UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
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(Amendment No. )
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T-Mobile US, Inc.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Place: Four Seasons Hotel 99 Union Street Seattle, WA 98101
Date: June 13, 2019
Time: 8:00 a.m. PDT |
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By Order of the Board of Directors,
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Timotheus Höttges Chairman of the Board of Directors
April
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 13, 2019
The Proxy Statement and Annual Report to Stockholders are available at
https://t-mobile.com/Proxy2019and https://www.proxyvote.com.
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This summary highlights information you will find in this Proxy Statement. As it is only a summary, please review the complete Proxy Statement before you vote.
2019 Annual Meeting Information
Date and Time: Thursday, June 13, 2019 at 8:00 a.m. (PDT) |
Four Seasons Hotel 99 Union Street
| Record Date: April 18, 2019 | Proxy Mail Date: On or about April 26, 2019 |
How to Vote
By Internet: Visit the website listed on your proxy card | By Phone: Call the telephone number on proxy card | By Mail: Sign, date and return your proxy card in the enclosed envelope | In Person: Attend the Annual Meeting in Seattle, Washington |
Voting: | ||
Admission to ∎ Notice of Internet Availability of Proxy Materials ∎ Admission ticket enclosed with the paper copy of the proxy ∎ Legal proxy, account statement or other documentation confirming yourT-Mobile stock holdings from the broker, bank or other institution that holds your |
Annual Meeting Agenda and Vote Recommendations:
Agenda and Voting Recommendations | ||||||||
Proposal | Description | Board Recommendation | Page | |||||
1 | Election of 11 Directors | “FOR” each nominee | 13 | |||||
2 | Ratification of Appointment of Independent Registered Public Accounting Firm for 2016 | “FOR” | 21 | |||||
3 | Stockholder Proposal for Implementation of Proxy Access | “AGAINST” | 47 | |||||
4 | Stockholder Proposal for Limitations on Acceleration of Equity Awards in the Event of a Change of Control | “AGAINST” | 49 | |||||
5 | Stockholder Proposal for an Amendment of the Company’s Clawback Policy | “AGAINST” | 51 |
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| Board Vote Recommendation | Page Reference (for more details) | ||||||
Proposal1 |
| FOR | 14 | |||||
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| FOR | 23 | |||||
| AGAINST | 54 |
In this Proxy Statement, “we,” “our,” “us,” “T-Mobile”“T-Mobile” and the “Company” refer toT-Mobile US, Inc. and the “Annual Meeting” refers to the 20162019 Annual Meeting of Stockholders. We first made this Proxy Statement and form of proxy card available to stockholders on or about April 28, 2016.26, 2019.
2016 PROXY STATEMENT SUMMARY INFORMATION
Commitment to Good Corporate Governance Practices
WeGovernance is real atT-Mobile. In connection with the business combination with MetroPCS Communications, Inc. completed in 2013 (the “Metro Combination”),T-Mobile became a publicly traded company with a significant stockholder, Deutsche Telekom AG (“Deutsche Telekom”). Deutsche Telekom has the right to designate a number of our directors, and as a result, we have stockholder representation on our Board. Directors approach each Board decision with a mindset that is intellectually independent from management. In addition, our Board has structured our corporate governance program to promote the long-term interest of stockholders, strengthen Board of Directorsthe Board’s and managementmanagement’s accountability and help build public trust in the Company. Highlights include:
Unclassified Board, with all directors elected annually
Unclassified Board and Annual Election of Directors | Annual Board and Committee Self-Evaluations | |||||
12 Director Nominees | No Poison Pill | |||||
Separation of Chairman and Chief Executive Officer Roles | Stockholder Right to Call Special Meeting and Act by Written Consent | |||||
Lead Independent Director | Anti-Hedging, Anti-Short Sale and Anti-Pledging Policies | |||||
Independent Chairs of the Audit, Compensation and Nominating and Corporate Governance Committees | Executive Compensation Driven by Pay for Performance | |||||
Regular Executive Sessions of Independent Directors | Stock Ownership Guidelines for Executive Officers and Directors | |||||
Comprehensive Risk Oversight by the Board and its Committees | Clawback Policy to Recapture Incentive Payments |
T-Mobile Had Record Financial Results and Strong Customer Growth in 2018 and Proved, Once Again, That Taking Care of ChairmanCustomers Is Also Good for Stockholders
T-Mobile had record financial results in 2018, including record service revenues, record total revenues, strong net income, record fourth quarter Adjusted EBITDA, strong net cash from operating activities and Chief Executive Officer roles
Appointment of a lead independent director
Independent directors serve as chairs of our Audit, Nominating and Corporate Governance and Compensation Committees
Regular executive sessions of independent directors
Regular Board and committee self-evaluations
Stock ownership guidelines for directors and executives
Clawback Policy to recapture incentive payments
Customer Momentum Continued at T-Mobile forrecord free cash flow. We added 7.0 million total net customers in 2018, marking the Second Straight Year, Resulting in Strong Financial Performance That Balanced Growth With Profitability
T-Mobile had another recordfifth year in 2015, delivering industry leadinga row of more than 5 million total net customer service revenue and Adjusted EBITDA growth.additions. We ended the year with more than 6379.7 million total customers and became the third largest wireless carrier in the United States. T-Mobile added 8.3 million total net customers in 2015 and captured all of the industry’s postpaid phone growth, which made T-Mobile America’s fastest growing wireless company once again. In addition to strong net customer additions, we kept customers longer, with branded postpaid phone churn of 1.39% for the full year of 2015.customers.
Our customer growth translated into strong financial results.industry-leading revenue growth. Service revenue of $24.8$32.0 billion for 20152018 grew at an industry-leading 10.9%6.1% year over year. Similarly,Net income of $2.9 billion for 2018 was down 36.3% year over year, due to the impact from the Tax Cuts and Jobs Act (the “Tax Act”), which resulted in an income tax benefit of $2.2 billion in 2017, and grew 22.6% year over year excluding the impact from the Tax Act. Adjusted EBITDA of $7.4$12.4 billion for 2015 grew 31.2%10.6% year over year, significantly outpacing the industry.year.
As of December 31, 2018,T-Mobile also delivered on several major network milestones in 2015. The Companycovered more than doubled its geographic325 million people with 4G LTE footprint duringLTE. Our stock price increased by 285.0% from May 1, 2013 (the first day of trading after the year, expanding its reach to 305 million Americans, and exceeding its stated year-end 2015 goal of 300 million. Since the Business Combination,Metro Combination) through December 31, 2018. Looking back three years, our stock price has increased by 137% from May 1, 2013163.3% (January 4, 2016 through December 31, 2015.2018).
Adjusted EBITDA is anon-GAAP financial measure. Thisnon-GAAP financial measure should be considered in addition to, but not as a substitute for, the information provided in accordance with U.S. generally accepted accounting principles (“GAAP”). A reconciliation to the most directly comparable GAAP financial measure is provided in Appendix A to this Proxy Statement.
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Our executive compensation program emphasizes pay for performance. As a result, our 2015 Named Executive Officer compensation reflects T-Mobile’s strong 2015 operational and financial performance.
2 | T-Mobile 2019 Proxy Statement |
2016 PROXY STATEMENT SUMMARY INFORMATION
Executive Compensation Highlights – Paying for Performance
Our executive compensation program is aligned with our business strategy and is designed to attract and retain top talent, reward short-term and long-term business results and exceptional individual performance, and, most importantly, maximize stockholder value. Our executive compensation program is competitive in the marketplace and highly incentive-based, with Company performance determining a significant portion of total compensation.
Key Features of Our Executive Compensation Program |
What We Do | ||||||
Emphasis on pay for performance | ||||||
Independent compensation consultant | ||||||
Executive and director stock ownership guidelines | ||||||
Clawback policy to recapture incentive payments | ||||||
Use multiple performance measures and caps on potential incentive payments | ||||||
Substantial majority of target total compensation is variable | ||||||
Use of executive compensation statements (“tally sheets”) | ||||||
Annual risk assessment of compensation programs |
What We Don’t Do | ||||||||
No short-selling, hedging or pledging of Company’s securities | ||||||||
No excise taxgross-ups | ||||||||
No | ||||||||
No | ||||||||
No single-trigger vesting of equity awards upon a change in control | ||||||||
No | ||||||||
What We Pay and Why: Goals and Elements of Compensation
2016 PROXY STATEMENT SUMMARY INFORMATION
To promote a performance-based culture that further aligns the interests of management and stockholders, in 2015 the executive compensation program focused extensively on variable, performance-based compensation. As illustrated in the charts below, the substantial majority of the Named Executive Officers’ total compensation as reported in the 2015 Summary Compensation Table was in the form of variable compensation (short-term and long-term).
T-Mobile 2019 Proxy Statement | 3 |
The Company’sT-Mobile Is Committed to Good Corporate Governance
Our corporate governance practices and policies promote the long-term interests of our stockholders, strengthen the accountability of theour Board of Directors and management and help build public trust.
Our Board has established a boardroom dynamic that encourages meaningful and robust discussions based on each director’s unique and
diverse background, resulting in informed decision-making that seeks to maximize stockholder value and
promotes stockholder interests. Directors exercise thorough oversight of decisions regarding the Company’s strategy and outlook. The Board regularly reviews developments in corporate governance and updates its practices and governance materials as it deems necessary and appropriate. The dashboard below highlights key aspects of the Company’s corporate governance program.
Governance Dashboard
Key Governance Materials
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You can access the Company’s current corporate governance guidelines, committee charters, Code of Business Conduct and Code of Ethics for Senior Financial Officers on the Investor Relations section of our website athttp://investor.t-mobile.com by selecting “Governance Documents” under the “Corporate Governance” tab. The certificate of incorporation, bylaws and Stockholder’s Agreement are exhibits to the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and are available on the SEC’s web site at www.sec.gov. Instructions on how to obtain copies of the Company’s corporate governance materials can also be found on page 56.
Governance Highlights
Unclassified Board and Annual Election of Directors |
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12 Director Nominees |
No Poison Pill | ||||||
Separation of Chairman and Chief Executive Officer Roles |
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Stockholder Right to Call Special Meeting and Act by Written Consent |
Lead Independent Director
Anti-Hedging, Anti-Short Sale and Anti-Pledging Policies |
Independent Chairs of the Audit, Compensation and Nominating and Corporate Governance Committees | Executive Compensation Driven by Pay for Performance |
Regular Executive Sessions of Independent Directors | Stock Ownership Guidelines for |
Comprehensive Risk Oversight by the Board and Its Committees | Clawback Policy to Recapture Incentive Payments |
Key Governance Materials |
Certificate of Incorporation | Charter for Each Board Committee | |||||
Bylaws | Code of Business Conduct | |||||
Corporate Governance Guidelines | Code of Ethics for Senior Financial Officers | |||||
Stockholder’s Agreement | Speak Up Policy (f.k.a. Whistleblower Protection Policy) |
These documents are available under the “Governance” section of our website athttp://investor.t-mobile.com or are listed as exhibits to the Annual Report on Form10-K filed with the Securities and Exchange Commission (“SEC”).
4 | T-Mobile 2019 Proxy Statement |
CORPORATE GOVERNANCE ATT-MOBILE
About the Board of DirectorsABOUT THE BOARD OF DIRECTORS
Corporate Governance GuidelinesFramework and Code of Business Conduct
Our Board of Directors established our corporate governance guidelines, which,has adopted Corporate Governance Guidelines that, together with our certificate of incorporation, our bylaws and the Stockholder’s Agreement with Deutsche Telekom, which beneficially ownsprovide a majority of our outstanding shares of common stock (approximately 65% as of March 31, 2016), set forthframework for the framework within which the Board and its committees direct the affairseffective governance of the Company. See “Transactions With Related Persons and Approval — Transactions With Deutsche Telekom — Stockholder’s Agreement” for more information regarding the
Stockholder’s Agreement. The Board also adopted our Code of Business Conduct, which establishes the standards of ethical conduct applicable to all of our directors, officers and employees. In addition, we have a Code of Ethics for Senior Financial Officers. In the event of a waiver by the Board of Directors of any Code of Business Conduct or Code of Ethics for Senior Financial Officers provisions applicable to directors or executive officers, we will promptly disclose the Board’s actions on our website.
CORPORATE GOVERNANCE
Our Board Compositionand Director Independence
The sizeOur Board consists of our Board12 directors, two of Directors has been fixed at 11. The size of our Board may be changed pursuant to our bylaws, subject towhom are currently employed by the provisions of our certificate of incorporation and the Stockholder’s Agreement between the Company and Deutsche Telekom.
Company. Pursuant to our certificate of incorporation and the Stockholder’s Agreement, Deutsche Telekom has certain rights to designate
director nominees and to have such designees serve on the committees of the Board. See “Transactions Withwith Related Persons and Approval — Transactions Withwith Deutsche Telekom — Stockholder’s Agreement” for more information.
We Are a Controlled Company with Certain Exemptions
Since Deutsche Telekom beneficially owns a majority of our outstanding stock (approximately 63.0% as of March 31, 2019), we are deemed a “controlled company” under the NASDAQ Stock Market LLC (“NASDAQ”) rules. These rules exempt “controlled companies,” like us, from certain corporate governance requirements, including: (i) that a majority of our Board be independent, (ii) that our Nominating and Corporate Governance Committee be composed entirely of independent directors, and (iii) that our Compensation Committee be composed entirely of independent directors. In addition, we rely on the exemption for controlled companies from NASDAQ rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act that relate to compensation committee member independence and compensation committee consultants.
Director Independence
TheOn an annual basis, our Board of Directors evaluates the independence of each director, including nominees for election to the Board, in accordance with applicable laws and regulations, the NASDAQ Stock Market LLC (“NASDAQ”) rules and our corporate governance guidelines. As a “controlled company” under NASDAQ rules, we are exempt from the requirement to have a majority of independent directors on our Board. However, pursuant to our certificate of incorporation, the Stockholder’s Agreement and our corporate governance guidelines, the Board is required to have at least three directors, including all the members of the Audit Committee, who meet the director independence standards under NASDAQ rules. We have five directors who our Board has determined are independent. The Board considers all relevant facts and circumstances in determining independence, including, among other things, making an affirmative
determination that the director has no material relationship with the Company directly or as an officer, stockholder, or partner of an organization that has a material relationship with the Company.Corporate Governance Guidelines. For certain types of relationships, NASDAQ rules require us to consider a director’s relationship with the Company, and also with any parent or subsidiary in a consolidated group with the Company, which includes Deutsche Telekom and its affiliates.
The Board Each of Directors has determined that Messrs. Barnes, Datar, Guffey and Westbrook and Ms. Taylor are independentthe following directors or director nominees is an “independent director” under NASDAQ rules and our corporate governance guidelines. In addition, the Board has determined that each member of the Audit Committee meets the heightened independence criteria applicable to audit committee members under NASDAQ and SEC rules.Corporate Governance Guidelines:
∎ Srikant M. Datar* | ∎ Kelvin R. Westbrook* | |
∎ Lawrence H. Guffey | ∎ Teresa A. Taylor* | |
∎ Olaf Swantee |
* | The Board has determined that each member of the Audit Committee meets the heightened independence criteria applicable to audit committee members under NASDAQ and SEC rules. |
SeparateBoard Leadership
Our Chairman and Our Chief Executive Officer Roles Are Separated
Our Board of Directors has chosen to separate the roles of Chairman of the Board and Chief Executive Officer, and it has appointed Timotheus Höttges, Deutsche Telekom’s Chief Executive Officer, as the Chairman of the Board.
We believe that separating the roles of Chief Executive Officer and Chairman of the Board is appropriate for the Company and in the best interests of the Company and its stockholders at this time. Our Chairman manages the overall Board function, and his current responsibilities include chairing all regular sessions of the Board; establishing the agenda for each Board meeting in consultation with the lead independent director, ourTimotheus Höttges, Deutsche Telekom’s Chief Executive Officer, and other
senior management as appropriate; and helping to establish, coordinate and reviewis the criteria and methods for evaluating, at least annually, the effectivenessChairman of the Board and its committees. Board. Key responsibilities of our Chairman include:
∎ | Managing the overall Board function |
∎ | Chairing all regular sessions of the Board |
∎ | Establishing the agenda for each Board meeting in consultation with the lead independent director, our Chief Executive Officer and other senior management as appropriate |
∎ | Assisting in establishing, coordinating and reviewing the criteria and methods for evaluating, at least annually, the effectiveness of the Board and its committees |
The separation of the offices allows Mr. Höttges to focus on management of Board matters and allows our Chief Executive Officer to focus on managing our business. Additionally, we believe the separation of the roles ensures the objectivity of the Board in its management oversight role, specifically with respect to reviewing and assessing our Chief Executive Officer’s performance. The Board believes that its role in risk oversight did not impact the leadership structure chosen by the Board.
We Have a Lead Independent Director
In addition to separating the Chairman of theOur Board and Chief Executive Officer roles, our Board of Directors has also chosen to also appoint a lead independent director. TheTeresa A. Taylor is our current lead independent director. Key responsibilities of our lead independent director a position currently held by Teresa A. Taylor, coordinates the activities of our independent directors, calls and presides over the executiveinclude:
sessions of the independent directors and functions as a liaison between such independent directors and the Chairman of the Board and/or the Chief Executive Officer. The lead independent director provides input on the flow of information to the Board, including the Board’s agenda and schedule.
We qualify as a “controlled company” under the NASDAQ rules because Deutsche Telekom beneficially owns a majority of our outstanding shares of common stock (approximately 65% as of March 31, 2016). As a controlled company, we are eligible for exemptions from certain corporate governance requirements under the NASDAQ rules. Specifically, we rely on controlled company exemptions from the NASDAQ rules that require:
a majority of the board of directors to be independent;
independent directors or a nominating committee composed entirely of independent directors to select (or recommend for selection by the full board) director nominees; and
a compensation committee composed entirely of independent directors to determine (or recommend for determination by the full board) the compensation of executive officers, including the chief executive officer.
In addition, we rely on the exemption for controlled companies from NASDAQ rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) that relate to compensation committee member independence and compensation committee consultants.
Coordinating the activities of our independent directors |
CORPORATE GOVERNANCE
∎ | Calling and presiding over the executive sessions of the independent directors |
∎ | Functioning as a liaison between the independent directors and the Chairman of the Board and/or the Chief Executive Officer |
∎ | Providing input on the flow of information to the Board, including the Board’s agenda and schedule |
Board Meetings and Director Attendance
Our Board meets regularly throughout the year. Committees typically meet the day prior to the Board meeting, and depending on the schedule of the Board meeting, the Audit Committee holds additional meetings in connection with quarterly earnings. Directors are expected to attend all meetings of the Board of Directors and each committee on which they serve, as well as the Annual Meeting of Stockholders. The Board met seven times during 2015. Each director attended at least 75% of the total number of meetings of the Board and Board committees on which he or she served. Eight of our directors attended our 2015 Annual Meeting of Stockholders.
Executive sessions, or meetings of outside (non-management) directors without management present, are held atAt each regularly scheduled Board meeting or(or more frequently if necessary. The Chairman of the Board or the lead independent director presides
over these executive sessions. Thenecessary), time is set aside for executive sessions provide an opportunity forwhere outside(non-management) directors to review any matters of interest raised by the Chairman of the Board, the lead independent director or the other non-management members of the Board, including strategic, operational, or financial issues andmeet without management performance and succession.
present. In addition, our corporate governance guidelinesCorporate Governance Guidelines require the independent directors to meet at least twice each year in executive session, with the lead independent director presiding at such executive session.
∎ | Our Board met 10 times during 2018 |
∎ | Each director attended at least 75% of the total number of meetings of the Board and Board committees on which he or she served |
∎ | All directors who then served on the Board, other than one, attended our 2018 Annual Meeting of Stockholders |
T-Mobile 2019 Proxy Statement | 5 |
CORPORATE GOVERNANCE ATT-MOBILE
Communications with DirectorsANNUAL BOARD AND COMMITTEE EVALUATIONS
The Nominating and Corporate Governance Committee oversees the annual Board and committee self-evaluation process. In 2018, the Committee engaged an outside consultant to coordinate and provide insight on the annual self-evaluation process.
The Board is committed to a comprehensive self-evaluation process to review the Board’s and each committee’s overall effectiveness. |
Noted below are the high-level steps of the Board and Committee self-evaluation process.
Board Evaluation Process
Interested persons
STEP 1 Begin Evaluation Process The Chair of the Nominating and Corporate Governance Committee initiates, with the assistance of the Corporate Secretary, the annual evaluation process by engaging an outside evaluation consultant STEP 2 Evaluation Working closely with management, the outside consultant distributes comprehensive questionnaires to each director soliciting feedback on the Board's and each relevant Committee's effectiveness, covering topics such as: Strategic Oversight Scope & Content of Presentations Risk Management Succession Planning STEP 3 Analysis The outside consultant reviews the responses and prepares an executive summary for the Board and each Committee, which includes an overview of director responses and guidance on any material issues. The Chair of the Nominating and Corporate Governance Committee reviews the reports together with management and works directly with the consultant to evaluate the findings. STEP 4 Results and Findings The Nominating and Corporate Governance chair, with assistance from the outside consultant, presents the results and findings to the Board. Each committee reviews the committee results and findings. STEP 5 Follow Up Results requiring additional consideration are addressed at subsequent board and committee meetings and reported back to the Board, where appropriate. STEP 1 Begin Evaluation Process The Chair of the Nominating and Corporate Governance Committee initiates, with the assistance of the Corporate Secretary, the annual evaluation process by engaging an outside evaluation consultant. STEP 2 Evaluation Working closely with management, the outside consultant distributes comprehensive questionnaires to each director soliciting feedback on the Board's and each relevant Committee's effectiveness, covering topics such as: Strategic Oversight Scope & Content of Presentations Risk Management Succession Planning STEP 3 Analysis The outside consultant reviews the responses and prepares an executive summary for the Board and each Committee, which includes an overview of director responses and guidance on any material issues. The Chair of the Nominating and Corporate Governance Committee reviews the reports together with management and works directly with the consultant to evaluate the findings. STEP 4 Results and Findings The Nominating and Corporate Governance chair, with assistance from the outside consultant, presents the results and findings to the Board. Each committee reviews the committee results and findings. STEP 5 Follow Up Results requiring additional consideration are addressed at subsequent board and committee meetings and reported back to the Board, where appropriate.
HOW TO COMMUNICATE WITH OUR BOARD
You may contact the Chairman of the Board, the Board as a whole, the lead independent director, or any individual director as follows:
T-Mobile US, Inc.
The Board of Directors
c/o Corporate Secretary
12920 SE 38th Street
Bellevue, Washington 98006
| T-Mobile US, Inc. The Board of Directors c/o Corporate Secretary 12920 SE 38th Street Bellevue, Washington 98006 |
After receipt, communications will generally be forwarded to the Chairman of the Board, the whole Board, the lead independent director or specific directors as the Corporate Secretary deems appropriate based on the content of, and the matters raised in, the communication.communications. Communications that are unrelated to the duties and responsibilities of the Board or are unduly hostile, threatening, potentially illegal or similarly unsuitable will not be forwarded. Responses to letters and any communications that are excluded are maintained by the Company and are available to any director upon request.
6 | T-Mobile 2019 Proxy Statement |
CORPORATE GOVERNANCE ATT-MOBILE
Board Committees and Related MattersBOARD COMMITTEES AND RELATED MATTERS
TheOur Board of Directors has four standing committees: Audit, Compensation, Executive, and Nominating and Corporate Governance. The Board makes committee and committee chair assignments annually at its meeting immediately following the Annual Meeting of Stockholders, although further changes may be made from time to time as deemed appropriate by the Board.
Each committee has a Board-approved charter, which is reviewed annually by the respective committee. Recommended changes, if
any, are submitted to the Board for approval. Each committee may retain and compensate consultants or other advisors as necessary for it to carry out its duties, without consulting with or obtaining the approval of the Board or the Company. A copy of the charter for each standing committee can be found on the Investor Relations section of our website athttp://investor.t-mobile.com by selecting “Governance Documents” under the “Corporate Governance”“Governance” tab.
CORPORATE GOVERNANCE
Audit Committee
Chair: Srikant M. Datar | ||||
Additional Teresa A. Taylor Kelvin R. Westbrook Meetings Held in 2018: 11 | ||||
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∎ Assist the Board in oversight of the integrity of the Company’s financial statements and the financial reporting process, disclosure controls and procedures and internal audit functions ∎ Directly appoint, compensate and retain our independent auditor, including the evaluation of the independent auditor’s qualifications, performance and independence ∎Pre-approve the retention of the independent auditor for all audit and suchnon-audit services as the independent auditor is ∎ Discuss the Company’s risk assessment and risk management policies, as well as annually review the implementation and effectiveness of our compliance and ethics programs ∎ Develop and oversee compliance with the Code of Ethics for Senior Financial Officers and the Code of Business Conduct for all employees, officers and directors ∎ Establish procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters ∎ Review and approve all related person transactions pursuant to the Company’s Related Person Transaction Policy
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The Audit Committee represents and assists the Board of Directors in its oversight responsibility relating to the integrity of the Company’s financial statements and the financial reporting process, disclosure controls and procedures and internal audit functions. The Audit Committee also oversees the appointment, compensation and retention of our independent registered public accounting firm, including the performance by the independent registered public accounting firm of permissible audit, audit-related, and non-audit services, and the associated fees. The Audit Committee periodically reviews the Company’s risk assessment and risk management
policies, as well as our compliance and ethics programs. The Audit Committee develops and oversees compliance with the Code of Ethics for Senior Financial Officers and the Code of Business Conduct for all employees, officers and directors. The Audit Committee is also responsible for establishing procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. In addition, the Audit Committee reviews and approves all related person transactions pursuant to the Company’s Related Person Transaction Policy.
T-Mobile 2019 Proxy Statement |
CORPORATE GOVERNANCE ATT-MOBILE
Compensation Committee
Chair: Additional Members Lawrence H. Guffey Dr. Christian P. Illek Raphael Kübler Olaf Swantee Meetings Held in 2018: 6 Section 16 Subcommittee: Lawrence H. Guffey Kelvin R. Westbrook | As more fully described in its charter, the primary responsibilities of the Compensation Committee are to: ∎ Review and approve the Company’s executive compensation philosophy and its programs, policies and practices ∎ Review and approve corporate goals and objectives relevant to the Chief Executive Officer’s compensation, evaluate the Chief Executive Officer’s performance in light of those goals and objectives and determine and approve the Chief Executive Officer’s compensation ∎ Review and approve compensation for the Company’s executive officers ∎ Oversee the development of succession plans for the Chief Executive Officer and senior management ∎ Assist the Board in reviewing the results of any shareholder advisory votes, or responding to other shareholder communications, that relate to executive officer compensation, and consider whether to make or recommend adjustments to the Company’s policies and practices as a result of such votes or communications ∎ Review a report from management regarding potential material risks, if any, created by the Company’s compensation policies and practices ∎ The Section 16 Subcommittee has sole authority to approve all awards granted to the Company’s officers who are subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended | |||
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The Compensation Committee has overall responsibility for evaluating and approving compensation plans, policies and programs applicable primarily to the Company’s executive officers, including executive compensation philosophy and Chief Executive Officer compensation. TheHas Engaged an Independent Compensation Committee is also responsible for certain compensation programs affecting the Company’s employees generally, such as equity compensation plans, and reviews annually with management the risks arising from such programs. In addition, the Compensation Committee reviews and oversees the independent director compensation policies. A significant focus area of the Compensation Committee is succession plan development for the Chief Executive Officer and senior management.Consultant
The Compensation Committee has established the Section 16 Subcommittee, which has sole authority to approve all awards granted to the Company’s officers who are subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Section 16 officers”) that are intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and unless otherwise determined by the Compensation Committee, authority to approve all equity or equity-based awards to the Company’s Section 16 officers. The Compensation Committee has delegated authority to the Company’s Executive Vice President, Human Resources, to make awards to employees who are not Section 16 officers. The Compensation Committee charter authorizes the Compensation Committee to form and delegate its authority to other subcommittees and to one or more members of the Board of Directors.
Compensation Consultant.The Compensation Committee has retained Mercer (a wholly owned subsidiary of Marsh & McLennan Companies, Inc.), a well-recognized employee benefits and compensation consulting firm, as its independent compensation consultant to adviseconsultant. Mercer assists the Compensation Committee in its evaluation of the compensation and benefits provided to the Chief Executive Officer and the other executive officers. At the request of the Compensation Committee, a consultant from Mercer generally attends the Committee meetings at which executive officer compensation is discussed and provides information, research and analysis pertaining to executive compensation as requested by the Compensation Committee. Mercer also updates the Compensation Committee on market trends.
In connection with its engagement of Mercer, the Compensation Committee considered various factors bearing upon Mercer’s independence including, but not limited to, the amount of fees received by Mercer from the Company, Mercer’s policies and procedures designed to prevent conflicts of interest, and the existence of any business or personal relationship that could impact Mercer’s independence. After reviewing these and other factors, the Compensation Committee determined that Mercer was independent and that its engagement did not present any conflicts of interest. Mercer also determined that it was independent from management and confirmed this in a written statement delivered to the Compensation Committee.
∎ | The Compensation Committee determined that Mercer is (and was, during 2018) independent and that its engagement does not (and did not, during 2018) present any conflicts of interest. |
∎ | Mercer also determined that it was independent from management and confirmed this in a written statement delivered to the Compensation Committee. |
During 2015,2018, Mercer provided executive compensation services to the Company. The aggregate fees for such services were approximately $179,000.$349,500. In addition, Mercer provided services to the Company for investment and benefits consulting and retirement plan consulting. The aggregate fees for such services were approximately $110,000.$233,000.
Compensation Committee Interlocks and Insider Participation
During 2018, the following individuals served on the Compensation Committee for all or part of the year: Ms. Taylor, Dr. Illek and Messrs. W. Michael Barnes, Thomas Dannenfeldt, Guffey, Kübler, Swantee and Westbrook. No member of the Compensation Committee who served during 2018 was an officer or employee of the Company or any of its subsidiaries during the year, was formerly a Company officer or had any relationship otherwise requiring disclosure as a compensation committee interlock.
8 | T-Mobile 2019 Proxy Statement |
CORPORATE GOVERNANCE ATT-MOBILE
The Compensation Committee sets compensation based on the skills, experience and achievements of each executive officer, taking into account market analysis and input provided by its compensation consultant and the compensation recommendations of our Chief Executive Officer, except with respect to his own position. The
Compensation Committee believes that input from both its consultant and our Chief Executive Officer provides useful information and points of view to assist the Compensation Committee in determining the appropriate compensation.
Executive Committee
Chair: Timotheus Höttges | ||||
Additional Lawrence H. Guffey Dr. Christian P. Illek Bruno Jacobfeuerborn Raphael Kübler Thorsten Langheim John J. Legere | ||||
Meetings Held in *Per the Executive Committee’s charter, the Committee meets as often as it determines necessary | As more fully described in its charter, the primary responsibilities of the Executive Committee are to: ∎ Monitor the Company’s operating performance relative to its operating objectives, strategy, plans and actions ∎ Provide management with feedback regarding the Company’s operating objectives, strategy, plans, and actions, as well as the Company’s operating performance ∎ Consider strategic operating goals, opportunities and risks ∎ Recommend changes to the Company’s operating objectives, strategy, plans, and actions for consideration by the Board, as appropriate | |||
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The Executive Committee has been established by our Board of Directors to review and provide guidance to our senior management regarding our strategy, operating plans and operating performance.
Nominating and Corporate Governance Committee
Chair: Teresa A. Taylor Additional Members Lawrence H. Guffey Thorsten Langheim Meetings Held in 2018: 5 | As more fully described in its charter, the primary responsibilities of the Nominating and Corporate Governance Committee are to: ∎ Subject to the terms of the Company’s certificate of incorporation and the Stockholder’s Agreement, review, approve and recommend for Board consideration director candidates based on the director selection guidelines then in effect, and advise the Board with regard to the nomination or appointment of such director candidates ∎ Periodically review and make recommendations to the Board regarding the appropriate size, role and function of the Board ∎ Develop and oversee a process for an annual evaluation of the Board and its committees ∎ Monitor the process for preparing agendas for, organizing and running Board meetings (including the occurrence of regular executive sessions) in coordination with the Chairman of the Board and Chief Executive Officer ∎ Recommend to the Board, as appropriate, the number, type, functions, and structure of committees of the Board, and the chairperson of each such committee ∎ Periodically review the Company’s director orientation program and recommend changes, as appropriate ∎ Monitor, plan and support continuing education activities of the directors ∎ Develop, update as necessary and recommend to the Board corporate governance principles and policies |
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The Nominating and Corporate Governance Committee assists the Board of Directors with the process of identifying, recruiting, evaluating, and nominating candidates for membership to our Board and overseeing corporate governance principles and policies
applicable to the Company. In addition, the Nominating and Corporate Governance Committee oversees the functions and needs of the Board and its committees, including leading the annual Board and committee performance review.
T-Mobile | 9 |
CORPORATE GOVERNANCE
AT T-MOBILE
Board of Directors’ Role in Risk ManagementBOARD RISK OVERSIGHT
Management of the Company, including the Chief Executive Officer and other executive officers, is primarily responsible for managing the risks associated with the business, operations, and financial and disclosure controls. Financial,Management conducts a quarterly enterprise-wide risk assessment and considers financial, strategic, IT, technology, operational, compliance, legal/regulatory, and reputational risks to the CompanyCompany. In addition, Management conducts an annual fraud risk assessment. The results of these assessments are considered by management when it conducts its quarterly enterprise-wide risk assessment and are reviewed and updated regularly in connection with the operational, financial, and business activities of the Company.
As partManagement Has Established a Third-Party Risk Management Program
Management has established a centralized Third-Party Risk Management program to evaluate multiple aspects of the risk management process, management of the Company has establishedrelated to doing business with third parties, including, but not limited to, cybersecurity, geopolitical, privacy, financial, anti-corruption, and fourth-party risks.
