37 — 37 
Stock-based compensation— — 177 — — 177 
Exercise of stock options483,266 — 27 — — 27 
Stock issued for employee stock purchase plan897,732 — 65 — — 65 
Issuance of vested restricted stock units2,383,098 — — — — — 
Shares withheld related to net share settlement of stock awards and stock options(648,872)— (72)— — (72)
Transfers with NQDC plan4,400 1 (1)— — — 
Shares issued in secondary offering (1)
24,750,000 — 2,550 — — 2,550 
Shares repurchased from SoftBank (2)
(24,750,000)— (2,546)— — (2,546)
Balance as of September 30, 20201,240,458,618 $(11)$72,705 $(1,621)$(6,586)$64,487 
Balance as of December 31, 2019856,905,400 $(8)$38,498 $(868)$(8,833)$28,789 
Net income— — — — 2,314 2,314 
Other comprehensive loss— — — (753)— (753)
Executive put option(342,000)— 1 — — 1 
Stock-based compensation— — 601 — — 601 
Exercise of stock options794,853 — 42 — — 42 
Stock issued for employee stock purchase plan2,144,036 — 148 — — 148 
Issuance of vested restricted stock units11,295,402 — — — — — 
Shares withheld related to net share settlement of stock awards and stock options(3,703,906)— (351)— — (351)
Transfers with NQDC plan(31,477)(3)3 — — — 
Shares issued in secondary offering (1)
198,314,426 — 19,766 — — 19,766 
Shares repurchased from SoftBank (1)
(198,314,426)— (19,536)— — (19,536)
Merger consideration373,396,310 — 33,533 — — 33,533 
Prior year Retained Earnings— — — — (67)(67)
Balance as of September 30, 20201,240,458,618 $(11)$72,705 $(1,621)$(6,586)$64,487 
(1)     Shares issued includes 5.0 million shares of our common stock purchased by Marcelo Claure, one of our directors.
(2)     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 $304 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.
7
Index for Notes to the Condensed Consolidated Financial Statements
T-Mobile US, Inc.
Index for Notes to the Condensed Consolidated Financial Statements

9
9
15
18
720
Significant Transactions
10
Note 3
Equipment Installment Plan Receivables
10
Note 4
Sales of Certain Receivables
11
Note 5
Spectrum License Transactions
14
Note 6
1522
1624
1826
27
29
1929
30
2030
33
2134



8
T-Mobile US, Inc.
Index for Notes to the Condensed Consolidated Financial Statements
(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”) and through our acquisitions of affiliates. These estimates are inherently subject to judgment and actual results could differ from those estimates.


ChangeAccounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” and has since modified the standard with 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 available for adoption through December 31, 2022, and the optional expedients for contract modifications must be elected for all arrangements within a given Accounting Standards Codification (“ASC”) Topic or Industry Subtopic. We expect to elect the optional expedients for eligible contract modifications accounted for under a given ASC Topic as they occur through December 31, 2022. The application of these expedients is not expected to have a material impact on our consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the U.S. Securities and Exchange Commission did not have, or are not expected to have, a significant impact on 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
9
Index for Notes to the Condensed Consolidated Financial Statements
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 Accounting Principlethe 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.


Effective JanuaryThe 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, 2017,2022 and ending on December 31, 2025. If the imputedthreshold price is not met, then none 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. As of September 30, 2021, DT and SoftBank held, directly or indirectly, approximately 46.8% and 4.9%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 48.3% of the outstanding T-Mobile common stock held by other stockholders. Pursuant to the Proxy, Lock-up and ROFR Agreement, dated as of April 1, 2020, by and between DT and SoftBank and the Proxy, Lock-up and ROFR Agreement, dated as of June 22, 2020 by and among DT, Marcelo Claure and Claure Mobile LLC, a Delaware limited liability company wholly owned by Mr. Claure, as of September 30, 2021, DT has voting control over approximately 52.0% of the outstanding T-Mobile common stock.

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 
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
10
Index for Notes to the Condensed Consolidated Financial Statements
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 the estimated future share-price volatility, which was based on historical market trends and the 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.
11
Index for Notes to the Condensed Consolidated Financial Statements
(in millions)April 1, 2020
Cash and cash equivalents$2,084 
Accounts receivable1,775 
Equipment installment plan receivables1,088 
Inventory658 
Prepaid expenses140 
Assets held for sale1,908 
Other current assets637 
Property and equipment18,435 
Operating lease right-of-use assets6,583 
Financing lease right-of-use assets291 
Goodwill9,423 
Spectrum licenses45,400 
Other intangible assets6,280 
Equipment installment plan receivables due after one year, net247 
Other assets (1)
540 
Total assets acquired95,489 
Accounts payable and accrued liabilities5,015 
Short-term debt2,760 
Deferred revenue508 
Short-term operating lease liabilities1,818 
Short-term financing lease liabilities8 
Liabilities held for sale475 
Other current liabilities681 
Long-term debt29,037 
Tower obligations950 
Deferred tax liabilities3,478 
Operating lease liabilities5,615 
Financing lease liabilities12 
Other long-term liabilities4,305 
Total liabilities assumed54,662 
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. None 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.

12
Index for Notes to the Condensed Consolidated Financial Statements
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 onrate, 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 Planinstallment 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 be uncollectible.

Indemnification Assets and Contingent Liabilities

Pursuant to Amendment No 2. to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses. As of the acquisition date, we recorded a contingent liability and an offsetting indemnification asset for the expected reimbursement by SoftBank for certain Lifeline matters. The liability is presented 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 amortized overdeemed to be necessary, as well as additional uncertain tax benefit reserves. As of the financed installment term usingdate of the effective interest method,Merger, the amount of the valuation allowance reserve and uncertain tax benefit reserves was previously presented within Interest income$851 million and $660 million, respectively.

Transaction Costs

We recognized transaction costs of $15 million and $8 million for the three months ended September 30, 2021 and 2020, respectively, and $28 million and $192 million for the nine months ended September 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,Income.

Pro Forma Information

The following unaudited pro forma financial information gives effect to the 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 now presented within Other revenuesa 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 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 alignsaccordance 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:
 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 revenues9,945
 74
 10,019
 9,246
 59
 9,305
Operating income1,249
 74
 1,323
 989
 59
 1,048
Interest income76
 (74) 2
 62
 (59) 3
Total other expense, net(343) (74) (417) (391) (59) (450)
Net income550
 —
 550
 366
 —
 366

 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
Total revenues29,641
 204
 29,845
 27,067
 189
 27,256
Operating income3,572
 204
 3,776
 2,860
 189
 3,049
Interest income219
 (204) 15
 198
 (189) 9
Total other expense, net(1,125) (204) (1,329) (1,139) (189) (1,328)
Net income1,829
 —
 1,829
 1,070
 —
 1,070


Article 11. The change in accounting principle did not have an impact on basic or diluted earnings per sharepro forma results for the three and nine months ended September 30, 2017 and 2016,2020 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 Accumulated deficit as of September 30, 2017 or December 31, 2016.

Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), and has since modified the standard with several ASUs. The standard is effective for us, and we will adopt the standard, on January 1, 2018.

The standard requires entities to recognize revenue through the application of a five-step model, which includes: identificationother expected benefits of the contract; identification of the performance obligations; determination of the transaction price; allocation of the transaction priceacquisition.
(in millions)Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Total revenues$19,269 $54,342 
Income from continuing operations1,359 2,461 
Income from discontinued operations, net of tax— 677 
Net income1,359 3,138 

13
Index for Notes to the performance obligations; and recognition of revenue as the entity satisfies the performance obligations.Condensed Consolidated Financial Statements

Significant nonrecurring pro forma adjustments include:
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 of 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 whether 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 considered 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 to our consolidated financial statements. We plan to utilize the practical expedient permitting expensing of costs to obtain a contract when the expected amortization period is one year or less which we expect will typically result in expensing commissions paid to acquire branded prepaid service contracts. Currently, we believe that incremental contract acquisition•Transaction costs of approximately $450$9 million to $550and $211 million that were incurred during the nine months ended September 30, 2017, which consists primarily of commissions paid 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 contingent on the customer maintaining a service contract will result in extended service contracts, which impacts the allocation and timing 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 expect the adoption of the standard will result in the recognition of right of use assets and lease liabilities that have not previously been recorded, which will have a material impact on our condensed consolidated financial statements.

We are in the process of implementing significant new lease accounting systems, processes and internal controls over lease recognition which will ultimately assist in the application 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 amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectibility of the reported amount. The standard will become effective for us beginning January 1, 2020, and will require a cumulative-effect adjustment to Accumulated deficit 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, 2017,2020, respectively, are assumed to have occurred on the pro forma close date of January 1, 2019, and are recognized as if incurred in the first 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 lost revenue,discontinued operations, net of tax;
•Permanent financing issued and debt redemptions occurring in connection with the closing of the Merger are assumed to have occurred on January 1, 2019, and historical interest expense associated with repaid borrowings is removed;
•Tangible and intangible assets damagedare assumed to be recorded at their estimated fair values as of January 1, 2019 and are depreciated or destroyedamortized 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 hurricane related costs incurredobligations to various state and federal agencies and certain nongovernmental organizations. See Note 13 - Commitments and Contingencies for further information.

Shenandoah Personal Communications Company Affiliate Relationship

Sprint PCS (specifically Sprint Spectrum L.P.) was $148 millionparty 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 $90 million, respectively. AsPennsylvania. 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 September 30, 2017, our loss assessment is ongoing and we expect additional expensesas the direct or indirect owner of Sprint PCS, exercised its option by delivering a binding notice of exercise 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.Shentel.

Purchase of Iowa Wireless


On September 18, 2017, weMay 28, 2021, T-Mobile USA, Inc., a Delaware corporation and our direct wholly owned subsidiary, entered into a Unit Purchase Agreement (“UPA”an asset purchase agreement (the “Purchase Agreement”) to acquirewith Shentel, for the remaining equity in INSacquisition of the Wireless Inc. (“INS”), a 54% owned unconsolidated subsidiary,Assets for aan aggregate purchase price of $25 million. We account forapproximately $1.9 billion in cash, subject to certain adjustments prescribed by the Management Agreement and such additional adjustments agreed by the parties.

Closing of Shentel Wireless Assets Acquisition

On July 1, 2021, upon the completion of certain customary conditions, including the receipt of certain regulatory approvals, 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. Through this transaction, we reacquired the exclusive rights to deliver Sprint’s wireless network services in Shentel’s former affiliate territory and simplified our existing investment in INSoperations. 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 equity methodManagement 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 calculation of the consideration transferred in exchange for the Wireless Assets, and the settlement of pre-existing arrangements between T-Mobile and Shentel did not result in material gains or losses.
14
Index for Notes to the Condensed Consolidated Financial Statements

Prior to the acquisition of the Wireless Assets, revenues generated from our affiliate relationship with Shentel were presented as we have significant influence, but not control.Other service revenues. Upon the close of the transaction, which is expectedrevenues generated from postpaid customers within the next six months, subject to regulatory approvals and customaryreacquired territory are presented as Postpaid revenues within our Condensed Consolidated Statements of Comprehensive Income. The financial results of the Wireless Assets since the closing conditions, INS will become a wholly-owned consolidated subsidiary.

Spectrum Transactions

During the nine months endedthrough September 30, 2017, we entered into agreements with third parties2021, were not material to our Condensed Consolidated Statements of Comprehensive Income, nor were they material to our prior period consolidated results on a pro forma basis.

Fair Value of Assets Acquired and Liabilities Assumed

We have accounted for the exchangeacquisition of certain spectrum licensesthe Wireless Assets as a business combination. The identifiable assets acquired and liabilities assumed were recorded at their preliminary fair values as of the winning bidderacquisition date and consolidated with those 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 relatedT-Mobile. Assigning fair market values to the issuance, borrowingassets acquired and redemptionliabilities assumed at the date of debt. See Note 7 - Debt for further information.an acquisition requires the use of significant judgment regarding estimates and assumptions. For the preliminary fair values of the assets acquired and liabilities assumed, we used the cost, income and market approaches, including market participant assumptions.

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:preliminary 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. We are in the process of finalizing the valuation of the assets acquired and liabilities assumed, including income tax related amounts. Therefore, the preliminary fair values set forth below are subject to further adjustment as additional information is obtained and the valuations are completed.
(in millions)July 1, 2021
Inventory$2 
Property and equipment136 
Operating lease right-of-use assets308 
Goodwill1,035 
Other intangible assets770 
Other assets7 
Total assets acquired2,258 
Short-term operating lease liabilities73 
Operating lease liabilities264 
Other long-term liabilities35 
Total liabilities assumed372 
Total consideration transferred$1,886 

Intangible Assets and Liabilities

Goodwill with a provisionally assigned value of $1.0 billion, substantially all of which is deductible for tax purposes, represents the anticipated cost savings from the operations of the combined company resulting from the planned integration of network infrastructure and facilities, the assembled workforce hired concurrently with the acquisition of Wireless Assets, and the intangible assets that do not qualify for separate recognition. All of the goodwill acquired is allocated to the wireless reporting unit.

Other intangible assets include $770 million of reacquired rights to provide services in Shentel’s former affiliate territory which is being amortized on a straight-line basis over a useful life of approximately nine years in line with the remaining term of the Management Agreement upon the acquisition of the Wireless Assets, which represents the period of expected economic benefits associated with the re-acquisition of such rights. 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. The key assumptions in applying the income approach include forecasted subscriber growth rates, revenue over an estimated period of time, the discount rate, estimated capital expenditures, estimated income taxes and the long-term growth rate, as well as forecasted earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins.

Note 3 – Receivables and Expected Credit Losses
(in millions)September 30,
2017		 December 31,
2016
EIP receivables, gross$3,599
 $3,230
Unamortized imputed discount(233) (195)
EIP receivables, net of unamortized imputed discount3,366
 3,035
Allowance for credit losses(130) (121)
EIP receivables, net$3,236
 $2,914
    
Classified on the balance sheet as:   
Equipment installment plan receivables, net$2,136
 $1,930
Equipment installment plan receivables due after one year, net1,100
 984
EIP receivables, net$3,236
 $2,914



We usemaintain 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.

15
Index for Notes to the Condensed Consolidated Financial Statements
We consider a proprietaryreceivable 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 scoring modellosses 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 measuresutilizes 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 athe customer at the time of application for mobile communications service using severalbase, 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 bureau information,losses for reasonable and supportable forecasts of future economic conditions. To do so, we monitor professional forecasts of changes in real U.S. gross domestic product and forecasts of consumer credit risk scores and service plan characteristics. behavior for comparable credit exposures. We also periodically evaluate other economic indicators such as unemployment rates to assess their level of correlation with our historical credit loss statistics.

EIP Receivables Portfolio Segment

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)September 30,
2021		December 31,
2020
EIP receivables, gross$7,164 $6,213 
Unamortized imputed discount(330)(325)
EIP receivables, net of unamortized imputed discount6,834 5,888 
Allowance for credit losses(248)(280)
EIP receivables, net of allowance for credit losses and imputed discount$6,586 $5,608 
Classified on the balance sheet as:
Equipment installment plan receivables, net of allowance for credit losses and imputed discount$4,306 $3,577 
Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount2,280 2,031 
EIP receivables, net of allowance for credit losses and imputed discount$6,586 $5,608 

16
Index for Notes to the Condensed Consolidated Financial Statements
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 September 30, 2021:
Originated in 2021Originated in 2020Originated prior to 2020Total EIP Receivables, net of
unamortized imputed discounts
(in millions)PrimeSubprimePrimeSubprimePrimeSubprimePrimeSubprimeGrand total
Current - 30 days past due$2,726 $1,917 $1,218 $712 $95 $38 $4,039 $2,667 $6,706 
31 - 60 days past due17 30 9 14 1 1 27 45 72 
61 - 90 days past due6 10 4 6 — 1 10 17 27 
More than 90 days past due4 9 3 8 2 3 9 20 29 
EIP receivables, net of unamortized imputed discount$2,753 $1,966 $1,234 $740 $98 $43 $4,085 $2,749 $6,834 

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 6.1% and the payment is past the contractual due date are classified6.7% as Billed – Past Due.of September 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:
 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
Billed – Current60
 90
 150
 51
 77
 128
Billed – Past Due25
 50
 75
 25
 48
 73
EIP receivables, gross$1,556
 $2,043
 $3,599
 $1,419
 $1,811
 $3,230

Activity for the nine months ended September 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:
September 30, 2021September 30, 2020
(in millions)Accounts Receivable AllowanceEIP Receivables AllowanceTotalAccounts Receivable AllowanceEIP Receivables AllowanceTotal
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— — — — 91 91 
Bad debt expense127 132 259 261 228 489 
Write-offs, net of recoveries(192)(164)(356)(114)(130)(244)
Change in imputed discount on short-term and long-term EIP receivablesN/A109 109 N/A60 60 
Impact on the imputed discount from sales of EIP receivablesN/A(104)(104)N/A(111)(111)
Allowance for credit losses and imputed discount, end of period$129 $578 $707 $208 $537 $745 

(in millions)September 30,
2017		 September 30,
2016
Imputed discount and allowance for credit losses, beginning of period$316
 $333
Bad debt expense215
 185
Write-offs, net of recoveries(205) (201)
Change in imputed discount on short-term and long-term EIP receivables163
 103
Impacts from sales of EIP receivables(126) (133)
Imputed discount and allowance for credit losses, end of period$363
 $287
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 September 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.