Management Has Established an Enterprise Risk and Compliance Committee to help oversee activities in the areas ofand an Information Security and Privacy Council
The Enterprise Risk and Compliance Committee oversees risk management and compliance activities as a means of bringing risk issues to the attention of senior management. Responsibilities for risk management and compliance are distributed throughout various functional areas of the business, and the Enterprise Risk and Compliance Committee regularly meets and reviews the Company’s activities in these areas. In addition, the Company has established an
The Information Security and Privacy Council with support from the Vice President, Enterprise Information Security, who serves as the Chief Information Security Officer, and the Vice President, Chief Privacy Officer, to overseeoversees the strategic governance and prioritization of the Company’s information security and privacy initiatives.
OurSelective Delegation of Risk Oversight to Committees
While the full Board of Directors assesses Company risks and strategieshas overall responsibility for risk mitigation, and it manages itsoversight, the Board has delegated risk oversight function primarily, but not exclusively, through the Audit Committeeresponsibility for certain risks to committees of the Board. As such,On a regular basis, reports of all committee meetings are presented to the Board, and the Board periodically conducts deep dives on key enterprise risks.
Audit Committee
The Audit Committee has primary responsibility for overseeing the Company’s various risk assessment and risk management policies. In performing this function, theThe Audit Committee considers and discusses policies with respect to risk assessment and risk management, including the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
To assist the Audit Committee with its risk assessment function, the Senior Vice President, Internal Audit & Risk Management, who serves as the Chief Audit Executive, and the Vice President, Chief Compliance Officer have direct reporting communications channels to the Audit Committee, and have regular meetings with the Audit Committee and/or its members. They provide a quarterly enterprise-wide risk assessment and annual fraud and compliance risk assessments to the Audit Committee and update the Audit Committee on significant issues raised by the Enterprise Risk and Compliance Committee.
The Audit Committee reviews all enterprise risk assessments, provides feedback to executive management and may shareshares the risk assessments with the Board. The Audit Committee also has other oversight responsibilities with respect to the Company’s internal audit and SOX Compliance program, as well as other compliance and ethics programs, as more fully set out in its charter.
Compensation Committee
The Compensation Committee has certain oversight responsibilities with respect to the assessment of risk in
connection with our compensation programs. The Executive Committee of the Board, charged with reviewing and providing guidance to senior management of the Company regarding the Company’s strategy, operating plans and operating performance, also plays a key role in helping the Board perform its risk oversight function by considering strategic operating goals, opportunities and risks. In addition, the Nominating and Corporate Governance Committee oversees Board process and corporate governance-related risks. Finally, reports of all committee meetings are presented to the Board on a regular basis.
Risk Assessment of Compensation Programs. The Company designs the compensation programs to encourage appropriate risk taking while discouraging behavior that may result in unnecessary or excessive risk. In this regard, the following elements have been incorporated in our compensation programs for executive officers:
Use of multiple metrics in annual incentive plan and use of two long-term incentive vehicles for executive officers
Each annual incentive award metric capped at 200%
Performance-based share awards capped at 200%
Emphasis on long-term and performance-based compensation
Compensation Committee has discretion to reduce incentive awards, as appropriate
Long-term incentive awards vest ratably over three years or performance vest at end of performance period
Formal clawback policy applicable to both cash and equity compensation
Alignment of interests of our executive officers with the long-term interests of our stockholders through stock ownership guidelines that call for significant share ownership
Generally no supplemental benefits or perquisites for executive officers
The Compensation Committee periodically reviews with management an assessment of whether risks arising from the Company’s compensation policies and practices for all employees are reasonably likely to have a material adverse effect on the Company, as well as the means by which any potential risks may be mitigated, such as through governance and oversight policies. The Company designs the compensation programs to encourage appropriate risk-taking while discouraging behavior that may result in unnecessary or excessive risk. In this regard, the following elements have been incorporated in our compensation programs for executive officers:
∎ | Use of multiple metrics in the annual incentive plan and use of two long-term incentive vehicles (time-based and performance-based) for executive officers |
∎ | Annual incentive award payouts capped at 200% of target |
∎ | Performance-based long-term incentive awards capped at 200% of target |
∎ | Emphasis on long-term and performance-based compensation |
∎ | Compensation Committee has discretion to reduce incentive awards, as appropriate |
∎ | Alignment of interests of our executive officers with the long-term interests of our stockholders through stock ownership guidelines that call for significant share ownership by our executive officers |
∎ | Formal clawback policy applicable to both cash and equity compensation |
∎ | Generally, long-term incentive awards vest ratably over three years or at the end of a three-year performance period |
∎ | No excessive perquisites for executive officers |
∎ | Based on an assessment conducted by management consultant Willis Towers Watson, which was presented to and discussed with the Compensation Committee, management concluded that our compensation policies and practices for all employees do not create risks that are reasonably likely to have a material adverse effect on the Company. |
Executive Committee
The Executive Committee reviews and provides guidance to senior management regarding the Company’s strategy, operating plans and operating performance. The Executive Committee also plays a key role in helping the Board perform its risk oversight function by considering strategic operating goals, opportunities and risks.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee oversees Board process and corporate governance-related risks.
10 | T-Mobile 2019 Proxy Statement |
CORPORATE GOVERNANCE ATT-MOBILE
Director CompensationDIRECTOR COMPENSATION
Non-Employee Director Compensation Program
Each directorOur“non-employee directors”—directors who isare not an employeeemployees of the Company or an officerofficers or employeeemployees of Deutsche Telekom (a “non-employee director”) isTelekom—are eligible to participate in the Company’snon-employee director compensation program. The main features of this program, outlined in more detail below, are:
A larger allocation to equity-based compensation than cash
All equity-based compensation is subject to a vesting period
Substantial stock ownership guidelines of five times his or her annual cash retainer
described below. The Compensation Committee periodically reviews the compensation of ournon-employee directors. As part of the review, the Compensation Committee engages Mercer to assess ournon-employee director compensation program in comparison to our peer group as discussed in “— Executive Compensation — (see “Executive Compensation—Factors Considered in Determining Executive Compensation — Compensation—Executive Compensation Peer Group.”Group” for more information on our peer group). Based on such assessment, the
non-employee director compensation program is adjusted as appropriate to ensure alignment with market practices.
Key Features of OurNon-Employee Director Compensation Program
∎ | A larger allocation of total director compensation to equity-based compensation rather than cash compensation |
∎ | All equity-based compensation is subject to a vesting period |
∎ | Substantial stock ownership guidelines of five times thenon-employee director’s annual cash retainer |
Annual cash retainers are subject to proration for any person who becomes a non-employee director and/or committee chair at any time of the year other than the date of the Company’s Annual Meeting of Stockholders. Directors also receive reimbursement of expenses incurred in connection with their Board service.
Elements ofNon-Employee Director Compensation | Amount ($) | |||
Annual cash retainer | 120,000 | |||
Additional annual cash retainer for: | ||||
Lead Independent Director | 35,000 | |||
Audit Committee Chair | 50,000 | |||
Compensation Committee Chair | 25,000 | |||
Nominating and Corporate Governance Committee Chair | 15,000 | |||
Additional Retainer for Audit Committee Members (Other Than Chair) | 15,000 | |||
Annual award of Restricted Stock Units | 195,000 | |||
Additional cash amounts for each Board and committee meeting in excess of 10 meetings per year: | ||||
In person | 2,000 | |||
By telephone | 1,000 | |||
Under our current non-employee director compensation program, immediately after each Annual Meeting of Stockholders, each non-employee director receives an
The annual award of restricted stock units (“RSUs”) with a value of $160,000 (rounded up to the nearest share number), with pro rata awards for non-employee directors joining the Board at any time other than the date of theis made immediately after each Annual Meeting of Stockholders. The RSUs vest on theone-year anniversary of the grant date or, for directors not standing forre-election, on the date of the next Annual Meeting of Stockholders, for directors not standing for re-election.subject to continued service as anon-employee director through the vesting date. In the event of a director’s termination of service prior to vesting, all RSUs are automatically forfeited. The RSUs immediately vest on the date of a change in control of the Company.
Annual cash retainers and the annual RSU award are prorated for any person who becomes anon-employee director and/or committee chair, or who otherwise becomes entitled to an additional annual cash retainer as described above, at any time of the year other than the date of the Company’s Annual Meeting of Stockholders.Non-employee directors also receive reimbursement of expenses incurred in connection with their Board service and are eligible to receive up to two handsets per year and up to ten10 lines of U.S. service pursuant to the Board of Directors Phone Perquisite Program.
Our Directors Are Required to Acquire and Maintain Ownership of Shares ofT-Mobile
Under our stock ownership guidelines, eachnon-employee director is expected to acquire and maintain ownership of shares of common stock equal in value to five times his or her annual cash retainer for Board service measured as of the later of (i) the date we adopted the policy (May 1, 2013) and (ii) the date on which he or she becomes anon-employee director. Eachnon-employee director is expected to meet the ownership guidelines within the later of (i) five years from the date we adopted the policy and (ii) the date on which he or she became anon-employee director, and is expected to retain at least 50% of the net shares of common stock acquired through equity awards until the ownership threshold is met.
The following table summarizes the compensation payable to the Company’s non-employee directors:
∎ | As of December 31, 2018, allnon-employee directors were in compliance with our stock ownership guidelines. |
T-Mobile 2019 Proxy Statement | |||||
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CORPORATE GOVERNANCE AT T-MOBILE
2015 2018Non-Employee Director Compensation Table
During fiscal year 2015,2018, the Company’snon-employee directors received the following compensation for their services:
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | All Other Compensation ($) (2) | Total ($) |
Fees Earned or
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W. Michael Barnes | 109,753 | 160,008 | 3,107 | 272,868 | ||||||||||||||||||||||||||||
W. Michael Barnes(1) | 70,750 | 178,798 | 7,221 | 256,769 | ||||||||||||||||||||||||||||
Srikant M. Datar | 155,753 | 160,008 | 2,537 | 318,298 | 198,000 | 178,798 | 4,195 | 380,993 | ||||||||||||||||||||||||
Lawrence H. Guffey | 112,753 | 160,008 | 4,028 | 276,789 | 137,000 | 178,798 | 9,471 | 325,269 | ||||||||||||||||||||||||
Olaf Swantee(2) | 65,918 | — | — | 65,918 | ||||||||||||||||||||||||||||
Teresa A. Taylor | 155,753 | 160,008 | — | 315,761 | 193,250 | 178,798 | 11,217 | 383,265 | ||||||||||||||||||||||||
Kelvin R. Westbrook | 126,658 | 160,008 | 3,823 | 290,489 | 174,500 | 178,798 | 12,445 | 365,743 |
(1) | Mr. Barnes was not nominated forre-election and his Board service ended on June 13, 2018, the date of the 2018 Annual Meeting of Stockholders. |
(2) | Mr. Swantee was elected to the Board on June 13, 2018, the date of the 2018 Annual Meeting of Stockholders. |
(3) | Includes meeting fees earned as an Independent Committee member. |
(4) | The value of stock awards is determined using the aggregate grant date fair value computed in accordance with |
Includes (i) phone perquisites under the Board of Directors Phone Perquisite Program, (ii) personal and spousal travel expenses in connection with a Board meeting, |
CORPORATE GOVERNANCE
Non-Employee Director Stock Ownership Guidelines
Under our stock ownership guidelines, each non-employee director is expected to acquire and maintain ownership of shares of common stock equal in value to five times his or her annual retainer measured as of May 1, 2013, for non-employee directors serving on that date or as of the date Board service commences for any non-employee director joining the Board after May 1, 2013. Each non-employee
director is expected to meet the ownership guidelines within five years from the applicable measurement date, and is expected to retain at least 50% of the net shares of common stock acquired through the Company’s equity compensation plans until the ownership threshold is met.
Director Nomination, Selection and Qualifications
Qualifications and Diversity
Subject to Deutsche Telekom’s board designation rights, the Nominating and Corporate Governance Committee is responsible for identifying and evaluating director nominees and recommending to the Board of Directors a slate of nominees for election at each Annual Meeting of Stockholders. The Board has adopted director selection guidelines, which the Nominating and Corporate Governance Committee considers in evaluating each director candidate.
The Nominating and Corporate Governance Committee considers, among others, the following factors:
Professional experience, industry knowledge, skills and expertise;
Leadership qualities, public company board and committee experience and non-business-related activities and experience;
High standard of personal and professional ethics, integrity and values;
Training, experience and ability at making and overseeing policy in business, government and/or education sectors;
Willingness and ability to keep an open mind when considering matters affecting interests of the Company and its constituents;
Willingness and ability to devote the required time and effort to effectively fulfill the duties and responsibilities related to Board and committee membership;
Willingness and ability to serve on the Board for multiple terms, if nominated and elected, to enable development of a deeper understanding of the Company’s business affairs;
∎ | Professional experience, industry knowledge, skills and expertise |
∎ | Leadership qualities, public company board and committee experience andnon-business-related activities and experience |
∎ | High standard of personal and professional ethics, integrity and values |
∎ | Training, experience and ability at making and overseeing policy in business, government and/or education sectors |
∎ | Willingness and ability to: |
∎ | keep an open mind when considering matters affecting interests of the Company and its constituents |
∎ | devote the required time and effort to effectively fulfill the duties and responsibilities related to Board and committee membership |
∎ | serve on the Board for multiple terms, if nominated and elected, to enable development of a deeper understanding of the Company’s business affairs |
∎ | Willingness not to engage in activities or interests that may create a conflict of interest with a director’s responsibilities and duties to the Company and its constituents |
∎ | Willingness to act in the best interests of the Company and its constituents and to objectively assess Board, committee and management performances |
Willingness not to engage in activities or interests that may create a conflict of interest with a director’s responsibilities and duties to the Company and its constituents; and
Willingness to act in the best interests of the Company and its constituents and to objectively assess Board, committee and management performances.
Diversity is one of many factors under our director selection guidelines that the Nominating and Corporate Governance Committee considers when evaluating potential director candidates. However, we do not have a formal policy with respect to diversity on the Board. Our director selection guidelines define diversity broadly to include not just factors such as gender and race, but also factors such as age, ethnic, geographic, cultural and professional diversity.
In connection with its general responsibility to monitor and advise the Board on the size, role, function and composition of the Board, the Nominating and Corporate Governance Committee will periodically consider whether the Board represents the overall mix of skills and characteristics described in the director selection guidelines, including diversity and the other factors described above. Subject to Deutsche Telekom’s board designation rights, the selection process for director candidates is intended to be flexible, and the Nominating and Corporate Governance Committee, in the exercise of its discretion, may deviate from the selection process when particular circumstances warrant a different approach.
Nomination Process
In addition to candidates designated by Deutsche Telekom, the Nominating and Corporate Governance Committee may consider possible director candidates from a number of sources, including those recommended by stockholders, directors, or officers. In addition, the Nominating and Corporate Governance Committee may engage the services of outside consultants and search firms to identify potential director candidates.
A stockholder who wishes to suggest a director candidate for consideration by the Nominating and Corporate Governance
Committee should submit the suggestion to the Chair of the Nominating and Corporate Governance Committee, care of our Corporate Secretary, at 12920 SE 38th Street, Bellevue, Washington 98006, and include the candidate’s name,
12 | T-Mobile 2019 Proxy Statement |
CORPORATE GOVERNANCE AT T-MOBILE
biographical data, relationship to the stockholder and other relevant information. The Nominating and Corporate Governance Committee may request additional information about the suggested candidate and the proposing stockholder. Subject to Deutsche Telekom’s board designation
rights, the full Board of Directors will approve all final nominations after considering the recommendations of the Nominating and Corporate Governance Committee.
T-Mobile 2019 Proxy Statement | 13 |
Proposal 1 - Election of Directors
2019 Director Nominees
The following persons, eachBoard has nominated 12 directors for election at the Annual Meeting to serve as directors for terms that would end at the 2020 Annual Meeting of whom is currentlyStockholders. Olaf Swantee has not been nominated for re-election and his Board service will end on the date of the Annual Meeting. The Board would like to recognize Mr. Swantee for his services and contributions as a member of the Board. The Board has nominated a new director for election, Srini Gopalan. If elected, Mr. Gopalan’s term will begin on June 13, 2019. Other than Dr. Illek and Mr. Gopalan, all nominees were elected at the 2018 Annual Meeting of T-Mobile, have beenStockholders.
Each nominee was nominated by the Board of Directors on the recommendation of the Nominating and Corporate Governance Committee for election at the Annual Meeting to serve as a director for a term that would end at the 2017 Annual Meeting of Stockholders.Committee. The Board has found each nominee to be qualified based on his or her qualifications, experience, attributes, skills and overall service during the director’s term, including the number of meetings attended, his or her level of participation, the quality of his or her performance and whether he or she meets the applicable independence standards. Each of the nominees has consented to stand for election and we do not anticipate any candidate will be unavailable to serve. In the event that any of the nominees should be unavailable for election as a result of an unexpected occurrence, shares may be voted for the election of such substitute nominee as
the Board of Directors may nominate. In the alternative, if a vacancy remains, the Board may fill such vacancy at a later date or reduce the size of the Board, subject to certain requirements in our certificate of incorporation. The Board knows of no reason why any of the nominees would be unavailable or unable to serve.
Messrs. Dannenfeldt, Höttges, Gopalan, IIlek, Jacobfeuerborn, Kübler, Langheim and Westbrook and Ms. Taylor were designated for nomination by Deutsche Telekom pursuant to its rights under our certificate of incorporation and the Stockholder’s Agreement.
Required Vote
Under our bylaws, directors are elected by a plurality of the votes cast by stockholders entitled to vote on the election of directors at the Annual Meeting. Shares represented by executed proxies received by the Company will be voted, unless otherwise marked withheld, “FOR” the election of each of the nominees.
Nominees
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PROPOSAL 1 – ELECTION OF DIRECTORS
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Director 2013
65 Other Public Company Boards: ∎ Novartis AG ∎ ICF International Inc. ∎ Stryker Corporation
Board ∎ Audit (Chair)
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Srikant M. Datar Arthur Lowes Dickinson Professor at the Graduate School of Business Administration at Harvard University; Senior Associate Dean for University Affairs
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Mr. Datar is the Arthur Lowes Dickinson Professor at the Graduate School of Business Administration at Harvard University. Mr. Datar is a Chartered Accountant and planner in industry, and has been a professor of accounting and business administration at Harvard since July 1996; he previously served as a professor at Stanford University and Carnegie Mellon University. Mr. Datar received gold medals upon his graduation from the Indian Institute of Management, Ahmedabad, and the Institute of Cost and Works Accountants of India. Mr. Datar Qualifications and Skills Supporting Election to the Board: ∎ Expertise in accounting, governance and risk management ∎ Public company director and committee experience ∎ Academic and commercial perspective on complex issues | ||||||
14 | T-Mobile 2019 Proxy Statement |
PROPOSAL 1 –- ELECTION OF DIRECTORS
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Age: 48 Other Public Company Boards: ∎ Hellenic Telecommunications Organization (OTE) | Srini Gopalan Member of the Board of Management Deutsche Telekom AG for Europe Biography: Since January 1, 2017, Mr. Gopalan has served as a member of the Board of Management Deutsche Telekom AG, our majority stockholder and a leading integrated telecommunications company. He is responsible for the Europe segment of the company. From September 2013 to September 2016, he served as the Consumer Director at Bharti Airtel in India, where he was responsible for consumer business that covered broadband connections and satellite TV, in addition to mobile communications. Prior to joining Bharti Airtel, from August 2010 to August 2013, he was the Consumer Director at Vodafone UK. Prior to that, from June 2009 to August 2010, he was the Chief Marketing Officer at T-Mobile UK and was part of the management team that led T-Mobile UK to the joint venture with Orange Communications SA, “everything-everywhere”. Prior to that, between 1999 and 2009, Mr. Gopalan worked at Capital One in several functions – starting as Senior Vice President, Head of UK Card and leaving as Managing Director UK. Mr. Gopalan studied Business Administration at St. Stephen’s College in New Delhi, India and later received a Master of Business Administration at Indian Institute of Management Ahmedabad in Ahmedabad, India. Qualifications and Skills Supporting Election to the Board:
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Director 2013
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Board ∎ Compensation ∎ Executive ∎ Nominating and Corporate Governance |
Lawrence H. Guffey Chief Executive Officer of LG Capital Investors LLC
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Mr. Guffey is Chief Executive Officer of LG Capital Investors LLC, a He holds a Bachelor of Arts and graduatedmagna cum laude Qualifications and Skills Supporting Election to the Board: ∎ Core financial and business skills ∎ Experience overseeing investments in media and communications industries ∎ Public company director and committee experience |
| T-Mobile 2019 Proxy Statement | 15 |
PROPOSAL 1 - ELECTION OF DIRECTORS
Director 2013
56
Other Company Boards:
∎ BT Group plc
Board Committees:
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Timotheus Höttges Chief Executive Officer of Deutsche Telekom Biography:
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Since January 2014, Mr. Höttges has served as Chief Executive Officer of Deutsche Telekom, our majority stockholder and a leading integrated telecommunications company. From March 2009 to December 2013, he served as Deutsche Telekom’s Chief Financial Officer Mr. Höttges studied Business Administration at the University of Cologne. |
Qualifications and Skills Supporting Election to the Board: ∎ Chief executive officer of major global communications company ∎ Core finance, business and leadership skills | ||||
PROPOSAL 1 – ELECTION OF DIRECTORS
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Director 2018
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Board ∎ Compensation ∎ Executive |
Christian P. Illek Chief Financial Officer of Deutsche Telekom
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Since April 2015, he has served as Chief Human Resources Officer and Member of Management Board of Deutsche Telekom. Dr. Illek has also served as Chairman of the Supervisory Board forT-Systems International GmbH since November 2016 (a subsidiary of Deutsche Telekom). Prior to that, Dr. Illek was Chairman of Management Board at Microsoft Germany from September 2012 to March 2015. From April 2010 to September 2012, he was Director of Marketing at Telekom Deutschland GmbH. In this position, he was responsible for all marketing activities for both consumers and business customers in Germany. He was also in charge of the Wholesale Center and the Value-Added Services Center, as well as international product development for Deutsche Telekom’s fixed-network, IPTV, a convergent and business customer portfolio. Before joining Deutsche Telekom, Dr. Illek held various managerial positions at Bain & Company and at Dell, in both Germany and in Switzerland. Dr. Christian P. Illek studied chemistry and business administration in Düsseldorf and Munich, beginning his career at the University of Munich in 1989. Qualifications and Skills Supporting Election to the Board: ∎ Expertise in global telecommunications industry ∎ Expertise in human resources, business and finance |
16 | T-Mobile 2019 Proxy Statement |
PROPOSAL 1 - ELECTION OF DIRECTORS
Director Since: 2014 Age: 58 Board Committees: ∎ Executive | Bruno Jacobfeuerborn Chief Executive Officer of DFMG Deutsche Funkturm GmbH and Chief Executive Officer of Comfortcharge GmbH Biography: Mr. Jacobfeuerborn has been Chief Executive Officer of DFMG Deutsche Funkturm GmbH since January 2017 and Chief Executive Officer of Comfortcharge GmbH since January 2018. Previously, he served as the Chief Technology Officer of Deutsche Telekom AG from February |
Qualifications and Skills Supporting Election to the Board: ∎ Expertise in global telecommunications industry ∎ Wireless network and technology expertise ∎ Core finance, business and leadership skills | ||||||
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Director 2013
56 Other Public Company Boards: ∎ Ströer SE & Co. KGaA ∎ Hellenic Telecommunications Organization (OTE) (2013-2018)
Board ∎ Compensation
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Raphael Kübler Senior Vice President of the Corporate Operating Office of Deutsche Telekom Biography:
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In January 2014, Mr. Kübler assumed the position of Senior Vice President of the Corporate Operating Office of Deutsche Telekom, our majority stockholder and a leading integrated telecommunications company, and he reports directly to the Chief Executive Officer of Deutsche Telekom. From July 2009 to December 2013, Mr. Kübler served as Mr. Kübler studied Business Administration at H.E.C. in Paris and the Universities of Bonn and Cologne. He holds a doctoral degree from the University of Cologne. Qualifications and Skills Supporting Election to the Board: ∎ Expertise in global telecommunications industry ∎ Core business, management and leadership skills ∎ Complex financial management experience |
T-Mobile 2019 Proxy Statement | 17 |
PROPOSAL 1 –- ELECTION OF DIRECTORS
| ||||
53
Board ∎ Executive ∎ Nominating and Corporate Governance |
Thorsten Langheim Member of the Deutsche Telekom AG Board of Management, USA and
| |||
Prior to that, from 2009 to December 2018, he first served as Senior Vice President of Corporate Development and then as Executive Vice President Group Development at Deutsche Telekom. Prior to his Mr. Langheim is a member of the Supervisory Board of Mr. Langheim holds a Master of Science degree in International Securities, Investment and Banking from the ISMA Centre for Education and Research at the University of |
Qualifications and Skills Supporting Election to the Board: ∎ Expertise in global telecommunications industry ∎ Experience overseeing telecommunications and technology investments ∎ Corporate strategy and M&A experience | ||||||
| ||||||
|
2013
60
Board ∎ Executive
|
John J. Legere
Biography:
| ||||
Mr. Legere joinedT-Mobile USA in September 2012 as President and Chief Executive Officer and became our President and Chief Executive Officer on April 30, 2013 upon the consummation of the Mr. Legere Qualifications and Skills Supporting Election to the Board: ∎ Chief Executive Officer ofT-Mobile ∎ Expertise in telecommunications and technology industries |
PROPOSAL 1 –- ELECTION OF DIRECTORS
2018 Age: 49 Other Public Company Boards: ∎ Shaw Communications | G. Michael (Mike) Sievert President and Chief Operating Officer ofT-Mobile US, Inc. Biography: Mr. Sievert serves as our President and Chief Operating Officer. Mr. Sievert is responsible for guiding all customer-facing operations across the business, including marketing, product development, retail management, sales and customer care for all of our direct and indirect channels and each of our brands. Mr. Sievert served as our Executive Vice President and Chief Marketing Officer from April 2013 to February 2015, and from November 2012 to April 2013, Mr. Sievert was Executive Vice President and Chief Marketing Officer ofT-Mobile USA. Prior to joiningT-Mobile USA, Mr. Sievert was an entrepreneur and investor involved with several Seattle-areastart-up companies. From April 2009 to June 2011, he was Chief Commercial Officer at Clearwire Corporation, a broadband communications provider, responsible for all customer-facing operations. From February 2008 to January 2009, Mr. Sievert wasco-founder and Chief Executive Officer of Switchbox Labs, Inc., a consumer technologies developer, leading up to its sale to Lenovo. He also served from January 2005 to February 2008 as Corporate Vice President of the worldwide Windows group at Microsoft Corporation, responsible for global product management and P&L performance for that unit. Prior to Microsoft, he served as Executive Vice President and Chief Marketing Officer at AT&T Wireless for three years. He also served as Chief Sales and Marketing Officer at E*TRADE Financial and began his career with management positions at Procter & Gamble and IBM. He has served on the boards of Rogers Wireless Communications in Canada, Switch & Data Corporation, and a number of technologystart-ups. Mr. Sievert holds a bachelor’s degree in Economics from the Wharton School at the University of Pennsylvania. Qualifications and Skills Supporting Election to the Board: ∎ President and Chief Operating Officer ofT-Mobile ∎ Expertise in telecommunications and technology industries | |||
|
2013
55
Other Company Boards:
∎ Black Hills Corporation ∎ NiSource Inc. (2012 to 2015)
∎ Nominating and Corporate Governance (Chair) ∎ Audit |
Teresa A. Taylor Chief Executive Officer of Blue Valley Advisors, LLC Biography:
| ||||
Since April 2011, Ms. Taylor has served as Chief Executive Officer of Blue Valley Advisors, LLC, an advisory firm. Ms. Taylor served as Chief Operating Officer of Qwest Communications, Inc., a telecommunications carrier, from August 2009 to April 2011. She served as Qwest’s Executive Vice President, Business Markets Group, from January 2008 to April 2009 and served as its Executive Vice President and Chief Administrative Officer from December 2005 to January 2008. Ms. Taylor served in various positions with Qwest and the former US West beginning in 1987. During her24-year tenure with Qwest and US West, she held various leadership positions and was responsible for strategic planning and execution, sales, marketing, product, network, information technology, human resources and corporate communications. Ms. Taylor Qualifications and Skills Supporting Election to the Board: ∎ Expertise in technology, media and telecommunications industries ∎ Expertise in strategic planning and execution, technology development, human resources, labor relations and corporate communications ∎ Public company director and committee experience | ||||||
| T-Mobile 2019 Proxy Statement | 19 |
PROPOSAL 1 - ELECTION OF DIRECTORS
Director 2013
63 Other Public Company Boards: ∎ Archer Daniels Midland Company ∎ Camden Property Trust ∎ The Mosaic Company ∎ Stifel Financial Corp. (2007 to 2018)
Board ∎ Compensation (Chair)
Audit |
Kelvin R. Westbrook President and
| |||||
Mr. Westbrook is President and Chief Executive Officer of KRW Advisors, LLC, a consulting and advisory firm, a position he has held since October 2007. Mr. Westbrook also served as Chairman and Chief Strategic Officer of Millennium Digital Media Systems, L.L.C. (“MDM”), a broadband services company that later changed its name to Broadstripe LLC, from September 2006 until October 2007. Mr. Westbrook was also President and Chief Executive Officer of MDM from May 1997 until October 2006. Broadstripe LLC (formerly MDM) and certain of its affiliates filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in January 2009, approximately Mr. Westbrook Qualifications and Skills Supporting Election to the Board: ∎ Expertise in the telecommunications industry ∎ Core legal, media, marketing and risk analysis skills ∎ Public company director and committee experience |
The Board of Directors recommends that you vote
“FOR”
the election of each of the above-named nominees.
T-Mobile 2019 Proxy Statement |
Executive Officers
The following sets forth information regarding the executive officers of the Company. Biographical information pertaining to Mr.Messrs. Legere and Sievert, who isare both an executive officerofficers and a directordirectors of the Company, can be found in the Section entitled “Proposal 1—Election of Directors.”
Name | Age | Position | |||||||||
John J. Legere | 60 | Chief Executive Officer | |||||||||
G. Michael Sievert | 49 | President and Chief Operating Officer | |||||||||
David R. Carey | 65 | Executive Vice President, Corporate Services | |||||||||
J. Braxton Carter | 60 | Executive Vice President and Chief Financial Officer | |||||||||
Peter A. Ewens | 56 | Executive Vice President, Corporate Strategy | |||||||||
Thomas C. Keys | 60 | President, | |||||||||
David A. Miller | 58 | Executive Vice President, General Counsel and Secretary | |||||||||
| 56 | ||||||||||
Executive Vice President and Chief Technology Officer | |||||||||||
| 56 | Executive Vice President, Human Resources |
David R. Carey
Mr. Carey serves as our Executive Vice President, Corporate Services and is responsible for leading the Enterprise Program Office, Corporate Communications, Corporate Real Estate, Corporate Responsibility, Corporate Security and a broad range of responsibilities in leading the Office of the Chief Executive Officer Staff.Officer. Mr. Carey has also served in the same role withT-Mobile USA, Inc., the wholly owned subsidiary of the Company(“T-Mobile USA”), since MarchFebruary 2013. Mr. Carey’s career spans 44 years in the telecom and energy services industry. Before joiningT-Mobile USA, from October 2011 to MarchFebruary 2013, Mr. Carey served as the Chief Executive Officer and Founder of TeleScopeTelescope Advisors, LLC, an advisory firm specializing in telecommunications. From September 1999 to October 2011, Mr. Carey served asin various executive positions, including Executive Vice President, Chief Marketing Officer, Head of Global Sales, Strategy and Corporate Development and Chief Ethics Officer at Global Crossing Limited, a telecommunications company, from September 1999company. In addition to October 2011. Mr. Carey’s career spans 35 years in the telecom and energy services industries. HisGlobal Crossing, his experience in telecom includes executive leadership positions at AT&T, LG&E Energy and Frontier Communications and Global Crossing. He currently serves on the Board of Directors of Wind Mobile, Canada and on the telecommunications and media advisory board of Hewlett-Packard Corporation.Communications. Mr. Carey holds a Master of Science in Management Science from the Massachusetts Institute of Technology, where he was appointed to a Sloan Fellowship, and received his Bachelor of Science degree at Clarkson University. He has also attended executive programs at the Harvard Business School and the Wharton School at the University of Pennsylvania.
J. Braxton Carter
Mr. Carter serves as our Executive Vice President and Chief Financial Officer, and is responsible for leading the financial functions of the Company. Mr. Carter served as MetroPCS’sMetroPCS Communications, Inc.’s Chief Financial Officer from March 2005 until the consummation of the BusinessMetro Combination. Mr. Carter also served as MetroPCS’sMetroPCS Communications Inc.’s Vice Chairman from May 2011 until the consummation of the BusinessMetro Combination. From February 2001 to March 2005 he was Vice President, Corporate Operations of MetroPCS.MetroPCS Communications, Inc. Mr. Carter also has extensive senior management experience in the wireless and retail industry and spent ten years in public accounting. Mr. CarterHe is a certified public accountant. Mr. Carter presently serves on the Board of Alumni for the Leeds School of Business of the University of Colorado. Mr. Carter receivedholds a Bachelor of Science degree from the University of Colorado with a major in accounting.
Peter A. Ewens
Mr. Ewens serves as our Executive Vice President, Corporate Strategy. He leads the Company’s corporate strategy, business development and M&A activities, which include spectrum strategy and acquisitions andco-brand partnerships. Mr. Ewens has also served as Executive Vice President and Chief Strategy Officer ofT-Mobile USA since July 2010. From April 2008 until July 2010, Mr. Ewens was Senior Vice President, Corporate Strategy atT-Mobile USA. Before joiningT-Mobile USA, Mr. Ewens was Vice President of OEM Business at Sun Microsystems, a computer software and information technology services company, from June 2006 through March 2008. Before that, Mr. Ewens was a partner at McKinsey & Company, a global management consulting firm. Mr. Ewens receivedholds a Master of Science in Management from the Sloan School at Massachusetts Institute of Technology, and Master’s and Bachelor’sbachelor’s degrees in Electrical Engineering from the University of Toronto.