17
Index for Notes to the Condensed Consolidated Financial Statements
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:
(in millions)September 30,
2017		 December 31,
2016
Other current assets$225
 $207
Accounts payable and accrued liabilities13
 17
Other current liabilities155
 129

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 amended to reduce the maximum funding commitment to $1.2 billion (the “EIP sale arrangement”) and extend the scheduled expiration date tois November 2018. 18, 2021.

As of both September 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)September 30,
2021		December 31,
2020
Other current assets$388 $388 
Other assets170 120 
Other long-term liabilities3 4 
(in millions)September 30,
2017		 December 31,
2016
Other current assets$357
 $371
Other assets90
 83
Other long-term liabilities2
 4



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 September 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
18
Index for Notes to the Condensed Consolidated Financial Statements
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)September 30,
2021		December 31,
2020
Other current assets$207 $378 
Other current liabilities344 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 September 30, 20172021 and December 31, 2016,2020, our deferred purchase price related to the sales of service receivables and EIP receivables was $671$764 million and $659$884 million, respectively.


19
Index for Notes to the Condensed Consolidated Financial Statements
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)September 30,
2021		December 31,
2020
Derecognized net service receivables and EIP receivables$2,459 $2,528 
Other current assets595 766 
of which, deferred purchase price594 764 
Other long-term assets170 120 
of which, deferred purchase price170 120 
Other current liabilities344 357 
Other long-term liabilities3 4 
Net cash proceeds since inception1,753 1,715 
Of which:
Change in net cash proceeds during the year-to-date period38 (229)
Net cash proceeds funded by reinvested collections1,715 1,944 
(in millions)September 30,
2017		 December 31,
2016
Derecognized net service receivables and EIP receivables$2,362
 $2,502
Other current assets582
 578
of which, deferred purchase price581
 576
Other long-term assets90
 83
of which, deferred purchase price90
 83
Accounts payable and accrued liabilities13
 17
Other current liabilities155
 129
Other long-term liabilities2
 4
Net cash proceeds since inception1,963
 2,030
Of which:   
Change in net cash proceeds during the year-to-date period(67) 536
Net cash proceeds funded by reinvested collections2,030
 1,494


We recognized lossesa loss 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 $4 million and a gain of $18 million, respectively, for the three months ended September 30, 2021 and 2020, respectively, and a gain of $26 million and a loss of $37 million for the nine months ended September 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 nine months ended September 30, 2021, and the year ended December 31, 2020, are as follows:
(in millions)Goodwill
Balance as of December 31, 2019, net of accumulated impairment losses of $10,766$1,930 
Goodwill from acquisitions in 20209,405 
Layer3 goodwill impairment(218)
Balance as of December 31, 202011,117 
Purchase price adjustment of goodwill from acquisitions in 202022 
Goodwill from acquisitions in 20211,049 
Balance as of September 30, 2021$12,188 
Accumulated impairment losses at September 30, 2021$(10,984)

On April 1, 2020, we completed the Merger, 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.

20
Index for Notes to the Condensed Consolidated Financial Statements
On July 1, 2021, we completed our acquisition of the Wireless Assets from Shentel, which was accounted for as a business combination resulting in $1.0 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 in the Sprint Merger

The following table summarizes the fair value of the intangible assets acquired in the Sprint Merger:
Weighted Average Useful Life (in years)Fair Value as of April 1, 2020
(in millions)
Spectrum licensesIndefinite-lived$45,400 
Tradenames (1)
2 years207 
Customer relationships8 years4,900 
Favorable spectrum leases18 years745 
Other intangible assets7 years428 
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.

Identifiable Intangible Assets Acquired in the Shentel Acquisition

We reacquired certain rights under the Management Agreement in connection with the acquisition of the Wireless Assets that provided us the ability to fully do business in Shentel’s former affiliate territories. We recognized an intangible asset for these reacquired rights at its preliminary fair value of $770 million as of July 1, 2021. The reacquired rights intangible asset is being amortized on a straight-line basis over a useful life of approximately nine years in line with the remaining term of the Management Agreement upon the acquisition of the Wireless Assets.

Spectrum Licenses

The following table summarizes our spectrum license activity duringfor the nine months ended September 30, 2017:2021:
(in millions)2021
Spectrum licenses, beginning of year$82,828 
Spectrum license acquisitions9,515 
Spectrum licenses transferred to held for sale(15)
Costs to clear spectrum261 
Spectrum licenses, end of period$92,589 
21
Index for Notes to the Condensed Consolidated Financial Statements
(in millions)Spectrum Licenses
Balance at December 31, 2016$27,014
Spectrum license acquisitions8,247
Spectrum licenses transferred to held for sale(271)
Costs to clear spectrum17
Balance at September 30, 2017$35,007

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 reserves and by issuing debtlicenses won in the auction. On July 23, 2021, the FCC issued to Deutsche Telekom AG (“DT”), our majority stockholder, pursuant to existing purchase commitments. See Note 7 - Debt for further information.us the licenses won in Auction 107. The licenses are included in Spectrum licenses in our Condensed Consolidated Balance Sheets as of September 30, 2017, on2021. Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in (Purchases) refunds of spectrum licenses and other intangible assets, including deposits in our Condensed Consolidated Balance Sheets.Statements of Cash Flows for the three and nine months ended September 30, 2021. We began deploymentexpect to incur an additional $1.0 billion in relocation costs which will be paid through 2024.

As of these licenses on our networkSeptember 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.

Other Intangible Assets

The components of Other intangible assets were as follows:
Useful LivesSeptember 30, 2021December 31, 2020
(in millions)Gross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount
Customer relationshipsUp to 8 years$4,903 $(1,643)$3,260 $4,900 $(865)$4,035 
Reacquired rightsUp to 9 years770 (23)747 — — — 
Tradenames and patentsUp to 19 years610 (511)99 598 (412)186 
Favorable spectrum leasesUp to 27 years731 (64)667 790 (35)755 
OtherUp to 10 years377 (103)274 377 (55)322 
Other intangible assets$7,391 $(2,344)$5,047 $6,665 $(1,367)$5,298 

Amortization expense for intangible assets subject to amortization was $316 million and $383 million for the three months ended September 30, 2021 and 2020, respectively, and $977 million and $794 million for the nine months ended September 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 September 30,
2022$1,128 
2023956 
2024799 
2025641 
2026480 
Thereafter1,043 
Total$5,047 

Substantially all of the estimated future amortization expense is associated with intangible assets acquired in the third quarterMerger and through our acquisitions of 2017.affiliates.



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.
22
Index for Notes to the Condensed Consolidated Financial Statements

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 at fair value that was derived primarily from observable market data, including yield curves. Interest rate lock derivatives were classified as follows:Level 2 in 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.

 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 assets3 $671
 $671
 $659
 $659
Liabilities:         
Guarantee liabilities3 121
 121
 135
 135

The principal amountsAggregate changes in the fair value of the interest rate lock derivatives, net of tax and fair valuesamortization, of our long-term debt included$1.5 billion and $1.6 billion are presented in Accumulated other comprehensive loss on our Condensed Consolidated Balance Sheets were as follows:
 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 parties1 $11,850
 $12,605
 $18,600
 $19,584
Senior Notes to affiliates2 7,500
 7,897
 —
 —
Incremental Term Loan Facility to affiliates2 4,000
 4,020
 —
 —
Senior Reset Notes to affiliates2 3,100
 3,290
 5,600
 5,955
Senior Secured Term Loans2 —
 —
 1,980
 2,005

Long-term Debt

The fair value of our Senior Notes to third parties was determined based on quoted 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 Loans 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, Incremental Term Loan Facility to affiliates, Senior Reset Notes to affiliates and Senior Secured Term Loans to affiliates. The fair value estimates were based on information available as of September 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 nine months ended September 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 nine months ended September 30, 2021, $47 million and $140 million, respectively, was amortized from Accumulated other comprehensive loss into Interest expense in the Condensed Consolidated Statements of Comprehensive Income. For the three and nine months ended September 30, 2020, $44 million and $83 million, respectively, was amortized from Accumulated other comprehensive loss into Interest expense. We expect to amortize $200 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 $764 million and $884 million at September 30, 2021 and December 31, 2020, respectively. Fair value was equal to carrying amount at September 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 ofhierarchy.

Although we have determined the returned device is recorded againstestimated 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 guarantee liabilities. Guarantee liabilities are included in Other current liabilities in our Senior
23
Index for Notes to the Condensed Consolidated Balance Sheets.Financial Statements

Notes to affiliates. 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 billionfair value estimates were based on information available as of September 30, 2017. This is2021 and December 31, 2020. As such, our estimates are not an indicationnecessarily indicative of the amount we could realize in a current market exchange.

The carrying amounts and fair values of our expected loss exposureshort-term and long-term debt included in our Condensed Consolidated Balance Sheets were as it does not considerfollows:
Level within the Fair Value HierarchySeptember 30, 2021December 31, 2020
(in millions)
Carrying Amount (1)
Fair Value (1)
Carrying Amount (1)
Fair Value (1)
Liabilities:
Senior Unsecured Notes to third parties1$31,408 $33,465 $29,966 $32,450 
Senior Notes to affiliates23,734 3,884 4,716 4,991 
Senior Secured Notes to third parties137,264 39,802 36,204 40,519 
(1)     Excludes $69 million and $240 million as of September 30, 2021 and December 31, 2020, respectively, in vendor financing arrangements and other debt as 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 nine months ended, September 30, 20172021:
(in millions)December 31,
2020
Proceeds from Issuances and Borrowings (1)
Note Redemptions (1)
Repayments
Reclassifications (1)
Other (2)
September 30,
2021
Short-term debt$4,579 $— $(2,250)$(1,063)$920 $(90)$2,096 
Long-term debt61,830 11,758 (5,737)(23)(920)(263)66,645 
Total debt to third parties66,409 11,758 (7,987)(1,086)— (353)68,741 
Short-term debt to affiliates— — — — 2,231 9 2,240 
Long-term debt to affiliates4,716 — (996)— (2,231)5 1,494 
Total debt$71,125 $11,758 $(8,983)$(1,086)$— $(339)$72,475 
(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.

Our effective interest rate, excluding the impact of derivatives and capitalized interest, was approximately 4.0% and 4.5% for the three months ended September 30, 2021 and 2020, respectively, and 4.1% and 4.7% for the nine months ended September 30, 2021 and 2020, respectively, on weighted average debt outstanding of $74.5 billion and $69.6 billion for the three months ended September 30, 2021 and 2020, respectively, and $74.4 billion and $54.5 billion for the nine months ended September 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.

24
(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 debt21,832
 1,495
 (8,365) (1,947) —
 148
 13,163
Total debt to third parties22,186
 1,495
 (8,365) (1,967) —
 372
 13,721
Short-term debt to affiliates—
 2,910
 —
 —
 (2,910) —
 —
Long-term debt to affiliates5,600
 8,985
 —
 —
 —
 1
 14,586
Total debt to affiliates5,600
 11,895
 —
 —
 (2,910) 1
 14,586
Total debt$27,786
 $13,390
 $(8,365) $(1,967) $(2,910) $373
 $28,307
(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.
(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.

DebtIndex for Notes to Third Partiesthe Condensed Consolidated Financial Statements

Issuances and Borrowings


During the nine months ended September 30, 2021, we issued the following Senior Notes and Senior Secured Notes:
(in millions)Principal IssuancesPremiums/Discounts and Issuance CostsNet Proceeds from Issuance of Long-Term DebtIssue Date
2.250% Senior Notes due 2026$1,000 $(7)$993 January 14, 2021
2.625% Senior Notes due 20291,000 (7)993 January 14, 2021
2.875% Senior Notes due 20311,000 (6)994 January 14, 2021
2.625% Senior Notes due 20261,200 (7)1,193 March 23, 2021
3.375% Senior Notes due 20291,250 (7)1,243 March 23, 2021
3.500% Senior Notes due 20311,350 (8)1,342 March 23, 2021
2.250% Senior Notes due 2026800 (2)798 May 13, 2021
3.375% Senior Notes due 20291,100 6 1,106 May 13, 2021
3.500% Senior Notes due 20311,100 6 1,106 May 13, 2021
Total of Senior Notes issued$9,800 $(32)$9,768 
3.400% Senior Secured Notes due 2052$1,300 $(11)$1,289 August 13, 2021
3.600% Senior Secured Notes due 2060700 1 701 August 13, 2021
Total of Senior Secured Notes issued$2,000 $(10)$1,990 

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.

Note Redemptions and Repayments

During the nine months ended September 30, 2017, we issued the following Senior Notes:
(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 2025500
 2
 498
5.375% Senior Notes due 2027500
 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 public 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, 2017,2021, 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 DateRedemption Price
6.500% Senior Notes due 2026$2,000 $36 $65 March 27, 2021103.250 %
6.000% Senior Notes due 20231,300 10 — May 23, 2021100.000 %
6.000% Senior Notes due 20241,000 9 — May 23, 2021100.000 %
5.125% Senior Notes due 2025500 3 6 May 23, 2021101.281 %
4.500% Senior Notes due 20261,000 5 23 August 23, 2021102.250 %
7.250% Senior Notes due 20212,250 — — September 15, 2021N/A
Total Senior Notes to third parties redeemed$8,050 $63 $94 
4.500% Senior Notes to affiliates due 2026$1,000 $4 $22 August 23, 2021102.250 %
Total Senior Notes to affiliates redeemed$1,000 $4 $22 
3.360% Secured Series 2016-1 A-1 Notes due 2021$656 $— $— August 20, 2021N/A
4.738% Secured Series 2018-1 A-1 Notes due 2025263 — — VariousN/A
Other debt167 — — VariousN/A
Total Repayments$1,086 $— $— 
(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 2018500
 1
 7
 March 4, 2017 101.313%
6.250% Senior Notes due 20211,750
 (71) 55
 April 1, 2017 103.125%
6.464% Senior Notes due 20191,250
 —
 —
 April 28, 2017 100.000%
6.542% Senior Notes due 20201,250
 —
 21
 April 28, 2017 101.636%
6.633% Senior Notes due 20211,250
 —
 41
 April 28, 2017 103.317%
6.731% Senior Notes due 20221,250
 —
 42
 April 28, 2017 103.366%
Total note redemptions$8,250
 $(115) $188
    
(1)(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 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.
(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 20242,000
 —
 —
LIBOR plus 2.750% Senior Secured Term Loan (2)
—
 (1,980) 13
Total$4,000
 $(1,980) $13
(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.
(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 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, 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 20251,250
 (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”).