Thomas C. Keys
Mr. Keys serves as our President, T-Mobile Indirect Channels,MetroPCS, and is responsible for leading our partner relationships, including dealers, for the Metro byT-Mobile and MetroPCS brands. business. Previously, Mr. Keys served as our Executive Vice President and Chief Operating Officer, MetroPCS Business, from April 2013 to February 2015. Mr. Keys served as MetroPCS’sMetroPCS Communications Inc.’s President from May 2011 until the consummation of the BusinessMetro Combination, and as Chief Operating Officer since June 2007. Mr. Keys also served as MetroPCS’sMetroPCS Communications Inc.’s President from June 2007 to December 2007, as Senior Vice President, Market Operations, West, from January 2007 until June 2007, and as Vice President and General Manager, Dallas, from April 2005 until January 2007. Mr. Keys receivedholds a Bachelor of Arts degree from the State University of New York at Oswego, and a Master of Arts from Syracuse University.
David A. Miller
Mr. Miller serves as our Executive Vice President, General Counsel and Secretary. Mr. Miller oversees all legal affairs and government affairs functions of the Company. Mr. Miller has also served asT-Mobile USA’s Chief Legal Officer, Executive Vice President, General Counsel and Secretary. Mr. Miller was appointed Senior Vice President and General Counsel ofT-Mobile USA in April 2002 and Executive Vice President in
T-Mobile 2019 Proxy Statement | 21 |
EXECUTIVE OFFICERS
January 2011. Previously, Mr. Miller served as Director of Legal Affairs for Western Wireless (a predecessor toT-Mobile USA) from March 1995 to May 1999, and he became Vice President of Legal Affairs of VoiceStream in May 1999 following itsspin-off from Western Wireless. VoiceStream was acquired by Deutsche Telekom in May 2001, when it becameT-Mobile USA. Prior to joining Western Wireless, Mr. Miller was an attorney with the law firm of Lane Powell and began his law career as an attorney with the firm McCutchen, Doyle, Brown and Enersen. Mr. Miller serves on the Board of Directors of the Competitive Carriers Association and is a member of its Executive Committee. Mr. Miller receivedholds a Bachelor’sbachelor’s degree in Economics from the University of Washington and a Juris Doctor from Harvard Law School.
Larry L. Myers serves as our Executive Vice President, Human Resources. Mr. Myers is responsible for leading the human resources function that supports our employees across the country. Mr. Myers has also served as Executive Vice President of Human Resources and Chief People
EXECUTIVE OFFICERS
Officer of T-Mobile USA since June 2008. From January 2001 to May 2008, Mr. Myers served as Senior Vice President of human resources for Washington Group International, a corporation that provided integrated engineering, construction, and management services to businesses and governments around the world. Mr. Myers has more than 36 years of experience in human resources management. Mr. Myers received Bachelor degrees in sociology and business administration from Idaho State University.
Neville R. Ray
Mr. Ray serves as our Executive Vice President and Chief Technology Officer. Mr. Ray joinedT-Mobile USA then VoiceStream,(then VoiceStream) in April 2000 and since December 2010 has served as its Chief Technology Officer, responsible for the national management and development of theT-Mobile USA wireless network and the Company’s ITcompany’s information technology services and operations. Prior to joiningT-Mobile USA, from September 1996 to September 1999, Mr. Ray served as Network Vice President for Pacific Bell Mobile Services. He currently serves on the Board of Directors of Next Generation Mobile Networks Alliance, a mobile telecommunications association of mobile operators, vendors, manufacturers and research institutes, and as the Chairperson of 4Gthe Board of Governors of 5G Americas, which promotesa mobile telecommunications association of mobile operators, vendors, and facilitatesmanufacturers. Both
associations have a focus on the seamless deployment throughout the Americasadvancement and development of the 3GPP family of5G technologies including HSPA, HSPA+, and LTE.services. He has alsopreviously served as a member of the National Telecommunications and Information Administration’s Commerce Spectrum Management Advisory Committee and the Federal Communications Commission’s Communications Security, Reliability and Interoperability Council. Mr. Ray is an honors graduate of The City University of London and a member of the Institution of Electrical and Electronic Engineers and the Institution of Civil Engineers.
Elizabeth A. McAuliffe
G. Michael (Mike) SievertMs. McAuliffe serves as our Chief Operating Officer. Mr. Sievert is responsible for guiding all customer-facing operations across the business, including marketing, product development, retail management, sales and customer care for all of our direct and indirect channels and each of our brands. Mr. Sievert served as our Executive Vice President, and Chief Marketing Officer from April 2013 to February 2015 and from November 2012 to April 2013, Mr. Sievert was Executive Vice President and Chief Marketing Officer of T-Mobile USA. Prior to joining T-Mobile USA, Mr. Sievert was an entrepreneur and investor involved with several Seattle-area start-up companies.Human Resources. Ms. McAuliffe is responsible for leading the human resources function that supports our employees across the country. From April 2009January 2014 to June 2011, he was Chief Commercial Officer at Clearwire Corporation, a broadband communications provider, responsible for all customer-facing operations. From February 2008 to January 2009, Mr. Sievert was co-founder and Chief Executive Officer of Switchbox Labs, Inc., a consumer technologies developer, leading up to its sale to Lenovo. He also2016 she served from January 2005 to February 2008 as CorporateSenior Vice President of the worldwide Windows groupTotal Rewards and Operations, encompassing leadership of all compensation, Rewards & Recognition, benefits, payroll, human resources systems and human resources operations. From June 2013 to January 2014, she served as Vice President, CHRO Regions, at Microsoft Corporation, responsible for global product management and P&L performance for that unit.Providence Health & Services, a nonprofit health system. From January 2011 to June 2013, she served as Senior Vice President, Human Resources atT-Mobile. Prior to Microsoft, he served as Executive Vice President and Chief Marketing Officer at AT&T Wireless for three years. He also served as Chief Sales and Marketing Officer at E*TRADE Financial and began his career with managementjoiningT-Mobile, Ms. McAuliffe held various positions at ProcterStarbucks Coffee Company, a coffee retailer, in both the Law & GambleCorporate Affairs department and IBM. He has served on the boards of Rogers Wireless in Canada, Switch & Data Corporation, andHuman Resources department. Ms. McAuliffe holds a number of technology start-ups. Mr. Sievert received a Bachelor’sbachelor’s degree in Economics from the Wharton School at the University of Pennsylvania.Massachusetts, Amherst and a Juris Doctor from Northeastern University School of Law.
T-Mobile 2019 Proxy Statement |
The Audit Committee has appointed PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2016.2019. Although ratification of the appointment of PricewaterhouseCoopers LLP by our stockholders is not required, the Board of Directors is submitting the selection of PricewaterhouseCoopers LLP to our stockholders for ratification as a matter of good corporate governance. If the selection is not ratified,
the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm.
We expect representatives of PricewaterhouseCoopers LLP to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions by stockholders.
Our Board of Directors recommends a voteFOR the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2019 |
ApprovalThe affirmative vote of the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2016 requires that the number of votes cast “FOR” the proposal represents a majority of the total
votes cast on theis required to approve this proposal. If the stockholders do not ratify the appointment of PricewaterhouseCoopers LLP, the Audit Committee will reconsider the appointment but is under no obligation to appoint a different independent registered public accounting firm.
Audit Committee Pre-Approval Policy Process
The Audit Committee is responsible for reviewing and, if appropriate,pre-approving all audit, audit-related andnon-audit services to be performed by our independent registered public accounting firm. The Audit Committee charter authorizes the Audit Committee to establish a policy and related procedures regarding thepre-approval of audit, audit-related andnon-audit services to be performed by our independent registered public accounting firm.
The Audit Committee has delegated itspre-approval authority to the Chair of the Audit Committee, who is authorized topre-approve services to be
performed by our independent registered public accounting firm and the compensation to be paid for such services if it is impracticable to delay the review and approval of such services and compensation until the next regularly scheduled meeting of the Audit Committee, provided that in such case, the Chair shall provide a report to the Audit Committee at its next regularly scheduled meeting of any services and compensation approved by the Chair pursuant to the delegated authority.
Audit and All Other Fees Paid to PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP was paid the following fees for services rendered during fiscal years 20152018 and 2014,2017, all of which were approved in conformity with the Audit Committee’spre-approval process, as described above under “Audit Committee “Pre-Approval Policy” Process”:
2015 ($) | 2014 ($) | 2018 ($) | 2017 ($) | |||||||||||||
Audit Fees(1) | 7,822,000 | 6,993,000 |
| 9,526,000 |
|
| 9,330,000 |
| ||||||||
Audit-Related Fees(2) | 562,000 | 47,000 |
| 900,000 |
|
| 748,000 |
| ||||||||
Tax Fees(3) | 568,000 | 361,000 |
| 300,000 |
|
| 163,000 |
| ||||||||
All Other Fees(4) | 58,000 | 355,000 |
| 1,701,000 |
|
| 79,000 |
| ||||||||
Total Fees | 9,010,000 | 7,756,000 |
| 12,427,000 |
|
| 10,320,000 |
|
(1) | Audit Fees relate to professional services rendered in connection with the audit of the Company’s annual financial statements and internal control over financial reporting, quarterly review of financial statements included in the Company’s Quarterly Reports on Form10-Q and audit services provided in connection with other statutory and regulatory filings. |
(2) | Audit-Related Fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under Audit Fees. This category includes fees related to audit and attest services not required by statute or regulations, and consultations concerning financial accounting and reporting standards. |
(3) | Tax Fees consist of fees for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance. |
(4) | All Other Fees consist of fees for permitted services other than those that meet the criteria above and include fees associated with the proposed Sprint Combination, fees to assess mobile advertising for a joint venture and research subscriptions. |
PROPOSAL 2 – RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2016
In the performance of its oversight responsibilities, the Audit Committee (1)(i) reviewed and discussed with management and the independent registered public accounting firm the Company’s audited financial statements for the fiscal year ended December 31, 2015; (2)2018; (ii) discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the Public Company Accounting Oversight Board (“PCAOB”(the “PCAOB”) Auditing Standard No. 16,1301,Communications with Audit Committees;Committees(3); (iii) received the written disclosures and the letter from the Company’s independent registered public accounting firm required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee regarding independence; and (4)(iv) discussed with the Company’s independent registered public accounting firm any relationships that may impact theirits objectivity and independence and satisfied itself as to the firm’s independence.
T-Mobile 2019 Proxy Statement | 23 |
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2019
Company management is responsible for the assessment and determination of risks associated with the Company’s business, financials,financial reporting, operations and contractual obligations. The Audit Committee, together with the Board of Directors, is responsible for oversight of the Company’s management of risks. As part of its responsibilities for oversight of the Company’s management of risk,risks, the Audit Committee has reviewed and discussed the Company’s enterprise-wide risk assessment, and the Company’s policies with respect to risk assessment and risk management, including discussions of individual risk areas as well as an annual summary of the overall process.
The Audit Committee has discussed with the Company’s Internal Audit Department and its independent registered public accounting firm the overall scope of and plans for their respective audits. The Committee regularly meets with the head of the Company’s Internal Audit Department and representatives of the independent registered public accounting firm, in regular and executive sessions, to discuss the results of their examinations, thetheir evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting and compliance programs.
Management is responsible for the Company’s financial reporting process, including establishing and maintaining adequate internal control over financial controlsreporting and the preparation of the Company’s financial statements. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing an opinion on the conformity of the Company’s audited financial statements with U.S.
generally accepted accounting principles. The Company’s independent registered public accounting firm also is responsible for performing an independent audit of the effectiveness of the Company’s internal controlscontrol over financial reporting and issuing a report thereon. We rely, without independent verification, on the information provided to us and on the representations made by management and the Company’s independent registered public accounting firm. Based on the review and discussion and the representations made by management and the Company’s independent registered public accounting firm, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements for the fiscal year ended December 31, 20152018 be included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2015.2018.
The Audit Committee:
Srikant M. Datar, Ph.D,Ph.D., Chairman
W. Michael Barnes, Ph.D.Teresa A. Taylor
Kelvin R. Westbrook
The material contained in this Audit Committee Report does not constitute soliciting material, is not deemed filed with the SEC, and is not incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made on, before, or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing, except to the extent that the Company specifically incorporates the Audit Committee Report by reference therein.
24 | T-Mobile 2019 Proxy Statement |
The Board of Directors recommends that you vote
“FOR”
the ratification of the appointment of PricewaterhouseCoopers LLP
as the Company’s independent registered public accounting firm for fiscal year 2016.COMPENSATION DISCUSSION AND ANALYSIS
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program for the following executive officers (collectively, the “Named Executive Officers”):
This Compensation Discussion and Analysis (“CD&A”) describes our 2018 executive compensation program for the following executive officers (collectively, the “Named Executive Officers”): | ||||||||
∎JohnJ.Legere | ||||||||
∎J.BraxtonCarter | ∎G.MichaelSievert | ∎NevilleR.Ray | ∎David R. Carey | |||||
Chief Executive Officer | Executive Vice | |||||||
| President and Chief Operating Officer | |||||||
| Executive Vice | |||||||
| Executive Vice President, |
During 2018, Mr. Legere served as our President and Chief Executive Officer, and Mr. Sievert served as our Chief Operating Officer, through April 29, 2018 (as ratified by the Board on June 13, 2018). Thereafter, Mr. Legere served as our Chief Executive Officer and Mr. Sievert served as our President and Chief Operating Officer.
T-Mobile Had Record Financial Results and Strong Customer Momentum Continued at T-Mobile for the Second Straight Year, ResultingGrowth in Strong Financial Performance2018 and Proved, Once Again, That Balanced Growth With ProfitabilityTaking Care of Customers Is Also Good For Stockholders
T-Mobile had another record financial results in 2018, including record service revenues, record total revenues, strong net income, record fourth quarter Adjusted EBITDA, strong net cash from operating activities and record free cash flow. We added 7.0 million total net customers in 2018, marking the fifth year in 2015, delivering industry leadinga row of more than 5 million total net customer service revenue and Adjusted EBITDA growth.additions. We ended the year with more than 6379.7 million total customers and became the third largest wireless carrier in the United States. T-Mobile added 8.3 million total net customers in 2015 and captured all of the industry’s postpaid phone growth, which made T-Mobile America’s fastest growing wireless company once again. In addition to strong net customer additions, we kept customers longer with branded postpaid phone churn of 1.39% for the full year 2015.customers.
Our customer growth translated into strong financial results.industry-leading revenue growth. Service revenue of $24.8$32.0 billion for 20152018 grew at an industry-leading 10.9%6.1% year over year. Similarly,Net income of $2.9 billion for 2018 was down 36.3% year over year, due to the impact from the Tax Act, which resulted in an income tax benefit of $2.2 billion in 2017, and grew 22.6% year over year excluding the impact from the Tax Act. Adjusted EBITDA of $7.4$12.4 billion for 2015 grew 31.2%10.6% year over year, significantly outpacing the industry.year.
As of December 31, 2018,T-Mobile also delivered on several major network milestones in 2015. The Companycovered more than doubled its geographic325 million people with 4G LTE footprint duringLTE. Our stock price increased by 285.0% from May 1, 2013 (the first day of trading after the year, expanding its reach to 305 million Americans, and exceeding its stated year-end 2015 goal of 300 million. Since the Business Combination,Metro Combination) through December 31, 2018. Looking back three years, our stock price has increased by 137% from May 1, 2013163.3% (January 4, 2016 through December 31, 2015.2018).
Adjusted EBITDA is anon-GAAP financial measure. Thisnon-GAAP financial measure should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. A reconciliation to the most directly comparable GAAP financial measure is provided in Appendix A to this proxy statement.
|
Our executive compensation program emphasizes pay for performance. As a result, our 20152018 Named Executive Officer compensation reflectsT-Mobile’s strong 20152018 operational and financial performance.
T-Mobile |
EXECUTIVE COMPENSATION
Executive Compensation Program
Our executive compensation program is aligned with our business strategy and is designed to attract and retain top talent, reward short-term and long-term business results and exceptional performance, and most importantly, maximize stockholder value. Our executive compensation program is competitive in the marketplace and highly incentive-based, with Company performance determining a significant portion of total compensation.
Key Features of Our Executive Compensation Program |
| ||||||
What We Do | ||||||
Emphasis on pay for performance | ||||||
Independent compensation consultant | ||||||
Executive and director stock ownership guidelines | ||||||
Clawback policy to recapture incentive payments | ||||||
Use of multiple performance measures and caps on potential incentive payments | ||||||
Substantial majority of target total compensation is variable | ||||||
Use of executive compensation statements (“tally sheets”) | ||||||
Annual risk assessment of compensation programs |
What We Don’t Do | ||||||
No short-selling, hedging or pledging of Company’s securities | ||||||
No excise tax gross ups | ||||||
No guaranteed increases or bonuses | ||||||
No | ||||||
No single-trigger vesting of equity awards upon a change in control | ||||||
No | ||||||
Goals of Compensation Program
What We Pay and Why: Goals and Elements of Compensation
Emphasis on pay for performance | Attract, retain and motivate talented and experienced executives within the highly competitive and dynamic wireless communications industry | Recognize and reward executives whose skill and performance are critical to our success | Align interests of our executives with our stockholders | Encourage appropriate risk taking |
Elements of Total Direct Compensation
Summary of Named Executive Officer Average Target Compensation as of December 31, 2018
Long-Term Incentive (LTI) Performance-based restricted stock units (PRSUs) and time-based restricted stock units (RSUs) Emphasis on long-term Company performance Retains and engages executive officers Aligns executive officer interests with our stockholders Approximately 73% of target total direct compensation Number of PRSUs that can be earned is capped at 200% of target Benefits and Perquisites Executive officers are generally not eligible for any additional benefits or perquisites beyond what is provided to the general employee population.Base Salary Competitive fixed base of cash compensation Amount based on individual factors such as scope of responsibility, experience and strategic impact Annual Short-Term Incentive (STI) Cash Award Based entirely on Company performance; not guaranteed Aligned with Company near-term objectives, while also supporting our long-term strategic plan Award opportunities established at threshold, target and maximum values Each measure capped at 200% of target The Compensation Committee considers input from its independent compensation consultant, compensation survey data, and internal comparators among the officer positions when setting target compensation. When setting base salaries, the Compensation Committee also considers the impact of base salary on other compensation elements.
T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
To promote a performance-based culture that further aligns the interests of management and stockholders, in 20152018 the executive compensation program focused extensively on variable, performance-based compensation. As illustrated in the charts below, the substantial majority of our Chief Executive Officer’s and other Named Executive Officers’ actual total compensation as reported in the 20152018 Summary Compensation Table was in the form of variable compensation (short-term and long-term).
Summary of Named Executive Officer Compensation as Reported in the Summary Compensation Table
CEO 2018 Pay Mix Named Executive Officer 2018 Average Pay Mix (Excluding CEO) (1) The value of stock awards is determined using the aggregate grant date fair value computed in accordance with ASC 718.
Factors Considered in Determining Executive Compensation
Compensation Consultant and Management
The Compensation Committee sets compensation levels based on the skills, experience and achievements of each executive officer, taking into account market analysis, input by its independent compensation consultant (Mercer) and the compensation recommendations of our Chief Executive Officer, except with respect to his own position. The Chief Executive Officer provides recommended annual compensation adjustments to the other Named Executive Officers’ base salaries, target annual short-term incentive opportunities and target long-term incentive opportunities. The Compensation Committee believes that input from both its independent compensation consultant and our Chief Executive Officer provides useful information and points of view to assist the Compensation Committee in determining appropriate compensation.
Market Analysis
We use comparative executive officer compensation data publicly disclosed by a peer group of public companies in addition to compensation survey data to evaluate the competitiveness of our executive officer compensation and to guide the compensation for newly hired executive officers. We believe a competitive total compensation package is necessary to attract and retain an executive management team with the appropriate abilities and experience required to lead the Company and
execute on our strategic business plan. In analyzing this information, we compare theour executive compensation program as a whole to the programs of our peer group companies and compare the pay of our individual executives to that of the executive officers of our peer group companies if we believe the positions are sufficiently similar to make meaningful comparisons. We do not target a specific percentile in the range of comparative data for each individual or for each component of compensation. In determining the amount of base salary, the target annual incentive award and level of equity compensationthe target annual long-term incentive award value for each Named Executive Officer, we review the comparative compensation data and consider each executive’s level of responsibility, prior experience, past job performance, internal comparators, contribution to
the Company’s success and results achieved. The Compensation Committee exercises its business judgment and discretion and does not apply formulas or assign these factors specific mathematical weights.
Executive Compensation Peer Group
We select our peer group based on similarity to us in terms of relative size of revenue and market capitalization, industry and the ability to compete with us for talent at the executive officer level. In October 2015,The Compensation Committee reviews the Company’s peer group on an annual basis. Our 2018 peer group was the same as partour peer group at the end of 2017. This peer group, which is described below, was used to set compensation for 2018.T-Mobile was ranked near the Compensation Committee’s regular reviewmedian of the peer group composition, fivefor 2018 both in terms of the companies that were previously part of our peer group were removed and one company was added.
Four of the removed companies, DIRECTV, Cablevision Systems Corporation, Time Warner Cable Inc. and Windstream Holdings, Inc., were no longer valid due to merger and acquisition activity. United States Cellular Corporation (with 2015 year end revenue of $4.0 billion and market capitalization of $3.4 billion) was removed due to the large difference in revenue and market capitalization relative to T-Mobile and the other peer group companies. Intel Corporation was added as a peer due to its relevant size and industry, as well as its prevalence among existing peer company peer groups. The current peer group is appropriate based on financial scope, with T-Mobile falling near the median for both revenue and market capitalization.
Compensation decisions made prior to October 2015 utilized the prior peer group for relevant peer practice information. Additionally, unvested performance-based RSUs granted prior to October 2015 that utilize relative total shareholder return (“RTSR”) as the performance metric continue to be measured relative to the prior peer group as established at the time of grant.
T-Mobile |
EXECUTIVE COMPENSATION
The following chart shows the currentT-Mobile’s 2018 peer group of 1514 companies theirand each such company’s revenue as of fiscalyear-end and market capitalization as of December 31, 2015.2018. Our peer group for 2019 has not changed.
TMUS executive compensation peer group peer company revenue (in billions) as of peer fiscal year-end market capitalization (in billions) as of December 31, 2018 AT&T, Inc. $170.76 $207.71 CenturyLink, Inc. $23.44 $16.37 Charter Communications, Inc. $43.63 $65.23 Cisco Systems, Inc. $49.33 $194.81 Comcast corp. $94.51 $154.91 Dish network corp. $13.62 $11.68 Frontier Communications Corporation $8.61 $0.25 Intel Corp. $70.85 $214.19 Liberty Global plc $11.96 $15.71 Microsoft corporation $110.36 $779.80 Motorola Solutions, Inc. $7.34 $18.81 QUALCOMM incorporated $22.73 $68.98 Sprint Corp. $32.41 $23.73 Verizon Communications Inc. $130.86 $232.30 Median $38.02 $67.11 T-Mobile US, Inc. $43.24 $53.97 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile peer revenue TMUS: $43.24 $9.6 $15.9 $38.0 54th percentile $88.6 $124.7 Market Capitalization TMUS: $53.97 $12.9 $17.0 44th Percentile $67.1 $204.5 $226.9
Analysis of Executive Officer Compensation
The key components of our annual target total compensation package for executive compensationofficers are base salary, an annual cash-based short termshort-term incentive awards, and long-term incentives composed ofequity incentive awards, including performance-based RSUsrestricted stock units (“PRSUs”) and time-based RSUs.restricted stock units (“RSUs”).
Target Total Direct Compensation
The Compensation Committee reviews the compensation of the Named Executive Officers based on a market analysis prepared by management in partnership with the Compensation Committee’s
independent compensation consultant. Based on such analysis, the Compensation Committee increased the target compensation of Messrs. Legere, Carter, Sievert and Ray for 2015. Increases were established based on the Compensation Committee’s
assessment of each Named Executive Officer in relation to peer and survey market data as well as the executive officer’s contribution to the Company’s ongoing strategy.strategy, including contributions related to the proposed merger with Sprint Corporation (the “Sprint Combination”) pursuant to that certain Business Combination Agreement, dated April 29, 2018, by and between the Company and certain other parties thereto (the “Sprint Business Combination Agreement”), the Compensation Committee increased the total target compensation of each of our Named Executive Officers for 2018, including increases to one or more components of base salary, annual short-term incentive opportunity and target long-term incentive opportunity. Increases to target compensation supported the continued retention and engagement of our Named Executive Officers.
The following table shows, as of December 31, 2018, the 2015 target total direct compensation established for each Named Executive Officer effective as of January 1, 2015. No subsequent changes were made in 2015 impacting target compensation.Officer.
Officer | Base Salary ($) | Target STIP Percent (1) | Target STIP Value ($) | Total Target Cash ($) | Target LTIP Percent (2) | Target LTIP Value ($) | Total Direct Compensation ($) | Base Salary ($) | Target STIP Percent (1) | Target STIP Value ($) | Total Target Cash ($) | Target LTIP Percent (2) | Target LTIP Value ($) | Target Total Direct Compensation ($) | ||||||||||||||||||||||||||||||||||||||||||
John J. Legere | 1,500,000 | 200% | 3,000,000 | 4,500,000 | 266.7% | 12,000,000 | 16,500,000 | 2,000,000 | 200% | 4,000,000 | 6,000,000 | — | 17,250,000 | 23,250,000 | ||||||||||||||||||||||||||||||||||||||||||
J. Braxton Carter | 700,000 | 100% | 700,000 | 1,400,000 | 250% | 3,500,000 | 4,900,000 | 900,000 | 150% | 1,350,000 | 2,250,000 | 250% | 5,625,000 | 7,875,000 | ||||||||||||||||||||||||||||||||||||||||||
G. Michael Sievert | 800,000 | 100% | 800,000 | 1,600,000 | 250% | 4,000,000 | 5,600,000 | 1,200,000 | 200% | 2,400,000 | 3,600,000 | — | 10,350,000 | 13,950,000 | ||||||||||||||||||||||||||||||||||||||||||
Neville R. Ray | 600,000 | 100% | 600,000 | 1,200,000 | 200% | 2,400,000 | 3,600,000 | 900,000 | 200% | 1,800,000 | 2,700,000 | 250% | 6,750,000 | 9,450,000 | ||||||||||||||||||||||||||||||||||||||||||
Thomas C. Keys | 700,000 | 100% | 700,000 | 1,400,000 | 250% | 3,500,000 | 4,900,000 | |||||||||||||||||||||||||||||||||||||||||||||||||
David R. Carey(5) | 775,000 | 125% | 968,750 | 1,743,750 | — | 4,359,375 | 6,103,125 |
(1) | Target STIP Percent as a percent of base salary. |
(2) | Target LTIP Percent as a percent of total target cash. |
(3) | Target STIP value and LTIP value for Mr. Legere are as specified in his employment agreement. |
(4) | Target LTIP value for Mr. Sievert as specified in his term sheet. |
(5) | Target LTIP value for Mr. Carey as specified in his term sheet. |
T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Annual Base Salaries
Base salary is designed to provide a competitive fixed component of income. Base salaries for our Named Executive Officers are set by the Compensation Committee, with assistance from the independent compensation consultant, after consideration of various factors including individual performance, executive experience and skill set, retention considerations, and market data. In particular, the Compensation Committee focuses on how base salary levels may impact the market competitiveness of an executive’s total compensation opportunity. See further discussion under “— Factors Considered in Determining Executive Compensation-Market Analysis” above. Effective April 29, 2018, to reward certain Named Executive Officers for their efforts in connection with the execution of the Business Combination Agreement, we increased Mr. Legere’s base salary from $1,666,667 to $2,000,000, Mr. Sievert’s base salary from $950,000 to $1,200,000, and Mr. Ray’s base salary from $850,000 to $900,000. See “— Employment Arrangements” below for additional details. In connection with the entrance into an amendment to the Carter Employment Agreement (as defined below) on March 25, 2019, Mr. Carter’s base salary was increased from $900,000 to $950,000, effective as of December 16, 2018.
Annual Short-Term Incentives
Our executive officers are eligible for annual cash-based short-term incentives under the 2013 Omnibus Incentive Plan. The Compensation Committee sets the valuestarget value of theeach executive’s short-term incentive award opportunitiesopportunity as a percentage of anthe executive’s base salary. TheseThe final award is based on the applicable executive’s eligible base earnings for the performance period. Award opportunities for each metric evaluated under the plan are established at threshold, target and maximum levels. The maximum level for each metric is capped at 200% of target. The 20152018 short-term incentive plan (the “2015“2018 STIP”) awards for executive officers, including the Named Executive Officers, were based entirely on Company performance, which was measured by: Total Service Revenue, Branded Net Additions (Total
Branded Customers)Customer Additions), Adjusted EBITDA, and Operating Free Cash Flow.Flow, and Adjusted EBIT. Adjusted EBITDA, Operating Free Cash Flow and Adjusted EBIT arenon-GAAP measures and Operating Free Cash Flow are non-GAAP measures.is not provided in our earnings materials. Please seeAppendix A for more information. information on how these measures are calculated.
Eligible Earnings Target Percentage Target STIP Opportunity Total Service Revenue (20%) Branded Net Adds (20%) Adjusted EBITDA (20%) Operating Free cash Flow (30%) Adjusted EBIT (10%) Corporate Performance Attainment Annual Incentive Amount
These measures were aligned with the operational objectives of the Company’s business. AAttainment of the minimum threshold had to be achieved onperformance level for at least one of the performance metrics was required in order for the executives to generate awards.receive any payment under the 2018 STIP. If none of the minimum performance thresholds had been achieved during 2018, no awards would have been paid. If the minimum threshold for any metric was achieved, then the results were applied to the participants’ target awards.
Metric | Weight | Minimum (in millions) | Target (in millions) | Maximum (in millions) | Actual (in millions) | Weight | Minimum (in millions) | Target (in millions) | Maximum (in millions) | Actual (in millions) | ||||||||||||||||||||||||||||||
Total Service Revenue | 30% | $ | 23,465 | $ | 24,700 | $ | 25,317 | $ | 24,821 | 20 | % | $ | 30,223 | $ | 31,814 | $ | 32,609 | $ | 32,027 | |||||||||||||||||||||
Branded Net Additions | 20% | 1.470 | 3.675 | 5.140 | 5.825 | 20 | % | 1.143 | 2.858 | 3.997 | 4.919 | |||||||||||||||||||||||||||||
Adjusted EBITDA | 20% | $ | 6,440 | $ | 7,000 | $ | 7,373 | $ | 7,393 | 20 | % | $ | 10,411 | $ | 11,316 | $ | 11,969 | $ | 12,000 | |||||||||||||||||||||
Operating Free Cash Flow | 30% | $ | 1,931 | $ | 2,549 | $ | 2,796 | $ | 2,923 | 30 | % | $ | 4,015 | $ | 5,300 | $ | 5,814 | $ | 5,413 | |||||||||||||||||||||
Adjusted EBIT | 10 | % | $ | 4,714 | $ | 5,124 | $ | 5,397 | $ | 5,514 |
The Company performed above target inlevels with respect to all fourfive performance metrics in 2015.2018. Overall performance under the 20152018 STIP, determined based on actual performance for each performance metric and the relative weighting of each such metric (as disclosed in the table above), was achieved at 176%162% of target. The 2018 actual results do not include the impacts of the new revenue standard, consistent with the 2018 STIP design and targets. The following table shows the payouts under the 20152018 STIP offor each Named Executive Officer.Officer based on these performance results.
Officer | Base Earnings (1) ($) | Target 2015 STIP Percent (as a % of Base Salary) | Target 2015 STIP Value ($) | Company Attainment | Total 2015 STIP Payout Value ($) | Base Earnings (1) ($) | Target 2018 STIP Percent (as a % of Base Earnings) | Target 2018 STIP Value ($) | Company Attainment | Total 2018 STIP Payout Value ($) | ||||||||||||||||||||||||||||||
John J. Legere | 1,492,358 | 200% | 2,984,716 | 176% | 5,253,101 | 1,878,205 | — | 3,784,475 | 162% | 6,130,849 | ||||||||||||||||||||||||||||||
J. Braxton Carter | 698,462 | 100% | 698,462 | 176% | 1,229,292 | 898,077 | 150.00% | 1,347,115 | 162% | 2,182,327 | ||||||||||||||||||||||||||||||
G. Michael Sievert | 792,308 | 100% | 792,308 | 176% | 1,394,461 | 1,108,654 | 200.00% | 2,217,308 | 162% | 3,592,039 | ||||||||||||||||||||||||||||||
Neville R. Ray | 598,462 | 100% | 598,462 | 176% | 1,053,293 | 879,808 | 181.73% | 1,598,874 | 162% | 2,590,177 | ||||||||||||||||||||||||||||||
Thomas C. Keys | 700,000 | 100% | 700,000 | 176% | 1,232,000 | |||||||||||||||||||||||||||||||||||
David R. Carey | 774,038 | 125.00% | 967,548 | 162% | 1,567,428 |
(1) | Base earnings |
(2) | Mr. Legere’s employment agreement provides that his short-term incentive value will be targeted at not less than $3,784,475. |
(3) | Mr. Ray’s target 2018 STIP percent reflects an increase from 150% to 200% effective April 29, 2018. |
Long-Term Incentives
T-Mobile 2019 Proxy Statement | 29 |
EXECUTIVE COMPENSATION
Long-Term Incentives
We grant our executive officers long-term incentive compensation in the form of performance-based RSUsPRSUs and time-based RSUs under the 2013 Omnibus Incentive Plan. Performance-based RSUsPRSUs are measured based on RTSR, which weour relative total shareholder return (“RTSR”) over a three-year performance period. We believe it is an appropriate performance measure due to the fact thatbecause RTSR inherently contains
reflects relevant financial and operational results as share price is a reflection of our current and expected future performance and directly links a significant portion of executive officer compensation with shareholderto stockholder value creation.
Long-Term Incentive Awards Granted in 20152018
On February 25, 2015,15, 2018, we granted annual long-term incentive awards to the Named Executive Officers long-term incentive awards.Officers. With the exception of Mr. Legere, the Named Executive Officers received half of the aggregate value of their 20152018 long-term incentive awards in the form of performance-based RSUsPRSUs and half of such
value in the form of time-based RSUs. We believe this mix emphasizes long-term Company performance as well as the retention and engagement of the Named Executive Officers. To further align Mr. Legere’s grantcompensation with stockholder value creation, Mr. Legere’s 2018 annual long-term incentive award had a greater emphasis on performance-based RSUs,PRSUs, with 2/3approximately 3/4 of his 2015 long-term incentivethe award consisting of performance-based RSUsPRSUs (excluding his Transaction PRSUs, as defined and
described below) and roughly 1/3 time-based4 consisting of RSUs. Time-based RSUsIn addition to their annual awards, each of Messrs. Legere, Sievert, Ray and Carey were granted special long-term incentive awards, as discussed below under “— Special Equity Awards in 2018.” RSU awards for 2018 generally vest annually in three equal tranches beginning in February 2016.2019, subject to the Named Executive Officer’s continued service through the applicable vesting date. The performance-based RSUsannual PRSU awards for 2018 generally cliff vest at the conclusion of athe three-year performance period from February 25, 2015 through February 25, 2018. Ourending on the third anniversary of the grant date, subject to the Named Executive Officers did not receive any equity grants in 2015 other than those issuedOfficer’s continued service through the vesting date and based on February 25, 2015.the level of RTSR attained during the performance period.
EXECUTIVE COMPENSATION
Performance-based RSUPRSU achievement can range from 0% to 200% of target based on relative performance against our peer group, and ispayouts are determined by multiplying the target number of performance-based RSUsPRSUs by an adjustment percentage based on the total shareholder return (“TSR”)RTSR percentile performance of the Company, relative to our peer group, as follows:set forth in the following table. No payout will be made if performance is attained below the 25th percentile.
2018-2021 PRSU award relative total shareholder return design RTSR percentile ranking adjustment percentage 1 Below 25th percentile o% 25th percentile 25% 50th percentile 100% 75th percentile 125% 100th percentile 200% 1 company total shareholder return for the performance period must be positive in order for the adjustment percentage to be greater than 100% PRSU adjustment Percentage 0 25 50 75 100 125 150 175 200 Poor Performance < 25th percentile No payout y=0 25th to 49th percentile y=3x-50 50th to 75th percentile slope (1:1) y=x+50 High performance 76th to 100th percentile y=3x-100 0 25 50 75 100 Relative TSR percentile Result Relative position at the conclusion of the performance period calculated as percentile rank based on linear interpolation beginning price means the average of the closing prices of the applicable stock for the 30 days prior to the start of the performance period Ending price means the average of the closing prices of the applicable stock for the last 30 days of the performance period total shareholder return for a given company means: [(ending price beginning price) + Dividends] divided by [Beginning price] (applicable dividend inclusion based on ex-dividend date; dividends re-invested for TSR calculation)
TheRTSR for the 2018 PRSU awards is measured against the following peer group, for the 2015 performance-based RSU award on which RTSR is measured consistsconsisting of 14 companies: AT&T, Cablevision Systems, CenturyLink, Charter Communications, Cisco Systems, Comcast, DIRECTV, Dish Network, Frontier Communications, Level 3 Communications,Intel, Liberty Global, Inc., Microsoft, Motorola Solutions, Qualcomm, Sprint Time Warner Cable, United States Cellular,and Verizon Communications, and Windstream. IfCommunications. Under the terms of the
award, if one or more members of the peer group cease to be a publicly traded entity during the performance period, then that company will be removed from the peer group. NoIn such an event, no additional companies will be added to the peer group for purposes of the award. The award was made prior to thedetermining any earned PRSU awards.
establishment of the new peer group that was confirmed by the Compensation Committee in October 2015. The new peer group will be used for applicable future performance-based RSU awards.
30 | T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
The total 2018 target 2015long-term incentive grant value award mix and unitsthe number of annual PRSUs and RSUs awarded are shown below for each Named Executive Officer. The number of unitsannual PRSUs and RSUs awarded was established as the total grantgrant-date target value multiplied by the award mix and divided by the average closing price of our common stock for the 30 calendar daycalendar-day period ending five business days prior to the grant date.
Officer | Total 2015 Grant Target Value ($) | Target PRSU / RSU Award | Target Number of Performance- Vested RSUs (#) | Number of Time- Vested RSUs (#) | ||||||||||||
John J. Legere | 12,000,000 | 2/3 PRSU, 1/3 RSU | 260,163 | 130,082 | ||||||||||||
J. Braxton Carter | 3,500,000 | 1/2 PRSU, 1/2 RSU | 56,911 | 56,911 | ||||||||||||
G. Michael Sievert | 4,000,000 | 1/2 PRSU, 1/2 RSU | 65,041 | 65,041 | ||||||||||||
Neville R. Ray | 2,400,000 | 1/2 PRSU, 1/2 RSU | 39,025 | 39,025 | ||||||||||||
Thomas C. Keys | 3,500,000 | 1/2 PRSU, 1/2 RSU | 56,911 | 56,911 |
Performance-Based Long-Term Incentive Awards Vested in 2015
Officer
| Total 2018 Grant
| Target Number of PRSUs (#)
| Number of
| |||||||||
John J. Legere |
| 15,000,000 |
|
| 173,283 |
|
| 63,012 |
| |||
J. Braxton Carter |
| 5,625,000 |
|
| 44,306 |
|
| 44,306 |
| |||
G. Michael Sievert |
| 7,125,000 |
|
| 56,121 |
|
| 56,121 |
| |||
Neville R. Ray |
| 5,312,500 |
|
| 41,844 |
|
| 41,844 |
| |||
David R. Carey |
| 4,359,375 |
|
| 34,337 |
|
| 34,337 |
|
(1) | Named Executive Officers received half of the aggregate target value of their long-term incentive awards in the form of PRSUs and half of such value in the form of RSUs, except for Mr. Legere who received approximately 3/4 of his target award in the form of PRSUs. |
In connection with the execution of the Business Combination Agreement, effective as of April 29, 2018 (and commencing with annual awards granted in calendar year 2019), we increased certain Named Executive Officers’ target annual long-term incentive grant values as follows: Mr. Legere: $17,250,000; Mr. Sievert: $10,350,000. See “—Employment Arrangements” below for additional details.
Special Equity Awards in 2018
In February 2018, to stabilize our senior leadership team and to incentivize continued high performance during a period of significant organizational uncertainty related to potential M&A activity, the Company grantedone-time special PRSUs with a one-time “Founders Grant” designedtarget value equal to give executives$3,000,000 to Messrs. Ray and employees at all levels an ownership stake inCarey. These PRSUs are subject to the Companysame vesting schedule and other terms and conditions applicable to align their interests with thosethe annual awards of our stockholders. For retention and incentive purposes, the Founders Grant made in June 2013PRSUs granted to the Named Executive Officers had longer vesting periodson February 15, 2018 (see “— Long-Term Incentive Awards Granted in 2018” above for time-based
RSUsadditional information), except that in order to further align the executives with stockholder value creation, the “threshold” level of attainment was increased such that no payout will be made if performance is attained below the 50th percentile (rather than the 25th percentile). The number of special PRSUs awarded to Messrs. Ray and a higher target value than were anticipated for future annual equity grants and wasCarey is shown below.
Officer
| Grant
| Total Grant
| Target Number of PRSUs (#)
| |||||||||
Neville R. Ray |
| 2/15/2018 |
|
| 3,000,000 |
|
| 47,259 |
| |||
David R. Carey |
| 2/15/2018 |
|
| 3,000,000 |
|
| 47,259 |
|
In April 2018, in lieuconnection with the execution of the 2014Business Combination Agreement and given the immense regulatory and advocacy work associated with a merger of this size and in this industry and related business planning activities, all while continuing to deliver business results to ensure alignment with stockholders during a critical period of potential value creation, the Compensation Committee, following discussion with its independent compensation consultant and management, approved special awards of PRSUs (the “Transaction PRSUs”) to Messrs. Legere, Sievert, Ray and Carey, which vest based onT-Mobile’s total shareholder return during the applicable performance period. The mechanics of RTSR make certain that any eventual value at vest aligns with the relative value provided to stockholders. The details of these Transaction PRSUs are outlined below. The Transaction PRSUs are generally subject to the same terms and conditions as the annual PRSUs granted to the Named Executive Officers on February 15, 2018 (see “— Long-Term Incentive Awards Granted in 2018” above for additional information), except that (i) for Mr. Legere, 50% of his Transaction PRSUs will vest upon the earlier of the closing of the Sprint Combination or April 30, 2020, and the remaining 50% of his Transaction PRSUs will vest on April 30, 2020, (ii) for Mr. Carey, 50% of his Transaction PRSUs will vest upon the earlier of the closing of the Sprint Combination or April 29, 2020, and the remaining 50% of his Transaction PRSUs will vest on April 29, 2020, and (iii) for Messrs. Sievert and Ray, 50% of their Transaction PRSUs will vest upon the earlier of the closing of the Sprint Combination or April 29, 2021, and the remaining 50% of their Transaction PRSUs will vest on April 29, 2021, subject, in each case, to the applicable Named Executive Officer’s continued employment through the applicable vesting date (except as otherwise provided in the applicable employment arrangement and/or award agreement). The total target grant (other than supplemental equity awards madevalues and the number of Transaction PRSUs awarded to retain high-performing leaders, reward exceptional performance or recognize expanded responsibilities).each Named Executive Officer is shown below.
T-Mobile 2019 Proxy Statement | 31 |
EXECUTIVE COMPENSATION
The performance-based RSU componentIf the Sprint Combination fails to close, 100% of the Founders GrantTransaction PRSUs will vest on the second vesting date. The delay in vesting, coupled with the actual value at vest of the Transaction PRSUs being entirely dependent on our RTSR, ensures recipients will be incented to refocus at that time and maximize shareholder value creation within the context of the resulting stand-alone Company.
Officer
| Grant
| Total Grant Target Value
| Target Number of PRSUs (#)
| |||||||||
John J. Legere |
| 4/29/2018 |
|
| 37,000,000 |
|
| 598,029 |
| |||
G. Michael Sievert |
| 4/29/2018 |
|
| 20,000,000 |
|
| 323,259 |
| |||
Neville R. Ray |
| 4/29/2018 |
|
| 12,187,500 |
|
| 196,986 |
| |||
David R. Carey |
| 4/29/2018 |
|
| 5,719,000 |
|
| 92,436 |
|
The annual and special RSUs and PRSUs granted during 2018 are subject to accelerated vesting in certain circumstances as described below under
“— Potential Payments upon Termination or in Connection with a Change in Control”.
Performance-Based Long-Term Incentive Awards Vested in 2018
The annual PRSUs granted to each of the Named Executive Officers in 2015 had a three-year performance period of May 1, 2013 to December 31, 2015.that ended on February 25, 2018. Based on the Company’s RTSR at the end of the performance period, an adjustment percentage of 185%179% was earned for each Named Executive Officer. The number of 2015 PRSUs earned by each Named Executive Officer and paid in 2018 is set forth in the table below.
Officer | Target 2013 PRSUs (#) | RTSR Adjustment Percentage | PRSUs Earned (#) | |||||||||
John J. Legere | 453,996 | 185% | 839,892 | |||||||||
J. Braxton Carter | 147,549 | 185% | 272,965 | |||||||||
G. Michael Sievert | 92,389 | 185% | 170,919 | |||||||||
Neville R. Ray | 92,389 | 185% | 170,919 | |||||||||
Thomas C. Keys | 152,089 | 185% | 281,364 |
Legacy T-Mobile USA LTIP
Officer | Target 2015 PRSUs ($) | RTSR Adjustment Percentage (%) | Earned PRSUs (#) | |||||||||
John J. Legere | 260,163 | 179% | 465,691 | |||||||||
J. Braxton Carter | 56,911 | 179% | 101,870 | |||||||||
G. Michael Sievert | 65,041 | 179% | 116,423 | |||||||||
Neville R. Ray | 39,025 | 179% | 69,854 | |||||||||
David R. Carey | 36,098 | 179% | 64,615 |
The legacy T-Mobile USA Long-Term Incentive Plan (the “legacy T-Mobile USA LTIP”) consisted of cash awards because T-Mobile USA was a wholly-owned subsidiary of Deutsche Telekom at the time the legacy T-Mobile USA LTIP was adopted. Executives received performance awards (with a three-year performance period) based on Company goals. To the extent earned, half of each performance award vested in three equal annual tranches beginning with the end of the first year of the performance period, with the other half of the
award cliff vesting at the end of the three-year performance period. In 2015, one cycle of legacy T-Mobile USA LTIP awards was outstanding. As a result of the Business Combination, outstanding awards continued to vest as scheduled with both tranche and cliff portions paying at the end of the respective performance periods, subject to continued employment, with the amount of payment fixed at 100% of target. The final tranche was earned in 2015 and is disclosed in the 2015 Summary Compensation Table.
Perquisites
We generally do not haveprovide perquisites forto any executive officer, including the Named Executive Officers, beyond what all other employees may be eligible for, other than relocation benefits from time to time.receive. In 2015,2018, we provided personal security for Mr. Legere
due to the range of security issues encountered by senior executiveschief executive officers of large public companies, particularly with respect to high profilehigh-profile chief executive officers such as Mr. Legere. For fiscal year 2015,2018, we paid $37,043approximately $16,000 toward Mr. Legere’s personal security.
We also reimbursed Mr. Legere for legal fees and expenses (capped at $25,000) incurred in connection with the negotiation and preparation of an amendment to his employment agreement. In 2018, the Company also permitted the spouses of executive officers, including the Named Executive Officers, to attend one Board meeting and paid for certain incremental costs (excluding travel costs) associated with such attendance.
Comprehensive Benefits Package
We provide a competitive benefits package to all full-time employees, including the Named Executive Officers, that includes health and welfare benefits, such as medical, dental, vision care, disability insurance, life insurance benefits and a 401(k) savings plan.plan (with an employer match up to 4%). We provide anon-qualified deferred compensation plan under which
eligible participants may defer up to 75% of their base salary and 100% of their short-term incentive and long-term cash incentive as well asannual RSUs. We do not provide any employer matching or discretionary allocations under thenon-qualified deferred compensation plan.
Severance andChange-in-Control Benefits
We provide severance pay and other termination benefits to eligible executive officers, including the Named Executive Officers, whose employment is terminated, including due to corporate restructuring, and, in some cases, due to involuntary termination by us without cause, due to ournon-renewal of the executive’s employment term, due to the executive’s retirement or due to the voluntary termination by the executive for good reason. These arrangementsWe entered into Severance Letter Agreements with Messrs. Carter, Carey and Ray and certain other executive officers and a Retirement Letter with Mr. Carey (the “Carey Retirement Letter”) to provide security of transition income and benefit replacement that allow such executives to focus on our prospective business priorities that create value for stockholders. We believe the level of severance and termination benefits provided by these arrangements is consistent with the practices of our peer group and is necessary to
attract and retain key employees. These benefits are provided pursuant to our Severance Guidelines, Executive Continuity Plan, 2013 Omnibus Incentive Plan, long-term incentive award agreements and, for each of Messrs. Legere, Sievert, Carey and Sievert,Carter, pursuant to a written agreements.employment agreement, term sheet and/or letter agreement, as applicable. The adoption of the Carey Retirement Letter recognizes his contributions to the Company. These arrangements do not include any gross up for excise taxes imposed as a result of severance or other payments that are deemed made in connection with a change in control. The potential payments and benefits available under these arrangements are discussed further under “— Potential Payments Uponupon Termination or in Connection Withwith a Change in Control.”
32 | T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Other Matters
Tax and Accounting Considerations
Tax Considerations
Section 162(m) of the Code. The Internal Revenue Code (the “Code”) Section 162(m) generally disallows an income tax deduction to public companies for annual compensation in excess of $1 million paid to the chief executive officer and other “covered employees.” For taxable years beginning on or before December 31, 2017, this deduction limit included an exception for “qualified performance-based compensation”. The recently-enacted Tax Act amended certain provisions of Code Section 162(m), including eliminating the three other most highly compensated named executive officers (excluding the chief financial officer). Compensationexemption for “qualified performance-based compensation” for tax years beginning after December 31, 2017. The Tax Act includes a grandfather provision, pursuant to which compensation that qualifies as “performance-based”is provided pursuant to a written binding contract in effect on November 2, 2017, and which has not been modified in any material respect on or satisfies another exception is excluded for purposes of calculating the amount of compensationafter that date, will not be subject to the $1 million limit. Althoughamendments made to Code Section 162(m) by the Tax Act. We believe that maintaining the discretion to evaluate the performance of our executive officers through the use of performance-based compensation is an important part of our responsibilities and benefits our stockholders, even if it may benon-deductible under Code Section 162(m). The Compensation Committee considershas historically considered the potential impact of Code Section 162(m) of the Code as well as other tax and accounting
consequences when developing and implementing the Company’s executive compensation programs,programs. However, the Compensation Committee retains the discretion and flexibility to design and administer compensation programs that are in the best interests of the Company and its stockholders. In addition, due to the ambiguitiesstockholders, and, uncertainties as to the application and interpretation of Section 162(m)in light of the repeal of the performance-based compensation exception to Code no assurances can be given that compensation even if intended bySection 162(m), the Compensation Committee may in the future approve compensation that would not have qualified as performance-based compensation under Code Section 162(m) as in effect prior to the Tax Act.
Section 280G of the Code. Code Section 280G disallows a tax deduction with respect to excess parachute payments to certain executives of companies which undergo a change in control. In addition, Code Section 4999 imposes a 20% excise tax on the individual with respect to the excess parachute payment. Parachute payments are compensation linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Code Section 280G based on the executive’s prior compensation. As discussed above, we do not provide taxgross-ups on income attributable to change in control and other executive arrangements.
Section 409A of the Code. Code Section 409A requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements for deductibility under Section 162(m) of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements can expose employees and directors to accelerated income tax liabilities, substantial additional taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our compensation and benefit plans and arrangements for all of our employees
and directors, including our Named Executive Officers, so that they are either exempt from, or satisfy the requirements of, Code would, in fact, do so.Section 409A.
EXECUTIVE COMPENSATIONAccounting for Stock-Based Compensation.
We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, for stock-based compensation awards. ASC Topic 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. Grants of performance-based RSUs, time-based RSUs and other equity-based awards under equity incentive award plans have been and will be accounted for under ASC Topic 718. We expect that we will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives. For further information on our accounting for our stock-based compensation awards, refer to our Annual Report on Form10-K for the year ended December 31, 2018.
Securities Trading Policy
Our insiderpolicy on securities trading policy prohibits our directors, officers and employees from trading in our securities during certain designated blackout periods and otherwise while they are aware of materialnon-public information, and from engaging in hedging transactions or short sales
and trading in puts and callsoptions with respect to our securities. The policy also prohibits holding our securities in a margin account or pledging our securities as collateral for a loan.
Clawback Provisions
In 2014, the Compensation Committee adopted a policy of recoupment of compensation in certain circumstances. The policy provides that in the event the Company issues a restatement of its financial statements due to its material noncompliance with financial reporting requirements under U.S. securities laws, the Company will, to the extent permitted by governing law, require reimbursement from current and former executive officers for excess incentive compensation received at any time during the three-year period preceding the date on which the Company is required to prepare the accounting restatement if a lower payment would have occurred based on the restated results, regardless of whether the executive officer engaged in misconduct or otherwise caused or contributed to the requirement for the restatement. The policy is administered by the
Section 16 Subcommittee, which has the sole discretion to seek recovery from an executive officer and may consider whether seeking recovery would be in the best interests of the Company, including the costs and benefits of seeking recovery and whether doing so may prejudice the interests of the Company, including in any related proceeding or investigation. All awards granted under the 2013 Omnibus Incentive Plan are subject to the requirements of Section 954 of the Dodd-Frank Act regarding the recovery of erroneously awarded compensation as well as any implementing rules and regulations under the Dodd-Frank Act, any policies adopted by the Company to implement such requirement, and any other compensation recovery policies that may be adopted from time to time by the Company.
T-Mobile 2019 Proxy Statement | 33 |
EXECUTIVE COMPENSATION
Stock Ownership Guidelines and Broad-Based Stock Ownership
Under our stock ownership guidelines, forthe Chief Executive Officer and all executive officers each executive officer isreporting to the Chief Executive Officer are expected to acquire and maintain ownership of ourshares of common stock equal in value to a specified multiple of the executive officer’s base salary measured as of May 1, 2013, for executives in office on that date, and asthe later of (i) the date we adopted the stock ownership guidelines (May 1, 2013) and (ii) the date on which he or she became an executive takes office for executives hired after that date. The multiple for our Chief Executive Officer is five times base salary and the multiple for our other executive officers is three times base salary. officer.
Position | Ownership Requirement | |||
Chief Executive Officer | 5x base salary | |||
Executive Officers reporting to the CEO | 3x base salary |
Each executive officer is expected to meet the ownership guidelines within the later of (i) five years from the date we adopted the policyguidelines and (ii) the date on which
he or she became an executive officer, and is expected to retain at least 50% of the net shares of common stock acquired through equity awards granted after the Business Combination until the ownership thresholds are met.
∎ As of December 31, 2018, our Chief Executive Officer and each of the executive officers reporting to the Chief Executive Officer were in compliance with our stock ownership guidelines. |
We believe that all employees should have a stake in the Company’s performance. Therefore,Accordingly, we implementedutilize a Company-wide annual equity award program. In addition, we implemented an Employee Stock Purchase Plan (“ESPP”) in 2015 to provide employees with a cost-effective vehicle to purchase stock.
Equity Granting Practices
The Compensation Committee has adopted an equity grant policy pursuant to which the Compensation Committee (or a subcommittee) approvesmay approve annual grants to executive officers and other members of the executive leadership team at a specified time.time each year. In addition to the annual grants, equity awards may be granted on a quarterly basis to new hires. We may also grant supplemental equity awards from time to time to retain high-performing leaders, reward
exceptional performance or recognize expanded responsibility. No such grants were made to the Named Executive Officers in 2015. The Compensation Committee has delegated authority to the Company’s Executive Vice President, Human Resources, subject to certain terms and limitations as established by the Compensation Committee, to makegrant awards to employees who are not Section 16 officers.
Results of Stockholder Advisory Approval of Named Executive Officer Compensation
At the 20142017 Annual Meeting of Stockholders, stockholders were asked to approve, on an advisory basis, the Named Executive Officer compensation for 20132016 as reported in the proxy statement. Thissay-on-pay proposal was approved by over 99% of the shares present and entitled to vote.vote, and the Compensation Committee believes this affirms our stockholders’ strong support of our executive compensation program.
TheAccordingly, while the Compensation Committee considered the results of the 20142017 advisory vote along with stockholder input and other factors discussed in this CD&A, andit concluded that no changes to our compensation policies and practices were warranted in response to the stockholder advisory vote. The Board has previously determined to hold advisorysay-on-pay votes every three years. Accordingly, the next advisorysay-on-pay proposal stockholder vote will occur in connection with the 20172020 Annual Meeting of Stockholders.
Compensation Committee ReportCOMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Company management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement and incorporated by reference into the 20152018 Form10-K.
The Compensation Committee:
Teresa A. Taylor,Kelvin R. Westbrook, Chair
W. Michael Barnes
Thomas DannenfeldtChristian P. Illek
Lawrence H. Guffey
Raphael Kübler
Olaf Swantee
T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Executive Compensation TablesEXECUTIVE COMPENSATION TABLES
20152018 Summary Compensation Table
The following table sets forth certain information with respect to compensation for the years ended December 31, 2015, 20142018, 2017 and 20132016 earned by or paid to our ChiefNamed Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers who were serving as executive officers at the end of 2015.Officers.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation ($) | Total ($) | Year | Salary ($) | Bonus ($) | Stock Awards (1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation (3) ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||
John J. Legere | 2015 | 1,492,358 | — | 13,675,485 | — | 9,253,101 | 37,043 | (3) | 24,457,987 | 2018 | 1,878,205 | — | 58,494,969 | — | 6,130,849 | 34,183 | 66,538,207 | |||||||||||||||||||||||||||||||||||||||||||||||
President and Chief Executive Officer | 2014 | 1,250,000 | — | 10,658,668 | — | 6,658,333 | — | 18,567,001 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 1,250,000 | 525,000 | 22,500,050 | — | 4,833,333 | 137,325 | 29,245,708 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Executive Officer | 2017 | 1,618,590 | — | 16,278,923 | — | 5,666,666 | 67,027 | 23,631,206 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 1,500,000 | — | 12,898,115 | — | 5,610,000 | 51,800 | 20,059,915 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Braxton Carter | 2015 | 698,462 | — | 3,907,509 | — | 2,895,959 | 10,600 | (4) | 7,512,530 | 2018 | 898,077 | — | 5,374,318 | — | 2,182,327 | 11,803 | 8,466,524 | |||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2014 | 650,000 | — | — | — | 1,424,167 | 10,400 | 2,084,567 | 2017 | 845,192 | — | 8,128,113 | — | 2,155,241 | 28,192 | 11,156,737 | ||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 605,426 | — | 9,493,794 | 931,855 | 1,701,747 | 99,997 | 12,832,819 | 2016 | 724,135 | — | 4,339,167 | — | 1,692,665 | 10,600 | 6,766,567 | |||||||||||||||||||||||||||||||||||||||||||||||||
G. Michael Sievert | 2015 | 792,308 | — | 4,465,715 | — | 2,751,128 | 10,600 | (4) | 8,019,751 | 2018 | 1,108,654 | — | 30,937,145 | — | 3,592,039 | 11,534 | 35,649,372 | |||||||||||||||||||||||||||||||||||||||||||||||
Chief Operating Officer | 2014 | 550,000 | — | 1,022,919 | — | 1,063,792 | 10,400 | 2,647,111 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
President and Chief Operating Officer | 2017 | 944,231 | — | 14,699,399 | — | 3,210,384 | 36,729 | 18,890,743 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 800,000 | — | 5,320,028 | — | 2,244,000 | 10,600 | 8,374,628 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Neville R. Ray | 2015 | 598,462 | — | 2,679,457 | — | 2,409,960 | 10,600 | (4) | 5,698,479 | 2018 | 879,808 | — | 22,293,403 | — | 2,590,177 | 11,511 | 25,774,898 | |||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President and Chief Technology Officer | 2014 | 550,000 | — | — | — | 1,683,583 | 10,400 | 2,243,983 | 2017 | 796,154 | — | 5,222,303 | — | 2,030,192 | 11,468 | 8,060,117 | ||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 550,000 | 600,000 | 5,362,258 | — | 2,612,448 | 10,641 | 9,135,347 | 2016 | 696,539 | — | 4,189,514 | — | 1,628,159 | 10,600 | 6,524,811 | |||||||||||||||||||||||||||||||||||||||||||||||||
Thomas C. Keys | 2015 | 700,000 | — | 3,907,509 | — | 2,565,333 | 10,600 | (4) | 7,183,442 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
President, T-Mobile Indirect Channel | 2014 | 688,462 | — | — | — | 1,400,449 | 10,400 | 2,099,311 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 647,714 | — | 9,806,246 | 980,900 | 1,761,187 | 5,100 | 13,201,147 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David R. Carey | 2018 | 774,038 | — | 13,501,485 | — | 1,567,428 | 11,025 | 15,853,977 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, Corporate Services |
(1) | The value of stock awards (consisting of RSUs and PRSUs at target level) is determined using the aggregate grant date fair value computed in accordance with ASC 718, excluding the effect of any estimated forfeitures. These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be realized by the Named Executive Officer. See Note |
(2) |
|
Name | T-Mobile 2015 STIP ($) | Legacy T-Mobile USA LTIP ($) | ||||||
John J. Legere | 5,253,101 | 4,000,000 | ||||||
J. Braxton Carter | 1,229,292 | 1,666,667 | ||||||
G. Michael Sievert | 1,394,461 | 1,356,667 | ||||||
Neville R. Ray | 1,053,293 | 1,356,667 | ||||||
Thomas C. Keys | 1,232,000 | 1,333,333 |
|
|
(3) | Amounts included in the “All Other Compensation” column are detailed in the table below. |
Officer | 401k ($) | Legal Fee ($) | Security ($) | Spousal Travel (1) ($) | Other (2) ($) | Total ($) | ||||||||||||||||||
John J. Legere | — | 18,375 | 15,784 | — | 25 | 34,183 | ||||||||||||||||||
J. Braxton Carter | 11,000 | — | — | 509 | 294 | 11,803 | ||||||||||||||||||
G. Michael Sievert | 11,000 | — | — | 509 | 25 | 11,534 | ||||||||||||||||||
Neville R. Ray | 11,000 | — | — | 486 | 25 | 11,511 | ||||||||||||||||||
David R. Carey | 11,000 | — | — | — | 25 | 11,025 |
(1) |
|
(2) | Amounts reflect the value of gifts provided to the |
T-Mobile |
EXECUTIVE COMPENSATION
20152018 Grants of Plan-Based Awards Table
The following table sets forth certain information with respect to grants of plan-based awards for the year ended December 31, 2015,2018, to the Named Executive Officers.
Name | Type of Award | Grant Date | Approval Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock or Units (#) | Grant Fair Value of Stock | Type of | Grant | Approval | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other (#) | Grant Date of Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($) | Target(1) ($) | Maximum (1) ($) | Threshold (#) | Target (2) (#) | Maximum (2) (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John J. Legere | STIP | — | 2,984,716 | 5,969,432 | — | — | — | — |
|
— |
| STIP | 189,224 | 3,784,475 | 7,568,950 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/15/2018 | 2/14/2018 | — | — | — | 31,506 | 126,024 | 252,048 | — | 7,669,821 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/15/2018 | 2/14/2018 | — | — | — | — | — | — | 63,012 | 3,808,445 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 260,163 | 520,326 | — | $ | 9,488,145 | PRSU | 2/15/2018 | 2/14/2018 | — | — | — | 11,815 | 47,259 | 94,518 | — | 2,876,183 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 130,082 | $ | 4,187,340 | PRSU | 4/29/2018 | 4/27/2018 | — | — | — | 149,507 | 598,029 | 1,196,058 | — | 44,140,520 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Braxton Carter | STIP | — | 698,462 | 1,396,924 | — | — | — | — | — | STIP | 67,356 | 1,347,115 | 2,694,230 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 56,911 | 113,822 | — | $ | 2,075,544 | PRSU | 2/15/2018 | 2/14/2018 | — | — | — | 11,077 | 44,306 | 88,612 | — | 2,696,463 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 56,911 | $ | 1,831,965 | RSU | 2/15/2018 | 2/14/2018 | — | — | — | — | — | — | 44,306 | 2,677,855 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
G. Michael Sievert | STIP | — | 792,308 | 1,584,616 | — | — | — | — | — | STIP | 110,865 | 2,217,308 | 4,434,616 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 65,041 | 130,082 | — | $ | 2,372,045 | PRSU | 2/15/2018 | 2/14/2018 | — | — | — | 14,030 | 56,121 | 112,242 | — | 3,415,524 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 65,041 | $ | 2,093,670 | RSU | 2/15/2018 | 2/14/2018 | — | — | — | — | — | — | 56,121 | 3,391,953 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 4/29/2018 | 4/27/2018 | — | — | — | 80,815 | 323,259 | 646,518 | — | 24,129,668 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Neville R. Ray | STIP | — | 598,462 | 1,196,924 | — | — | — | — | — | STIP | 79,944 | 1,598,874 | 3,197,749 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 39,025 | 78,050 | — | $ | 1,423,242 | PRSU | 2/15/2018 | 2/14/2018 | — | — | — | 10,461 | 41,844 | 83,688 | — | 2,546,626 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 39,025 | $ | 1,256,215 | RSU | 2/15/2018 | 2/14/2018 | — | — | — | — | — | — | 41,844 | 2,529,051 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Thomas C. Keys | STIP | — | 700,000 | 1,400,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2015 | 2/12/2015 | — | — | — | — | 56,911 | 113,822 | — | $ | 2,075,544 | PRSU | 2/15/2018 | 2/14/2018 | — | — | — | 11,815 | 47,259 | 94,518 | — | 2,513,706 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | 2/12/2015 | — | — | — | — | — | — | 56,911 | $ | 1,831,965 | PRSU | 4/29/2018 | 4/27/2018 | — | — | — | 49,247 | 196,986 | 393,972 | — | 14,704,020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David R. Carey | STIP | 48,377 | 967,548 | 1,935,096 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/15/2018 | 2/14/2018 | — | — | — | 8,584 | 34,337 | 68,674 | — | 2,089,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/15/2018 | 2/14/2018 | — | — | — | — | — | — | 34,337 | 2,075,328 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/15/2018 | 2/14/2018 | — | — | — | 11,815 | 47,259 | 94,518 | — | 2,513,706 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 4/29/2018 | 4/27/2018 | — | — | — | 23,109 | 92,436 | 184,872 | — | 6,822,701 |
(1) | Represents the threshold, target and maximum amounts of annual cash incentive compensation that might have |
(2) | Represents the threshold, target and maximum number of shares that might be paid pursuant to |
(3) | The value of |
Employment Arrangements
Employment Arrangements
Employment Agreement with Mr. Legere. TheDuring 2018, the Company entered intowas party to an amended and restated employment agreement with Mr. Legere effective September 22, 2012 (which was amended on October 23, 2013(the “Legere Employment Agreement”). In connection with the execution of the Business Combination Agreement, the Company and February 25, 2015) providing for his employment as Chief Executive Officer and his appointmentMr. Legere entered into an amendment to the BoardLegere Employment Agreement (the “2018 Legere Amendment”), effective as of Directors. The initialApril 29, 2018.
Prior to the 2018 Legere Amendment, the term of the agreement ends on September 22, 2017Legere Employment Agreement extended through April 1, 2019, and automatically extendsextended for successiveone-year terms. Either the Company or Mr. Legere may give terms thereafter (unless either party provided notice that the term will not be extended. ofnon-renewal).
Pursuant to the amendment entered into on February 25, 2015,Legere Employment Agreement, as in effect prior to the 2018 Legere Amendment, Mr. Legere iswas entitled (effective January 1, 2015) to a minimum (i) an annual base salary of $1.5 million$1,666,667, and (ii) an annual incentive plan target award of $3 millionno less than $3,333,333 (with a maximum award equal to 200% of target). The Legere Employment Agreement also provides that Mr. Legere is entitled to employee benefits to the same extent and (iii)on the same terms as such benefits are provided generally by the Company to its senior managers.