The redemption prices 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 $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(2)The redemption premium is the excess paid over the principal amount. Redemption premiums are included within Other expense, net in our option under existing purchase agreementsCondensed Consolidated Statements of Comprehensive Income and issued the following Senior Notes to DT:
(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 20241,350
 40
 1,390
6.000% Senior Notes due 2024650
 24
 674
Total$4,000
 $64
 $4,064

The proceeds were used to fund a portion of the purchase price of spectrum licenses won in the 600 MHz spectrum auction. Net proceeds from these issuances include $64 million 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 as of September 30, 2017 and December 31, 2016. Proceeds and borrowings from the revolving credit facility are presented in Proceeds from borrowing on revolving credit facility and Repayments of revolving credit facility within Net cash (used in) provided byused in financing activities in our Condensed Consolidated Statements of Cash Flows.


25
Index for Notes to the Condensed Consolidated Financial Statements
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 – Tower Obligations

Existing CCI Tower Lease Arrangements

In 2012, we conveyed to Crown Castle International Corp. (“CCI”) the exclusive right to manage and operate approximately 6,200 tower sites (“CCI Lease Sites”) via a master prepaid lease with site lease terms ranging from 23 to 37 years. CCI has fixed-price purchase options for the CCI Lease Sites totaling approximately $2.0 billion, exercisable 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.
26
Index for Notes to the Condensed Consolidated Financial Statements
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)September 30,
2021		December 31,
2020
Property and equipment, net$2,591 $2,838 
Tower obligations2,862 3,028 
Other long-term liabilities1,712 1,712 

Future minimum payments related to the tower obligations are approximately $404 million for the year ending September 30, 2022, $638 million in total for the years ending September 30, 2023 and 2024, $605 million in total for the years ending September 30, 2025 and 2026, and $397 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 September 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 September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Postpaid service revenues
Postpaid phone revenues$9,952 $9,532 $29,102 $24,450 
Postpaid other revenues852 677 2,497 1,605 
Total postpaid service revenues$10,804 $10,209 $31,599 $26,055 

We operate as a single operating segment. The balances presented within each revenue line item in our Condensed Consolidated Statements of Comprehensive Income represent categories of revenue 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 and customer-based, third-party 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 $179 million and $563 million for the three and nine months ended September 30, 2021, respectively, and were $213 million and $424 million for the three and nine months ended September 30, 2020, respectively. Wireline service revenues are presented in Other service revenues in our Condensed Consolidated Statements of Comprehensive Income.

27
Index for Notes to the Condensed Consolidated Financial Statements
Equipment revenues from the lease of mobile communication devices were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Equipment revenues from the lease of mobile communication devices$770 $1,350 $2,725 $2,936 

Contract Balances

The contract asset and contract liability balances from contracts with customers as of December 31, 2020 and September 30, 2021, were as follows:
(in millions)Contract AssetsContract Liabilities
Balance as of December 31, 2020$278 $824 
Balance as of September 30, 2021262 792 
Change$(16)$(32)

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 $201 million and $204 million as of September 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 nine months ended September 30, 2021 and 2020 include the following:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Amounts included in the beginning of year contract liability balance$29 $5 $753 $543 

Remaining Performance Obligations

As of September 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 $1.0 billion. We expect to recognize revenue as the service is provided on these postpaid contracts over an extended contract term of 24 months at the time of origination.

As of September 30, 2021, the aggregate amount of transaction price allocated to remaining service and lease performance obligations associated with operating leases was $286 million and $173 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 has been excluded from the above, which primarily consists of monthly service contracts.

Certain of our wholesale, roaming and service contracts include variable consideration based on usage. This variable consideration has been excluded from the disclosure of remaining performance obligations. As of September 30, 2021, the aggregate amount of the contractual minimum consideration for wholesale, roaming and service contracts is $386 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 $1.3 billion and $1.1 billion as of September 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
28
Index for Notes to the Condensed Consolidated Financial Statements
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 $277 million and $221 million for the three months ended September 30, 2021 and 2020, respectively, and $789 million and $631 million for the nine months ended September 30, 2021 and 2020, respectively.

The deferred contract cost asset is assessed for impairment on a periodic basis. There were no impairment losses recognized on deferred contract cost assets for the three and nine months ended September 30, 2021 and 2020.

Note 10 – Income Taxes


Within our Condensed Consolidated Statements of Comprehensive Income, we recorded an Income tax benefit on continuing operations of $3 million and Income tax expense of $356 million and $232$407 million for the three months ended September 30, 20172021 and 2016,2020, respectively, and $618Income tax expense of $520 million and $651$715 million for the nine months ended September 30, 20172021 and 2016,2020, respectively.

The change for the three months ended September 30, 20172021 was primarily from higher income before income taxes. The change for the nine months ended September

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 duebenefits associated with legal entity reorganization related to historical Sprint entities, including 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 related to the reduction in the valuation allowance were $289 million through September 30, 2017.lower income before income taxes. The effective tax rate was further decreased by the recognition of $62 million of excess tax benefits related to share-based paymentschange 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 evidence2021 was primarily from tax benefits associated with legal entity reorganization related to historical Sprint entities, including a reduction in the utilization of thevaluation allowance against 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 thecertain state jurisdictions, as well as projecting sustained earningsand a reduction in those jurisdictions. Due to this positive evidence, we reducedexpenses that were not deductible for income tax purposes, partially offset by higher income before income taxes.

The effective tax rate from continuing operations was (0.3)% and 24.5% for the valuation allowance which resulted in a decrease to Deferred tax liabilities in our Condensed Consolidated Balance Sheets. three months ended September 30, 2021 and 2020, respectively, and 16.7% and 26.4% for the nine months ended September 30, 2021 and 2020, respectively.

We will continue to monitor positive and negative evidence related to the utilization of the remainingour deferred tax assets for whichsubject to a valuation allowance continues to be provided.allowance. It is possible thatthe valuation allowance we may release additional portions of the remaining valuation allowancedeem to be necessary will be reduced within the next three12 months.


Note 911 – Earnings Per Share


The computation of basic and diluted earnings per share was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions, except shares and per share amounts)2021202020212020
Income from continuing operations$691 $1,253 $2,602 $1,994 
Income from discontinued operations, net of tax— — — 320 
Net income$691 $1,253 $2,602 $2,314 
Weighted average shares outstanding - basic1,248,189,719 1,238,450,665 1,246,441,464 1,111,511,964 
Effect of dilutive securities:
Outstanding stock options and unvested stock awards5,471,526 11,348,075 7,950,323 10,528,564 
Weighted average shares outstanding - diluted1,253,661,245 1,249,798,740 1,254,391,787 1,122,040,528 
Basic earnings per share:
Continuing operations$0.55 $1.01 $2.09 $1.79 
Discontinued operations— — — 0.29 
Earnings per share - basic$0.55 $1.01 $2.09 $2.08 
Diluted earnings per share:
Continuing operations$0.55 $1.00 $2.07 $1.78 
Discontinued operations— — — 0.28 
Earnings per share - diluted$0.55 $1.00 $2.07 $2.06 
Potentially dilutive securities:
Outstanding stock options and unvested stock awards127,732 54,485 87,968 30,469 
SoftBank contingent consideration (1)
48,751,557 48,751,557 48,751,557 32,738,272 
(1)     Represents the weighted average SoftBank Specified Shares that are contingently issuable from the acquisition date of April 1, 2020.

29
Index for Notes to the Condensed Consolidated Financial Statements
 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 - basic537
 353
 1,788
 1,029
Add: Dividends related to mandatory convertible preferred stock13
 —
 41
 —
Net income attributable to common stockholders - diluted$550
 $353
 $1,829
 $1,029
        
Weighted average shares outstanding - basic831,189,779
 822,998,697
 829,974,146
 821,626,675
Effect of dilutive securities:       
Outstanding stock options and unvested stock awards7,992,286
 9,259,122
 9,523,365
 9,614,352
Mandatory convertible preferred stock32,238,000
 —
 32,238,000
 —
Weighted average shares outstanding - diluted871,420,065
 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 September 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 no preferred stock outstanding as of our common stock upon conversion.

September 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 1012 – CommitmentsLeases

Lessee

We are a lessee for non-cancelable operating and Contingenciesfinancing leases for cell sites, switch sites, retail stores, network equipment and office facilities with contractual terms that generally extend through 2035. Additionally, we lease dark fiber through non-cancelable operating leases with contractual terms that generally extend through 2041. The majority of cell site leases have a non-cancelable term of five to 15 years with several renewal options that can extend the lease term from five to 35 years. In addition, we have financing leases for network equipment that generally have a non-cancelable lease term of two to five years. The financing leases do not have renewal options and contain a bargain purchase option at the end of the lease.


CommitmentsOn September 15, 2021, we modified the terms of one of our master lease agreements, which resulted in a $1.0 billion advance rent payment. Our operating lease liabilities were reduced as a result of this prepayment.


Operating LeasesMaturities of lease liabilities as of September 30, 2021, were as follows:
(in millions)Operating LeasesFinance Leases
Twelve Months Ending September 30,
2022$3,655 $1,196 
20234,282 846 
20243,892 555 
20253,401 150 
20262,949 48 
Thereafter17,817 37 
Total lease payments35,996 2,832 
Less: imputed interest6,640 91 
Total$29,356 $2,741 

Interest payments for financing leases were $15 million and Purchase Commitments

During$19 million for the three months ended September 30, 2021 and 2020, respectively, and $51 million and $59 million for the nine months ended September 30, 2017,2021 and 2020, respectively.

As of September 30, 2021, we entered into ahave additional operating leases for cell sites and commercial properties that have not yet commenced with future lease payments of approximately $227 million.

As of September 30, 2021, we were contingently liable for future ground lease payments related to certain tower obligations. These contingent obligations are not included in the above table as the amounts owed are contractually owed by Crown Castle International Corp. based on the subleasing arrangement. See Note 8 - Tower Obligations and Note 9 - Tower Obligations in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020, for further information.

Note 13 – Commitments and Contingencies

Purchase Commitments

We have commitments for non-dedicated transportation lines with varying expiration terms that generally extend through 2030. In addition, we have commitments to purchase commitmentwireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary course of business, with a handset Original Equipment Manufacturer, resulting in a material increasevarious terms through 2045.

30
Index for Notes to the future minimum payments for purchase commitments summarized below.Condensed Consolidated Financial Statements

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
20192,153
 1,210
20201,867
 1,015
20211,472
 759
20221,163
 661
Thereafter2,240
 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 $4.5 billion for the twelve-month period ending September 30, 2022, $5.6 billion in total for the twelve-month periods ending September 30, 2023 and 2024, $2.2 billion in total for the twelve-month periods ending September 30, 2025 and 2026, and $1.7 billion in total 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 $360 million for the twelve-month period ending September 30, 2022, $617 million in total for the twelve-month periods ending September 30, 2023 and 2024, $591 million in total for the twelve-month periods ending September 30, 2025 and 2026 and $4.8 billion in total 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 September 30, 2021 was $87 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 bytwelve-month period ending September 30, 2022, $13 million in total for the facility. T-Mobile USA will net settletwelve-month periods ending September 30, 2023 and 2024 and $1 million in total for the forward agreementtwelve-month periods ending September 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 and Regulatory Matters

We are involved in various lawsuits and disputes, claims, government agency investigations and enforcement actions, and other proceedings (“Litigation and Regulatory Matters”) that arise in the ordinary course of business, which include 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 and Regulatory 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 isappropriate. The accruals are reflected in the condensed consolidated financial statements but that we dothey are 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
31
Index for Notes to the Condensed Consolidated Financial Statements
factual record. WhileFor Litigation and Regulatory Matters that may result in a contingent gain, we recognize such gains in the condensed consolidated financial statements when the gain is realized or realizable. Except as otherwise specified below, we do not expect that the ultimate resolution of these proceedings,Litigation and Regulatory Matters, individually or in the aggregate, will have a material adverse effect on our financial position, but we note that an unfavorable outcome of some or all of 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.


Note 11 – Guarantor Financial Information

Pursuant toOn February 28, 2020, we received a Notice of Apparent Liability for Forfeiture and Admonishment from the applicable indentures and supplemental indentures, the long-term debt to affiliates and third parties, excluding Senior Secured Term Loans and capital leases, issued by T-Mobile USA (“Issuer”) is fully and unconditionally guaranteed, jointly and severally, onFCC, which proposed a senior unsecured basis by T-Mobile (“Parent”) and certainpenalty against us for allegedly violating section 222 of the Issuer’s 100% owned subsidiaries (“Guarantor Subsidiaries”).

In January 2017, T-Mobile USA,Communications Act and certain of its affiliates, as guarantors, borrowed $4.0 billion under the Incremental Term Loan Facility to refinance $1.98 billion of outstanding secured term loans under its Term Loan Credit Agreement dated November 9, 2015, with 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% Senior Notes due 2022, (ii) issued $500 million in aggregate principal amount of public 5.125% Senior Notes due 2025 and (iii) issued $500 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 Notes 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.

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 facilitiesFCC’s regulations governing the long-term debt contain covenants that, among other things, limitprivacy of customer information. In the abilityfirst quarter of 2020, we recorded an accrual for an estimated payment amount. We maintained 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 informationaccrual as of September 30, 2021, which was included in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets.

On April 1, 2020, in connection with the closing of the Merger, we assumed the contingencies and litigation matters of Sprint. Those matters include a wide variety of disputes, claims, government agency investigations and enforcement actions, and other proceedings. These matters include, among other things, certain ongoing FCC and state government agency investigations into Sprint’s Lifeline program. In September 2019, Sprint notified the FCC that it had claimed monthly subsidies for serving subscribers even though these subscribers may not have met usage requirements under Sprint's usage policy for the Lifeline program, due to an inadvertent coding issue in the system used to identify qualifying subscriber usage that occurred in July 2017 while the system was being updated. Sprint has made a number of payments to reimburse the federal government and certain states for excess subsidy payments.

We note that pursuant to Amendment No. 2 to the Business Combination Agreement, SoftBank agreed to indemnify us against certain specified matters and losses, 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 SoftBank. See Note 2 - Business Combinations for further information.

On June 1, 2021, a putative shareholder class action and 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 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.

On October 2020, we notified MVNOs using the legacy Sprint CDMA network that we planned to sunset that network on December 31, 2016,2021. In response to that notice, DISH, which has Boost Mobile customers who use the legacy Sprint CDMA network, has made several efforts to prevent us from sunsetting the CDMA network until mid-2023, including by urging the U.S. Department of Justice to move for a finding of contempt under the April 1, 2020 Final Judgment entered by the U.S. District Court for the District of Columbia, and by pursuing a Petition for Modification and related proceedings pursuant to the California Public Utilities Commission’s April 2020 decision concerning the T-Mobile-Sprint merger. We disagree with the merits of DISH’s positions and have opposed them. On October 22, 2021, we announced that we would delay the sunset of the legacy Sprint CDMA network for three months, until March 31, 2022, to, among other things, help ensure that DISH and other MVNOs fulfill their contractual responsibilities and transition customers off the legacy Sprint CDMA network before the sunset. We cannot predict the outcome of the proceedings described above, but we intend to vigorously oppose any efforts to further delay the sunset of the legacy Sprint CDMA network.

On August 12, 2021, we became aware of a potential cybersecurity issue involving unauthorized access to T-Mobile’s systems (the “August 2021 cyberattack”). We immediately began an investigation and engaged cybersecurity experts to assist with the assessment of the incident and to help determine what data was impacted. Our investigation uncovered that the perpetrator had illegally gained access to certain areas of our systems on or before March 18, 2021, but only gained access to and took data of current, former, and prospective customers beginning on or about August 3, 2021. With the assistance of our outside cybersecurity experts, we located and closed the unauthorized access to our systems and identified current, former and prospective customers whose information was impacted and notified them, consistent with state and federal requirements. We also undertook a number of other measures to demonstrate our continued support and commitment to data privacy and protection. We also coordinated with law enforcement. Our forensic investigation is now complete and we believe we now have a full view of the data compromised.