Pursuant to the Legere Employment Agreement (as in effect prior to the 2018 Legere Amendment), commencing with calendar year 2018, Mr. Legere was entitled to annual long-term incentive planawards with a target value equal to $15,000,000, allocated as follows: (i) 20% of such value was to be granted in the form of PRSUs (the “Incremental PRSUs”); and (ii) with respect to the remaining 80% of such value,(a) one-third of such
remaining value was to be granted in the form of annual RSUs and(b) two-thirds of such remaining value was to be granted in the form of annual PRSUs.
In addition, pursuant to the Legere Employment Agreement, Mr. Legere is entitled upon request to certain Company-paid financial planning advice in connection with potential change in control payments under Code Section 280G.
2018 Legere Amendment. The 2018 Legere Amendment amended the Legere Employment Agreement to (i) extend the term of Mr. Legere’s employment thereunder through April 30, 2020 (with Mr. Legere’s employment automatically terminating on such date, unless terminated earlier) and (ii) increase (A) Mr. Legere’s annual base salary to $2,000,000, (B) Mr. Legere’s target annual incentive award to $4,000,000 and (C) the target grant-date value of Mr. Legere’s annual long-term incentive awards (commencing with calendar year 2019) to $17,250,000 (allocated among annual RSUs, annual PRSUs and Incremental PRSUs in the same manner described above). In addition, concurrently with the entrance into the 2018 Legere Amendment, Mr. Legere was granted an award of $12 million.Transaction PRSUs, with an approximate aggregate grant-date value of $37,000,000. See “— Long-Term Incentive Awards Granted in 2018” above for additional information.
Term Sheets with Messrs. Carter and Keys. Effective May 1, 2013, Messrs. Carter and Keys entered into term sheets with
The 2018 Legere Amendment also provides that the Company which confirmed their post Business Combination roles and compensation.will reimburse Mr. Legere for up to $25,000 in legal fees incurred in connection with the negotiation of such amendment.
36 | T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Term Sheet with Mr. Sievert. Effective January 1, 2015, During 2017, the Company was party to an amended and restated term sheet with Mr. Sievert (the “Sievert Term Sheet”). In connection with the execution of the Business Combination Agreement, the Company and Mr. Sievert entered into a term sheet pursuantan amendment to whichthe Sievert Term Sheet, effective as of April 29, 2018 (the “2018 Sievert Amendment”).
Pursuant to the Sievert Term Sheet (as in effect prior to the 2018 Sievert Amendment), Mr. Sievert will receivewas entitled to (i) an (i) annual base salary of $800,000,$950,000, (ii) an annual incentive plan target of 100%200% of his base salary, and (iii) an annual long-term incentive plan award with a target value of $7,125,000. The Sievert Term sheet also provides that Mr. Sievert is eligible to receive any employee benefits provided broadly to executives at his level in the future (except as would result in a duplication of benefits).
2018 Sievert Amendment.The 2018 Sievert Amendment amended the Sievert Term Sheet to reflect Mr. Sievert’s new position as President and Chief Operating Officer of the Company, effective as of April 29, 2018 (as ratified by the Board on June 13, 2018), and to provide for his service as President and Chief Operating Officer of the combined entity resulting from the closing of the Sprint Combination. In addition, the 2018 Sievert Amendment increases (i) Mr. Sievert’s annual base salary to $1,200,000, and (ii) the target grant-date value of Mr. Sievert’s annual long-term incentive awards (commencing with calendar year 2019) to $10,350,000. In addition, concurrently with the entrance into the 2018 Sievert Amendment, Mr. Sievert was granted an award of Transaction PRSUs, with an approximate aggregate grant-date value of $20,000,000. See “— Long-Term Incentive Awards Granted in 2018” above for additional information.
Employment Agreement with Mr. Carter.During 2018, the Company was party to an amended and restated employment agreement with Mr. Carter (the “Carter Employment Agreement”). In connection with the execution of the Business Combination Agreement, the Company and Mr. Carter entered into an amendment to the Carter Employment Agreement (the “2018 Carter Amendment”), effective as of April 29, 2018. Effective March 25, 2019, the Company and Mr. Carter entered into a second amendment to the Carter Employment Agreement (the “2019 Carter Amendment”). The terms of the 2019 Carter Amendment (which were not in effect in 2018) are described below under “— 2019 Carter Amendment”.
Pursuant to the Carter Employment Agreement (as in effect during 2018 prior to the 2018 Carter Amendment), the term of the Carter Employment Agreement extended through March 1, 2019, unless extended or earlier terminated by the parties.
In addition, pursuant to the Carter Employment Agreement as in effective during 2018, Mr. Carter is entitled to receive (i) an annual base salary of $850,000, (ii) an annual incentive plan target of 150% of his eligible base earnings, (iii) an annual long-term incentive award with a target value of 250% of his total target cash compensation.compensation, (iv) aone-time special cash bonus equal to $2,500,000 (the full amount was paid in March 2019), (v) aone-time award of time-based RSUs with a target value of $2,500,000 (the award vested in full on March 1, 2019); and (vi) employee benefits to the same extent and on the same terms as such benefits are provided generally by the Company to its similarly-situated executives.
2018 Carter Amendment. The 2018 Carter Amendment amended the Carter Employment Agreement to provide that Mr. Carter’s employment thereunder will continue until the first to occur of the following dates: (1) if the Sprint Combination closes, the 20th day following the
Company’s (or combined entity’s) first quarterly or annual financial filing following the closing; or (2) if the Sprint Combination is terminated and (a) public announcement thereof is made prior to March 1, 2019, (x) the 20th day following the Company’s next quarterly or annual financial filing after such public announcement if the deadline for such financial filing is after March 1, 2019, or (y) March 1, 2019 if the deadline for the Company’s next quarterly or annual financial filing after such public announcement is before March 1, 2019, and (b) public announcement thereof is made following March 1, 2019, the 20th day following the first quarterly or annual financial filing made by the Company after such public announcement. The 2018 Carter Amendment also clarifies that Mr. Carter’s employment will automatically terminate upon the expiration of his employment term (unless earlier terminated).
2019 Carter Amendment. The 2019 Carter Amendment amended the Carter Employment Agreement to provide that the term of Mr. Carter’s employment thereunder will continue until the first to occur of the following dates: (1) December 31, 2019; (2) if the Sprint Combination closes prior to December 31, 2019, the 20th day following the first quarterly or annual financial filing made by the combined entity after the closing; or (3) if, prior to December 31, 2019, the Company publicly announces that the Sprint Combination has been terminated, the 20th day following the first quarterly or annual financial filing made by the Company after such public announcement. The 2019 Carter Amendment also increased Mr. Carter’s annual base salary to $950,000, effective as of December 16, 2018.
Following entrance into the 2019 Carter Amendment, Mr. Carter was granted (i) a one-time award of PRSUs with respect to a number of shares of Company common stock equal to $156,250 divided by the average closing price of the Company’s common stock for the 30 calendar day-period ending five business days prior to February 15, 2019, rounded up to the nearest whole PRSU (the “True-Up PRSUs”) and (ii) a one-time award of RSUs with respect to a number of shares of Company common stock equal to $156,250 divided by the average closing price of the Company’s common stock for the 30 calendar day-period ending five business days prior to February 15, 2019, rounded up to the nearest whole RSU (the “True-Up RSUs”). The True-Up PRSUs and True-Up RSUs are subject to the same vesting schedule and other terms and conditions (including, with respect to the True-Up PRSUs, performance goals) applicable to the annual awards of PRSUs and RSUs granted to Mr. Carter on February 15, 2019.
In addition, following entrance into the 2019 Carter Amendment, Mr. Carter was granted a one-time award of PRSUs with an aggregate value (based on the volume weighted average price of the Company’s common stock during the 90 calendar day period ending with (and including) April 27, 2018) of $3,500,000. These PRSUs are generally subject to the same terms and conditions as the PRSUs granted to Mr. Carter under the Plan on February 15, 2018, except that (i) fifty percent (50%) of the PRSUs will vest on the earlier of the closing of the Sprint Combination or the third anniversary of April 29, 2018, and (ii) the remaining fifty percent (50%) of the PRSUs will vest on the third anniversary of April 29, 2018, subject to Mr. Carter’s continued employment through the applicable vesting date (except as otherwise set forth in the Carter Employment Agreement (as amended) and PRSU award agreement).
Term Sheet with Mr. Carey. In connection with the execution of the Business Combination Agreement, effective as of April 29, 2018 the Company entered into a compensation term sheet with Mr. Carey (the “Carey Term Sheet”). The term of the Carey Term Sheet extends through
T-Mobile 2019 Proxy Statement | 37 |
EXECUTIVE COMPENSATION
April 29, 2020, unless earlier terminated. Pursuant to the Carey Term Sheet, Mr. Carey is entitled to (i) an annual base salary of $775,000, (ii) a target annual incentive award equal to 125% of his eligible earnings, and (iii) commencing with calendar year 2019, annual long-term incentive awards with an aggregate target grant-date value of no less than $4,359,375. Concurrently with the entrance into the Carey Term Sheet, Mr. Carey was granted an award of Transaction PRSUs, with an approximate aggregate grant date value of $5,719,000. See “— Long-Term Incentive Awards Granted in 2018” above for additional information.
See “— Potential Payments Uponupon Termination or in Connection Withwith a Change in Control” for information regarding payments payable upon termination of employment of the Named Executive Officers.
Cash and Incentive Compensation
Non-Equity Incentive Plan AwardsAwards.. The 20152018 Summary Compensation Table includes payments received under the 20152018 STIP as well as payments underfor the legacy T-Mobile USA LTIP that were paid at target with respect to performance periodsperiod ended in 2013, 2014 and 2015 in connection with the Business Combination. For Messrs. Carter and Keys, the 2015 Summary Compensation Table also includes payments under the legacy MetroPCS short-term incentive plan for 2013.December 31, 2018. The 20152018 Grants of Plan-Based Awards Table includes the range of potential payouts of awards granted under the 20152018 STIP.
Equity Incentive Plan AwardsAwards.. All of the Named Executive Officers received equity awards consisting of both time-based RSUs that vest in three annual installments beginning in February 20162019, subject to continued service through the applicable vesting dates, and performance-based RSUsPRSUs that vest based on the relative performance of the Company’s TSR compared to that of the peer group over a three-year measurement period, ending on February 25, 2018.subject to continued service through the end of the measurement period (in each case, except as described below). See “— Long-Term Incentives” above.above for more information.
T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Outstanding Equity Awards at 20152018 FiscalYear-End Table
The following table sets forth certain information with respect to all outstanding equity awards held by the Named Executive Officers as of December 31, 2015.2018. The number of PRSUs (and related market value) set forth below assume attainment of maximum Company performance (200% of target). As a result, the values disclosed are materially higher than the actual trending value as of December 31, 2018. Actual value received at vest will be based on Company performance at that time.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | | Type of | |
| Grant Date |
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Number of |
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Number of |
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| Option Exercise Price ($) |
| | Option Expiration | |
| Value of Unexercised In-the- Money Options/ SARs at Year-End (6) ($) |
|
| Number of Shares or Units or Stock Vested |
|
| Market Value of Shares or Units of Stock That Have Not Vested (7) ($) |
| | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | |
| Equity Incentive Plan Awards: Value of Units or Rights That Not Vested (7) ($) |
| | Type of Award | | | Grant Date |
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|
Number of |
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|
Number of
|
| | Option Exercise Price ($) |
| | Option Expiration |
| | Value of Unexercised In-the- Money Options/ SARs at Year-End ($) |
| | Number of Shares or Units of Stock Not Vested (#) |
| | Market Value of Shares or Units of Stock That Have Not Vested (7) ($) |
| | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested |
| | Equity Incentive Plan Awards: Value of Units or Rights That Not Vested (7) ($) |
| ||||||||||||||||||||||||||||||
Exercisable | Unexerciseable | Exercisable | Unexercisable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John J. Legere | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 260,163 | 10,177,577 | PRSU | 4/29/2018 | (1) | — | — | — | — | — | — | — | 598,029 | 76,081,249 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | (2) | — | — | — | — | — | 130,082 | 5,088,808 | — | — | RSU | 2/15/2018 | (3) | — | — | — | — | — | 63,012 | 4,008,193 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 12/16/2014 | (3) | — | — | — | — | — | — | — | 282,986 | 11,070,412 | PRSU | 2/15/2018 | (2) | — | — | — | — | — | — | — | 47,259 | 6,012,290 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 12/16/2014 | (4) | — | — | — | — | — | — | — | 282,986 | 11,070,412 | PRSU | 2/15/2018 | (2) | — | — | — | — | — | — | — | 126,024 | 16,032,773 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 6/10/2013 | (2) | — | — | — | — | — | 181,599 | 7,104,153 | — | — | PRSU | 4/1/2017 | (2) | — | — | — | — | — | — | — | 48,757 | 6,202,866 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 130,018 | 16,540,890 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2017 | (3) | — | — | — | — | — | 43,340 | 2,756,857 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 215,112 | 27,366,549 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2016 | (3) | — | — | — | — | — | 35,852 | 2,280,546 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Braxton Carter | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 56,911 | 2,226,358 | PRSU | 2/15/2018 | (2) | — | — | — | — | — | — | — | 44,306 | 5,636,609 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/15/2018 | (3) | — | — | — | — | — | 44,306 | 2,818,305 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 12/22/2017 | (4) | — | — | — | — | — | 40,545 | 2,579,067 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 43,170 | 5,492,087 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | (2) | — | — | — | — | — | 56,911 | 2,226,358 | — | — | RSU | 2/25/2017 | (3) | — | — | — | — | — | 28,780 | 1,830,696 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 6/10/2013 | (2) | — | — | — | — | — | 98,366 | 3,848,078 | — | — | PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 54,829 | 6,975,345 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option | 4/18/2007 | (5) | 145,500 | — | 37.91 | 4/18/2017 | 176,055 | — | — | — | — | RSU | 2/25/2016 | (3) | — | — | — | — | — | 18,277 | 1,162,600 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
G. Michael Sievert | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 65,041 | 2,544,404 | PRSU | 4/29/2018 | (1) | — | — | — | — | — | — | — | 323,259 | 41,125,010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | (2) | — | — | — | — | — | 65,041 | 2,544,404 | — | — | PRSU | 2/15/2018 | (2) | — | — | — | — | — | — | — | 56,121 | 7,139,714 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 6/5/2014 | (2) | — | — | — | — | — | 20,363 | 796,601 | — | — | RSU | 2/15/2018 | (3) | — | — | — | — | — | 56,121 | 3,569,857 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 6/10/2013 | (2) | — | — | — | — | — | 61,593 | 2,409,518 | — | — | PRSU | 2/25/2017 | (5) | — | — | — | — | — | — | — | 57,899 | 7,365,911 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Neville R. Ray | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 39,025 | 1,526,658 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | (2) | — | — | — | — | — | 39,025 | 1,526,658 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 6/10/2013 | (2) | — | — | — | — | — | 61,593 | 2,409,518 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Thomas C. Keys | PRSU | 2/25/2015 | (1) | — | — | — | — | — | — | — | 56,911 | 2,226,358 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2015 | (2) | — | — | — | — | — | 56,911 | 2,226,358 | — | — | RSU | 2/25/2017 | (6) | — | — | — | — | — | 38,600 | 2,455,346 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 6/10/2013 | (2) | — | — | — | — | — | 101,393 | 3,966,494 | — | — | PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 57,899 | 7,365,911 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option | 8/8/2007 | (5) | 200,000 | — | 55.43 | 8/8/2017 | — | — | — | — | — | RSU | 2/25/2017 | (3) | — | — | — | — | — | 57,899 | 3,682,955 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Option | 4/18/2007 | (5) | 88,875 | — | 37.91 | 4/18/2017 | 107,539 | — | — | — | — | PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 67,223 | 8,552,110 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2016 | (3) | — | — | — | — | — | 22,408 | 1,425,373 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Neville R. Ray | PRSU | 4/29/2018 | (1) | — | — | — | — | — | — | — | 196,986 | 25,060,559 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/15/2018 | (2) | — | — | — | — | — | — | — | 47,259 | 6,012,290 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/15/2018 | (2) | — | — | — | — | �� | — | — | 41,844 | 5,323,394 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/15/2018 | (3) | — | — | — | — | — | 41,844 | 2,661,697 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 40,631 | 5,169,076 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2017 | (3) | — | — | — | — | — | 27,088 | 1,723,068 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 52,938 | 6,734,772 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2016 | (3) | — | — | — | — | — | 17,646 | 1,122,462 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David R. Carey | PRSU | 4/29/2018 | (1) | — | — | — | — | — | — | — | 92,436 | 11,759,708 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/15/2018 | (2) | — | — | — | — | — | — | — | 47,259 | 6,012,290 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/15/2018 | (2) | — | — | — | — | — | — | — | 34,337 | 4,368,353 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/15/2018 | (3) | — | — | — | — | — | 34,337 | 2,184,177 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2017 | (2) | — | — | — | — | — | — | — | 30,854 | 3,925,246 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2017 | (3) | — | — | — | — | — | 20,570 | 1,308,458 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU | 2/25/2016 | (2) | — | — | — | — | — | — | — | 34,956 | 4,447,102 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU | 2/25/2016 | (3) | — | — | — | — | — | 11,652 | 741,184 | — | — |
(1) |
|
(2) |
|
|
T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
(3) | RSUs vest in annual installments with respect toone-third of the shares on each of the first three anniversaries of the grant date, subject to continued service through the applicable vesting date (except as otherwise provided in the applicable award or employment agreement). |
(4) | RSUs which vested in full on March 1, 2019. |
(5) | PRSUs |
|
|
Calculated based on the number of PRSUs that may be earned upon achievement of |
Option Exercises and Stock Vested for Fiscal Year 20152018 Table
The following table sets forth certain information with respect to option exercises and restricted stock units vesting during the fiscal year ended December 31, 2015,2018, with respect to the Named Executive Officers. There were no option exercises during the fiscal year ended December 31, 2018.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | ||||||||||||||||||||||||||||
John J. Legere | — | — | 930,691 | 35,779,395 | — | — | 566,573 | 34,028,374 | ||||||||||||||||||||||||||||
J. Braxton Carter | 516,300 | 8,620,434 | 322,148 | 12,261,592 | — | — | 153,507 | 9,219,630 | ||||||||||||||||||||||||||||
G. Michael Sievert | — | — | 211,896 | 8,087,358 | — | — | 179,811 | 10,799,449 | ||||||||||||||||||||||||||||
Neville R. Ray | — | — | 201,715 | 7,677,675 | — | — | 114,052 | 6,849,963 | ||||||||||||||||||||||||||||
Thomas C. Keys | 469,904 | 5,763,492 | 332,060 | 12,638,864 | ||||||||||||||||||||||||||||||||
David R. Carey | — | — | 98,584 | 5,920,955 |
(1) | ||
Included in the amount listed in this column is vesting of |
EXECUTIVE COMPENSATION2018Non-Qualified Deferred Compensation
The following table shows the contributions, earnings and the aggregate balance of total deferrals as of December 31, 2018.
2015 Non-Qualified Deferred Compensation
Name | Executive Contributions in | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year-End(2)($) | |||||||||
John J. Legere | — | — | — | |||||||||
J. Braxton Carter | — | (74,839 | ) | 2,567,421 | ||||||||
G. Michael Sievert | — | — | — | |||||||||
Neville R. Ray | 187,988 | (385,487 | ) | 5,810,246 | ||||||||
David R. Carey | 234,147 | (61,348 | ) | 837,381 |
(1) | Of the amounts listed in this column, the following aggregate amounts were reported in the Summary Compensation Table for 2018: Mr. Carey, $234,147. |
(2) | Of the amounts listed in this column, the following aggregate amounts were reported in the Summary Compensation Tables in proxy statements for 2016 and 2017: Mr. Carter, $677,066. |
All of the Named Executive Officers are eligible to participate in the Company’snon-qualified deferred compensation plan (the “Deferred Compensation Plan”). However, only Messrs. Carter, Ray and RayCarey have elected to do so. Under the terms of the Deferred Compensation Plan, participants are eligible to defer up to 75% of their base salary, 100% of their annual incentive compensation and 100% of annual RSU awards. All amounts attributable to participant deferrals under the Deferred Compensation Plan are fully vested at all times. We did not provide any employer matching or discretionary allocations under the Deferred Compensation Plan for 2015.2018.
Participants choose how their deferrals (and their account balances) will be allocated among the national investment funds available under the Deferred Compensation Plan. For 2015,2018, there were 1618 funds for deferral of base salary and incentive compensation, which did not include a Company stock fund. Any deferred RSUs would be credited to a Company stock fund.
A participant’s account balancesbalance under the Deferred Compensation Plan will be distributed in alump-sum distribution when the participant terminates employment, unless termination is due to retirement or disability, in which case the
participant can elect annual installments over two to fifteen15 years. For this purpose, “retirement” means termination of employment on or after either (i) the date on which the sum of the participant’s age and years of service equals 65 or (ii) the date on which the participant completes ten years of service. Participants may also elect to have amounts attributable to their deferrals for a particular year distributed (or commence to be distributed) as of a specified date in a lump sum or in annual installments over two to five years, even if they are still employed by the Company on that date. Generally, the specified date for base
salary and incentive compensation distribution may not be earlier than the first day of the second year beginning after the year in which such amounts are deferred and for RSUs may not be earlier than the first day of the fourth year beginning after the year in which such amounts are deferred.
If a participant’s employment with the Company terminates prior to thein-service distribution date specified by the participant or whilein-service distribution installment payments are being made, then any portions of the participant’s account balances that are subject to specified distribution date elections will be distributed upon termination of employment, as described above.
40 | T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
If a participant dies before his or her entire interest under the Deferred Compensation Plan has been distributed, his or her remaining interest will be distributed in a lump sum to his or her beneficiary.
If a participant’s employment terminates within 24 months following a change in control (as defined in the Company’s 2013 Omnibus Incentive Plan), then all amounts credited to his accounts under the Deferred Compensation Plan will be paid to the participant in a lump sum within 90 days after such termination. Similarly, if a change in control occurs after a participant retires or becomes disabled, any undistributed amounts remaining in such participant’s accounts under the Deferred Compensation Plan will be distributed in a lump sum within 90 days after the change in control. Notwithstanding the foregoing, if a participant is a “specified employee” for purposes of Code Section 409A of the Code at the time his or her employment with the Company terminates, then distributions on account of termination of employment will not be made (or commence to be made) prior to the earlier of the participant’s death or thesix-month anniversary of the participant’s termination of employment. Each of the Named Executive Officers is a specified employee for this purpose. Distributions are made in cash or stock, as applicable.
The Deferred Compensation Plan is an unfunded plan for tax purposes and for purposes of the Employee Retirement Income Security Act of 1974, as amended. We have established a “rabbi trust” to satisfy our obligations under the Deferred Compensation Plan.
Potential Compensation and Benefits upon Qualifying Termination
The following table showsdescribes potential compensation and benefits that may be made to Named Executive Officers experiencing a qualifying separation from service. To the contributions, earnings and the aggregate balance of total deferrals as of December 31, 2015.extent that a Named Executive Officer is eligible for severance benefits under any arrangements below, that person may not receive any duplicative benefits.
Name | Executive Contributions in | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year-End(1)($) | |||||||||
John J. Legere | — | — | — | |||||||||
J. Braxton Carter | 453,000 | (12,219 | ) | 920,288 | ||||||||
G. Michael Sievert | — | — | — | |||||||||
Neville R. Ray | 698,990 | (110,891 | ) | 3,266,823 | ||||||||
Thomas C. Keys | — | — | — |
|
Potential Payments Uponupon Termination or in Connection Withwith a Change in Control
The following describes and quantifies the estimated amount of potential payments and benefits that would be provided to each of our current Named Executive Officers under the Company’s compensation plans and agreements in the event of a termination of employment and/or change in control of the Company. The amounts shown assume that the termination was effective as of December 31, 2015, and that the price of our common stock as of termination was the closing price of $39.12 on December 31, 2015. The actual amounts can be determined only following the officer’s termination and the conclusion of all relevant incentive plan performance periods. If an executive officer voluntarily leaves the Company, the executive officer is not entitled to any severance compensation.
Named Executive Officers are subject to covenants regarding protection of confidential information, anon-compete and certain other restrictive covenants regarding solicitation of employees or customers for a period through one year after termination of employment for Named Executive Officers other thanemployment. For Mr. Legere, and for athis period throughis two years after termination of employment and for Mr. Legere.Carey (upon a retirement only), this period is the later of one year after his retirement or the last date on which any RSUs and/or PRSUs are paid to Mr. Carey under the Carey Retirement Agreement (as defined and discussed below).
Mr. Legere’s Employment AgreementTermination Due to Death or Disability. Mr. Legere’s employment agreement provides for the following termination benefits.
Upon a termination of the applicable executive’s employment due to death or disability, each Named Executive Officer is entitled to receive (i) an unpaid annual incentive award from the preceding fiscal year (if any); (ii) a target annual incentive award for the current fiscal year; and (iii) for Mr. Carter, a prorated portion of his special cash bonus of $2,500,000 (the full amount was paid in March 2019) (discussed above under
“Employment Arrangements – Employment Agreement with Mr. Carter”). In addition, (a) any unearned time-based long-term incentive awards (“LTI awards”) then-held by the Named Executive Officer will become immediately earned and vested, and (b) any performance-based LTI awards will vest and be paid at target as of the date of the executive’s separation from service.
Termination Without Cause or for Good Reason
(No Change in Control)
Under their respective employment arrangements with the Company (prior to the 2018 and 2019 amendments discussed above under “Employment Arrangements”), upon a termination of the applicable executive’s employment by us without “cause” or“cause,” by Mr. Legerethe executive for “good reason” not(or, for Mr. Sievert, due to a “constructive termination”) (each, as defined in connectionthe applicable employment arrangement), or, in the case of Mr. Legere, due to the expiration of his employment term, each of Messrs. Legere, Sievert and Carter will (subject to his timely execution andnon-revocation of a release of claims in favor of the Company and, for Mr. Legere, his compliance with a change in control, he willcertain restrictive covenants) be entitled to receive: (i) a
∎ | alump-sum cash payment equal to two times the sum of his annual base salary and then-current target annual incentive award; |
∎ | his unpaid annual incentive award from the preceding fiscal year (if any); |
∎ | a prorated portion of his annual incentive award for the current fiscal year, based on actual performance; |
∎ | for Mr. Carter, a prorated portion of his special cash bonus (if not previously paid); |
∎ | with respect to their LTI awards: |
∎ | For Messrs. Sievert and Carter, (a) accelerated vesting of the next tranche of any time-based LTI awards and(b) pro-rata vesting of any performance-based LTI awards (subject to adjustment based on actual performance during the applicable performance period); |
∎ | For Mr. Legere, (a) full vesting of any then-outstanding time-based LTI awards and (b) with respect to any performance-vesting LTI awards (including any PRSUs), such awards will become vested and earned as of the date of termination based on actual performance through the termination date, except that the accelerated vesting of Mr. Legere’s Incremental PRSUs, described above, and True-Up PRSUs granted in 2017 will be subject to Mr. Legere’s satisfactory participation and cooperation in, and assistance with, succession planning (including his satisfactory and orderly transition of duties and responsibilities to his successor) after any notice of qualifying termination is provided until the termination date, with such determination to be made by the Section 16 Subcommittee in its good faith sole discretion; and |
∎ | Company-paid group medical and dental benefits for up to 18 months (for Mr. Legere) or 12 months (for Mr. Carter) following termination. |
The April 2018 Amendments to the employment arrangements for Messrs. Legere, Sievert and Carter amended the foregoing severance provisions as follows:
∎ | Mr. Legere’s severance benefits were updated to include Company-paid office space and executive assistant (not to exceed $25,000 per month in the aggregate) for 18 months following termination (in addition to the payments and benefits outlined above). |
∎ | For Mr. Sievert, (i) in addition to the payments and benefits outlined above, he will be entitled to (a) 12 months of Company-paid outplacement services following termination and (b) Company-paid group medical and dental benefits for up to 18 months following termination; and (ii) in lieu of the accelerated vesting described above, |
T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
he will be entitled to (a) full vesting of any then-outstanding time-based LTI awards and (b) unless the applicable award agreement provides for better treatment,(i)pro-rata vesting of a portion of each performance-based LTI award based on the portion of the performance period completed as of termination and based on actual performance, and(ii) pro-rata vesting of a portion of each performance-based LTI award based on the portion of the performance period left to be completed based on target performance. |
∎ | For Mr. Carter, the payments and benefits outlined above will also be payable upon the expiration of his employment term (subject to his execution of a release). |
EXECUTIVE COMPENSATIONTermination Due to Retirement
On February 19, 2018, the Company entered into a letter agreement regarding eligibility for certain payments and benefits with Mr. Carey (the “Carey Retirement Agreement”). Pursuant to the Carey Retirement Agreement, upon Mr. Carey’s voluntary resignation from the Company for any reason on or after September 3, 2018, he will be entitled to receive (subject to his timely execution andnon-revocation of a release of claims in favor of the Company):
∎ | a prorated portion of his annual incentive award for the current fiscal year, based on actual performance through the calendar quarter ending immediately prior to termination (or, for a termination during the first calendar quarter of any year, at target); |
∎ | with respect to his LTI awards: |
∎ | his RSUs shall remain outstanding and shall continue to vest and be paid in accordance with the terms of the applicable award agreements; and |
∎ | his PRSUs (except for hisone-time special PRSUs granted on February 15, 2018 and his Transaction PRSUs) shall remain outstanding and shall continue to vest and be paid in accordance with the terms of the applicable award agreement based on the lesser of (i) actual performance during the full performance period or (ii) actual performance during the portion of the performance period ending on the termination date; |
∎ | Company-paid group medical and dental benefits for up to 18 months following termination; and |
∎ | continued eligibility for the Company’s employee mobile service discount program. |
lump-sum cash payment equalIn addition, under the Carey Retirement Agreement, upon Mr. Carey’s death or disability following his retirement but prior to two times the sumlast date on which any RSUs and/or PRSUs become vested in accordance with the Carey Retirement Agreement, his then-outstanding and unvested RSUs and PRSUs will vest in full as of the date of his annual base salary and then-current target annual incentive award; (ii) his annual incentive award from the preceding fiscal year that remains unpaid; (iii) a prorated portion of his annualdeath or disability, with actual performance bonus for the current fiscal year, basedPRSUs determined as if Mr. Carey had retired on such date.
Termination in Connection with a Corporate Restructuring, Business Combination or Change in Control
John J. Legere
Under the Company’s actual performance results; (iv) any unpaid, but earned, tranche vesting or cliff vesting legacy T-Mobile USA LTIP awards; (v) the portion of any outstanding legacy T-Mobile USA LTIP awards that vest in annual tranches, at target and prorated over the one-year vesting period; and (vi) the portion of any outstanding legacy T-Mobile USA LTIP awards that cliff vest at the end of the three-year vesting period, at target for the current year and prorated over the three-year vesting period.
UponLegere Employment Agreement, as amended, upon termination by the Companyus without cause or“cause,” by Mr. Legere for good reason within a period beginning three months prior“good reason” or due to the entering into of an agreement that leads to a change in control and ending on the second anniversaryCompany’snon-renewal of the change in control, Mr. Legere would receive, in addition to the benefits described in the preceding paragraph, the difference between the full amount, at target, of any outstanding legacy T-Mobile USA LTIP awards that he has not yet earned, and the amounts described in subsections (v) and (vi) of the preceding paragraph. See “— 2013 Omnibus Incentive Plan” below for the treatment of Mr. Legere’s RSUs.
“Good reason” is defined as any of the following:
a material diminution in base compensation, annual performance bonus target, or long-term incentive target or in the maximum potential amount payable with respect to any annual bonus or long-term incentive bonus award provided for under his employment agreement;
a material diminution in authority, duties or responsibilities, including, without limitation, any change in title or the appointment of any person as a result of which Mr. Legere ceases to be the Company’s sole Chief Executive Officer, provided that it will not be good reason if,agreement in connection with a change in control, Mr. Legere reportshe would be entitled to the Boardreceive (subject to his timely execution of Directors rather than the Chairmana release of claims in favor of the Board;
a material diminution inCompany and compliance with certain restrictive covenants) the authority, dutiesbenefits described above under “—Termination Without Cause or responsibilities of the supervisor to whom Mr. Legere is required to report (including a requirement that he report to a corporate officerfor Good Reason,” except that: (a) if such termination occurs on or employee instead of reporting directly to the Chairman of the Board);
a change of 50 miles or greater in the principal geographic location at which he must perform services; or
any other action or inaction that constitutes a material breach by the Company or the successor company, as applicable, of any agreement under which Mr. Legere provides services to the Company or the successor company, as applicable.
“Cause” has generally the same definition as in the Executive Continuity Plan, discussed below, except that the employment agreement’s definition also includes breach of a nonsolicitation covenant as well as unlawful discrimination, harassment, or retaliation, assault or other violent act toward any employee or third party, or other act or omission that, in each case, in the view of the Board of Directors constitutes a material breach of the Company’s written policies or Code of Business Conduct.
“Change in control” has the same definition as in the 2013 Omnibus Incentive Plan, discussed below.
Mr. Sievert’s Term Sheet. Mr. Sievert’s term sheet provides that he is entitled to two times the sum of his base salary and annual incentive plan target in the event he is terminated without cause or constructively discharged.
“Cause” generally has the same definition as in the Executive Continuity Plan, discussed below.
“Constructive discharge” has generally the same definition as “constructive termination” in the Executive Continuity Plan, discussed below, except that the definition of “constructive discharge” in the term sheet also includeswithin 24 months after a change in reporting relationship such that Mr. Sievert reports to anyone below the Chief Executive Officer level as an additional condition.