32
Index for Notes to the Condensed Consolidated Financial Statements
As a result of the cyberattack, we have become subject to numerous lawsuits, including multiple class action lawsuits, that have been filed in numerous jurisdictions seeking unspecified monetary damages, costs and attorneys’ fees arising out of the cyberattack. A request to consolidate the federal class action lawsuits is pending before the Judicial Panel on Multidistrict Litigation and we anticipate a ruling on that request later this year or in early 2022.There can be no assurance that the request will be granted, and we are unable to predict at this time the potential timing and outcome of any of these claims (whether consolidated or not) and whether we may be subject to further private litigation. We intend to vigorously defend all of these lawsuits.

In addition, the Company has received inquiries from various government agencies, law enforcement and other governmental authorities related to the cyberattack. We are responding to these inquiries and cooperating fully with regulators. However, we cannot predict the timing or outcome of any of these inquiries, and whether we may be subject to further regulatory inquiries.

In light of the inherent uncertainties involved in such matters and based on the information currently available to us, as of the date of this Quarterly Report, we have not recorded any accruals for losses related to the above proceedings and inquiries, as any such amounts (or ranges of amounts) are not probable or estimable at this time. We believe it is reasonably possible that we could incur losses associated with these proceedings and inquiries, and the Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. Ongoing legal and other costs related to these proceedings and inquiries, as well as any potential future proceedings and inquiries, may be substantial, and losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries could be material to our business, reputation, financial condition, cash flows and operating results.

Note 14 – 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 September 30, 2021Nine Months Ended September 30, 2021Incurred to Date
Contract termination costs$5 $14 $192 
Severance costs(3)16 401 
Network decommissioning36 90 587 
Total restructuring plan expenses$38 $120 $1,180 

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 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 $265 million and $649 million for the three and nine months ended September 30, 20172021, respectively, and 2016.

are included within Costs of services and Selling, general and administrative in our Condensed Consolidating Balance Sheet Information
Consolidated Statements of Comprehensive Income. Restructuring expenses related to the acceleration or termination of leases were $80 million for both the three and nine months ended September 30, 20172020.

The changes in the liabilities associated with our restructuring initiatives, including expenses incurred and cash payments, are as follows:
(in millions)December 31,
2020		Expenses IncurredCash Payments
Adjustments for Non-Cash Items (1)
September 30,
2021
Contract termination costs$81 $14 $(73)$(1)$21 
Severance costs52 16 (63)(3)2 
Network decommissioning30 90 (88)(16)16 
Total$163 $120 $(224)$(20)$39 
33
Index for Notes to the Condensed Consolidated Financial Statements
(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 assets29
 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, net19,823
 37,943
 —
 —
 (57,766) —
Intercompany receivables and note receivables425
 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)    Non-cash items consists of non-cash stock-based compensation included within Severance costs and the write-off of assets within Network decommissioning.
(1)Assets

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 15 – Additional Financial Information

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities are summarized as follows:
(in millions)September 30,
2021		December 31,
2020
Accounts payable$4,101 $5,564 
Payroll and related benefits1,205 1,163 
Property and other taxes, including payroll1,606 1,540 
Interest824 771 
Commissions278 399 
Toll and interconnect229 217 
Advertising64 135 
Other428 407 
Accounts payable and accrued liabilities$8,735 $10,196 

Book overdrafts included in accounts payable and accrued liabilities were $245 million and $628 million as of September 30, 2021 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, 20162020, respectively.

(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 assets358
 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, net17,682
 35,095
 —
 —
 (52,777) —
Intercompany receivables and note receivables196
 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.





Condensed Consolidating Statement of Comprehensive Income Information
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 subsidiaries550
 885
 —
 —
 (1,435) —
Net income550
 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 tax1
 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 subsidiaries366
 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 tax2
 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 subsidiaries1,829
 2,924
 (17) —
 (4,736) —
Net income1,829
 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 tax3
 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 subsidiaries1,070
 2,176
 (15) —
 (3,231) —
Net income1,070
 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 tax2
 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 StatementSupplemental Consolidated Statements of Cash Flows Information
Three Months Ended September 30, 2017
The following table summarizes T-Mobile’s supplemental cash flow information:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2021202020212020
Interest payments, net of amounts capitalized$884 $940 $2,742 $1,889 
Operating lease payments2,251 1,349 5,165 3,493 
Income tax payments38 63 123 118 
Non-cash investing and financing activities
Non-cash beneficial interest obtained in exchange for securitized receivables891 1,535 3,361 4,634 
Non-cash consideration for the acquisition of Sprint— — — 33,533 
Change in accounts payable and accrued liabilities for purchases of property and equipment113 (216)(427)(555)
Leased devices transferred from inventory to property and equipment214 599 1,032 2,352 
Returned leased devices transferred from property and equipment to inventory(309)(433)(1,170)(1,030)
Short-term debt assumed for financing of property and equipment— — — 38 
Operating lease right-of-use assets obtained in exchange for lease obligations985 11,833 2,939 13,046 
Financing lease right-of-use assets obtained in exchange for lease obligations623 219 1,109 912 

34
(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, net1
 —
 (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 period43
 1
 121
 16
 —
 181
End of period$29
 $2
 $678
 $30
 $—
 $739
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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, net11
 —
 (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 period367
 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, net20
 —
 (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 period358
 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, net25
 —
 (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 period378
 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, such as the criminal cyberattack we became aware of in August 2021;
•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, 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,framework under which we operate;
•laws and regulations relating to the handling of privacy and data protection;
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•unfavorable outcomes of existing or future legal proceedings, including these proceedings and inquiries relating to the Securitiescriminal cyberattack we became aware of in August 2021;
•our offering of regulated financial services products and Exchange Commission (“SEC”), may require, which could result in an impact on earnings;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 (https://investor.t-mobile.com), newsroom website (https://t-mobile.com/news), press releases, SEC filings and public conference calls and webcasts. We intend to also use 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.
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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 nine months ended September 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,Shentel Wireless Assets Acquisition

On July 1, 2021, we introduced, Un-carrier Next, where monthlycompleted the acquisition of Shentel’s wireless service feestelecommunications assets (the “Wireless Assets”) used to provide Sprint PCS’s wireless mobility communications network products in certain parts of Maryland, North Carolina, Virginia, West Virginia, Kentucky, Ohio and sales taxesPennsylvania. As a result, T-Mobile become the legal owner of the Wireless Assets.

This transaction represented an opportunity to reacquire the exclusive rights to deliver Sprint’s wireless network services in Shentel’s former affiliate territory and simplify our operations. The acquisition of the Wireless Assets has altered the composition of certain assets and liabilities on our balance sheet, including Goodwill and Other intangible assets.

For more information regarding our acquisition of the Wireless Assets, see Note 2 – Business Combinations of the Notes to the Condensed Consolidated Financial Statements.

Merger-Related Costs

Merger-related costs associated with the Merger and acquisitions of affiliates generally include:

•Integration costs to achieve efficiencies in network, retail, information technology and back office operations, migrate customers to the T-Mobile network and the impact of legal matters assumed as part of the Merger;
•Restructuring costs, including severance, store rationalization and network decommissioning; and
•Transaction costs, including legal and professional services related to the completion of the transactions.

Transaction and restructuring costs are disclosed in Note 2 – Business Combinations and Note 14 - Restructuring Costs, respectively, of the Notes to the Condensed Consolidated Financial Statements. Merger-related costs have been excluded from our calculations of Adjusted EBITDA and Core Adjusted EBITDA, which are non-GAAP financial measures, as we do not consider these costs to be reflective of our ongoing operating performance. See “Adjusted EBITDA and Core 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 lessNet cash provided by operating activities in our Condensed Consolidated Statements 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.Cash Flows.


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.
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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 forMerger-related costs during the three and nine months ended September 30, 2017,2021 and 2020, are presented below:
(in millions)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
20212020$%20212020$%
Merger-related costs
Cost of services, exclusive of depreciation and amortization$279 $79 $200 253 %$688 $119 $569 478 %
Cost of equipment sales236 — 236 NM340 — 340 NM
Selling, general and administrative440 209 231 111 %836 1,110 (274)(25)%
Total Merger-related costs$955 $288 $667 232 %$1,864 $1,229 $635 52 %
Cash payments for Merger-related costs$617 $379 $238 63 %$1,084 $910 $174 19 %
NM - Not Meaningful

Merger-related costs will be impacted by restructuring and integration activities expected to occur over the next three years, increasing throughout 2021 and 2022, as we implement initiatives to realize cost efficiencies from lost revenue, assets damaged or destroyedthe Merger. Transaction costs, including legal and professional service fees related to the completion of the Merger and acquisitions of affiliates, are expected to continue to decrease in periods subsequent to the close of the Merger and acquisitions of affiliates.

Restructuring

Upon the close of the Merger, we began implementing restructuring initiatives to realize cost efficiencies from the Merger. The major activities associated with the restructuring initiatives to date include:

•Contract termination costs associated with rationalization of retail stores, distribution channels, duplicative network and backhaul services and other hurricane relatedagreements;
•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 integration and 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 included inevaluating additional restructuring initiatives which are dependent on consultations and negotiation with certain counterparties and the table below. expected impact on our business operations, which could affect the amount or timing of the restructuring costs and related payments. We expect our principal sources of funding to be sufficient to meet our liquidity requirements and anticipated payments associated with the restructuring initiatives.

As a result of September 30, 2017, our loss assessment is ongoing andrestructuring activities, we expect additionalto realize cost efficiencies by eliminating redundancies within our combined network as well as other business processes and operations. We expect these activities to result in a reduction of expenses withinCost of services and Selling, general and administrative in our Condensed Consolidated Statements of Comprehensive Income.

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

Cyberattack

As we previously reported in our Current Reports on Forms 8-K furnished with the Securities and customer activityExchange Commission on August 16, 17, 20 and 27, 2021, we were subject to be impacted ina criminalcyberattack involving unauthorized access to T-Mobile’s systems. We became aware of a potential issue on August 12, 2021. We immediately began a forensic investigation and engaged cybersecurity experts to assist with the fourth quarterassessment of 2017, primarily relatedthe incident and to help determine what data was impacted. As we previously reported, we promptly located and closed the unauthorized access to our operations in Puerto Rico. We have not recognized any potential insurance recoveries relatedsystems. Our investigation uncovered that the perpetrator illegally gained access to those hurricane losses ascertain areas of our systems on or about March 18, 2021, but only gained access to and took data of current, former and prospective customers beginning on or about August 3, 2021.

Based on the initial investigation findings, we continuemoved to assess the damagequickly identify current, former and prospective customers whose information was impacted and notify them, consistent with state and federal requirements. Simultaneously, we undertook a
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number of other measures to demonstrate our continued support and commitment to data privacy and protection and continued to work with our insurance carriers.cybersecurity experts to finish our forensic investigation, with the goal to ensure we had a complete understanding of the scope and impact of the unauthorized access. We also coordinated our efforts with law enforcement.


Our forensic investigation took time, but it is now complete, although our overall investigation into the incident is ongoing. At this time, we believe we have a full view of the data compromised. We have no evidence that individual financial account numbers, such as full credit or debit card numbers, were accessed or taken in relation to the cyberattack.

Throughout our forensic investigation of this cyberattack, our top priority has been to support those individuals impacted by the cyberattack. We sent notifications to our customers and customer accounts whose names, dates of birth, Social Security numbers (“SSNs”)/Tax Identifiers (“Tax IDs”) and driver’s license/identification numbers (“ID Numbers”) were taken, consistent with state and federal requirements, including to approximately 7.8 million current customer accounts and approximately 40.0 million former and prospective customers. We also notified an additional 1.9 million former and prospective customers who had their names, dates of birth and ID Numbers (but not valid SSNs/Tax IDs) taken.

Out of an abundance of caution during the earliest days of our investigation and to help alleviate consumer concerns and confusion, we rapidly sent notifications to approximately 5.3 million customer accounts who had their names, dates of birth and addresses taken. These accounts did not have SSNs/Tax IDs or ID Numbers taken. Later in our investigation, we identified approximately 790,000 additional former and prospective customers who had similar information — names, dates of birth and, in many cases, addresses, but not SSNs/Tax IDs or ID Numbers — taken and sent them notifications consistent with state and federal requirements. Our investigation also identified approximately 26.0 million additional individuals with the same types of information taken, but for whom individual notifications were not required under state and federal law in light of the types of information taken. By that point, since our original notifications, we had already launched a broad-reaching communications outreach program through which we kept our customers and the public informed and made information available and accessible on our website to provide support for any individuals who may have been impacted, including information on how they could take steps to protect themselves.

We also took actions to proactively reset the personal identification numbers (“PINs”) for approximately 870,000 current customer accounts whose names and PINs may have been taken. We previously reported that further data files including phone numbers, International Mobile Equipment Identity (“IMEI”) numbers and International Mobile Subscriber Identity (“IMSI”) numbers were taken; a significant portion of this data was related to inactive devices. For a number of additional current Metro customers, these files included names but no other personally identifiable information.

As described above, taking steps to further ensure we are supporting individuals impacted by the cyberattack has been a top priority. As previously reported, this support has included:

•Offering two years of free identity protection services with McAfee’s ID Theft Protection Service to any person who believes they may be affected;
•Recommending that all eligible customers sign up for free scam-blocking protection through Scam Shield;
•Supporting individuals impacted by the cyberattack with additional best practices and practical security steps such as resetting PINs and passwords; and
•Publishing a customer support webpage that includes information and access to these tools at https://www.t-mobile.com/brand/data-breach-20211.

As described above, we take data protection and the protection of our customers very seriously, and we have worked diligently to further enhance security across our platforms throughout this process. As part of those efforts, and as we have previously reported, we have entered into long-term partnerships with the industry-leading cybersecurity experts at Mandiant, and with consulting firm KPMG LLP, as part of our efforts to ensure that the Company has cybersecurity practices that are among the best in our industry. We have also created a Cyber Transformation Office reporting directly to our Chief Executive Officer that will be responsible for managing our efforts.

We have incurred certain cyberattack-related expenses which were not material and expect to continue to incur additional expenses in future periods, including costs to investigate and remediate the attack, send notifications to customers and provide additional customer support and enhance customer protection, only some of which may be covered and reimbursable by insurance. We also intend to commit substantial additional resources towards cybersecurity initiatives over the next several years.

1The reference to this website is intended to be an inactive textual reference and information on or accessible from such website is not included or incorporated in this report.
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(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 sales4
 4
Selling, general and administrative36
 36
Of which, bad debt expense20
 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 revenues0.20% 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)
It is not possible to precisely measure the amount of lost revenue directly attributable to the cyberattack. We are unable to predict the full impact of the cyberattack on customer behavior in the future, including whether a change in our customers’ behavior could negatively impact our results of operations on an ongoing basis. Accordingly, we are not able to predict with any certainty any possible future impact to our revenues or expenses attributable to the cyberattack, which could have a material adverse effect on our future results.



As a result of the attack, we are subject to numerous arbitration demands and lawsuits, including class action lawsuits, and regulatory inquiries as described in Note 13 – Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements and Part II, Item 1. Legal Proceedings, and we could be subject to additional lawsuits and inquiries. We are cooperating fully with regulators in connection with the inquiries, though we cannot predict the timing or outcome of any of these inquiries. In light of the inherent uncertainties involved in such matters and based on the information currently available to us, as of the date of this Quarterly Report, we have not recorded any accruals for losses related to the above proceedings and inquiries as any such amounts (or ranges of amounts) are not probable or estimable at this time. We believe it is reasonably possible that we could incur losses associated with these proceedings and inquiries, and the Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. Losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries, including ongoing costs related thereto, could be material to our business, reputation, financial condition, cash flows and operating results in future periods.

COVID-19 Pandemic

The Pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial 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 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.

As a critical communications infrastructure provider as designated by the government, our focus has been on providing crucial connectivity to our customers and impacted communities while ensuring the safety and well-being of our employees.

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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 of $2.4 billion for the three months ended September 30, 2017, increased $622 million, or 36% (see “Liquidity and Capital Resources”).

Free Cash Flow, a non-GAAP financial measure, of $921 million for the three months ended September 30, 2017, increased $340 million, or 59% (see “Liquidity and Capital Resources”).



Highlights for the nine months ended September 30, 2017, compared to the same period in 2016

Total revenues of $29.8 billion for the nine months ended September 30, 2017, increased $2.6 billion, or 9%. 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 $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 as a result of strong customer response to our Un-carrier initiatives, promotions and the success of our MetroPCS brand.

Equipment revenues 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 sold 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 and Cost of services expenses.

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 driven by the factors described above, a lower tax rate primarily due to a reduction in the valuation allowance against deferred tax assets and a net decrease in interest expense, partially offset by the negative impact from hurricanes. Net income included net, after-tax gains of $41 million and $511 million, for the nine months ended September 30, 2017 and 2016, respectively.

Adjusted EBITDA, a non-GAAP financial measure, 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.

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 revenues2,376
 2,182
 194
 9 % 7,009
 6,326
 683
 11 %
Wholesale revenues274
 238
 36
 15 % 778
 645
 133
 21 %
Roaming and other service revenues59
 66
 (7) (11)% 151
 170
 (19) (11)%
Total service revenues7,629
 7,133
 496
 7 % 22,403
 20,599
 1,804
 9 %
Equipment revenues2,118
 1,948
 170
 9 % 6,667
 5,987
 680
 11 %
Other revenues272
 224
 48
 21 % 775
 670
 105
 16 %
Total revenues10,019
 9,305
 714
 8 % 29,845
 27,256
 2,589
 9 %
Operating expenses               
Cost of services, exclusive of depreciation and amortization shown separately below1,594
 1,436
 158
 11 % 4,520
 4,286
 234
 5 %
Cost of equipment sales2,617
 2,539
 78
 3 % 8,149
 7,532
 617
 8 %
Selling, general and administrative3,098
 2,898
 200
 7 % 8,968
 8,419
 549
 7 %
Depreciation and amortization1,416
 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 expense8,696
 8,257
 439
 5 % 26,069
 24,207
 1,862
 8 %
Operating income1,323
 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 income2
 3
 (1) (33)% 15
 9
 6
 67 %
Other income (expense), net1
 (1) 2
 NM
 (89) (6) (83) NM
Total other expense, net(417) (450) 33
 (7)% (1,329) (1,328) (1) — %
Income before income taxes906
 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
 $470
 6 %
Free Cash Flow921
 581
 340
 59 % 1,588
 690
 898
 130 %
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in millions)20212020$%20212020$%
Revenues
Postpaid revenues$10,804 $10,209 $595 6 %$31,599 $26,055 $5,544 21 %
Prepaid revenues2,481 2,383 98 4 %7,259 7,067 192 3 %
Wholesale revenues944 930 14 2 %2,776 1,663 1,113 67 %
Other service revenues493 617 (124)(20)%1,772 1,430 342 24 %
Total service revenues14,722 14,139 583 4 %43,406 36,215 7,191 20 %
Equipment revenues4,660 4,953 (293)(6)%15,221 11,339 3,882 34 %
Other revenues242 180 62 34 %706 502 204 41 %
Total revenues19,624 19,272 352 2 %59,333 48,056 11,277 23 %
Operating expenses
Cost of services, exclusive of depreciation and amortization shown separately below3,538 3,314 224 7 %10,413 8,051 2,362 29 %
Cost of equipment sales, exclusive of depreciation and amortization shown separately below5,145 4,367 778 18 %15,740 10,563 5,177 49 %
Selling, general and administrative5,212 4,876 336 7 %14,840 14,168 672 5 %
Impairment expense— — — NM— 418 (418)(100)%
Depreciation and amortization4,145 4,150 (5)— %12,511 9,932 2,579 26 %
Total operating expenses18,040 16,707 1,333 8 %53,504 43,132 10,372 24 %
Operating income1,584 2,565 (981)(38)%5,829 4,924 905 18 %
Other income (expense)
Interest expense(780)(765)(15)2 %(2,392)(1,726)(666)39 %
Interest expense to affiliates(58)(44)(14)32 %(136)(206)70 (34)%
Interest income2 3 (1)(33)%7 21 (14)(67)%
Other expense, net(60)(99)39 (39)%(186)(304)118 (39)%
Total other expense, net(896)(905)9 (1)%(2,707)(2,215)(492)22 %
Income from continuing operations before income taxes688 1,660 (972)(59)%3,122 2,709 413 15 %
Income tax benefit (expense)3 (407)410 (101)%(520)(715)195 (27)%
Income from continuing operations691 1,253 (562)(45)%2,602 1,994 608 30 %
Income from discontinued operations, net of tax— — — NM— 320 (320)(100)%
Net income$691 $1,253 $(562)(45)%$2,602 $2,314 $288 12 %
Statement of Cash Flows Data
Net cash provided by operating activities$3,477 $2,772 $705 25 %$10,917 $5,166 $5,751 111 %
Net cash used in investing activities(4,152)(1,132)(3,020)267 %(17,474)(9,068)(8,406)93 %
Net cash (used in) provided by financing activities(3,060)(6,144)3,084 (50)%237 9,031 (8,794)(97)%
Non-GAAP Financial Measures
Adjusted EBITDA6,811 7,129 (318)(4)%20,622 17,811 2,811 16 %
Core Adjusted EBITDA6,041 5,779 262 5 %17,897 14,875 3,022 20 %
Free Cash Flow, excluding gross payments for the settlement of interest rate swaps1,559 3521,207343 %4,534 2,5252,00980 %
NM - Not Meaningful



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The following discussion and analysis is for the three and nine months ended September 30, 2017,2021, compared to the same periodsperiod in 20162020 unless otherwise stated.


Total revenues increased $714$352 million, or 8%2%, for the three months ended and $2.6increased $11.3 billion, or 9%23%, for the nine months ended September 30, 2017, primarily due to higher2021. The components of these changes are discussed below.

Postpaid revenues from branded postpaid and prepaid customers as well as higher equipment revenues as discussed below.

Branded postpaid revenues increased $273$595 million, or 6%, for the three months ended and $1.0increased $5.5 billion, or 7%, for the nine months ended September 30, 2017.

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 initiatives 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 revenues increased $194 million, or 9%, for the three months ended and $683 million, or 11%, for the nine months ended September 30, 2017, primarily from:

Higher average branded prepaid customers primarily driven by growth in the customer base; and
Higher branded prepaid ARPU from the success of our MetroPCS brand; partially offset by
The impact from the optimization of our third-party distribution channels; and
The negative impact from hurricanes of $11 million.

Wholesale revenues increased $36 million, or 15%, for the three months ended and $133 million, or 21%, for the nine months ended September 30, 2017,2021.

The increase for the three and nine months ended September 30, 2021, was primarily fromfrom:

•Higher average postpaid accounts; and
•Higher postpaid ARPA. See “Postpaid ARPA” in the impact“Performance Measures” section of this MD&A.

Prepaid revenues increased Wholesale revenues resulting from the MVNO Transaction.

Roaming and other service revenues decreased $7$98 million, or 11%4%, for the three months ended and $19increased $192 million, or 11%3%, for the nine months ended September 30, 2017.2021, primarily from:


Equipment•Higher average prepaid customers; and
•Higher prepaid ARPU. See “Prepaid ARPU” in the “Performance Measures” section of this MD&A.

Wholesale revenues increased$170 $14 million, or 9%2%, for the three months ended and $680 million,increased $1.1 billion, or 11%67%, for the nine months ended September 30, 2017.2021.


The change for the three months ended September 30, 2017 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, 20172021, was primarily from:


An increase•Our Master Network Service Agreement with DISH, which went into effect on July 1, 2020; and
•The success of $413 million in device salesour other MVNO relationships.

Other service 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 decreased $124 million, or 5%20%, for the three months ended and $1.9 billion,increased $342 million, or 8%24%, for the nine months ended September 30, 2017,2021.

The decrease for the three months ended September 30, 2021, was primarily from higher Cost of services, Cost of equipment sales, Selling, generalfrom:

•Lower advertising and administrative and lower Gains on disposal of spectrum licenses,wireline revenues; partially offset by lower Depreciation
•Higher Lifeline revenues.

The increase for the nine months ended September 30, 2021, was primarily from:

•Higher Lifeline revenues, primarily associated with operations acquired in the Merger; and amortization as discussed below.

•Inclusion of wireline operations acquired in the Merger.
Cost of services increased $158
Equipment revenues decreased $293 million, or 11%6%, for the three months ended and $234 million,increased $3.9 billion, or 5%34%, for the nine months ended September 30, 2017.2021.


The changedecrease for the three months ended September 30, 20172021, was primarily from:


Higher•A decrease of $580 million in lease expenses associated with our network expansion;
revenues due to a lower number of customer devices under lease due to the planned shift in device financing from leasing to EIP; and
The negative impact from hurricanes•A decrease of $69 $117 million; in liquidation revenues primarily due to a lower volume of returned devices; partially offset by
•An increase of $397 million in device sales revenue, excluding purchased leased devices, primarily from:
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Lower regulatory expenses.•Higher average revenue per device sold driven by a higher mix of phone versus other devices, partially offset by an increase in promotional activities; and

•An increase in the number of devices sold driven by switching activity returning to more normalized levels compared to the muted conditions from the Pandemic in the prior year and the planned shift in device financing from leasing to EIP.

The changeincrease for the nine months ended September 30, 20172021, was primarily from:


•An increase of $3.3 billion in device sales revenue, excluding purchased leased devices, primarily from:
•An increase in the number of devices sold due to a larger customer base as a result of the Merger, switching activity returning to more normalized levels compared to the muted conditions from the Pandemic in the prior year and the planned shift in device financing from leasing to EIP; and
•Higher lease expenses associated with network expansion; and
The negative impact from hurricanesaverage revenue per device sold driven by a higher mix of $69 million;phone versus other devices, partially offset by
an increase in promotional activities;
Lower long distance•An increase of $325 million in sales of accessories, due to increased retail store traffic due to closures arising from the Pandemic in the prior period and toll costsa larger customer base as we continuea result of the Merger;
•An increase of $208 million in liquidation revenues, primarily due to renegotiate contracts with vendors;an increase in the high-end device mix and
a higher volume of returned devices; and
Lower regulatory expenses.
•An increase of $198 million in purchased leased devices, primarily due to a larger base of leased devices as a result of the Merger; partially offset by

•A decrease of $212 million in lease revenues due to a lower number of customer devices under lease due to the planned shift in device financing from leasing to EIP.
Cost of equipment sales
Other revenues increased $78$62 million, or 3%34%, for the three months ended and $617increased $204 million, or 8%41%, for the nine months ended September 30, 2017.2021, primarily from higher interest income on our EIP receivables.


Operating expenses increased $1.3 billion, or 8%, for the three months ended and increased $10.4 billion, or 24%, for the nine months ended September 30, 2021. The components of this change are discussed below.

Cost of services, exclusive of depreciation and amortization, increased $224 million, or 7%, for the three months ended and increased $2.4 billion, or 29%, for the nine months ended September 30, 2021.

The increase for the three months ended September 30, 20172021, was primarily from:


•An increase of $66$200 million in Merger-related costs, including incremental costs associated with network decommissioning and integration; and
•Higher lease expenses related to a new tower master lease agreement executed in 2020.

The increase for the nine months ended September 30, 2021, was primarily from:

•An increase in expenses associated with leases and backhaul agreements acquired in the Merger and the continued build-out of our nationwide 5G network, including a new tower master lease agreement in 2020;
•An increase of $569 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 Merger.

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Cost of equipment sales, exclusive of depreciation and amortization, increased $778 million, or 18%, for the three months ended and increased $5.2 billion, or 49%, for the nine months ended September 30, 2021.

The increase for the three months ended September 30, 2021, was primarily from:

•An increase of $973 million in device cost of equipment sales, excluding purchased leased devices, primarily due to:
from:
A higher•Higher average costcosts per device sold primarily from an OEM recalldue to a higher mix of its smartphone devices in the third quarter of 2016; partially offset byphone versus other devices; and

A 5% decrease•An increase in the number of devices sold;sold driven by switching activity returning to more normalized levels relative to the muted conditions from the Pandemic in the prior year and
the planned shift in device financing from leasing to EIP; partially offset by
An increase•A decrease of $58$127 million in lease device cost of equipment sales, primarily due to:
An increase in lease buyouts as leases began reaching their term dates in 2017; partially offset by
A decrease in device upgrades from fewer customers in the handset lease program.
These increases are partially offset by a decrease of $31 million in cost of equipmentcosts related to an increase in proceeds from the liquidation due to a lower volume of returned customer handsets under our insurance programs; anddevices.
The negative impact from hurricanes of $4 million.
•Merger-related costs, primarily related to moving Sprint customers to devices that are compatible with the T-Mobile network, were $236 million compared to no Merger-related costs for the three months ended September 30, 2020.


The changeincrease for the nine months ended September 30, 20172021, was primarily from:


•An increase of $483 million $4.7 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 a larger customer base as a result of the Merger, switching activity returning to more normalized levels relative to the muted conditions from the Pandemic in the prior year and
the planned shift in device financing from leasing to EIP; and
•Higher average costs per device sold due to a higher mix of phone versus other devices;
•An increase of $245$183 million in leasecosts related to the liquidation of a higher volume of returned devices;
•An increase of $156 million in cost 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 result of the Merger; and
•An increase of $100 million in leased device cost of equipment sales, primarily due to:
to a larger base of leased devices as a result of the Merger.
An increase in lease buyouts as leases began reaching their term dates in 2017; partially offset by
A decrease in device upgrades from fewer customers in the handset lease program.
These increases are partially offset by a decrease of $69 million•Merger-related costs, primarily due to inventory adjustments related to obsolete inventory; andmoving Sprint customers to devices that are compatible with the T-Mobile network, were $340 million compared to no Merger-related costs for the nine months ended September 30, 2020.
The negative impact from hurricanes of $4 million.

Under our JUMP! On Demand program, upon device upgrade or at the end 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.

Selling, general and administrative expenses increased $200$336 million, or 7%, for the three months ended and $549increased $672 million, or 7%5%, for the nine months ended September 30, 2017,2021.

The increase for the three months ended September 30, 2021, was primarily from:

•Merger-related costs of $440 million primarily related to integration, restructuring and legal-related expenses, compared to $209 million of Merger-related costs for the three months ended September 30, 2020; and
•Higher advertising expenses.

The increase for the nine months ended September 30, 2021, was primarily from:

•Higher advertising, external labor and professional services and lease expenses primarily from strategic investmentsthe Merger; and
•Higher employee-related costs due to support our growing customer base including higheran increase in the number of employees primarily from the Merger; partially offset by
•Lower bad debt expense.
•Selling, general and administrative expenses for the nine months ended September 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 for the nine months ended September 30, 2021.
•Merger-related costs of $836 million primarily related to managed servicesintegration, restructuring and outsourced functions, partially offset by lower external labor costs. Additionally,legal-related expenses, compared to $1.1 billion of Merger-related costs for the negative impact from hurricanesnine months ended September 30, 2020.

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Table of $36 million contributed to the increase.Contents


Depreciation and amortization decreased $152 million, or 10%,slightly for the three months ended and $196 million,increased $2.6 billion, or 4%26%, for the nine months ended September 30, 2017,2021.

The decrease for the three months ended September 30, 2021, was primarily from:


•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, the costlease; and
•Lower amortization of a leased wireless device is depreciated over the lease term to its estimated residual value; partiallycustomer relationship intangibles; offset by
The•Higher depreciation expense, excluding leased devices, from the continued build-out of our 4G LTEnationwide 5G network.


Cost of MetroPCS business combination decreased $15 million for the three months ended and $110 millionThe increase for the nine months ended September 30, 2017. On July 1, 2015, we officially completed2021, was primarily from:

•Higher depreciation expense, excluding leased devices, from the shutdowncontinued build-out of our nationwide 5G network;
•Higher depreciation expense on leased devices resulting from a larger base of leased devices as a result of the MetroPCS CDMA network. Network decommissioning costs primarily relate toMerger; and
•Higher amortization from intangible assets.

Operating income, the accelerationcomponents 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 licenseswhich are discussed above, decreased $170$981 million, or 85%38%, for the three months ended and $768increased $905 million, or 92%18%, 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 2016.2021.