Executive Severance Benefit Guidelines. Under the Company’s Executive Severance Benefit Guidelines (“Severance Guidelines”), if as a result of a corporate restructuring or business combination in which an executive is terminated or resigns after being offered a new position that would:
result in a greater than 5% reduction in total compensation, or
require a move to a work location more than 50 miles from the executive’s current work location,
the executive may be considered for the following benefits: (i) a cash payment of two times total target cash (composed of annual salary and target annual bonus); (ii) acontrol, his prorated portion of the annual short-term incentive award for the current fiscal year will be paid at target; and (b) if such termination occurs on or within 12 months after a change in control, his performance-vesting LTI awards (including any PRSUs) will vest based on the Company’sgreater of target or actual performance results; (iii) COBRA benefit payments for up to 12 months; (iv) 12 monthsthrough the change in control.
Named Executive Officers (Other Than Mr. Legere)
Each of executive outplacement services valued at $6,500; (v) an amount equal to the tranche of each legacy T-Mobile USA LTIP award that would have vested at the end of the year in which the separation occurs, prorated at target by the ratio of the number of daysMessrs. Sievert, Carter, Ray and Carey participate in the tranche year preceding the date of the separation to the number of days in the tranche year; and (vi) an amount equal to the cliff-vesting portion of each legacy T-Mobile USA LTIP award prorated at target by the ratio of the number of days in the performance period preceding the date of the separation to the total number of days in the entire performance period.
Executive Continuity Plan. The Company’s Executive Continuity Plan, which provides that the Named Executive Officersparticipants who are terminated within the period of 24 months following a change in control byof the Company without cause or by the participant as the result ofdue to a constructive termination or for good reason are entitled to receive (subject to the Named Executive Officer’s timely execution andnon-revocation of a release of claims in favor of the Company) two times the sum of (a) the executive’s base salary plus (b) the greater of the executive’s target annual bonus percentageshort-term incentive award (i) at the time of termination, or (ii) immediately prior to the change in control.control, payable in alump-sum
“Cause” is defined in amount within 60 days following termination. Any cash severance paid under the Executive Continuity Plan as any one of the following:
the participant’s gross neglect or willful material breach of participant’s principal employment responsibilities or duties;
a final judicial adjudication that the participant is guilty of any felony (other than a law, rule or regulation relating to a traffic violation or other similar offense that has no material adverse effect on the Company or any of its affiliates);
EXECUTIVE COMPENSATION
the participant’s breach of any non-competition or confidentiality covenant between the participant and the Company or any affiliate of the Company;
fraudulent conduct, as determined by a court of competent jurisdiction, in the course of the participant’s employment with the Company or any of its affiliates; and
the material breach by the participant of any other obligation that continues uncured for a period of 30 days after notice thereof by the Company or any of its affiliates and that is demonstrably injurious to the Company or its affiliates.
For the Named Executive Officers other than Mr. Legere, “constructive termination” or “good reason” means the occurrence, after a change in control, of any of the following conditions:
a material diminution in the participant’s duties, authority or responsibilities;
a material reduction in the participant’s base salary, target short-term incentive opportunity, or target long-term incentive opportunity as in effect immediately prior to the change in control, except for across-the-board salary reductions based on the Company’s and its subsidiaries’ financial performance similarly affecting all or substantially all management employees of the Company and its subsidiaries;
a material reduction in the kind or level of qualified retirement and welfare employee benefits from the like kind benefits to which the participant was entitled immediately prior to a change in control with the result that the participant’s overall benefits package is materially reduced without similar action occurring to other eligible comparably situated employees;
the relocation of the office at which the participant was principally employed immediately prior to a change in control to a location more than 50 miles from the location of such office, or the participant being required to be based anywhere other than such office, except to the extent the participant was not previously assigned to a principal location and except for required travel on business to an extent substantially consistent with the participant’s business travel obligations at the time of the change in control; or
such other event, if any, as is set forth in the participant’s agreement regarding executive continuity benefits.
For Mr. Legere, “good reason” has the same definition as in his employment agreement described above.
“Change in control” in the Executive Continuity Plan has the same definition as in the 2013 Omnibus Incentive Plan.
The cash severance payments pursuant to the above-described severance plans or agreements will be reduced by any cash severance payments otherwise required to be provided to a participantpayable pursuant to any other severance plans or agreements except that any rights or payments(including amounts payable under the employment arrangements for Messrs. Sievert and Carter).
In addition, pursuant to the 2013 Omnibus Incentive Plan or any other long-term incentive plan or bonus plan will not reduce any such cash severance payments.
2013 Omnibus Incentive Plan. Under the terms of the 2013 Omnibus Incentive Plan and the award agreements applicable togoverning the Named Executive Officers, in the event ofLTI awards for Messrs. Sievert, Carter, Ray and Carey, if (i) a change in control in whichoccurs and outstanding awards are assumed, converted or replaced by the resulting entity, all time-based RSUs will become fully vested, and all performance-based RSUs will be deemed to be satisfied and paid at the greater of target or actual performance determined as of the
last trading day prior to the change in control (without proration) if,(ii) on or after the change in control and within one year after the change in control, the participant’sexecutive’s employment or service is terminated by the Company other than for cause or by the participantexecutive for good reason.reason, then: (a) all time-based LTI awards will become fully vested, and (b) all performance-based LTI awards will vest and be paid at the greater of target or actual performance determined as of the last trading day prior to the change in control. In addition, unless more favorable treatment is provided under the Executive Continuity Plan, each such Named Executive Officer’s annual incentive award will vest and be paid at the greater of target or actual performance determined as of the last trading day prior to the change in control.
Termination in Connection with the Sprint Combination
In connection with the execution of the Business Combination Agreement, effective as of April 29, 2018, the Company entered into severance letter agreements with Messrs. Carter, Ray and Carey (the “Severance Letter Agreements”). Each Severance Letter Agreement provides that, upon the applicable executive officer’s termination of employment without cause or for good reason, in either case, within 12 months following the first to
42 | T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
occur of (i) the closing of the Sprint Combination or (ii) the Company’s public announcement that the Sprint Combination will not close, such executive officer would be entitled to the following: (1) alump-sum cash payment equal to two times the sum of the executive officer’s annual base salary plus then-current target annual incentive award; (2) a prorated annual incentive award for the year of termination, based on actual performance; (3) any earned, unpaid annual incentive award for the preceding fiscal year (if any); (4) full vesting of the executive’s time-based long-term incentive awards; (5) vesting of the executive’s performance-based long-term incentive awards based on actual performance through the termination date; (6) Company-paid medical and dental coverage up to 18 months following termination; and (7) Company-paid outplacement services for 12 months following termination.
As a condition of receiving the severance benefits under the Severance Letter Agreements, the applicable executive officer must execute a release of claims in favor of the Company and continue to comply with certainnon-competition andnon-solicitation restrictions for 18 months following termination (or 12 months if such termination occurs within 12 months following the date on which the Company publicly announces the Sprint Combination will not close). The severance benefits under the Severance Letter Agreements are in lieu of any other severance benefits (unless such other benefits are more favorable to the applicable executive).
Executive Severance Benefit Guidelines
Under the Company’s Executive Severance Benefit Guidelines (“Severance Guidelines”), which covers all Named Executive Officers, if, as a result of a corporate restructuring or business combination in which a Named Executive Officer is terminated or resigns after being offered a new position that would: (i) result in a greater than 5% reduction in total cash compensation, (ii) require a move to a work location more than 50 miles from the executive’s current work location, or (iii) significantly reduce their duties and responsibilities (including such a change to their existing position), then, in any such case, we will consider providing the applicable executive with the following benefits: (i) alump-sum cash payment of two times the executive’s total target cash (composed of annual salary and target annual bonus); (ii) a prorated annual short-term incentive for the current fiscal year, based on actual performance; (iii) COBRA benefit payments for up to 12 months following termination; and (iv) 12 months of outplacement services valued at $6,500. Any cash severance paid under the Severance Guidelines will be reduced by any cash severance payments payable pursuant to any other severance plans or agreements (including amounts payable under the applicable executive’s employment arrangement and/or the Executive Continuity Plan (as applicable)).
“Best Pay” Provisions
The employment arrangements for each of Messrs. Legere, Sievert and Carter, as well as our Executive Continuity Plan, include “best pay” provisions under Code Section 280G, pursuant to which any “parachute payments” that become payable to the applicable Named Executive Officer will either be paid in full or reduced so that such payments are not subject to the excise tax under Code Section 4999, whichever results in the betterafter-tax treatment to the Named Executive Officer.
Change in Control (No Termination)
Pursuant to our 2013 Omnibus Incentive Plan and award agreements thereunder, in the event of a change in control of the Company in which outstanding awards are not assumed, converted or replaced by the resulting entity, (i) all time-based RSUsLTI awards will become vested, and(ii) all
performance-based RSUsLTI awards will be deemed to be satisfied and paid at the greater of target or actual performance as of the last trading day prior to the change in control prorated up to and including the date of the change in control.
The award agreements under the 2013 Omnibus Incentive Plan also provide that, in the case of death or total and permanent disability, any unearned time-based RSUs will become immediately earned and vested and any performance-based RSUs will be paid at target as of the date of the executive’s separation from service.
For the Named Executive Officers, other than Mr. Legere, under the terms of the 2013 Omnibus Incentive Plan and the applicable award agreements, in the event of a termination of employment in connection with a workforce reduction or divestiture, time-based RSUs that are scheduled to vest at the next scheduled vesting date will become earned and vested immediately. For performance-based RSUs, the number of performance-adjusted units would be determined after the end of the performance period and multiplied by the pro rata fraction (as defined below).
“Pro rata fraction” is defined as a fraction, the numerator of which is the number of days from the grant date of the award to the date of separation from service and the denominator of which is the number of days from the grant date through the end of the performance period.
“Divestiture” is defined as a separation from service as the result of a divestiture or sale of a business unit.
“Workforce reduction” is defined as the executive’s separation from service as a result of a reduction in force, realignment or similar measure.
Mr. Legere’s award agreements also provide that if he is terminated by the Company other than for cause, or if he leaves for good reason, he would be entitled to any unearned time-based RSUs scheduled to vest on the next vesting date. The number of performance-based RSUs will be determined following the end of the performance period and multiplied by the pro rata fraction, as defined above.
Mr. Legere’s award agreements provide that, from the period following a change in control but before the first anniversary of the change in control, upon termination other than for cause or for separation for good reason, any unearned time-based RSUs will become immediately earned and vested and any performance-based RSUs will become immediately earned and vested as of the date of such separation from service at the greater of target or actual performance immediately prior to the change in control.
Beginning with the 2015 performance-based RSU awards (and Mr. Legere’s 2014 performance-based RSU award), under the 2013 Omnibus Incentive Plan, the award agreements provide that in the event of a change in control, and continuation of service by an executive, the performance cycles outstanding upon a change in control under performance-based RSUs(iii) all annual incentive awards will be paid at the greater of target or actual performance as of the endlast trading day prior to the change in control prorated up to and including the date of the performance period.change in control.
Potential Payments upon Death or DisabilityDefinitions. Under the terms
For each of the 2015 STIP,Named Executive Officers, “cause” generally has the following meaning:
∎ | the executive’s gross neglect or willful material breach of the executive’s principal employment responsibilities or duties; |
∎ | a final judicial adjudication that the participant is guilty of any felony (other than a law, rule or regulation relating to a traffic violation or other similar offense that has no material adverse effect on the Company or any of its affiliates); |
∎ | the executive’s breach of anynon-competition or confidentiality covenant between the participant and the Company or any affiliate of the Company; |
∎ | fraudulent conduct, as determined by a court of competent jurisdiction, in the course of the executive’s employment with the Company or any of its affiliates; |
∎ | the material breach by the executive of any other obligation that continues uncured for a period of 30 days after notice thereof by the Company or any of its affiliates and that is demonstrably injurious to the Company or its affiliates; and |
∎ | for Mr. Legere, his breach of hisnon-solicitation covenant, or his unlawful discrimination, harassment, or retaliation, assault or other violent act toward any employee or third party, or other act or omission that, in each case, in the view of the Board of Directors, constitutes a material breach of the Company’s written policies or Code of Conduct. |
For Mr. Legere, “good reason” is defined as any of the following:
∎ | a material diminution in base compensation, annual performance bonus target, or long-term incentive target or in the maximum potential amount payable with respect to any annual bonus or long-term incentive bonus award provided for under the Legere Employment Agreement (as amended by the 2018 Legere Amendment); |
∎ | a material diminution in authority, duties or responsibilities, including, without limitation, any change in title or the appointment of any person as a result of which Mr. Legere ceased to be the Company’s sole Chief Executive Officer, provided that it would not be good reason if, in connection with a change in control, Mr. Legere reported to the Board of Directors rather than the Chairman of the Board; |
∎ | a material diminution in the authority, duties or responsibilities of the supervisor to whom Mr. Legere is required to report (including a requirement that he report to a corporate officer or employee instead of reporting directly to the Chairman of the Board); |
∎ | a change of 50 miles or greater in the principal geographic location at which he must perform services; or |
∎ | any other action or inaction that constitutes a material breach by the Company or the successor company, as applicable, of any agreement under which Mr. Legere provides services to the Company or the successor company, as applicable. |
For Messrs. Sievert and Carter, “good reason” or “constructive discharge” generally has the same definition as in the case of death or disability, a Named Executive Continuity Plan, discussed below, except that it includes:
T-Mobile 2019 Proxy Statement | 43 |
EXECUTIVE COMPENSATION
∎ | for Mr. Sievert, (a) in the event of a change in control, Mr. Sievert does not become the sole Chief Operating Officer of the principal entity resulting from such change in control, (b) any reduction (rather than a material reduction) in total target direct compensation (which consists of base salary, long term incentive and short-term incentive), (c) a change in reporting relationship such that Mr. Sievert would report to anyone other than Mr. Legere or the Board of Directors, (d) in the event of a change in control, Mr. Sievert does not become Chief Executive Officer of the principal entity resulting from such change in control within six months after such change in control, and (e) Mr. Sievert does not become Chief Executive Officer of the principal entity resulting from the Sprint Combination within six months after the earlier of the date on which the closing of the Sprint Combination occurs or the date on which the Company publicly announces that the Sprint Combination will not close for any reason (as determined by the Company in its discretion); and |
∎ | for Mr. Carter, (a) a reduction by more than five percent (rather than a material reduction) in Mr. Carter’s then-effective total target direct compensation (which consists of his then-effective base salary, short-term incentive award and long-term incentive award) and (b) a change in reporting relationship such that Mr. Carter would report to anyone other than the Chief Executive Officer of the Company or the Board of Directors. In addition to the foregoing, neither the appointment or hiring of a new Chief Financial Officer (or the related change in Mr. Carter’s title) nor the requirement that Mr. Carter engage in any transition duties under his employment agreement will constitute good reason. |
Officer (or his/her dependent) would be eligible for an incentive payout forFor purposes of the performance period in which the executive diedExecutive Continuity Plan, “constructive termination” or was disabled. Any such incentive payout would be prorated at 100% achievement and calculated using the executive’s target incentive payout percentage and annual salary prorated for the number of weeks employed during the performance period.
Under the legacy T-Mobile USA LTIP, a“good reason” means, with respect to our Named Executive Officer who dies or becomes disabled is entitled toOfficers (other than Mr. Legere), the payment for tranche vesting and cliff vestingoccurrence, after a change in control, of any of the awardfollowing conditions (as modified, for Messrs. Sievert and Carter, by their employment arrangements, as discussed above):
∎ | a material diminution in the participant’s duties, authority or responsibilities; |
∎ | a material reduction in the participant’s base salary, target short-term incentive opportunity, or target long-term incentive opportunity as in effect immediately prior to the change in control, except foracross-the-board salary reductions based on the Company’s and its subsidiaries’ financial performance similarly affecting all or substantially all management employees of the Company and its subsidiaries; |
∎ | a material reduction in the kind or level of qualified retirement and welfare employee benefits from the like kind benefits to which the participant was entitled immediately prior to a change in control with the result that the participant’s overall benefits package is materially reduced without similar action occurring to other eligible comparably situated employees; |
∎ | the relocation of the office at which the participant was principally employed immediately prior to a change in control to a location more than 50 miles from the location of such office, or the participant being required to be based anywhere other than such office, except to the extent the participant was not previously assigned to a principal location and except for required travel on business to an extent substantially consistent with the participant’s business travel obligations at the time of the change in control; or |
∎ | such other event, if any, as is set forth in the participant’s agreement regarding executive continuity benefits. |
For each of our Named Executive Officers, “change in control” generally has the calendar yearmeaning set forth in which the executive dies or becomes disabled as if the executive were employed through the date of payment.2013 Omnibus Incentive Plan.
Estimated Payments
The following table presents the estimated compensation payable to each of the Company’s Named Executive Officers if a termination of employment and/or change in control (as applicable) had occurred as of December 31, 20152018 under the circumstances described above. The amounts shown with respect to RSUs are based on the closing price of our common stock ($63.61 per share) on December 31, 2018. The estimated compensation is presented in the following benefit categories:
Cash |
Carter, and (ii) in the case of termination without cause or for good reason in connection with or after a change in control, under the Executive Continuity Plan; |
Time-Based |
Performance-Based |
|
|
Medical |
∎ | Continued Mobile Service Discounts: estimated value of these discounts pursuant to the terms of the Carey Retirement Agreement; |
∎ | Executive Office and Office Assistant: estimated potential value of this service pursuant to the terms under the 2018 Legere Amendment; and |
∎ | Outplacement Services: estimated potential value of this service pursuant to the terms of (i) |
The actual amounts that may become payable to our Named Executive Officers can be determined only following the officer’s termination and the conclusion of all relevant incentive plan performance periods.
Because the Sprint Combination had not closed or been publicly abandoned as of December 31, 2018, none of the Named Executive Officers would have become entitled to payments under the Severance Letter Agreements upon a qualifying termination on such date and, accordingly, the table below does not include amounts payable pursuant to those arrangements. Except in connection with a retirement by Mr. Carey, if an executive officer voluntarily leaves the Company, the executive officer is not entitled to any severance compensation. |
T-Mobile 2019 Proxy Statement |
EXECUTIVE COMPENSATION
Name | Termination in Connection with Restructuring Before a Change in Control ($) | Termination Without Cause or for Good Reason in Connection with or After a Change in Control(1) ($) | Death or Disability ($) | |||||||||
John J. Legere | ||||||||||||
Cash Severance | 12,000,000 | 12,000,000 | — | |||||||||
Time-Based RSUs | 9,045,596 | 9,045,596 | 9,045,596 | |||||||||
Performance-Based RSUs | 74,118,308 | 74,118,308 | 74,118,308 | |||||||||
2018 STIP | 6,130,849 | 6,130,849 | 6,130,849 | |||||||||
Office & Assistant | 450,000 | 450,000 | — | |||||||||
Medical Coverage | 10,148 | 10,148 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 101,761,402 | 101,761,402 | 89,294,754 | |||||||||
J. Braxton Carter | ||||||||||||
Cash Severance | 4,500,000 | 4,500,000 | — | |||||||||
Time-Based RSUs | 5,596,450 | 8,390,668 | 8,390,668 | |||||||||
Performance-Based RSUs | 5,822,968 | 9,052,021 | 9,052,021 | |||||||||
2018 STIP | 2,182,327 | 2,182,327 | 2,182,327 | |||||||||
Bonus | 2,155,963 | 2,155,963 | 2,155,963 | |||||||||
Medical Coverage | 14,512 | 14,512 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 20,278,720 | 26,301,991 | 21,780,979 | |||||||||
G. Michael Sievert | ||||||||||||
Cash Severance | 7,200,000 | 7,200,000 | — | |||||||||
Time-Based RSUs | 11,133,531 | 11,133,531 | 11,133,531 | |||||||||
Performance-Based RSUs | 35,774,328 | 35,774,328 | 35,774,328 | |||||||||
2018 STIP | 3,592,039 | 3,592,039 | 3,592,039 | |||||||||
Medical Coverage | 29,910 | 29,910 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 57,736,307 | 57,736,307 | 50,499,897 | |||||||||
Neville R. Ray | ||||||||||||
Cash Severance | 5,400,000 | 5,400,000 | — | |||||||||
Time-Based RSUs | 2,871,207 | 5,507,227 | 5,507,227 | |||||||||
Performance-Based RSUs | 9,261,889 | 24,150,045 | 24,150,045 | |||||||||
2018 STIP | 2,590,177 | 2,590,177 | 2,590,177 | |||||||||
Medical Coverage | 21,875 | 21,875 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 20,151,648 | 37,675,824 | 32,247,448 | |||||||||
David R. Carey | ||||||||||||
Cash Severance | 3,487,500 | 3,487,500 | — | |||||||||
Time-Based RSUs | 2,123,450 | 4,233,818 | 4,233,818 | |||||||||
Performance-Based RSUs | 6,816,865 | 15,256,350 | 15,256,350 | |||||||||
2018 STIP | 1,567,428 | 1,567,428 | 1,567,428 | |||||||||
Medical Coverage | 15,021 | 15,021 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 14,016,764 | 24,566,617 | 21,057,595 |
(1) | Upon Mr. Carey’s voluntary resignation from the Company as of December 31, 2018, he would have been entitled to: (i) 2018 |
T-Mobile 2019 Proxy Statement | 45 |
EXECUTIVE COMPENSATION
Name | Termination in Connection with Restructuring Before a Change in Control(1) ($) | Termination Without Cause or for Good Reason in Connection with or After a Change in Control ($) | Death or Disability ($) | |||||||||
John J. Legere | ||||||||||||
Cash Severance | 9,000,000 | 9,000,000 | — | |||||||||
Time-Based RSUs | 5,248,300 | 12,192,961 | 12,192,961 | |||||||||
Performance-Based RSUs | 19,474,171 | 32,318,401 | 32,318,401 | |||||||||
2015 STIP | 5,253,101 | 5,253,101 | 5,253,101 | |||||||||
Legacy T-Mobile USA LTIP | 6,000,000 | 6,000,000 | 6,000,000 | |||||||||
Medical Coverage | 6,075 | 6,075 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 44,988,147 | 64,777,038 | 55,764,463 | |||||||||
J. Braxton Carter | ||||||||||||
Cash Severance | 2,800,000 | 2,800,000 | — | |||||||||
Time-Based RSUs | 2,666,145 | 6,074,436 | 6,074,436 | |||||||||
Performance-Based RSUs | 629,167 | 2,226,358 | 2,226,358 | |||||||||
2015 STIP | 1,229,292 | 1,229,292 | 1,229,292 | |||||||||
Legacy T-Mobile USA LTIP | 1,666,667 | 1,666,667 | 1,666,667 | |||||||||
Medical Coverage | 6,213 | 6,213 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 9,003,984 | 14,009,466 | 11,196,753 | |||||||||
G. Michael Sievert | ||||||||||||
Cash Severance | 3,200,000 | 3,200,000 | — | |||||||||
Time-Based RSUs | 2,451,142 | 5,750,523 | 5,750,523 | |||||||||
Performance-Based RSUs | 719,026 | 2,544,404 | 2,544,404 | |||||||||
2015 STIP | 1,394,461 | 1,394,461 | 1,394,461 | |||||||||
Legacy T-Mobile USA LTIP | 1,356,667 | 1,356,667 | 1,356,667 | |||||||||
Medical Coverage | 20,196 | 20,196 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 9,147,992 | 14,272,751 | 11,046,055 | |||||||||
Neville R. Ray | ||||||||||||
Cash Severance | 2,400,000 | 2,400,000 | — | |||||||||
Time-Based RSUs | 1,713,612 | 3,936,176 | 3,936,176 | |||||||||
Performance-Based RSUs | 431,454 | 1,526,658 | 1,526,658 | |||||||||
2015 STIP | 1,053,293 | 1,053,293 | 1,053,293 | |||||||||
Legacy T-Mobile USA LTIP | 1,356,667 | 1,356,667 | 1,356,667 | |||||||||
Medical Coverage | 20,073 | 20,073 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 6,981,599 | 10,299,367 | 7,872,794 | |||||||||
Thomas C. Keys | ||||||||||||
Cash Severance | 2,800,000 | 2,800,000 | — | |||||||||
Time-Based RSUs | 2,725,334 | 6,192,852 | 6,192,852 | |||||||||
Performance-Based RSUs | 629,167 | 2,226,358 | 2,226,358 | |||||||||
2015 STIP | 1,232,000 | 1,232,000 | 1,232,000 | |||||||||
Legacy T-Mobile USA LTIP | 1,333,333 | 1,333,333 | 1,333,333 | |||||||||
Medical Coverage | 18,058 | 18,058 | — | |||||||||
Outplacement Services | 6,500 | 6,500 | — | |||||||||
Total Estimated Value | 8,744,392 | 13,809,101 | 10,984,543 |
|
In addition to the items described above, the Named Executive Officers are entitled to receive amounts earned during the term of employment.employment through the date of termination. These amounts, which are not included in the table, include earned base salary, vested awards under our long-term incentive awards, any vested entitlements under our applicable
employee benefit plans, including vested 401(k) plan balances, and rights to continuation of coverage under our group medical plans. In addition,plans at the Named Executive Officer’s expense.
Pay Ratio
As required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of RegulationS-K, we are providing the following information regarding the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Legere, our Chief Executive Officer. We have calculated the median of our employees’ 2018 total annual compensation (excluding our Chief Executive Officer) to be $59,653. Our Chief Executive Officer’s 2018 total annual compensation, as set forth in the 2018 Summary Compensation Table above (adjusted to include his employer-paid health benefits with respect to 2018), was $66,543,571. As a result, the estimated ratio of the total compensation of Mr. Legere to the median of the annual total compensation of our employees (other than the Chief Executive Officer) was 1,116 to 1. We believe this pay ratio is entitled upon requesta reasonable estimate calculated in a manner consistent with applicable rules of the Securities and Exchange Commission. This information is being provided for compliance purposes. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions.
The total annual compensation for our Chief Executive Officer was atypically high in 2018 due to certain financial planning adviceMr. Legere’s receipt of a specialone-time equity award, his Transaction PRSUs in connection with potential changethe Sprint Combination (see page 32 for details). If Mr. Legere’s Transaction PRSU award is removed from this calculation, his annualized total compensation
for 2018, as adjusted, would be approximately $22.4 million and would result in control excise taxes.a ratio of 376:1. We believe that this reduced compensation amount, and the resulting lower ratio, would provide a more accurate picture of the total annual compensation of our Chief Executive Officer in the ordinary course of business and the annual total compensation of our employees.
We identified the median employee by preparing a listing of all 51,900 individuals (excluding our Chief Executive Officer) who were employed by us on December 31, 2018, the last day of the calendar year, and examining the 2018 total compensation paid to each such individual as reflected in our payroll records for 2018. We included all employees (other than the Chief Executive Officer), whether employed on a full-time, part-time, or seasonal basis who received a paycheck in the final pay period of the year. We did not make any assumptions, adjustments, or estimates with respect to total compensation paid, and we did not annualize the compensation for any employees that were not employed by us for all of 2018. We believe the use of total compensation paid for all employees as reflected in our payroll records is a consistently applied compensation measure due to our large part-time, retail and customer service employee population and practice of granting annual equity awards across our broad employee base.
Using the method described above, we identified a small sample of 18 employees, consisting of the median employee and 17 other employees whose gross pay was very close to the median employee’s gross pay (“median group”). We then calculated annual total compensation for such employees using the same methodology we use for our Named Executive Officers as set forth in the 2018 Summary Compensation Table in this proxy statement, taking into account employer-paid costs for 2018 health benefits, and selected the median employee from this median group. We believe that our median employee’s compensation reasonably reflects the actual annual compensation of our employees generally in terms of realized pay and benefits.
EXECUTIVE COMPENSATION
Equity Compensation Plan InformationEQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2015,2018, with respect to outstanding equity awards and shares available for future issuance under our equity compensation plans.
Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, (a) | Weighted Average Warrants and (b) | Number of Securities Under Equity Compensation Plans (c) | Number of Securities to of Outstanding Options, (a) | Weighted Average (b) | Number of Securities (c) | ||||||||||||||||||
Equity Compensation Plans Approved by Stockholders: | ||||||||||||||||||||||||
Equity Compensation Plans Approved by Stockholders | 27,838,984 | (5) | ||||||||||||||||||||||
Stock Options | 1,824,354 | (1) | $ | 30.50 | — | 284,811 | (1) | $ | 14.58 | — | ||||||||||||||
RSUs | 16,334,271 | (2)(3) | — | (4) | — | 14,862,189 | (2)(3) | — | (4) | — | ||||||||||||||
Equity Compensation Plans Not Approved by Stockholders | — | — | — | — | — | — | ||||||||||||||||||
Total | 18,158,625 | $ | 30.50 | (4) | 37,838,752 (5) | 15,147,000 | $ | 14.58 | (4) | 27,838,984 | (5) |
(1) | Granted under |
(2) | Granted under the 2013 Omnibus Incentive |
(3) | Includes performance-based |
(4) | RSUs do not have an exercise price and are not included in the weighted average exercise price. The weighted average exercise price is also determined without considering outstanding rights under the Company’s ESPP. |
(5) |
|
The following table sets forth information, as of March 31, 20162019, regarding the beneficial ownership of T-Mobile US, Inc.our common stock by:
each of our directors;
each of the Named Executive Officers;
all of our directors and executive officers as a group; and
each person known by us to beneficially own more than 5% of the outstanding shares of our common stock.
∎ | each of our directors; |
∎ | each of the Named Executive Officers; |
∎ | all of our directors and executive officers as a group; and |
∎ | each person known by us to beneficially own more than 5% of the outstanding shares of our common stock. |
The beneficial ownership information has been presented in accordance with SEC rules and is not necessarily indicative of
beneficial ownership for
any other purpose. Unless otherwise indicated below and except to the extent authority is shared by spouses under applicable law, to our knowledge, each of the persons set forth below has sole voting and investment power with respect to all shares of common stock shown as beneficially owned by him or her. The number of shares of common stock used to calculate each listed person’s percentage ownership of each such class includes the shares of common stock underlying options or other convertible securities held by such person that are exercisable or vest within 60 days after March 31, 2016. None of our directors or executive officers owns any of our outstanding shares of 5.50% Mandatory Convertible Preferred Stock, Series A, as of March 31, 2016.2019.
Common Stock Beneficially Owned | ||||||||||||||||
Common Stock Beneficially Owned | Number | Percentage | ||||||||||||||
Number | Percentage | |||||||||||||||
Directors, Nominees and Named Executive Officers (1) | ||||||||||||||||
W. Michael Barnes(2) | 201,356 | * | ||||||||||||||
J. Braxton Carter(3) | 372,068 | * | ||||||||||||||
Thomas Dannenfeldt | — | * | ||||||||||||||
Srikant M. Datar (4) | 21,424 | * | ||||||||||||||
David A. Carey |
| 226,795 |
|
| * |
| ||||||||||
J. Braxton Carter |
| 211,601 |
|
| * |
| ||||||||||
Srikant M. Datar (2) |
| 28,782 |
|
| * |
| ||||||||||
Lawrence H. Guffey | 13,424 | * |
| 20,782 |
|
| * |
| ||||||||
Timotheus Höttges | — | * |
| — |
|
| * |
| ||||||||
Christian P. Illek |
| — |
|
| * |
| ||||||||||
Bruno Jacobfeuerborn | — | * |
| — |
|
| * |
| ||||||||
Thomas C. Keys(5) | 522,076 | * | ||||||||||||||
Raphael Kübler | — | * |
| ��� |
|
| * |
| ||||||||
Thorsten Langheim | — | * |
| — |
|
| * |
| ||||||||
John J. Legere | 825,910 | * |
| 1,673,089 |
|
| * |
| ||||||||
Neville R. Ray(6) | 75,337 | * | ||||||||||||||
Neville R. Ray(3) |
| 272,743 |
|
| * |
| ||||||||||
G. Michael Sievert | 89,097 | * |
| 405,743 |
|
| * |
| ||||||||
Olaf Swantee |
| — |
|
| * |
| ||||||||||
Teresa A. Taylor | 13,424 | * |
| 20,782 |
|
| * |
| ||||||||
Kelvin R. Westbrook | 13,424 | * |
| 20,782 |
|
| * |
| ||||||||
All directors and executive officers as a group (19 persons) | 2,449,556 | * |
| 3,421,265 |
|
| * |
| ||||||||
Beneficial Owners of More Than 5%: | ||||||||||||||||
Deutsche Telekom AG(7) Friedrich-Ebert-Alle 140 53113 Bonn, Germany | 535,286,077 | 65.11 | % | |||||||||||||
T. Rowe Price Associates, Inc.(8) 100 E. Pratt Street Baltimore, Maryland 21202 | 43,917,985 | 5.34 | % | |||||||||||||
Deutsche Telekom AG(4) Friedrich-Ebert-Alle 140 53113 Bonn, Germany
|
| 538,590,941
|
|
| 63.0
| %
|
* | Represents less than 1% |
(1) | Unless otherwise indicated, the address of each person is c/oT-Mobile US, Inc., 12920 SE 38th Street, Bellevue, Washington 98006. |
(2) |
|
|
Includes 8,000 shares of common stock held by Datar Investment LLC and 13,424 shares held by Safari LLC. Mr. Datar is aco-manager of Datar Investment LLC and Safari LLC and has shared voting and investment power over the securities held by these entities. |
Includes |
|
According to the Schedule 13D/A filed by Deutsche Telekom on |
|
T-Mobile 2019 Proxy Statement | 47 |
Transactions with Related Persons and Approval
Related Person TransactionsRELATED PERSON TRANSACTIONS
Since the BusinessMetro Combination, we have not been a participant in any related person transactions (as defined in the Related Person Transaction Policy described below) other than as described below in “Transactions with Deutsche Telekom” and “Indemnification.Telekom.” We are party to a number of related person transactions with our majority stockholder, Deutsche Telekom and its affiliates. These transactions include important financing arrangements and commercial arrangements pursuant to which we obtain or provide various services and/or license intellectual property or technology. Each of the related person transactions with Deutsche Telekom or its affiliates
described below that were entered into from and after the consummation of the BusinessMetro Combination werewas reviewed and approved in accordance with our current Related Person Transaction Policy (the “Related Person Transaction Policy”), which includes consideration of whether the terms are comparable to those generally available in arms’-lengtharm’s-length transactions with unaffiliated third parties and whether the related person transaction is consistent with the best interests of the Company. All factors that are considered by the Audit committeeCommittee are described below.
Related Person Transaction PolicyRELATED PERSON TRANSACTION POLICY
Under the Company’s written Related Person Transaction Policy, any proposed or existing transaction, arrangement or relationship involving a director, director nominee, executive officer, or a member of the immediate family of any of the foregoing, or a greater than 5% owner of our stock (a “related person”), must be reviewed by our General Counsel to determine whether such transaction is a related person transaction. A “related person transaction” is any transaction, arrangement or relationship or any series of transactions, arrangements or relationships in which:
the Company, or any of its subsidiaries, is, was or will be a participant;
the aggregate amount involved exceeds, or may be expected to exceed, $120,000; and
any related person has, had or will have a direct or indirect material interest.
∎ | the Company, or any of its subsidiaries, is, was or will be a participant; |
∎ | the aggregate amount involved exceeds, or may be expected to exceed, $120,000; and |
∎ | any related person has, had or will have a direct or indirect material interest. |
A transaction, arrangement or relationship that is determined to be a related person transaction must be submitted to our Audit Committee for review, approval or ratification based on certain factors, including the following:
the nature and terms of the related person transaction and the terms of the related person transaction;
∎ | the nature of the related person transaction and the terms of the related person transaction; |
the extent of the related person’s interest in the transaction;
the business reasons for the Company to enter into the related person transaction;
whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties;
whether the terms are comparable to those generally available in arms’-length transactions with unaffiliated third parties;
whether the related person transaction is consistent with the best interests of the Company; and
in the case of any related person transaction involving an outside director of the Company, the potential impact of such related person transaction on such outside director’s independence and the Company’s continued compliance with the requirements under the Exchange Act, the NASDAQ rules or any other exchange on which the Company’s securities are traded, or other applicable laws and regulations.
∎ | the extent of the related person’s interest in the transaction; |
∎ | the business reasons for the Company to enter into the related person transaction; |
∎ | whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties; |
∎ | whether the terms are comparable to those generally available inarm’s-length transactions with unaffiliated third parties; |
∎ | whether the related person transaction is consistent with the best interests of the Company; and |
∎ | in the case of any related person transaction involving an outside director of the Company, the potential impact of such related person transaction on such outside director’s independence and the Company’s continued compliance with the requirements under the Exchange Act, the NASDAQ rules, or other applicable rules, laws and regulations. |
If the proposed related person transaction is with Deutsche Telekom or any of its affiliates while the Stockholder’s Agreement is in effect, the Audit Committee must unanimously approve such transaction or must submit such transaction to the full Board of Directors for approval.
Transactions With Deutsche TelekomTRANSACTIONS WITH DEUTSCHE TELEKOM
Certain of the related person transactions with Deutsche Telekom or its affiliates described below were not required to be approved in accordance with our current Related Person Transaction Policy because they were entered into prior to or in connection with the
consummation of the BusinessMetro Combination, at which time Deutsche Telekom became a “related person” and our current Related Person Transaction Policy became effective.
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
Stockholder’s Agreement
Pursuant to the Stockholder’s Agreement we entered into with Deutsche Telekom on April 30, 2013 in connection with the BusinessMetro Combination, we granted certain governance and other rights to Deutsche Telekom and Deutsche Telekom agreed to certain restrictions, as outlined below:
So long as Deutsche Telekom’s stock ownership percentage is at least 10%, Deutsche Telekom has the right to designate as nominees for election to our Board of Directors a number of individuals in proportion to its stock ownership percentage, rounded to the nearest whole number. We and Deutsche Telekom have agreed to use our reasonable best efforts to cause the Deutsche Telekom designees to be elected to our Board.
Each committee of the Board of Directors shall include in its membership a number of Deutsche Telekom designees in proportion to its stock ownership percentage, rounded to the nearest whole number, except to the extent such membership would violate applicable securities laws or stock exchange rules. No committee of the Board may consist solely of directors who are also officers, employees, directors or affiliates of Deutsche Telekom. We and Deutsche Telekom have agreed to use our reasonable best efforts to cause at least three members of our Board to be considered “independent” under SEC and NASDAQ rules, including for purposes of Rule 10A-3 promulgated under the Exchange Act.
So long as Deutsche Telekom beneficially owns 30% or more of the outstanding shares of our common stock, without Deutsche Telekom’s consent we are not permitted to take certain actions, including the incurrence of debt (excluding certain permitted debt) if our consolidated ratio of debt to cash flow for the most recently ended four full fiscal quarters for which financial statements are available would exceed 5.25 to 1.0 on a pro forma basis, the acquisition of any business, debt or equity interests, operations or assets of any person for consideration in excess of $1 billion, the sale of any of the Company’s or its subsidiaries’ divisions, businesses, operations or equity interests for consideration in excess of $1 billion, any change in the size of our Board of Directors, the issuances of equity securities in excess of 10% of our outstanding shares or to repurchase debt held by Deutsche Telekom, the repurchase or redemption of equity securities or the declaration of extraordinary or in-kind dividends or distributions other than on a pro rata basis, or the termination or hiring of our Chief Executive Officer.
We must notify Deutsche Telekom any time it is reasonably likely that we will default on any indebtedness with a principal amount greater than $75 million and Deutsche Telekom will have the right, but not the obligation, to provide us new debt financing up to the amount of the indebtedness that is the subject of the potential default plus any applicable prepayment or other penalties, on the same terms and conditions as such indebtedness (together with any waiver of the potential default).
As long as Deutsche Telekom beneficially owns 10% or more of the outstanding shares of our common stock, we must provide Deutsche Telekom with certain information and consultation rights, subject to certain confidentiality restrictions.
∎ | So long as Deutsche Telekom’s stock ownership percentage is at least 10%, Deutsche Telekom has the right to designate as nominees for |
During the term of the Stockholder’s Agreement, Deutsche Telekom is not permitted to, and is required to cause the Deutsche Telekom designees then serving as directors on our Board of Directors not to, support, enter into or vote in favor of any controlling stockholder transaction, unless such transaction is approved by a majority of the directors on our Board, which majority includes a majority of the directors on our Board that are not affiliates of Deutsche Telekom. In August 2013, the Company (upon the approval of a majority of the directors on our Board, which included a majority of directors not affiliated with Deutsche Telekom) and Deutsche Telekom agreed to waive the approval requirement described above with respect to (i) any controlling stockholder transaction in which the amount involved does not exceed, or is not expected to exceed, $120,000; or (ii) any controlling stockholder transaction in which the amount involved exceeds, or is expected to exceed, $120,000 that has been unanimously approved by the Audit Committee.
Deutsche Telekom and its affiliates are generally prohibited from acquiring more than 80.1% of the outstanding shares of our common stock unless it makes an offer to acquire all of the then remaining outstanding shares of our common stock at the same price and on the same terms and conditions as the proposed acquisition from all other stockholders of the Company, which is either (i) accepted or approved by the majority of the directors, which majority includes a majority of the directors that are not affiliates of Deutsche Telekom, or (ii) accepted or approved by holders of a majority of our common stock held by stockholders other than Deutsche Telekom or its affiliates.
Deutsche Telekom is prohibited from transferring any shares of the Company’s common stock in any transaction that would result in the transferee owning more than 30% of the outstanding shares of the Company’s common stock unless such transferee offers to acquire all of the then outstanding shares of the Company’s common stock at the same price and on the same terms and conditions as the proposed transfer.
We have granted Deutsche Telekom certain demand and piggyback registration rights for shares of our common stock and debt securities of the Company and its subsidiaries beneficially owned by Deutsche Telekom and acquired in connection with the Business Combination or in the future.
Deutsche Telekom’s ability to compete with the Company in the United States, Puerto Rico and the territories and protectorates of the United States is subject to certain restrictions during the period beginning on the date of the closing of the Business Combination and ending on the date that is two years after the date on which Deutsche Telekom beneficially owns less than 10% of the outstanding shares of the Company’s common stock. In addition, for the period that commenced at the closing of the Business Combination and expires on the first anniversary of the termination of the trademark license in accordance with its terms, Deutsche Telekom may not manufacture, market or distribute any products or services under, or use in any way, the trademarkT-Mobile in connection with certain specified activities, other than by the Company and its affiliates in accordance with the terms of the trademark license. The trademark license is more fully described below.
election to our Board a number of individuals in proportion to its stock ownership percentage, rounded to the nearest whole number. We and Deutsche Telekom have agreed to use our reasonable best efforts to cause the Deutsche Telekom designees to be elected to our Board. |
∎ | Each committee of the Board shall include in its membership a number of Deutsche Telekom designees in proportion to its stock ownership percentage, rounded to the nearest whole number, except to the extent such membership would violate applicable securities laws or stock exchange rules. No committee of the Board may consist solely of directors who are also officers, employees, directors or affiliates of Deutsche Telekom. We and Deutsche Telekom have agreed to use our reasonable best efforts to cause at least three members of our Board to be considered “independent” under SEC and NASDAQ rules, including for purposes ofRule 10A-3 promulgated under the Exchange Act. |
∎ | So long as Deutsche Telekom beneficially owns 30% or more of the outstanding shares of our common stock, without Deutsche Telekom’s |
T-Mobile 2019 Proxy Statement |
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
consent we are not permitted to take certain actions, including the incurrence of debt (excluding certain permitted debt) if our consolidated ratio of debt to cash flow for the most recently ended four full fiscal quarters for which financial statements are available would exceed 5.25 to 1.0 on a pro forma basis, the acquisition of any business, debt or equity interests, operations or assets of any person for consideration in excess of $1 billion, the sale of any of the Company’s or its subsidiaries’ divisions, businesses, operations or equity interests for consideration in excess of $1 billion, any change in the size of our Board, the issuances of equity securities in excess of 10% of our outstanding shares or for the purpose of redeeming or purchasing debt held by Deutsche Telekom, the repurchase or redemption of equity securities or the declaration of extraordinary orin-kind dividends or distributions other than on a pro rata basis, or the termination or hiring of our Chief Executive Officer. |
∎ | We must notify Deutsche Telekom any time it is reasonably likely that we will default on any indebtedness with a principal amount greater than $75 million, and Deutsche Telekom will have the right, but not the obligation, to provide us new debt financing up to the amount of the indebtedness that is the subject of the potential default plus any applicable prepayment or other penalties, on the same terms and conditions as such indebtedness (together with any waiver of the potential default). |
∎ | As long as Deutsche Telekom beneficially owns 10% or more of the outstanding shares of our common stock, we must provide Deutsche Telekom with certain information and consultation rights, subject to certain confidentiality restrictions. |
∎ | During the term of the Stockholder’s Agreement, Deutsche Telekom is not permitted to, and is required to cause the Deutsche Telekom designees then serving as directors on our Board not to, support, enter into or vote in favor of any controlling stockholder transaction, unless such transaction is approved by a majority of the directors on our Board, which majority includes a majority of the directors on our Board that are not affiliates of Deutsche Telekom. In August 2013, the Company (upon the approval of a majority of the directors on our Board, which included a majority of directors not affiliated with Deutsche Telekom) and Deutsche Telekom agreed to waive the approval requirement described above with respect to (i) any controlling stockholder transaction in which the amount involved does not exceed, or is not expected to exceed, $120,000; or (ii) any controlling stockholder transaction in which the amount involved exceeds, or is expected to exceed, $120,000 that has been unanimously approved by the Audit Committee. |
∎ | Deutsche Telekom and its affiliates are generally prohibited from acquiring more than 80.1% of the outstanding shares of our common stock unless they make an offer to acquire all of the then-remaining outstanding shares of our common stock at the same price and on the same terms and conditions as the proposed acquisition from all other stockholders of the Company, which is either (i) accepted or approved by the majority of the directors, which majority includes a majority of the directors that are not affiliates of Deutsche Telekom, or (ii) accepted or approved by holders of a majority of our common stock held by stockholders other than Deutsche Telekom or its affiliates. |
∎ | Deutsche Telekom is prohibited from transferring any shares of the Company’s common stock in any transaction that would result in the transferee owning more than 30% of the outstanding shares of the Company’s common stock unless such transferee offers to acquire all of the then-outstanding shares of the Company’s common stock at the same price and on the same terms and conditions as the proposed transfer. |
∎ | We have granted Deutsche Telekom certain demand and piggyback registration rights for shares of our common stock and debt securities of the Company and its subsidiaries beneficially owned by Deutsche Telekom and acquired in connection with the Metro Combination or in the future. |
∎ | Deutsche Telekom’s ability to compete with the Company in the United States, Puerto Rico and the territories and protectorates of the United States is subject to certain restrictions during the period beginning on the date of the closing of the Metro Combination and ending on the date that is two years after the date on which Deutsche Telekom beneficially owns less than 10% of the outstanding shares of the Company’s common stock. In addition, for the period that commenced at the closing of the Metro Combination and expires on the first anniversary of the termination of the trademark license in accordance with its terms, Deutsche Telekom may not manufacture, market or distribute any products or services under, or use in any way, the trademark“T-Mobile” in connection with certain specified activities, other than by the Company and its affiliates in accordance with the terms of the trademark license. The trademark license is more fully described below. |
Trademark License
In connection with the BusinessMetro Combination, we and Deutsche Telekom entered into a trademark license, pursuant to which we received (a)(i) a limited, exclusive,non-revocable and royalty-bearing license to certainT-Mobile trademarks (including Internetinternet domains) for use in connection with telecommunications and broadband products and services in the United States, Puerto Rico and the territories and protectorates of the United States, (b)(ii) a limited,non-exclusive,non-revocable and royalty-bearing license to use certain other trademarks for use in connection with telecommunications and broadband products and services in the United States, Puerto Rico and the territories and protectorates of the United States, and (c)(iii) free of charge, the right to use the trademark “T-Mobile”“T-Mobile” as a name for the Company.
The initial term of the trademark license endsended on December 31, 2018, subject to automatic renewal for successive five-year terms unless we provide notice of our intent not to renew the trademark license prior to the expiration of the then-current term. Thereafter, the trademark license automatically renews for subsequent five-year periods unless we provide 12 months’ notice prior to the expiration of the then-current term. We may terminate the trademark license at any time upon one year’s12 months’ prior notice, and Deutsche Telekom can terminate the trademark license if we abandon the trademarks licensed thereunder or if we commit a material breach.
We and Deutsche Telekom are obligated to negotiate a new trademark license when (a)(i) Deutsche Telekom has 50% or less of the voting power of the outstanding shares of capital stock of the Company or (b)(ii) any third-party owns or controls, directly or indirectly, 50% or more of the voting power of the outstanding shares of capital stock of the Company, or otherwise has the power to direct or cause the direction of the management and policies of the Company. If we and Deutsche Telekom fail to agree on a new trademark license, either we or Deutsche Telekom may terminate the trademark license and such termination shall be effective, in the case of clause (a)(i) above, on the third anniversary after notice of termination and, in the
case of clause (b)(ii) above, on the second anniversary after notice of termination. We have the right to continue to sell products under the licensed trademarks for a period of one year12 months after termination or expiration of the trademark license. Additionally, we have the right to continue to use advertising materials bearing the licensed trademarks for a period of up to six months after termination or expiration of the trademark license.
T-Mobile 2019 Proxy Statement | 49 |
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
We are obligated to pay Deutsche Telekom a royalty in an amount equal to 0.25%, which we refer to as the royalty rate, (the “royalty rate”) of the net revenue (as defined in the trademark license) generated by products and services sold by the Company under the licensed trademarks. In 2015,2018, we paid Deutsche Telekom royalties totaling approximately $64.9$83.5 million under the terms of the trademark license. On the fifth anniversary of the trademark license, the Company and Deutsche Telekom have agreed to adjust the royalty rate to the royalty rate found under similar licenses for trademarks in the field of wireless telecommunication, broadband and information products and services in the territory through a binding benchmarking process. The royalty rate adjustment mechanism has been postponed until the conclusion of the Sprint Combination. The current royalty rate will remain effective until that time. The royalty rate under the license agreement will be adjusted retroactively if the Sprint Business Combination Agreement is terminated.
The trademark license contains certain quality control requirements, branding guidelines and approval processes that the Company is obligated to maintain.
Deutsche Telekom is obligated to indemnify us against trademark infringement claims with respect to certain licensedT-Mobile marks and has the right (but not the obligation) to indemnify us against trademark infringement claims with respect to certain other licensed trademarks. If Deutsche Telekom chooses not to defend us against trademark infringement claims with respect to certain other licensed trademarks, we have the right to defend ourselfourselves against such claim.claims. We are obligated to indemnify Deutsche Telekom against third-party claims due to the Company’s advertising or anti-competitive use by the Company of the
licensed trademarks. Except for indemnification obligations and intentional misconduct, the liability of the Company and Deutsche Telekom is limited to€1 million per calendar year.
Financing Arrangements
Senior Unsecured Notes
In connection withDeutsche Telekom currently holds the Business Combination, on April 28, 2013,T-Mobile USA issued senior unsecured notes described in an aggregate principal amount of $11.2 billion to Deutsche Telekom pursuant to an indenture between T-Mobile USA, the guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee. These notestable below, which were issued as part of a recapitalization of T-Mobile USA pursuant to which, among other things, certain previously outstandingfrom 2013 through 2018. The notes payable to Deutsche Telekom were retired. The new notesareT-Mobile USA’s unsecured obligations and are guaranteed on an unsecured basis by the Company and by all ofT-Mobile USA’s wholly owned domestic restricted subsidiaries (other than certain designated special purpose entities, a certain reinsurance subsidiary and immaterial subsidiaries), all ofT-Mobile USA’s restricted subsidiaries that guarantee certain ofT-Mobile USA’s indebtedness and any future subsidiary of the Company that directly or indirectly owns any ofT-Mobile USA’s equity interests.T-Mobile USA may, at its option, redeem some or all of these notes at any time on or after the dates set forth in the table below under “Optional redemption” at the redemption price set forth in the governing indenture, or prior to such dates at a specified “make-whole” redemption price, plus accrued and unpaid interest to, but not including, the redemption date. In addition, prior to the dates set forth in the table below under “Optional redemption with equity proceeds,”T-Mobile USA may redeem up to the percentage of the aggregate principal amount set forth in such column, at the redemption prices set forth in the governing indenture, with the net cash proceeds of certain sales of equity securities, including the sale of the Company’s common stock.
Series | Largest principal amount outstanding during 2018 | Principal amount as of March 31, 2019 | Interest payment dates | Maturity | Optional redemption | Optional redemption with equity proceeds | Principal paid in 2018 | Interest paid in 2018 | Other amounts paid or (received) in 2018 (1) | |||||||||||||||||||
5.300% Senior Notes due 2021 | $ | 2,000,000,000 | $ | 2,000,000,000 | March 15 and September 15 | March 15, 2021 | March 15, 2018 | Prior to March 15, 2018, up to 35% | $ | 0 | $ | 106,000,000 | $ | 0 | ||||||||||||||
4.000% Senior Notes due2022-1 | $ | 1,000,000,000 | $ | 1,000,000,000 | April 15 and October 15 | April 15, 2022 | March 16, 2022 | Not applicable | $ | 0 | $ | 40,000,000 | $ | 0 | ||||||||||||||
9.332% Senior Reset Notes due 2023(2) | $ | 600,000,000 | $ | 600,000,000 | April 28 and October 28 | April 28, 2023 | April 28, 2019 | Prior to April 28, 2016, up to 35% | $ | 0 | $ | 55,992,000 | $ | 0 | ||||||||||||||
6.000% Senior Notes due 2024 | $ | 2,000,000,000 | $ | 2,000,000,000 | April 15 and October 15 | April 15, 2024 | April 15, 2019 | Prior to April 15, 2019, up to 35% | $ | 0 | $ | 120,000,000 | $ | 0 | ||||||||||||||
5.125% Senior Notes due2025-1 | $ | 1,250,000,000 | $ | 1,250,000,000 | April 15 and October 15 | April 15, 2025(3) | April 15, 2020 | Prior to April 15, 2020, up to 40% | $ | 0 | $ | 64,062,500 | $ | 0 | ||||||||||||||
4.500% Senior Notes due2026-1 | $ | 1,000,000,000 | $ | 1,000,000,000 | February 1 and August 1 | February 1, 2026 | February 1, 2021 | Prior to February 1, 2021, up to 40% | $ | 0 | $ | 23,250,000 | $ | (11,875,000 | ) | |||||||||||||
5.375% Senior Notes due2027-1 | $ | 1,250,000,000 | $ | 1,250,000,000 | April 15 and October 15 | April 15, 2027(3) | April 15, 2022 | Prior to April 15, 2020, up to 40% | $ | 0 | $ | 67,187,500 | $ | 0 | ||||||||||||||
4.750% Senior Notes due2028-1 | $ | 1,500,000,000 | $ | 1,500,000,000 | February 1 and August 1 | February 1, 2028 | February 1, 2023 | Prior to February 1, 2021, up to 40% | $ | 0 | $ | 36,812,500 | $ | (18,802,083 | ) | |||||||||||||
8.097% Senior Reset Notes due 2021 | $ | 1,250,000,000 | $ | 0 | April 28 and October 28 | April 28, 2021 | April 28, 2018 | Prior to April 28, 2016, up to 35% | $ | 1,250,000,000 | $ | 50,606,250 | $ | 50,606,250 | ||||||||||||||
8.195% Senior Reset Notes due 2022 | $ | 1,250,000,000 | $ | 0 | April 28 and October 28 | April 28, 2022 | April 28, 2018 | Prior to April 28, 2016, up to 35% | $ | 1,250,000,000 | $ | 51,218,750 | $ | 51,218,750 |
(1) | Other amounts consist of redemption premium paid of $50,606,250 with respect to the 8.097% Senior Reset Notes due 2021 and $51,218,750 with respect to the 8.195% Senior Reset Notes due 2022 as well as interest received of $11,875,000 with respect to 4.500% Senior Notes due 2026-1 and $18,802,083 with respect to 4.750% Senior Notes due 2028-1. |
(2) | The 9.332% Senior Reset Notes have been called for redemption effective April 28, 2019. |
(3) | Effective immediately prior to the consummation of the Sprint Combination, the maturity date applicable to the 5.125% Senior Notes due2025-1 will be amended to April 15, 2021, and the maturity date applicable to the 5.375% Senior Notes due2027-1 will be amended to April 15, 2022. See “Transactions with Related Persons and Approval — Transactions with Deutsche Telekom — Financing Matters Agreement” for more information. |
50 | T-Mobile 2019 Proxy Statement |
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
Each series ofT-Mobile USA senior notes held by Deutsche Telekom was issued pursuant to an indenture (the “Indenture”), dated as of April 28, 2013, amongT-Mobile USA, the Company, the other guarantors party thereto, and Deutsche Bank Trust Company Americas, as trustee. The Indenture, as amended and supplemented with respect to the notes, originallycontains covenants that, among other things, restrict the ability ofT-Mobile USA and its restricted 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 agreements that restrict dividends or distributions from subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. The Indenture, as so amended and supplemented, also contains customary events of default. These covenants and events of default are subject to a number of important qualifications and exceptions, including certain customary baskets, exceptions and incurrence-based ratio tests.
T-Mobile USA’s 4.000% Senior Notes due2022-1, 6.000% Senior Notes due 2024, 5.125% Senior Notes due2025-1, 4.500% Senior Notes due2026-1, 5.375% Senior Notes due2027-1 and 4.750% Senior Notes due2028-1 held by Deutsche Telekom (collectively, the “Specified DT Notes”) have substantially the same terms and conditions asT-Mobile USA’s 4.000% Senior Notes due 2022, 6.000% Senior Notes due 2024, 5.125% Senior Notes due 2025, 4.500% Senior Notes due 2026, 5.375% Senior Notes due 2027 and 4.750% Senior Notes due 2028 issued in public offerings (collectively, the “Specified Public Notes”), as applicable, other than issue date, registration rights and CUSIP. IfT-Mobile USA exercises its rights in respect of Specified Public Notes,T-Mobile USA has agreed to exercise the same rights under the corresponding Specified DT Notes on an equal and ratable basis.
On January 22, 2018,T-Mobile USA, the Company, and the other guarantors party thereto entered into a purchase agreement with Deutsche Telekom (the “Purchase Agreement”), pursuant to whichT-Mobile USA agreed to issue and sell to Deutsche Telekom, and Deutsche Telekom agreed to purchase, $1.0 billion in aggregate principal amount of 4.500% Senior Notes due2026-1 and $1.5 billion in aggregate principal amount of 4.750% Senior Notes due2028-1 (collectively, the “2018 DT Notes”) directly fromT-Mobile USA.T-Mobile USA was not required to pay any upfront fees, underwriting fees, new issuance concession or other consideration to Deutsche Telekom in connection with the issuance and sale of the 2018 DT Notes.
On April 30, 2018, pursuant to the terms of the Purchase Agreement,T-Mobile USA issued to Deutsche Telekom were comprised of five series of senior unsecured notesthe 2018 DT Notes and, contemporaneously with interest rates that remain constant through maturity (the “non-reset notes”) and five series of
senior unsecured notes with interest rates that reset at various intervals (the “reset notes”), having tenors ranging from six to ten years. In October 2013, Deutsche Telekom sold the non-reset notes to third parties in a secondary public offering.
The no-call period with respect to each series of reset notes ranges from four to six years after the issuance, thereof, which is two or three years after the applicable interest reset date of such series. Each seriesredeemed through net settlement all of the reset notes has an initial$1.25 billion in aggregate principal amount of 8.097% Senior Reset Notes due 2021 and all of the $1.25 billion except that the series of reset notes with a tenor of ten years has an initialin aggregate principal amount of $600 million.
The interest rates applicable to8.195% Senior Reset Notes due 2022. In connection with the reset notes were determined atexchange,T-Mobile USA paid Deutsche Telekom in cash the closingpremium portion of the Business Combination. The interest rates applicable to the reset notes were reset at the applicable times, according to a formula specifiedredemption price set forth in the indenture governing the reset notes.notes, plus accrued but unpaid interest on such reset notes to, but not including, the exchange date.
On March 28, 2019, T-Mobile USA issued a notice of redemption, pursuant to which the $600 million aggregate principal amount of outstanding 9.332% Senior Reset Notes due 2023 has been called for redemption effective April 28, 2019.
Revolving Credit Facilities
On December 29, 2016,T-Mobile USA, the Company and the other guarantors party thereto entered into (i) a $1.0 billion senior unsecured
revolving credit agreement with Deutsche Telekom, as administrative agent and lender (the “unsecured revolving credit facility”), and (ii) a $1.5 billion senior secured revolving credit agreement with Deutsche Telekom, as administrative agent, collateral agent and lender (the “secured revolving credit facility” and, together with the unsecured revolving credit facility, the “revolving credit facilities”).
Interest on outstanding borrowings and commitment fees under the revolving credit facilities are based on the Company’s leverage profile, which is determined on a quarterly basis in accordance with a debt to cash flow ratio.
The indenture governingrevolving credit facilities do not contain financial maintenance covenants and only contain certain limited covenants on the reset notes containsCompany’s andT-Mobile USA’s (and certain of their subsidiaries’) ability to incur liens, sell assets and extend loans and/or guaranties. The revolving credit facilities also contain customary events of default,default.
If Deutsche Telekom ceases to own and control more than 50% of the voting stock of the Company,T-Mobile USA may draw any remaining capacity under the revolving credit facilities and (i) in the case of the secured revolving credit facility, atT-Mobile’s option, convert the outstanding loans to secured term debt and/or issue senior unsecured notes to Deutsche Telekom in satisfaction of outstanding loans under the secured revolving credit facility, in either case, with a tenor equal to the remaining tenor under the secured revolving credit facility, in an aggregate amount not to exceed the loans then outstanding under the secured revolving credit facility, and (ii) in the case of the unsecured revolving credit facility, issue senior unsecured notes to Deutsche Telekom in satisfaction of the outstanding loans under the unsecured revolving credit facility, with a tenor equal to the remaining tenor under the unsecured revolving credit facility in an aggregate amount not to exceed the loans then outstanding under the unsecured revolving credit facility.
The revolving credit facilities are guaranteed by the same entities that guaranteeT-Mobile USA’s senior notes. The obligations ofT-Mobile USA and the guarantors under the secured revolving credit facility are secured by a first priority lien on substantially all ofT-Mobile USA’s and such guarantors’ assets, subject to certain exceptions. In addition,T-Mobile USA’s obligations under the secured revolving credit facility are subject to a first priority pledge of the equity interests ofT-Mobile USA and substantially all of its direct and indirect subsidiaries, subject to certain exceptions.
On March 29, 2018, terms of the revolving credit facilities were amended to, among other things, (i) amend the range of applicable margin payable under the secured revolving credit facility from 1.00%–1.75% to 1.05%–1.80%, (ii) amend the range of the applicable margin payable under the unsecured revolving credit facility from 2.00%–3.25% to 2.05%–3.05%, (iii) amend the undrawn commitment fee applicable to the secured revolving credit facility from 0.25% to a range of 0.25%–0.45%, (iv) amend the range of the undrawn commitment fee applicable to the unsecured revolving credit facility from a range of 0.25%–0.625% to a range of 0.20%–0.575%, and (v) extend the maturity date of the revolving credit facilities from December 28, 2019 to December 29, 2020. The amendments also modified the revolving credit facilities to update certain covenants and other terms, including, among other things,provisions to make them substantially consistent, subject to certain additional carveouts, withT-Mobile USA’s 4.500% Senior Notes due 2026 and 4.750% Senior Notes due 2028 issued in January 2018.
On November 15, 2018, the termination date of the revolving credit facilities was extended to December 29, 2021.
In 2018, we paid to Deutsche Telekom commitment fees of approximately $2.7 million and approximately $13.6 million in interest on borrowings
T-Mobile |
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
covenants that restrictunder the abilitysecured revolving credit facility and commitment fees of the issuerapproximately $4.7 million and its subsidiaries to, among other things, pay dividends and make certain other restricted payments, incur indebtedness and issue preferred stock, create liens on assets, sell or otherwise dispose of assets, enter into transactions with affiliates and enter new lines of business. These covenants include certain customary baskets, exceptions and incurrence-based ratio tests. The indenture does not contain any financial maintenance covenants.
Pursuant to a Noteholder Agreement entered into by T-Mobile USA and Deutsche Telekom upon the closing of the Business Combination, Deutsche Telekom has certain special rights, and is subject to certain special restrictions, that do not apply to other persons who may become holders of the reset notes, including
among other things (i) a more broadly defined change in control put right, (ii) restrictions on its ability to tender the notes into a change-in-control offer following a change in control resulting from a transfer of common stock of the Company by Deutsche Telekom unless all holders of common stock are required or entitled to participate on the same terms, (iii) a right to consent to equity issuances the proceeds of which would be used to redeem reset notes held by Deutsche Telekom, and (iv) a right to consent to any redemption of the reset notes held by Deutsche Telekom with the proceeds of any equity issuance by T-Mobile USA or the Company.
During 2015, we paid Deutsche Telekom approximately $330$1.3 million in interest on the reset notes.
Working Capital Facility
Upon the closing of the Business Combination, T-Mobile USA and Deutsche Telekom entered into a credit agreement pursuant to which Deutsche Telekom made available to T-Mobile USA a revolving credit facility with a maximum principal amount of $500 million, to be used for working capital and other general corporate purposes (the “working capital facility”).
T-Mobile USA’s obligations under the credit agreement are unsecured but are guaranteed by the Company and each ofT-Mobile USA’s wholly owned domestic restricted subsidiaries (other than certain designated special purpose entities, a certain reinsurance subsidiary and immaterial subsidiaries). The term of the working capital facility is five years after the closing date of the Business Combination.
T-Mobile USA may borrow from time to time under the working capital facility during the term. Outstanding borrowings under the facility bear interest at a variable rate based on the prime rate or Eurodollar rate plus a margin ranging from 2.5% to 3.0% (for Eurodollar rate loans) or 1.5% to 2.0% (for base rate loans) (depending on T-Mobile USA’s debt-to-cash flow ratio). At the endunsecured revolving credit facility.
As of the five-year term, allMarch 31, 2019, there was no amounts outstanding under the working capitalsecured revolving credit facility will be dueor the unsecured revolving credit facility.
Secured Term Loans
On January 25, 2017,T-Mobile USA entered into a Second Incremental Facility Amendment amongT-Mobile USA, as borrower, the Company, the other guarantors party thereto, Deutsche Bank AG New York Branch (“DB”), as administrative agent, and payable. LoansDeutsche Telekom, as lender, which amended the existing Term Loan Credit Agreement, dated November 9, 2015, betweenT-Mobile USA and DB, as administrative agent, as amended by that certain First Incremental Facility Amendment dated as of December 29, 2016, among the Company,T-Mobile USA, DB and Deutsche Telekom, as lender. Pursuant to the Second Incremental Facility Amendment, Deutsche Telekom agreed (i) to increase its incremental term loan commitment provided toT-Mobile USA under that certain First Incremental Facility Amendment dated as of December 29, 2016 from $660.0 million to $2.0 billion and (ii) to provide toT-Mobile USA an additional $2.0 billion incremental term loan commitment (collectively, the “secured term loan facility”).
The loans under the working capitalsecured term loan facility were drawn in two tranches of $2.0 billion each on January 31, 2017, one of which matures on November 9, 2022, and one of which matures on January 31, 2024. The rates of interest on amounts borrowed under the secured term loan facility are based on, at the Company’s option, either LIBOR (subject to a 0% LIBOR floor) or an alternate base rate, plus a margin. The alternate base rate is the highest of (i) the prime rate of the administrative agent, (ii) the federal funds effective rate plus 0.50% and(iii) one-month adjusted LIBOR plus 1.00%. The loans under the secured term loan facility may be prepaid without penalty or premium (other than customary Eurodollar breakage costs) at any time.
The working capital facility requires the payment of additional commitment fees ranging from 0.25% to 0.50% (depending onT-Mobile USA’s debt-to-cash flow ratio) of the amount of the undrawn commitment, payable quarterly in arrears. In 2015, we paid Deutsche Telekom commitment fees of approximately $2.5 million.
The credit agreement governing the working capital facility contains customary events of default, covenants and other terms, including, among other things, restrictions on payment of dividends and the making of certain other restricted payments, incurrence of indebtedness and issuance of preferred stock, creation of liens on assets, sales or other dispositions of assets, entry into transactions with affiliates and entry into new lines of business. If loans are outstanding under the working capital facility, then T-Mobile USA is required to maintain a debt-to-cash flow ratio, tested quarterly, as set forth in the credit agreement.