Net Income
Interest expense increased $184$15 million, or 50%2%, for the three months ended and $759increased $666 million, or 71%39%, for the nine months ended September 30, 2017, primarily from higher operating income and a net decrease in interest expense, 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 income2021.

The increase for the nine months ended September 30, 2017 additionally included2021, was primarily from:

•Higher average debt outstanding due to debt assumed in the impactMerger and the issuance of debt; and
•Lower capitalized interest; partially offset by
•A lower average effective interest rate due to refinancing of existing debt at lower rates.

Interest expense to affiliates increased $14 million, or 32%, for the three months ended and decreased $70 million, or 34%, for the nine months ended September 30, 2021.

The decrease for the nine months ended September 30, 2021, was primarily from:

•Lower average debt outstanding due to the redemption of debt; partially offset by
•Lower capitalized interest.

Other expense, net decreased $39 million, or 39%, for the three months ended and decreased $118 million, or 39%, for the nine months ended September 30, 2021, primarily from a lower tax rate as discussed below.losses on the extinguishment of debt.


OperatingIncome from continuing operations before income taxes, the components of which are discussed above, was $688 million and include the negative impact from hurricanes, increased $275 million, or 26%, 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$1.7 billion for the three months ended September 30, 20172021 and 2020, respectively, and was primarily from higher income before income taxes. $3.1 billion and $2.7 billion for the nine months ended September 30, 2021 and 2020, respectively.

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Income tax expense decreased $410 million for the three months ended and decreased $195 million, or 27%, for the nine months ended September 30, 2021.

The effective tax rate was 39.3% and 38.8%decrease for the three months ended September 30, 2017 and 2016, respectively.

The change for the nine months ended September 30, 20172021, 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, primarily due•Tax benefits associated with legal entity reorganization related to historical Sprint entities, including 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 2017jurisdictions; 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
•Lower Income from continuing operations before income taxes.

Our 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; partially offset by
Higher income before income taxes.

See Note 8 - Income Taxes of the Notes to the Condensed Consolidated Financial Statements.

Interest expensedecreased $123 million, or 33%, for the three months ended (0.3)% and $226 million, or 21%, for the nine months ended September 30, 2017, primarily from:

The early extinguishment of our LIBOR plus 2.750% Senior Secured Term Loan and redemption of $8.3 billion of Senior Notes; partially offset by
The issuance of $1.5 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 million, or 120%, for the three months ended and $150 million, or 60%, for the nine months ended September 30, 2017, primarily from:

An increase in interest associated with a $4.0 billion secured Incremental Term Loan Facility with DT entered into in January 2017;
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 increase24.5% for the three months ended September 30, 2017, was also partially from the net issuance of $500 million in Senior Notes in April 2017.2021 and 2020, respectively.


See Note 7 – Debt of the Notes to the Condensed Consolidated Financial Statements for additional details.

Other income (expense), net remained flatThe decrease for the three months ended and increased $83 million for the nine months ended September 30, 2017. The change2021, was primarily from:

•Tax benefits associated with legal entity reorganization related to historical Sprint entities, including a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions; and
•A reduction in expenses that were not deductible for tax purposes; partially offset by
•Higher Income from continuing operations before income taxes.

Our effective tax rate was 16.7% and 26.4% for the nine months ended September 30, 20172021 and 2020, respectively.

Income from continuing operations was $691 millionand$1.3 billionfor the three months ended September 30, 2021 and 2020, respectively, and was $2.6 billion and $2.0 billion for the nine months ended September 30, 2021 and 2020, respectively. The changes in Income from continuing operations were primarily from:
due to the items discussed above.


A $73Income from discontinued operations, net of tax, was $320 million net loss recognized fromfor the early redemption of certain Senior Notes;nine months ended September 30, 2020, and
A $13 million net loss recognized from the refinancing of our outstanding Senior Secured Term Loans.

See Note 7 – Debt consisted of the Notes toresults of the Condensed Consolidated Financial Statements.Prepaid Business that was divested on July 1, 2020. There were no discontinued operations for the three months ended September 30, 2020 and for the three and nine months ended September 30, 2021.



Net income, the components of which are discussed above, decreased $562 million, or 45%, for the three months ended and increased $288 million, or 12%, for the nine months ended September 30, 2021.

Net income for the three months ended September 30, 2021, included the following:

•Merger-related costs, net after-tax gains on disposal of spectrum licensestax, of $18 million and $122$707 million for the three months ended September 30, 2017 and 2016, respectively, and $412021, compared to $208 million and $511for the three months ended September 30, 2020.

Net income for the nine months ended September 30, 2021, included the following:

•Merger-related costs, net of tax, of $1.4 billion for the nine months ended September 30, 2021, compared to $960 million for the nine months ended September 30, 2017 and 2016, respectively.2020;

Guarantor Subsidiaries

The financial condition and results•Impairment expense of operations$366 million, net of the Parent, Issuer and Guarantor Subsidiaries is substantially similar to our consolidated financial condition. The most significant components of the financial condition of our Non-Guarantor Subsidiaries were as follows:
 September 30,
2017		 December 31,
2016		 Change
(in millions)  $ %
Other current assets$576
 $565
 $11
 2 %
Property and equipment, net322
 375
 (53) (14)%
Tower obligations2,204
 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 sales241
 300
 (59) (20)% 738
 768
 (30) (4)%
Selling, general and administrative209
 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 Subsidiariestax, for the nine months ended September 30, 2017 was primarily from:2020, compared to no impairment expense for the nine months ended September 30, 2021; and

•The negative impact of supplemental employee payroll, third-party commissions and cleaning-related COVID-19 costs, net of tax, of $339 million for the nine months ended September 30, 2020, compared to an insignificant impact for the nine months ended September 30, 2021.
Higher Service revenues primarily due
Guarantor Financial 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 resultinitial valuation. These revisions to the estimated values did not have a significant impact on our summarized financial information for the consolidated obligor group.
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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 non-guarantor subsidiaryGuarantor 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, provides device insurance, primarily driven by growth in our customer base;
Lower Costamong other things, limit the ability of equipment sales expenses primarily duethe Issuers or borrowers and the Guarantor Subsidiaries to lower non-return fees chargedincur 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 customer;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.
Higher Selling, general
Basis of Presentation

The following tables include summarized financial information of the obligor groups of debt issued by T-Mobile USA, Inc., Sprint, Sprint Communications, Inc., and administrative expenses primarily dueSprint 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 higher costsSEC 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)September 30, 2021December 31, 2020
Current assets$15,673 $22,638 
Noncurrent assets174,561 165,294 
Current liabilities18,035 19,982 
Noncurrent liabilities115,104 112,930 
Due to non-guarantors7,842 7,433 
Due to related parties3,826 4,873 
Due from related parties21 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:
Nine Months Ended September 30, 2021Year Ended December 31, 2020
(in millions)
Total revenues$58,289 $67,112 
Operating income3,635 4,335 
Net income727 1,148 
Revenue from non-guarantors1,229 1,496 
Operating expenses to non-guarantors1,992 2,127 
Other expense to non-guarantors(109)(114)

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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)September 30, 2021December 31, 2020
Current assets$9,013 $2,646 
Noncurrent assets9,334 26,278 
Current liabilities11,556 4,209 
Noncurrent liabilities69,262 65,161 
Due from non-guarantors1,293 25,993 
Due to related parties3,826 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:
Nine Months Ended September 30, 2021Nine Months Ended December 31, 2020
(in millions)
Total revenues$1 $10 
Operating loss(248)(15)
Net loss(1,127)(2,229)
Revenue from non-guarantors2 6 
Other income, net, from non-guarantors1,386 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)September 30, 2021December 31, 2020
Current assets$9,013 $2,646 
Noncurrent assets18,383 35,330 
Current liabilities11,627 4,281 
Noncurrent liabilities74,289 70,253 
Due from non-guarantors10,342 35,046 
Due to related parties3,826 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:
Nine Months Ended September 30, 2021Nine Months Ended December 31, 2020
(in millions)
Total revenues$1 $10 
Operating loss(248)(15)
Net loss(1,070)(2,165)
Revenue from non-guarantors2 6 
Other income, net, from non-guarantors1,662 1,085 

Affiliates Whose Securities Collateralize Securities Registered or Being Registered

For a description of the collateral arrangements relating to support our growing customer base, partially offsetsecurities 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 a decrease in program service fees.reference.


All otherThe assets, liabilities and results of operations of the Parent, Issuer and Guarantor Subsidiariescombined affiliates whose securities are substantially similar topledged as Collateral are not materially different than the Company’scorresponding amounts presented in the condensed consolidated results of operations. See Note 11 – Guarantor Financial Informationfinancial statements of the Notes to the Condensed Consolidated Financial Statements.Company.



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,
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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, and the impact of the acquisition of the Wireless Assets from Shentel on a prospective basis from the close date of July 1, 2021. Historical results prior to the respective close dates 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 September 30,Change
(in thousands)20212020#%
Customers, end of period
Postpaid phone customers (1)(2)
69,418 65,794 3,624 6 %
Postpaid other customers (1)(2)
16,495 13,938 2,557 18 %
Total postpaid customers85,913 79,732 6,181 8 %
Prepaid customers (1)
21,007 20,630 377 2 %
Total customers106,920 100,362 6,558 7 %
Acquired customers, net of base adjustments (2)
818 29,228 (28,410)(97)%
(1)    Includes customers acquired in connection with the Merger and certain customer base adjustments. See Customer Base Adjustments and Net Customer Additions tables below.
 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 customers36,975
 33,230
 3,745
 11 %
Branded prepaid customers20,519
 19,272
 1,247
 6 %
Total branded customers57,494
 52,502
 4,992
 10 %
Wholesale customers13,237
 16,852
 (3,615) (21)%
Total customers, end of period70,731
 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) 
(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.
(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.
(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.

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. In the third quarter of 2021, we acquired 716,000 postpaid phone customers and 90,000 postpaid other customers through our acquisition of the Wireless Assets from Shentel.

Total customers increased 6,558,000, or 7%, primarily from:

•Higher postpaid phone customers, primarily due to our Un-carrier initiatives and promotional activities and the growingcontinued 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 targeted promotional activity and increased competitive activityretail store traffic due to closures arising from the Pandemic in the marketplaceprior period;
•Higher postpaid other customers, primarily due to growth in other connected devices, primarily related to public and less reliance on add a line promotions;
educational sector customers and wearable products, and growth in home internet; and
•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.

Wholesale

Wholesale customers decreased 3,615,000, or 21%, primarilyprepaid business due to Lifeline subscribers,promotional activity and rate plan offers.
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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 customersPostpaid other customersTotal postpaid customersPrepaid customersTotal customers
Reconciliation to beginning customers
T-Mobile customers as reported, end of period March 31, 202040,797 7,014 47,811 20,732 68,543 
Sprint customers as reported, end of period March 31, 202025,916 8,428 34,344 8,256 42,600 
Total combined customers, end of period March 31, 202066,713 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, 202064,852 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 beginning 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
September 30,		ChangeNine Months Ended
September 30,		Change
(in thousands)20212020#%20212020#%
Net customer additions
Postpaid phone customers673 689 (16)(2)%2,073 1,394 679 49 %
Postpaid other customers586 1,290 (704)(55)%1,672 2,474 (802)(32)%
Total postpaid customers1,259 1,979 (720)(36)%3,745 3,868 (123)(3)%
Prepaid customers66 56 10 18 %293 61 232 NM
Total customers1,325 2,035 (710)(35)%4,038 3,929 109 3 %
Acquired customers, net of base adjustments806 — 806 NM818 29,228 (28,410)(97)%
NM - Not Meaningful
 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 customers817
 969
 (152) (16)% 2,548
 2,900
 (352) (12)%
Branded prepaid customers226
 684
 (458) (67)% 706
 1,967
 (1,261) (64)%
Total branded customers1,043
 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 additions1,329
 1,970
 (641) (33)% 3,804
 6,072
 (2,268) (37)%
Adjustments to branded postpaid phone customers (1)
—
 —
 —
 
 (253) —
 (253) 
Adjustments to branded postpaid other customers (1)
—
 —
 —
 
 253
 —
 253
 
(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.
(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 610,000,710,000, or 37%35%, for the three months ended and 1,613,000,increased 109,000, or 33%3%, for the nine months ended September 30, 2017.2021.


The decrease for the three months ended September 30, 20172021, was primarily from:


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•Lower branded prepaidpostpaid other net customer additions, primarily due to higher MetroPCS deactivations from a growing customer base and increased competitive activityelevated gross additions in the marketplace,prior period related to the public and educational sector resulting from the Pandemic, as well as higher churn in the current period related to post-Pandemic demand levels; and
•Lower branded postpaid phone net customer additions, primarily due to lowerhigher churn, mostly offset by higher gross additions driven by switching activity returning to more normalized levels relative to muted conditions from the Pandemic in the prior year and continued growth from T-Mobile for Business; partially offset by
•Higher prepaid net customer additions, from increased competitive activity in the marketplace, the split and shift in iPhone launch timing, and the negative impact from hurricanes;primarily driven by higher gross additions, partially offset by higher churn and migrations to postpaid plans.
•
Higher branded 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 decreaseincrease for the nine months ended September 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. Additional decreases resulted from the optimization of our third party distribution channels, 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 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
•
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, 2017 from lowerprimarily due to elevated gross 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.

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 160,000prior period related to the public and 4,368,000 reported wholesale customers as ofeducational sector resulting from the beginning of the third quarter of 2017Pandemic and beginning of the second quarter of 2017, respectively. No further Lifeline adjustments are expected in future periods.higher disconnects from an increased customer base.

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.
 September 30,
2017		 September 30,
2016		 Change
  # %
Branded postpaid customers per account2.92
 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.
 Three Months Ended September 30, Bps Change Nine Months Ended September 30, Bps Change
2017 20162017 2016
Branded postpaid phone churn1.23% 1.32% -9 bps 1.18% 1.30% -12 bps
Branded prepaid churn4.25% 3.82% 43 bps 4.06% 3.86% 20 bps


The following table sets forth the churn:
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2021202020212020
Postpaid phone churn0.96 %0.90 %6 bps0.93 %0.85 %8 bps
Prepaid churn2.90 %2.86 %4 bps2.76 %3.07 %-31 bps
Branded postpaid
Postpaid phone churn decreased 9increased 6 basis points for the three months ended and 12increased 8 basis points for the nine months ended September 30, 2017,2021.

The increase for the three months ended September 30, 2021, was primarily duefrom:

•More normalized switching activity relative to the MVNO Transaction asmuted Pandemic-driven conditions a year ago; and
•Elevated Sprint churn during the accelerated integration process.

The increase for the nine months ended September 30, 2021, was primarily from:

•Higher churn from customers transferred hadacquired in the Merger; and
•More normalized switching activity relative to the muted Pandemic-driven conditions a higher rate of churn.year ago.


Branded prepaidPrepaid churn increased 434 basis points for the three months ended and 20decreased 31 basis points for the nine months ended September 30, 2017,2021.

The increase for the three months ended September 30, 2021, was primarily from more normalized switching activity relative to the muted Pandemic-driven conditions a year ago.

The decrease for the nine months ended September 30, 2021, was primarily from:

•Promotional activity; and
•Improved quality of recently acquired customers.
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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.
As of September 30,Change
(in thousands)20212020#%
Accounts, end of period
Total postpaid customer accounts (1)(2)
26,901 25,623 1,278 5 %
(1)     Includes accounts acquired in connection with the Merger and certain account base adjustments. See Account Base Adjustments table below.
(2)    In the third quarter of 2021, we acquired 270,000 postpaid accounts through our acquisition of the Wireless Assets of Shentel.

Total postpaid customer accounts increased 1,278,000, or 5%, primarily due to higher MetroPCS churnthe continued 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, 202015,244 
Sprint accounts, end of period March 31, 202011,246 
Total combined accounts, end of period March 31, 202026,490 
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, 202025,385 
(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
September 30,		ChangeNine Months Ended
September 30,		Change
20212020$%20212020$%
Calculation of Postpaid Phone ARPU
Postpaid service revenues$10,804 $10,209 $595 6 %$31,599 $26,055 $5,544 21 %
Less: Postpaid other revenues(852)(677)(175)26 %(2,497)(1,605)(892)56 %
Postpaid phone service revenues9,952 9,532 420 4 %29,102 24,450 4,652 19 %
Divided by: Average number of postpaid phone customers (in thousands) and number of months in period69,033 65,437 3,596 5 %67,848 56,971 10,877 19 %
Postpaid phone ARPU$48.06 $48.55 $(0.49)(1)%$47.66 $47.69 $(0.03)NM
Calculation of Prepaid ARPU
Prepaid service revenues$2,481 $2,383 $98 4 %$7,259 $7,067 $192 3 %
Divided by: Average number of prepaid customers (in thousands) and number of months in period20,936 20,632 304 1 %20,886 20,591 295 1 %
Prepaid ARPU$39.49 $38.49 $1.00 3 %$38.61 $38.13 $0.48 1 %
NM - Not Meaningful

Postpaid Phone ARPU

Postpaid phone ARPU decreased $0.49, or 1%, for the three months ended and was essentially flat for the nine months ended September 30, 2021.

The decrease for the three months ended September 30, 2021, was primarily from:

•Promotional activity; and
•The impact of the transition of Sprint customers to tax-inclusive rate plans; partially offset by
•Higher premium services, including Magenta Max.

Postpaid phone ARPU was essentially flat for the nine months ended September 30, 2021, and was primarily impacted by:

•Promotional activity; and
•The impact of the transition of Sprint customers to tax-inclusive rate plans; offset by
•Higher premium services, including Magenta Max; and
•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).

Prepaid ARPU

Prepaid ARPU increased $1.00, or 3%, for the three months ended and increased $0.48, or 1%, for the nine months ended September 30, 2021, primarily due to:

•Higher premium services; and
•Higher revenues due to improved rate plan mix; partially offset by
•A reduction in certain non-recurring charges.
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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
September 30,		ChangeNine Months Ended
September 30,		Change
20212020$%20212020$%
Calculation of Postpaid ARPA
Postpaid service revenues$10,804 $10,209 $595 6 %$31,599 $26,055 $5,544 21 %
Divided by: Average number of postpaid accounts (in thousands) and number of months in period26,766 25,582 1,184 5 %26,264 22,054 4,210 19 %
Postpaid ARPA$134.54 $133.03 $1.51 1 %$133.68 $131.27 $2.41 2 %

(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 period32,852
 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
 $—
 — %
     

 

     

 

Calculation of Branded Postpaid ABPU    

 

     

 

Branded postpaid service revenues$4,920
 $4,647
 $273
 6 % $14,465
 $13,458
 $1,007
 7 %
EIP billings1,481
 1,394
 87
 6 % 4,285
 4,062
 223
 5 %
Lease revenues159
 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 period36,505
 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)%
     

 

     

 

Calculation of Branded Prepaid ARPU    

 

     

 

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 period20,336
 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 %
(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,ARPA increased $1.51, or 3%1%, 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 ARPU increased $0.92, or 2%, for the three months ended and $0.89,$2.41, or 2%, for the nine months ended September 30, 2017, compared to2021.

The increase for the same periodsthree months ended September 30, 2021, was primarily from:

•Higher premium services, including Magenta Max; and
•An increase in 2016, primarily from continued growth of MetroPCS customers who generate higher ARPU. These increases wereper account; partially offset by
•Promotional activity; and
•The impact of the negative impact from hurricanestransition of $0.18 and $0.06Sprint customers to tax-inclusive rate plans.

The increase for the three and nine months ended September 30, 2017, respectively.2021, was primarily from:


•An increase in customers per account; and
•Higher premium service, including Magenta Max; partially offset by
•Promotional activity; and
•The impact of the transition of Sprint customers to tax-inclusive rate plans.

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 measure
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measures 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:
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in millions)20212020$%20212020$%
Net income$691 $1,253 $(562)(45)%$2,602 $2,314 $288 12 %
Adjustments:
Income from discontinued operations, net of tax— — — NM— (320)320 (100)%
Income from continuing operations691 1,253 (562)(45)%2,602 1,994 608 30 %
Interest expense780 765 15 2 %2,392 1,726 666 39 %
Interest expense to affiliates58 44 14 32 %136 206 (70)(34)%
Interest income(2)(3)1 (33)%(7)(21)14 (67)%
Other expense, net60 99 (39)(39)%186 304 (118)(39)%
Income tax (benefit) expense(3)407 (410)(101)%520 715 (195)(27)%
Operating income1,584 2,565 (981)(38)%5,829 4,924 905 18 %
Depreciation and amortization4,145 4,150 (5)— %12,511 9,932 2,579 26 %
Operating income from discontinued operations (1)
— — — NM— 432 (432)(100)%
Stock-based compensation (2)
127 125 2 2 %386 387 (1)— %
Merger-related costs955 288 667 232 %1,864 1,229 635 52 %
COVID-19-related costs— — — NM— 458 (458)(100)%
Impairment expense— — — NM— 418 (418)(100)%
Other, net (3)
— 1 (1)(100)%32 31 1 3 %
Adjusted EBITDA6,811 7,129 (318)(4)%20,622 17,811 2,811 16 %
Lease revenues(770)(1,350)580 (43)%(2,725)(2,936)211 (7)%
Core Adjusted EBITDA$6,041 $5,779 $262 5 %$17,897 $14,875 $3,022 20 %
Net income margin (Net income divided by Service revenues)5 %9 %-400 bps6 %6 %— bps
Adjusted EBITDA margin (Adjusted EBITDA divided by Service revenues)46 %50 %-400 bps48 %49 %-100 bps
Core Adjusted EBITDA margin (Core Adjusted EBITDA divided by Service revenues)41 %41 %— bps41 %41 %— bps
NM - Not Meaningful
(1)Following the Prepaid Transaction starting on July 1, 2020, we provide MVNO services to DISH. We have included the operating income from April 1, 2020 through June 30, 2020, in our determination of Adjusted EBITDA to reflect contributions of the Prepaid Business that were replaced by the MVNO Agreement beginning on July 1, 2020 in order to enable management, analysts and investors to better assess ongoing operating performance and trends.
(2)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.
(3)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.

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Table of Contents

 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:    

 

     

 

Interest expense253
 376
 (123) (33)% 857
 1,083
 (226) (21)%
Interest expense to affiliates167
 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 expense356
 232
 124
 53 % 618
 651
 (33) (5)%
Operating income (1)
1,323
 1,048
 275
 26 % 3,776
 3,049
 727
 24 %
Depreciation and amortization1,416
 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% 

 200 bps
 8% 5% 

 300 bps
Adjusted EBITDA margin (Adjusted EBITDA divided by service revenues) (1)
37% 38% 

 -100 bps
 38% 39% 

 -100 bps
(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.
(2)Beginning in the first quarter of 2017, the Company will no longer separately present Cost of MetroPCS business combination as it is insignificant.
(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.

Core Adjusted EBITDA increased $133$262 million, or 5%, for the three months ended and $470 million,increased $3.0 billion, or 6%20%, for the nine months ended September 30, 2017.2021. The components comprising Core Adjusted EBITDA are discussed further above.


The changeincrease for the three months ended September 30, 20172021 was primarily from:due to:


An increase in branded postpaid and prepaid•Higher Total service revenues; and
•Higher Equipment 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
Lower losses on equipment;excluding Lease revenues; partially offset by
•Higher selling, general and administrative expenses;Cost of equipment sales, excluding Merger-related costs.
Higher cost of services expense;

Lower gains on disposal of spectrum licenses of $170 million; gains on disposal were $29 million for the three months ended September 30, 2017, compared to $199 million in the same period in 2016; and
The negative impact from hurricanes of $148 million.

The changeincrease for the nine months ended September 30, 20172021, was primarily from:due to:


An increase in branded postpaid and prepaid•Higher Total service revenues; and
•Higher Equipment 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 wholesaleexcluding Lease revenues; partially offset by
Lower gains on disposal•Higher Cost of spectrum licensesequipment sales, excluding Merger-related costs;
•Higher Cost of $768services, 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 $318 million,; gains on disposal were $67 million or 4%, for the three months ended and increased $2.8 billion, or 16%, 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
2021. 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 Noteschanges were primarily due to the Condensed Consolidated Financial Statementsfluctuations in Core Adjusted EBITDA, discussed above, including changes in Lease revenues. Lease revenues decreased $580 million for additional details.

We have applied this change retrospectively and presented the effect on the three months ended and $211 million for the nine months ended September 30, 2016, in the table below.2021.

 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
Interest income62
 (59) 3
 198
 (189) 9
Net income366
 —
 366
 1,070
 —
 1,070
Net income as a percentage of service revenue5% —% 5% 5% —% 5%
Adjusted EBITDA2,630
 59
 2,689
 7,843
 189
 8,032
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 nine months ended September 30, 20172021 and 2016:2020:
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in millions)20212020$%20212020$%
Net cash provided by operating activities$3,477 $2,772 $705 25 %$10,917 $5,166 $5,751 111 %
Net cash used in investing activities(4,152)(1,132)(3,020)267 %(17,474)(9,068)(8,406)93 %
Net cash (used in) provided by financing activities(3,060)(6,144)3,084 (50)%237 9,031 (8,794)(97)%

56
 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)%
Table of Contents


Operating Activities


Net cash provided by operating activities increased $622$705 million, or 36%25%, for the three months ended and $1.4 billion, or 30%, for the nine months ended September 30, 2017, compared to the same periods in 2016.

The change for the three months ended September 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, 2017 was primarily from:

Higher Net income and higher non-cash adjustments to net income including from lower Gains on disposal of spectrum licenses and Depreciation and amortization. In total, changes in working capital were relatively flat as improvements in Accounts payable and accrued liabilities and Inventories were partially offset by changes in Equipment installment plan receivables. The change in EIP receivables was primarily due to a decrease in net cash proceeds from the sale of EIP receivables as the nine months ended September 30, 2016 benefited from net cash proceeds of $366 million primarily related to upsizing of the EIP securitization facility as well as an increase in devices financed on EIP.


Investing Activities

Net cash used in investing activities decreased $404 million for the three months ended and increased $5.8 billion, or 111%, for the nine months ended September 30, 2017.2021.


The changeincrease for the three months ended September 30, 20172021, was primarily from:


•A $690$1.8 billion decrease in net cash outflows from changes in working capital, primarily due to lower use of cash from Accounts receivable, Accounts payable and accrued liabilities and Inventories, partially offset by higher use of cash from operating lease liabilities, including a $1.0 billion advance rent payment related to the modification of one of our master lease agreements; partially offset by
•A $1.1 billion decrease in Net income, adjusted for non-cash income and expense.
•Net cash provided by operating activities includes $617 million and $379 million in payments for Merger-related costs for the three months ended September 30, 2021 and 2020, respectively.

The increase for the nine months ended September 30, 2021, was primarily from:

•A $4.2 billion decrease in net cash outflows from changes in working capital, primarily 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 nine months ended September 30, 2020, included in the use of cash from Other current and long-term liabilities, as well as lower use of cash from Inventories, Accounts payable and accrued liabilities and operating lease right-of-use assets, partially offset by higher use of cash from Equipment installment plan receivables and operating lease liabilities, including a $1.0 billion advance rent payment related to the modification of one of our master lease agreements; and
•A $1.5 billion increase in Net income, adjusted for non-cash income and expense.
•Net cash provided by operating activities includes $1.1 billion and $910 million in payments for Merger-related costs for the nine months ended September 30, 2021 and 2020, respectively.

Investing Activities

Net cash used in investing activities increased $3.0 billion, or 267%, for the three months ended and increased $8.4 billion, or 93%, for the nine months ended September 30, 2021.

The use of cash for the three months ended September 30, 2021, was primarily from:

•$2.9 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;
•$1.9 billion in Acquisitions of companies, primarily due to our acquisition of the Wireless Assets (as defined in Note 2 – Business Combinations of the Notes to the Condensed Consolidated Financial Statements); and
• $407 million in Purchases of spectrum licenses and other intangible assets, including deposits; partially offset by
•$1.1 billion in Proceeds related to beneficial interests in securitization transactions.
A $282 million increase
The use of cash for the nine months ended September 30, 2021, was primarily from:

•$9.4 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;

The change for the nine months ended September 30, 2017 was primarily from:

A $3.0•$9.3 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 drivendue to $8.9 billion paid for spectrum licenses won at the conclusion of Auction 107 in March 2021; and
•$1.9 billion in Acquisitions of companies, primarily due to our acquisition of the Wireless Assets (as defined in Note 2 – Business Combinations of the Notes to the Condensed Consolidated Financial Statements); partially offset by our winning bid for 1,525 licenses
•$3.1 billion in the 600 MHz spectrum auction during the second quarter of 2017; andProceeds related to beneficial interests in securitization transactions.

A $473 million increase in Purchases
57
Table of property and equipment, including capitalized interest.
Contents


Financing Activities


Net cash provided by and used in financing activities increased $282 million to a use of $349 million indecreased $3.1 billion for the three months ended and increased $1.2Net cash provided by financing activities decreased $8.8 billion to a use of $527 million infor the nine months ended September 30, 2017.2021.


The use of cash infor the three months ended September 30, 20172021, was primarily from:


•$1.74.6 billion for in Repayments of our revolving credit facility;long-term debt; and
•$266 million in Repayments of financing lease obligations; partially offset by
•$1.12.0 billion in Proceeds from borrowing on our revolving credit facility; and
$500 million in Proceeds from issuance of long-term debt.
debt, net of issuance costs.


The usesource of cash infor the nine months ended September 30, 20172021, was primarily from:


•$10.211.8 billion for Repayments of long-term debt;
$2.9 billion for Repayments of our revolving credit facility;
$350 million for Repayments of capital lease obligations; and
$296 million for Repayments of short-term debt for purchases of inventory, property and equipment, net; partially offset by
$10.5 billion in Proceeds from issuance of long-term debt,; net of issuance costs; partially offset by
•$10.0 billion in Repayments of long-term debt;
•$822 million in Repayments of financing lease obligations; and
•$2.9 billion308 million in Proceeds from borrowingTax withholdings on our revolving credit facility.
share-based awards.


Cash and Cash Equivalents


As of September 30, 2017,2021, our Cash and cash equivalents were $739 million.$4.1 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.



The following table illustratesIn the second quarter of 2021, we sold tower sites for proceeds of $31 million, which are included in Proceeds from sales of tower sites within Net cash used in investing activities in our Condensed Consolidated Statements of Cash Flows. As these proceeds were from the sale of fixed assets and are used by management to assess cash available for capital expenditures during the year, we determined the proceeds are relevant for the calculation of Free Cash Flow and included them in the table below. Other proceeds from the sale of fixed assets for the periods presented are not significant. We have presented the impact of the sales in the table below, which reconciles Free Cash Flow and Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, to Net cash provided by operating activities, which we consider to be the most directly comparable GAAP financial measure:measure.
Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
(in millions)20212020$%20212020$%
Net cash provided by operating activities$3,477 $2,772 $705 25 %$10,917 $5,166 $5,751 111 %
Cash purchases of property and equipment(2,944)(3,217)273 (8)%(9,397)(7,227)(2,170)30 %
Proceeds from sales of tower sites— — — NM31 — 31 NM
Proceeds related to beneficial interests in securitization transactions1,071 855 216 25 %3,099 2,325 774 33 %
Cash payments for debt prepayment or debt extinguishment costs(45)(58)13 (22)%(116)(82)(34)41 %
Free Cash Flow1,559 352 1,207 343 %4,534 182 4,352 NM
Gross cash paid for the settlement of interest rate swaps— — — NM— 2,343 (2,343)(100)%
Free Cash Flow, excluding gross payments for the settlement of interest rate swaps$1,559 $352 $1,207 343 %$4,534 $2,525 $2,009 80 %
NM - Not Meaningful
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Table of Contents

 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%


Free Cash Flow, excluding gross payments for the settlement of interest rate swaps, increased $340$1.2 billion, or 343%, for the three months ended and increased $2.0 billion, or 80%, for the nine months ended September 30, 2021.

The increase for the three months ended September 30, 2021, was impacted by the following:

•Higher Net cash provided by operating activities, as described above;
•Lower Cash purchases of property and equipment, including capitalized interest of $46 million and $108 million for the three months ended September 30, 2021 and $8982020, respectively; and
•Higher Proceeds related to beneficial interests in securitization transactions.
•Free Cash Flow includes $617 million and $379 million in payments for Merger-related costs for the three months ended September 30, 2021 and 2020, respectively.

The increase for the nine months ended September 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 $187 million and $339 million for the nine months ended September 30, 20172021 and 2020, respectively.
•Free Cash Flow includes $1.1 billion and $910 million in payments for Merger-related costs for the nine months ended September 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 nine months ended September 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 September 30, 2021, there were no outstanding balances under such financing arrangement.

We also maintain vendor financing arrangements primarily from higher net cash provided by operating activities due to working capital changes, as described above, partially offset by higherwith our main network equipment suppliers. Under the respective agreements, we can obtain extended financing terms. During the three and nine months ended September 30, 2021, we repaid $76 million and $167 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 primarily dueand other financial liabilities, in our Condensed Consolidated Statements of Cash Flows. As of September 30, 2021 and December 31, 2020, the outstanding balance under the vendor financing arrangements and other financial liabilities was $69 million and $240 million, respectively, of which $12 million and $122 million, respectively, was assumed in connection with the closing of the Merger.

We maintain a revolving credit facility (the “Revolving Credit Facility”) with an aggregate commitment amount of $5.5 billion. As of September 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 September 30, 2017,2021, our total debt was $28.3and financing lease liabilities were $75.2 billion, excluding our tower obligations, of which $27.7$68.1 billion was classified as long-term debt.debt and $1.6 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:
(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 debt21,832
 1,495
 (8,365) (1,947) —
 148
 13,163
Total debt to third parties22,186
 1,495
 (8,365) (1,967) —
 372
 13,721
Short-term debt to affiliates—
 2,910
 —
 —
 (2,910) —
 —
Long-term debt to affiliates5,600
 8,985
 —
 —
 —
 1
 14,586
Total debt to affiliates5,600
 11,895
 —
 —
 (2,910) 1
 14,586
Total debt$27,786
 $13,390
 $(8,365) $(1,967) $(2,910) $373
 $28,307
(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.
(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 nine months ended September 30, 2017,2021, we issued the following Senior Notes:
(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 2025500
 2
 498
5.375% Senior Notes due 2027500
 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:
(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 2018500
 1
 7
 March 4, 2017 101.313%
6.250% Senior Notes due 20211,750
 (71) 55
 April 1, 2017 103.125%
6.464% Senior Notes due 20191,250
 —
 —
 April 28, 2017 100.000%
6.542% Senior Notes due 20201,250
 —
 21
 April 28, 2017 101.636%
6.633% Senior Notes due 20211,250
 —
 41
 April 28, 2017 103.317%
6.731% Senior Notes due 20221,250
 —
 42
 April 28, 2017 103.366%
Total note redemptions$8,250
 $(115) $188
    
(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 20242,000
 —
 —
LIBOR plus 2.750% Senior Secured Term Loan (2)
—
 (1,980) 13
Total$4,000
 $(1,980) $13
(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.
(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$11.8 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 20251,250
 (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$10.1 billion.
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Table of Senior Reset Notes with various interest rates and maturity dates (the “old DT Notes”).Contents


The redemption prices
For 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:
(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 20241,350
 40
 1,390
6.000% Senior Notes due 2024650
 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.

For more information regarding our spectrum auction. Net proceeds from these issuances include $64 million in debt premiums. See licenses, see Note 5 - Goodwill, Spectrum License Transactions and Other Intangible Assets for further information. of the Notes to the Condensed Consolidated Financial Statements.


Revolving Credit FacilityOff-Balance Sheet Arrangements


We had no outstanding borrowings under our $1.5 billion senior securedhave arrangements, as amended from time to time, to sell certain EIP accounts receivable and service accounts receivable on a revolving credit facility with DTbasis as a source of liquidity. As of September 30, 2017 and December 31, 2016. Proceeds and borrowings from2021, we derecognized net receivables of $2.5 billion upon sale through these arrangements. 

For more information regarding these off-balance sheet arrangements, see Note 4 – Sales of Certain Receivables of the revolving credit facility are presented in Proceeds from borrowing on revolving credit facility and Repayments of revolving credit facility within Net cash (used in) provided by financing activities in ourNotes to the Condensed Consolidated StatementsFinancial Statements.

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 stockholder 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 September 30, 2017.2021.


Capital
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Shentel Wireless Assets Acquisition

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 September 30, 2017,2021, we have committed to $2.0$6.2 billion of capitalfinancing leases under these capitalfinancing lease facilities, of which $138$599 million and $735 million$1.1 billion was executed during the three and nine months ended September 30, 2017,2021, respectively. We expect to enter into up to an additional $165$131 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,and spectrum licenses, including the build out of 700 MHz A-Blockacquired C-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 third quarter of 2017. See Note 5 - Spectrum License Transactions of the Notes to the Condensed Consolidated Financial Statements for additional details.foreseeable future.


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 September 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 September 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
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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 September 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 September 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 September 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 September 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 September 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


See For information regarding recently issued accounting standards, see Note 1 – BasisSummary of PresentationSignificant Accounting Policies of the Notes to the Condensed Consolidated Financial Statements.Statements.


Item 3. Quantitative and Qualitative Disclosures About Market Risk


There have been no material changes to the interest rate risk as previously disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 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.

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The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) are filed as exhibits 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.


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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 13 – 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;
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•compliance with Government Commitments relating to national security;
•known or potential unknown liabilities of Sprint that are larger than expected; and
•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.

We have recently experienced a criminal cyberattack and could in the future be further harmed by disruption, data loss or other security breaches, whether directly or indirectly.

Our business involves the receipt, storage and transmission of our customers’ confidential information, including sensitive personal information and payment card information, confidential information about our employees and suppliers, and other sensitive information about our Company, such as our business plans, transactions and intellectual property (collectively, “Confidential Information”). Unauthorized access to Confidential Information is difficult to anticipate, detect or prevent, particularly given that the methods of unauthorized access constantly change and evolve. We and our third-party service providers are subject to attacks and threats to our and their IT networks, systems and supply chain, including attacks and threats by state-sponsored parties, malicious actors, employees or third parties, who may exploit bugs, errors, misconfigurations or other vulnerabilities that can compromise the confidentiality and integrity of Confidential Information or cause serious operational disruptions (e.g., ransomware).

As a telecommunications carrier, we are considered a critical infrastructure provider and therefore are likely to be the target of cyberattacks (e.g., denial of service and other malicious attacks). In addition, the Pandemic has presented additional operational and cybersecurity risks to our IT systems due to work-from-home arrangements at the Company and our providers. Attacks against companies like ours are perpetrated by a variety of groups or persons, including those in jurisdictions where law enforcement measures to address such attacks are ineffective or unavailable, and such attacks may even be perpetrated by or at the behest of foreign governments.

In addition, we provide confidential, proprietary and personal information to third-party service providers as part of our business operations. These third-party service providers have experienced data breaches and other attacks that included unauthorized access to Confidential Information and operational disruptions in the past, and face security challenges common to all parties that collect and process information.

In August 2021, we disclosed that our systems were subject to a criminal cyberattack that compromised the data of millions of our current customers, former customers, and prospective customers, including, in some instances, social security numbers, names, addresses, dates of birth and driver’s license/identification numbers. With the assistance of outside cybersecurity experts, we located and closed the unauthorized access to our systems and identified current, former and prospective customers whose information was impacted and notified them, consistent with state and federal requirements. We have incurred certain cyberattack-related expenses and expect to continue to incur additional expenses in future periods, including costs to investigate and remediate the attack, send notifications to customers and provide additional customer support and enhance customer protection. For more information, see “Cyberattack” in the Overview section of MD&A. As a result of this cyberattack, we are subject to numerous lawsuits and regulatory inquiries, the ongoing costs of which may be material, and we may be subject to further regulatory inquiries and private litigation. For more information, see “– Contingencies and Litigation – Litigation and Regulatory Matters” in Note 13 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements, and “– Unfavorable outcomes of legal proceedings may adversely affect our business, reputation, financial condition, cash flows and operating results” below. As a result of this cyberattack or other cyberattacks or security breaches involving our Company or our third-party suppliers, we may incur significant costs or experience other material financial impacts, which may not be covered by, or may exceed the coverage limits of, our cyber insurance, and such costs and impacts may have a material adverse effect on our business, reputation, financial condition, cash flows and operating results.

In addition to the August 2021 cyberattack, we have previously experienced other incidents involving unauthorized access to certain Confidential Information, and we expect to experience cyberattacks and other cybersecurity incidents in the future.
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Typically, these incidents have involved attempts to commit fraud by taking control of a customer’s phone line. In other cases, the incidents have also involved unauthorized access to certain of our customers’ private information, including credit card information, financial data, social security numbers or passwords.

Our procedures and safeguards to prevent unauthorized access to sensitive data and to defend against attacks seeking to disrupt our services must be continually evaluated and revised to address the ever-evolving threat landscape and changing cybersecurity regulations, which could require the investment of significant resources. We cannot make assurances that all preventive actions taken will adequately repel a significant attack or prevent security breaches or misuses of data, unauthorized access by third parties or employees or exploits against third-party supplier environments, or that we or our third-party suppliers will be able to effectively identify, investigate or remediate such incidents. We expect to continue to be the target of cyberattacks, data breaches or security incidents, given the nature of our business. Any future cyberattacks, data breaches, or security incidents may have a material adverse effect on our business, reputation, financial condition, cash flows and operating results.

Unfavorable outcomes of legal proceedings may adversely affect our business, reputation, financial condition, cash flows and operating results.

We and our affiliates are involved in various disputes, governmental and/or regulatory inspections, investigations and proceedings and litigation matters. Such legal proceedings can be complex, costly, and highly disruptive to our business operations by diverting the attention and energy of management and other key personnel.

In connection with the Transactions, it is possible that stockholders of T-Mobile and/or Sprint may file putative class action lawsuits or shareholder derivative actions against the Company and the legacy T-Mobile board of directors and/or the legacy Sprint board of directors. Among other remedies, these stockholders could seek damages. The outcome of any litigation is uncertain and any such potential lawsuits could result in substantial costs and may be costly and distracting to management.

Additionally, 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, including, among other things, certain ongoing FCC and state government agency investigations into Sprint’s Lifeline program. In September 2019, Sprint notified the FCC that it had claimed monthly subsidies for serving customers even though those customers may not have met usage requirements under Sprint’s usage policy for the Lifeline program due to an inadvertent coding issue in the system used to identify qualifying customer usage that occurred in July 2017 while the system was being updated. Sprint has made a number of payments to reimburse the federal government and certain states for excess subsidy payments. Unfavorable resolution of these matters could require making additional reimbursements and paying additional fines and penalties.

On February 28, 2020, we received a Notice of Apparent Liability for Forfeiture and Admonishment from the FCC, which proposed a penalty against us for allegedly violating Section 222 of the Communications Act and the FCC’s regulations governing the privacy of customer information. We recorded an accrual for an estimated payment amount as of March 31, 2020, which was included in Accounts payable and accrued liabilities in our Consolidated Balance Sheets.

As a result of the August 2021 cyberattack, we are subject to numerous lawsuits, including multiple class action lawsuits seeking unspecified monetary damages, and inquiries by various government agencies, law enforcement and other governmental authorities, and we may be subject to further regulatory inquiries and private litigation. We are cooperating fully with regulators and vigorously defending against the class action and other lawsuits. In light of the inherent uncertainties involved in these proceedings and inquiries, as of the date of this Quarterly Report, we have not recorded any accruals for losses related to these proceedings and inquiries, as any such amounts are not yet probable or estimable. We believe it is reasonably possible that we could incur losses associated with these proceedings and inquiries, and we will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. Ongoing legal and other costs related to these proceedings and inquiries, as well as any potential future proceedings and inquiries, may be substantial, and losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries could be significant and have a material adverse impact on our business, reputation, financial condition, cash flows and operating results.

We, along with equipment manufacturers and other carriers, are subject to current and potential future lawsuits alleging adverse health effects arising from the use of wireless handsets or from wireless transmission equipment such as cell towers. In addition, the FCC has from time to time gathered data regarding wireless device emissions, and its assessment of the risks associated with using wireless devices may evolve based on its findings. Any of these allegations or changes in risk assessments could result in customers purchasing fewer devices and wireless services, could result in significant legal and regulatory
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liability, and could have a material adverse effect on our business, reputation, financial condition, cash flows and operating results.

The assessment of the outcome of legal proceedings, including our potential liability, if any, is a highly subjective process that requires judgments about future events that are not within our control. The amounts ultimately received or paid upon settlement or pursuant to final judgment, order or decree may differ materially from amounts accrued in our financial statements. In addition, litigation or similar proceedings could impose restraints on our current or future manner of doing business. Such potential outcomes including judgments, awards, settlements or orders could have a material adverse effect on our business, reputation, financial condition, cash flows and operating results.

Our business may be impacted by new or amended tax laws or regulations or administrative interpretations and judicial decisions affecting the scope or application of tax laws or regulations.

In connection with the products and services we sell, we calculate, collect, and remit various federal, state, and local taxes, fees and regulatory charges (“tax” or “taxes”) to numerous federal, state and local governmental authorities, including federal and state USF contributions and common carrier regulatory charges and public safety fees. In addition, we incur and pay state and local transaction taxes and fees on purchases of goods and services used in our business.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. In many cases, the application of existing, newly enacted or amended tax laws (such as the Coronavirus Aid, Relief, and Economic Security Act of 2020 or the U.S. Tax Cuts and Jobs Act of 2017) may be uncertain and subject to different interpretations, especially when evaluated against new technologies and telecommunications services, such as broadband internet access and cloud related services and in the context of our recent merger with Sprint. Legislative changes, administrative interpretations and judicial decisions affecting the scope or application of tax laws could also impact revenue reported and taxes due on tax inclusive plans.

In the event that T-Mobile, including pre-acquisition Sprint, has incorrectly described, disclosed, determined, calculated, assessed, or remitted amounts that were due to governmental authorities, we could be subject to additional taxes, fines, penalties, or other adverse actions, which could materially impact our business, financial condition and operating results. In the event that federal, state, and/or local municipalities were to significantly increase taxes and regulatory or public safety charges on our network, operations, or services, or seek to impose new taxes or charges, such as a proposed corporate minimum tax or new limits on interest deductibility, it could have a material adverse effect on our business, financial condition and operating results.

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.


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Item 6. Exhibits

See the Index to Exhibits immediately following this page.


INDEX TO EXHIBITS
    Incorporated by Reference  
Exhibit No. Exhibit Description Form Date of First Filing Exhibit Number Filed/Furnished Herewith
10.1
 
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 
10.2
 
Second Amended and Restated Receivables Sale Agreement, dated as of August 21, 2017, by and between T-Mobile Financial LLC, as seller, and T-Mobile Handset Funding LLC, as purchaser.
 
 
 
 X
10.3
 
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.
 
 
 
 X
31.1
 
Certifications of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 X
31.2
 
Certifications of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 X
32.1*
 
Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 X
32.2*
 
Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 X
101.INS XBRL Instance Document. 
 
 
 X
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 Document. 
 
 
 X
Incorporated by Reference
Exhibit No.Exhibit DescriptionFormDate of First FilingExhibit NumberFiled Herein
4.18-K8/13/20214.3
4.28-K8/13/20214.4
4.38-K8/13/20214.5
10.1X
22.1X
31.1X
31.2X
32.1*X
32.2*X
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document.X
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.X
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.X
101.LABXBRL Taxonomy Extension Label Linkbase Document.X
101.PREXBRL Taxonomy Extension Presentation Linkbase.X
104Cover Page Interactive Data File (the cover page XBRL tags)
*Furnished herewith.herein.



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SIGNATURESIGNATURES


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.


T-MOBILE US, INC.
November 2, 2021T-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)



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