On November 2, 2015, T-Mobile and T-Mobile USA entered into Amendment No. 3 to the credit agreement with Deutsche Telekom and JP Morgan Chase Bank, N.A. (the “Amendment”). The Amendment sets the maximum debt-to-cash flow ratio at 5.00 to 1.00 for fiscal periods ending on or prior to June 30, 2016, 4.75 to 1.00 for fiscal periods ending after June 30, 2016 and on or prior to June 30, 2017 and 4.25 to 1.00 for fiscal periods ending after June 30, 2017. We had no borrowings under the working capital facility in 2015.
Commitment to Purchase Senior Unsecured Notes
On March 6, 2016, the Company, T-Mobile USA and certain of its wholly-owned domestic restricted subsidiaries entered into a purchase agreement with Deutsche Telekom pursuant to whichterminated byT-Mobile USA has agreed to issue and sell to Deutsche Telekom $2.0 billion aggregate principal amount of T-Mobile USA’s 5.300% Senior Notes due 2021 (the “2021 DT Notes”) for an aggregate purchase price of $2.0 billion. Subject to certain limited and customary closing conditions (which closing conditions do not include the absence of a material adverse change), the closing of the issuance and sale of the 2021 DT Notes is scheduled to occur on a date determined by T-Mobile USA that may not be later than December 7, 2016.
Pursuant to the purchase agreement, T-Mobile USA is required to use the proceeds from the sale of the 2021 DT Notes (i) for acquisitions of low-band spectrum, (ii) if the proceeds are not needed for acquisitions of low-band spectrum, for refinancing of debt (other than certain T-Mobile USA debt held by Deutsche Telekom) and (iii) if the proceeds are not needed for acquisitions of low-band spectrum or refinancing of debt, for general corporate purposes.
No commitment fees, underwriting fees, new issuance concession or other compensation are payable to Deutsche Telekom in connection with the commitment under the purchase agreement or the issuance and sale of the 2021 DT Notes.
T-Mobile USA may elect not to issue the 2021 DT Notes and can terminate the commitment under the purchase agreement at any time on any interest payment date without penalty or prior to November 30, 2016 subject to T-Mobile USA reimbursing Deutsche Telekom for the cost of its hedging arrangements (if any) related to the transaction.premium.
The 2021 DT Notes, if issued, will bear interest at a fixed rate of 5.300% per year, which is payable on a semiannual basis, and will mature on March 15, 2021. The notes will be redeemable at the option of T-Mobile USA at the redemption prices set forth in the indenture, which redemption price would include a make-whole payment for redemptions prior to March 15, 2018. The 2021 DT Notes, if issued, willsecured term loan facilities have the benefit of guarantees from the same entities that are guarantors underT-Mobile USA’s senior notes. The obligations ofT-Mobile USA and the guarantors under the secured term loan facility are secured by a first priority lien on substantially all ofT-Mobile USA’s and such guarantors’ assets, subject to certain exceptions. In addition,T-Mobile USA’s obligations under the secured term loan facility are subject to a first priority pledge of the equity interests ofT-Mobile USA’s existing senior unsecured notes USA and substantially all of its direct and indirect subsidiaries, subject to certain exceptions. The secured term loan facilities include customary events of default.
On March 29, 2018, the terms of the secured term loan facility were amended to, among other things, (i) reduce the applicable margin payable on LIBOR indexed loans from 2.00% to 1.50% under the $2.0 billion incremental secured term loan maturing on November 9, 2022 and (ii) reduce the applicable margin payable on LIBOR indexed loans from 2.00% to 1.75% under the $2.0 billion incremental secured term loan maturing on January 31, 2024. The amendments also modified the secured term loan facility to (a) include a soft-call prepayment premium of 1.00% of the outstanding principal amount of the loans under the secured term loan facility payable to Deutsche Telekom upon certain refinancings of such loans byT-Mobile USA with lower priced debt prior to a date that is six months after March 29, 2018 and (b) update certain covenants and other thanprovisions to make them substantially consistent, subject to certain additional carveouts, withT-Mobile USA’s 4.500% Senior Notes due 2026 and 4.750% Senior Notes due 2028 issued in January 2018.
In 2018, we paid to Deutsche Telekom approximately $148.8 million in interest rate,under the secured term loan facility.
Financing Matters Agreement
In connection with the Sprint Business Combination Agreement, Deutsche Telekom andT-Mobile USA entered into a Financing Matters Agreement, dated as of April 29, 2018 (the “Financing Matters Agreement”). Pursuant to the Financing Matters Agreement, Deutsche Telekom, among other things, consented to the incurrence byT-Mobile USA of secured debt in connection with and after the consummation of the Sprint Combination, and agreed to refrain from sellingT-Mobile USA’s 5.125% Senior Notes due2025-1 or 5.375% Senior Notes due2027-1 until the earlier of April 15, 2020 or the termination of the Sprint Business Combination Agreement. In addition, Deutsche Telekom consented to amendments toT-Mobile USA’s outstanding notes held by Deutsche Telekom, effective immediately prior to the consummation of the Sprint Combination (i) increasing the amount of indebtedness permitted to be secured under the covenants applicable to the 9.332% Senior Reset Notes due 2023, (ii) permitting certain entities related to Sprint’s existing spectrum securitization notes program to benon-guarantor restricted subsidiaries, subject to certain conditions, (iii) amending the maturity date applicable to the 5.125% Senior Notes due2025-1 from April 15, 2025 to April 15, 2021, (iv) amending the maturity date applicable to the 5.375% Senior Notes due2027-1 from April 15, 2027 to April 15, 2022, and optional redemption pricing,(v) providing thatT-Mobile USA shall be required to redeem 100% of the then-outstanding 5.125% Senior Notes due2025-1 at par plus accrued and unpaid interest on any date thatT-Mobile USA redeems or prepays any other notes or debt securities (other thanT-Mobile USA notes held by Deutsche Telekom and outstanding as of April 29, 2018). Further,T-Mobile USA agreed, among other things, upon closing of the Sprint Combination, to repay and terminate the secured term loan facility and the revolving credit facilities, as well as to purchase its outstanding 5.300% Senior Notes due 2021 and 6.000% Senior Notes due 2024.
In connection with receiving the consents, we paid to Deutsche Telekom $7 million during 2018. If the Sprint Business Combination is consummated, we will have substantially the same terms as T-Mobile USA’s existing senior unsecured notes.
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
make additional payments for consents to Deutsche Telekom of $20 million.
Other Agreements
The related person transactions described below consist of ongoing arrangements under which the execution of transactions or the provision of services, and the payments related thereto, may vary
from period to period or may only occur from time to time, depending on the circumstances of the parties involved and the terms of the applicable arrangements.
Management Agreement Between Deutsche TelekomT-Systems andT-Mobile USA
The Management Agreement covers certain international multinational corporation (“MNC”) services thatT-Systems International GmbH(“T-Systems”), a wholly owned subsidiary of Deutsche Telekom, provides toT-Mobile USA in the MNC segment. These services include sales, business development and account management services, marketing and bid management services, business strategy and ITinformation technology services, and business solicitation services aimed toward multinational enterprises. In March 2015, the partiesThe Management Agreement was initially entered into an
amendment tobetween the Company and Deutsche Telekom. In July 2016, Deutsche Telekom transferred its rights and obligations under the Management Agreement, which updated the commissions payableas amended, to Deutsche Telekom.T-Systems. The Management Agreement may be terminated by either party on 12 months’ notice. During 2015, 2018,T-Mobile USA incurred approximately $0.5 million$109,000 in expenses for Deutsche Telekom’sT-Systems’ services under the Management Agreement.
52 | T-Mobile 2019 Proxy Statement |
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
Discount Agreements on Inter-Operator Tariffs
T-Mobile USA has entered into Discount Agreements on Inter-Operator Tariffs with certain Deutsche Telekom affiliates. The Discount Agreements establish a reciprocal discount scheme for roaming charges based on inter-operator tariffs to be paid by the Home Public Mobile Network operator to the Visited Public Mobile
Network operator according to their respective international roaming agreements. The Discount Agreements expirehad an initial term ending on December 31, 2016 with yearly renewal terms thereafter. During 2015, 2018,T-Mobile USA received approximately $1.8$1.5 million in net revenue and incurred approximately $3.6$5.2 million in net expenses for Deutsche Telekom’s and its affiliates’ services under these agreements.
the Discount Agreements.
Agreement on Commercial Roaming Broker Services Between Deutsche Telekom andT-Mobile USA
Under this agreement, Deutsche Telekom negotiates, for the benefit of certain of its wireless affiliates, includingT-Mobile USA referred to as “NatCos,”(“NatCos”), the terms of group roaming discount agreements with third-party network/service operators, or roaming partners. This agreement has an indefinite term, but by September 30 of each year,T-Mobile USA has the right to elect to participate or decline to participate under the broker arrangement for the following calendar year, and the parties negotiate the scope of roaming partners with which Deutsche Telekom is entitled to negotiate forT-Mobile USA’s benefit. IfT-Mobile USA agrees to be a participating NatCo in a given calendar year,T-Mobile USA will receive and/or provide roaming services according to the terms of the group roaming discount agreements during such calendar year, and at the end of a specified settlement period, Deutsche Telekom will receive from, or make payments to, the roaming partners forT-Mobile USA and the other participating NatCos, pursuant to the payment terms of the roaming
agreements. Intercompany payments are made between Deutsche Telekom andT-Mobile USA to settle any amounts due to, or owed by,T-Mobile for roaming services under the roaming agreements.
Deutsche Telekom may realize volume discounts for roaming services based on the NatCos’ participation in the group roaming discount agreements. Deutsche Telekom also allocates its commercial roaming costs, which consist of certain strategic and financial planning costs associated with roaming transactions, to the NatCos, includingT-Mobile USA. During 2015, 2018,T-Mobile USA experienced an approximately $6.0$4.9 million reductionincrease in roaming revenues (primarily as a result of minimum revenue commitment payments toT-Mobile USA from certain partners) and receivedexperienced an approximately $20.8$4.1 million increase in roaming expenses (primarily as a result of expense discountsminimum revenue commitment payments fromT-Mobile USA to certain partners) for roaming usage provided to, or delivered by, third-party operators under this agreement. In September 2015, November 2018,T-Mobile USA elected to participate in the roaming broker arrangement for calendar year 2016.
2019.
Frame Agreement for the Provision and Marketing of “Mobile Device Management” Between Deutsche Telekom and T-Mobile USA
Pursuant to the Frame Agreement for the Provision and Marketing of “Mobile Device Management,” Deutsche Telekom granted to T-Mobile USA the right to market, resell, and license certain mobile device management services and agreed to provide support related
to these services. The agreement expired on January 7, 2015. During 2015, T-Mobile USA did not incur any expenses for Deutsche Telekom’s services under this agreement.
Framework Agreement for the Provision and Marketing of “Global Corporate Access” between Deutsche Telekom and T-Mobile USA
Pursuant to the Framework Agreement for the Provision and Marketing of “Global Corporate Access,” Deutsche Telekom provides a specific global corporate access service, based on products offered by iPass Inc., and WiFi network access services to T-Mobile USA for the purpose of resale toT-Mobile USA’s business
customers in the United States. The agreement was terminated effective February 2016. During 2015, T-Mobile USA incurred approximately $130,800 in expenses for Deutsche Telekom’s services under the Framework Agreement.
TRANSACTIONS WITH RELATED PERSONS AND APPROVAL
Telecom Master Services Agreement Between Deutsche Telekom North America Inc. and T-Mobile USA
Pursuant to the Master Services Agreement, Deutsche Telekom North America, a wholly owned subsidiary of Deutsche Telekom, provides international long-distance and IP transit (internet connectivity) services toT-Mobile USA. The Master Services Agreement will remain in effect for so long as there remain statements of work pending. In December 2017 and
February 2018, the Company entered into amendments to the Master
Services Agreement to enable new services over other carrier networks. During 2015, 2018,T-Mobile USA incurred approximately
$1.2 $36.3 million in expenses for Deutsche Telekom North America’s services under the Master Services Agreement. In February 2016, the Company entered into a new statement of work under the Master Services Agreement and expects an increase in the total spend in 2016.
Services Agreement BetweenT-Systems North America andT-Mobile USA
T-Mobile USA andT-Systems North America, Inc., a wholly owned subsidiary of Deutsche Telekom(“T-Systems North America”), entered into a Services Agreement on January 4, 2008, which governs the terms of certain IT support services provided byT-Systems North America toT-Mobile USA. The agreement will terminateexpired on January 31, 2017 unless extended by mutual written agreement byand the parties. In general, specificparties entered into a Statement of Work, pursuant to whichT-Systems North America would provide termination assistance to transition IT support services to be provided under the Services Agreement are governed by statements of work entered into by the parties from time to time. The Services Agreement
will remain in effect for so long as there remain statements of work pending. The statements of work currently pending under the Services Agreement have varying expiration terms, but they may generally be terminated upon 30 days’ notice, except for certain scopes of work in which the parties agree to limit that right.a new vendor. During 2015, 2018,T-Mobile USA incurred approximately $22.1 million$205,000 in aggregate expenses forT-Systems North America’s services under the agreement.
Statement of Work. We do not expect to incur any further expenses under this arrangement.
Insurance Brokerage Services Provided by DeTeAssekuranz-Deutsche Telekom Assekuranz-Vermittlungsgesellschaft mbH (DeTeAssekuranz)
DeTeAssekuranz, a wholly owned subsidiary of Deutsche Telekom, provides certain insurance brokerage services forT-Mobile USA.
During 2015, 2018,T-Mobile USA incurred approximately $0.8$3.3 million in expenses for DeTeAssekuranz’s services under this arrangement.
SOX Tool Provided by Deutsche Telekom
In November 2013, the Company entered into an arrangement with Deutsche Telekom whereby Deutsche Telekom modified its ICCS tool to enable the Company to use it for its Sarbanes-Oxley Act
compliance. During 2015, the Company incurred approximately $49,000 in expenses under the arrangement.
Data Reseller Agreement Between Deutsche Telekom and T-Mobile USA
In April 2014, T-Mobile USA and Deutsche Telekom entered into a Data Reseller Agreement, pursuant to which Deutsche Telekom may purchase data services from T-Mobile USA for resale to its enterprise customers in the United States. The Data Reseller Agreement
terminates in April 2019 and automatically renews on monthly terms unless terminated upon 60 days’ prior written notice by either party. T-Mobile USA did not receive any revenue in 2015 under the Data Reseller Agreement.
Services Agreement Between Deutsche Telekomand T-Mobile
In February 2015,T-Mobile entered into a Services Agreement effective as of January 1, 2014 with Deutsche Telekom pertaining to the provision byT-Mobile of certain financial, tax and accounting-related services to Deutsche Telekom and the payment by Deutsche Telekom for such services. The services relate to certain operating
and financial data and other information that Deutsche Telekom may request fromT-Mobile. In December 2016, the parties entered into an Amendment updating the fees and services schedule. The parties intend to enter into another Amendment extending the terms of the agreement. Pursuant to the Services Agreement, as amended,T-Mobile has billed Deutsche Telekom $1.2$10.0 million for such services in 2015.
2018.
IndemnificationConnected Solutions Agreement Between Mojioand T-Mobile
We indemnify our directorsIn November 2016,T-Mobile entered into a Connected Car Agreement effective as of November 18, 2016 with Mojio, Inc. (“Mojio”), a company in which an affiliate of Deutsche Telekom at the time owned an approximately 14% equity interest. In December 2018, the agreement was further amended. The amended agreement enables Mojio to provide cloud platform and our officerssoftware support to the fullest extent permittedCompany for multiple connected product lines, including the connected car devices purchased by law so that they will be free from undue concern about personal liabilitythe Company. During 2018, the Company incurred approximately $6.6 million in expenses under the arrangement. In addition, in connection with their service to the Company. This is required under our certificate of incorporation, and we have also entered into agreements with our directors and executive officers that require us to indemnify and advance expenses to such directors and executive officers to the fullest extent permitted by applicable law if the person is or is threatened to be made a party to any threatened, pending or completed action, suit, hearing, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether formal or informal, governmental or non-governmental, or civil, criminal, administrative or investigative, provided such director or executive officer acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests ofamended agreement, the Company orinvested an aggregate total of approximately $5.0 million in a manner otherwise expressly permitted under our certificate of incorporation, bylaws or the Stockholder’s Agreement.Mojio’s Class B preferred share financing.
T-Mobile 2019 Proxy Statement | 53 |
Ms. Eileen Dunbar,Proposal 3 - Stockholder Proposal for Limitations on Accelerated Vesting of Equity Awards in the Event of a Change of Control
AmalgaTrust, a division of Amalgamated Bank of Chicago, on behalf of Marco Consulting Group Trust I, 550 W.theAFL-CIO Reserve Fund, 815 16th St., N.W., Washington, Blvd., Suite 900, Chicago, Illinois 60661,D.C. 20006, a beneficial owner of 1,632200 shares of the Company’s common stock, has
advised us that sheit intends to submit the following proposal at the Annual Meeting.
Proposal
RESOLVED: Shareholders of T-Mobile US, Inc. (the “Company”) ask the board of directors (the “Board”) to adopt, and present for shareholder approval, a “proxy access” bylaw. Such bylaw shall require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as defined herein) of any person nominated for election to the board by a shareholder or group (the “Nominator”) that meets the criteria established below. The Company shall allow shareholders to vote on such nominee on the Company’s proxy card.
The number of shareholder-nominated candidates appearing in proxy materials shall not exceed one quarter of the directors then serving. This bylaw, which shall supplement existing rights under Company bylaws, should provide that a Nominator must:
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The Nominator may submit with the Disclosure a statement not exceeding 500 words in support of the nominee (the “Statement”). The Board shall adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations, and the priority to be given to multiple nominations exceeding the one-quarter limit.
Supporting Statement
We believe proxy access is a fundamental shareholder right that will make directors more accountable and contribute to increased shareholder value. The CFA Institute’s 2014 assessment of pertinent academic studies and the use of proxy access in other markets concluded that proxy access:
Would “benefit both the markets and corporate boardrooms, with little cost of disruption.”
Has the potential to raise overall US market capitalization by up to $140.3 billion if adopted market-wide. (http://www.cfapubs.org/dio/pdf/10.2469/ccb.v2014.n9.1) [sic]
Shareholders would benefit from this reform, which would provide holders of some $10 billion of equity with a meaningful voice given Deutsche Telekom’s controlling shareholder status. It is also the default policy in Germany where Deutsche Telekom is based, and has already been adopted by U.S. companies of various sizes across industries.
Our Board of Directors recommends a vote |
PROPOSAL 3 — STOCKHOLDER PROPOSAL FOR IMPLEMENTATION OF PROXY ACCESS
Board of Directors’ Response to Proposal 3
The Board recommends a vote “AGAINST” Proposal 3.
We are aware of and understand the ongoing developments regarding the issue of proxy access. However, after careful consideration of this proposal, the Board and Nominating and Corporate Governance Committee have concluded that adoption of proxy access is not appropriate or beneficial at this time in light of our controlled company status.
Although this proposal is a common form of proxy access stockholder proposal, we believe that it raises unique policy and practical considerations for our company that are neither acknowledged nor addressed in the proposal. As disclosed elsewhere in this Proxy Statement, T-Mobile is a controlled company. Our controlling stockholder, Deutsche Telekom, currently owns approximately 65% of our outstanding shares of common stock and is entitled to certain governance rights pursuant to our certificate of incorporation and the publicly filed Stockholder’s Agreement described elsewhere in this Proxy Statement. Among these rights, Deutsche Telekom may designate a number of nominees for election to our Board in proportion to its share ownership percentage, which currently corresponds to designation rights for seven of the eleven seats on the T-Mobile Board. Thus, the proponent’s proxy access proposal raises unique considerations for a controlled company like T-Mobile, such as how such proxy access would interact with Deutsche Telekom’s existing director designation rights, how
Deutsche Telekom’s status as a greater than 3% stockholder would be addressed or managed under a proxy access bylaw, and whether it is appropriate for the board of a controlled company to further reduce its oversight of the director nomination process by adopting proxy access when there is already significant stockholder influence in place pursuant to the Stockholder’s Agreement. In this respect, we believe it is instructive that,to our knowledge, no other controlled company has adopted proxy access to date.
Given these considerations, the proponent has not meaningfully addressed how or why it believes our stockholders would benefit from proxy access, since we believe that the interests of Deutsche Telekom are properly aligned with those of other long-term stockholders. Importantly, since the Business Combination, the directors designated by Deutsche Telekom (which include two independent directors) and our other directors have successfully guided the Company to enhance value for all stockholders. Furthermore, the Company has a number of existing governance practices that are designed to support the accountability of our Board of Directors to our stockholders, including annual election of all directors, independent committee chairpersons of our three core Board committees and a lead independent director.
We believe that proxy access is neither necessary nor appropriate for us at this time due to the circumstances set forth above that are unique to our controlled company status. Therefore, the Board recommends a vote against this proposal.
Required Vote
Approval of the stockholder proposal for implementationlimitations on accelerated vesting of proxy accessequity awards in the event of a change of control requires that the number of votes cast “FOR” the proposal represents a majority of the total votes cast on the proposal.
The Board of Directors recommends that you vote
“AGAINST”
the proposal for implementation of proxy access.
Ms. Heather Slavkin, on behalf of the AFL-CIO Reserve Fund, 815 Sixteenth St. N.W., Washington, D.C. 20006, a beneficial owner of
200 shares of the Company’s common stock, has advised us that she intends to submit the following proposal at the Annual Meeting.
Proposal
RESOLVED: The shareholdersShareholders urge the Board of Directors ofT-Mobile US Inc. (the “Company”) to adopt a policy that in the event of a change in control of the Company, as defined under any applicable employment agreement, equity incentive plan or other plan, there shall be no acceleration of vesting of any equity award granted to any senior executive. However, under this policy the Compensation Committee may provide in an applicable grant or
purchase agreement that any unvested award will vest on a partial,pro ratabasis up to the time of the senior executive’s termination, with such qualifications for an award as the Compensation Committee may determine. ThisThe policy shallshould be implemented so as not affect [sic]to violate any contractual rightsobligations in existence on the date adopted.
Supporting Statement
The Company allows senior executives to receive accelerated equity awards under certain conditions after a change in control of the Company. These accelerated equity awards can significantly increase the total value of senior executives’ “golden parachutes” after a change in control. We do not question that a reasonable amount of severance payments may be appropriate for senior executives and other employees.
We are concerned, however, that current practices at our Company may permit windfall awards to senior executives. As of December 31, 2014,2017, our Company’s Chief Executive OfficerCEO John Legere had $31just under $53 million in unvested time-based and performance-based restricted stock units subject to acceleration following a change in control. This amount of accelerated equity is in addition to a lump sum of $5.5$10 million in cash severance $2.3and $5.7 million in short term cash incentives and $11.2 million in long-term cash incentives that Leger [sic]Legere would have been entitled to receive if his employment was terminated after a change inon control.
We note that many companies use a “double trigger” system to determine eligibility for accelerated vesting of equity wards-thereawards – there must be a change in control, and the executive must be involuntarily terminated. While we support the use of double triggers, we are not convinced that executives deserve to receive all unvested awards after a termination event. We do believe, however, that an affected executive should be eligible to receive vesting of equity awards on apro rata basis as of his or
her termination date, with the details of anypro rata award to be determined by the Compensation Committee.
Other leading companies, including Apple Inc., Chevron Corporation, Exxon Mobil Corporation, International Business Machines Corporation, Intel Corporation, Microsoft Corporation and Occidental Petroleum Corporation impose limitations on accelerated vesting of equity, such as providingpro rataawards or simply forfeiting unearned awards.
We urge you to vote FOR this proposal.
PROPOSAL 4 — STOCKHOLDER PROPOSAL FOR LIMITATIONS ON ACCELERATED VESTING OF EQUITY AWARDS IN THE EVENT OF A CHANGE OF CONTROL
Board of Directors’The Board’s Response to Proposal 4
The Board recommends a vote “AGAINST” Proposal 4.3
The proponents have submitted substantially the same proposal in previous years. Having again carefully considered the matter, for similar reasons as with the prior proposals, the Board believes that adoption of this proposal is not in the best interests of the Company and its stockholders. None
In connection with a change in control, none of the Company’s outstanding equity awards granted as part of our annual compensation program provides for automatic accelerated vesting of awardsunless an acquirer or successor does not assume or replace such awards. Instead, in connection with a change in control. Instead,control, equity awards granted to our executives are subject to “double-trigger” accelerated vesting, meaning that equity awards accelerate only upon a change in control, which effectively aligns the interests of our executive officers with those of our stockholders by requiring the occurrence of aqualifying termination of employment, either for good reason (such as material diminution of duties, material reduction of compensation or other specified adverse events) or, without cause or, in limited cases, due to expiration of the applicable executive’s employment term. Providing for “double-trigger” accelerated vesting of equity awards upon a qualifying termination of employment in connection with a change in control effectively aligns the interests of our executive officers with those of our stockholders by encouraging our executive officers to be accelerated. In addition,continue in employment with the Company through the consummation of a change in control.
Even in the proposed Sprint Combination, which is not a change in control of the Company, the Company’s outstanding equity awards do not provide for automatic accelerated vesting. Instead, each Severance Letter Agreement entered into in connection with the Business Combination Agreement provides for accelerated vesting only upon a qualifying termination of employment in connection with the closing or abandonment of the Sprint Combination, either for good reason, without cause or, in limited cases, due to expiration of the applicable executive’s employment term.
Notwithstanding the assertions in the proposal, eliminating the executives’ “double-trigger” arrangements upon adoption of the proposal would place the Company outside the practice of its peers and lead to a competitive disadvantage when competing for executive talent. Thus, weWe also do not believe that adoption of this proposal is appropriate given our existing compensation practices and programs, which have received strong support from stockholders as demonstrated by the fact that our most recentsay-on-pay proposal was approved by 99%99.5% of the votes cast on the proposal.
54 | T-Mobile 2019 Proxy Statement |
PROPOSAL 3 - STOCKHOLDER PROPOSAL FOR LIMITATIONS ON ACCELERATED VESTING OF EQUITY AWARDS IN THE EVENT OF A CHANGE OF CONTROL
We provide our executives with benefits, including severance and change in control benefits, that the Compensation Committee believes are competitively necessary, customary and in the best
interests of the Company and its stockholders. ProvidingAs noted above, providing for “double-trigger” accelerated vesting of equity awards upon a qualifying termination of employment in connection with a change in control commonly referred to as “double-trigger,” further aligns the interests of the Company’s executives with those of its stockholders.stockholders by encouraging continued stability of our executive team through a change in control. No windfall is created because an executive will not receive accelerated vesting based solely on a change in control, nor would an executive be entitled to receive accelerated vesting solely if he or she is terminated with cause or leaves voluntarily (other thanupon a termination of employment unless the executive terminates for good reason as definedor the Company terminates the executive without cause or, in relevantlimited cases, due to expiration of the executive’s employment agreements or plans). term.
Allowing for double-trigger accelerated vesting ensures that executives are not penalized with a loss of then-unvested equity compensation awards that would occur fromdue to an involuntary termination of employment in connection with the consummation of a transaction that, while outside the control of the executives,any individual executive, is in the best interests of stockholders. Therefore, weWe believe that accelerated vesting in appropriate circumstances permits management to remain objective and focused on protecting stockholder rights and maximizing stockholder value during a potential change in control event. In addition, the double-trigger provision in our equity awards ensures that executives are not distracted by a potential loss of employment and remain with the Company through the transaction, thereby reducing deal uncertainty.
For the reasons above, the Board recommends a vote against this proposal.
Required Vote
Approval of the stockholder proposal for limitations on accelerated vesting of equity awards in the event of a change of control requires that the number of votes cast “FOR” the proposal represents a majority of the total votes cast on the proposal.
The Board of Directors recommends that you vote
“AGAINST”
the proposal for limitations on accelerated vesting of equity awards in the event of a change of control.
For the reasons above, the Board recommends a voteAGAINST this proposal. |
Mr. Cornish F. Hitchcock, on behalf of the Amalgamated Bank’s LongView Broad Market 3000 Index Fund, 5614 Connecticut Avenue, N.W. No. 304, Washington, D.C. 20015, a beneficial owner
of 2,768 shares of the Company’s common stock, has advised us that he intends to submit the following proposal at the Annual Meeting.
Proposal
RESOLVED: The shareholders of T-Mobile US. Inc. (the “Company”) urge the Compensation Committee of the Board of Directors (the “Committee”) to amend the Company’s compensation clawback policy, as applied to senior executives, to provide that the Committee will review and determine whether to seek recoupment of incentive compensation paid, granted or awarded to a senior executive if, in the Committee’s judgment, there has been conduct resulting in a violation of law or T-Mobile policy that causes significant financial or reputational harm to T-Mobile, and a senior executive either engaged
in the conduct or failed in his or her responsibility to manage or monitor conduct or risks, with the Company to disclose to shareholders the circumstances of any recoupment and of any decision not to pursue recoupment in the situations described above.
“Recoupment” includes both recovery of compensation already paid and forfeiture, recapture, reduction or cancellation of amounts awarded or granted over which T-Mobile retains control. These amendments should operate prospectively and be implemented so as not to violate any contract, compensation plan, law or regulation.
Supporting Statement
As long-term shareholders, we believe that compensation policies should promote sustainable value creation. We agree with former GE general counsel Ben Heineman Jr. that recoupment policies are “a powerful mechanism for holding senior leadership accountable to the fundamental mission of the corporation: proper risk taking balanced with proper risk management and the robust fusion of high performance with high integrity.” (http//:blogs.law.harvard.edu/corpgov/2010/08/13/making-sense-out-of-clawbacks/)
T-Mobile has adopted a policy allowing recoupment of certain incentive pay from a corporate officer as a result of a restatement of financial results, taking into account, among other things, whether the incentive award would have been lower based on the restated results. In our view, providing for recoupment only for accounting and financial reporting noncompliance is too narrow. We believe that recoupment is an important remedy for other kinds of conduct that may not cause a restatement, but may harm T-Mobile’s reputation and prospects.
Our proposal retains the Board’s discretion to decide whether a recoupment is appropriate in particular circumstances. Moreover, the current policy allows for too much discretion by limiting clawbacks to incidents having a “material” effect on the company without providing a definition of materiality. Thus the policy may not cover conduct that causes reputational damage to T-Mobile and harms shareholders.
Recent legal settlements underscore the need for a stronger policy in this area, notably T-Mobile’s agreement to pay $112.5 million in 2014 to settle an FTC lawsuit alleging that T-Mobile placed unauthorized third-party charges on its customers’ mobile phone bills. Did the board scrutinize the actions of executives responsible for any control failures to see if any incentive compensation should be recouped?
We urge you to vote FOR this proposal.
T-Mobile |
PROPOSAL 5 — STOCKHOLDER PROPOSAL FOR AN AMENDMENT OF THE COMPANY’S CLAWBACK POLICY
Board of Directors’ Response to Proposal 5Questions and Answers About the Annual Meeting and Voting
The Board recommends a vote “AGAINST” Proposal 5.
The Board believes that this proposal is unnecessary because the Company has already adopted a customary and robust executive compensation clawback policy. In contrast to the Company’s existing clawback policy, the proposal’s vague and imprecise standards could be problematic when put into practice, injecting unnecessary subjectivity into our compensation programs and impacting our ability to attract and retain executive talent. In addition, the proposal’s disclosure obligations could prevent the Board from acting in the Company’s best interests.
The Company adopted its clawback policy in October 2014 after undertaking a review of market practice and the SEC’s proposed clawback policy rules. As a result, the Company adopted a clawback policy that is based on measureable impacts to the Company and is in line with the triggers under the SEC’s proposed clawback policy rules, which are expected to be adopted later this year. Our current clawback policy allows the Compensation Committee to recoup cash and equity incentive compensation from current and former executive officers due to an accounting restatement. The policy provides the Compensation Committee with discretion to ensure that recoupment would be in the best interests of the Company, but avoids the vague and subjective standards advocated by this proposal. The Board believes the Company’s current compensation structure and recoupment tools strike the right balance to motivate executives to deliver long-term results, while at the same time discouraging inappropriate behavior.
In contrast, the proponent’s amendment would introduce vague and imprecise standards into the recoupment process by requiring recoupment if there has been conduct resulting in a “violation of law or T-Mobile policy that causes significant financial or reputational harm to T-Mobile.” There is no definition or measurable standard for what qualifies as financial or reputational harm or for calculating the recoupment amount resulting from such harm. In addition, the proposal’s lack of clarity is further exacerbated by the fact that the proposed amendment would subject an executive to recoupment if he or she “failed in his or her responsibility to manage or monitor conduct or risks.” The Board believes the proposed amendment would undermine the effectiveness of our performance-based compensation by introducing the type of discretionary, subjective evaluations that we have sought to avoid under our performance-based programs.
Finally, the Board believes that requiring public disclosure of all recoupment action could be harmful to the Company, its employees and stockholders. SEC rules already require disclosure of recoupment action taken against our CEO, CFO and other Named Executive Officers. The Board believes that disclosure of recoupment action impacting other executive officers should be at the Board’s discretion, subject to its fiduciary duties and business judgment, in order to balance investors’ interest in receiving the information with applicable legal, commercial and privacy concerns.
Due to the foregoing reasons, the Board believes adopting the proposal’s amendments are not in the best interests of the Company and its stockholders.
Required Vote
Approval of the stockholder proposal for an amendment of the Company’s clawback policy requires that the number of votes cast “FOR” the proposal represents a majority of the total votes cast on the proposal.
The Board of Directors recommends that you vote
“AGAINST”
the proposal for an amendment of the Company’s clawback policy.
Why did I receive these materials?
As a holder of common stock ofT-Mobile US, Inc. at the close of business on April 19, 2016,18, 2019, the record date, you are entitled to vote at the Annual Meeting. We are providing you with these proxy materials in connection with the solicitation of proxies by our Board of Directors to be used at the Annual Meeting. These proxy materials
were first made available to our stockholders on or about April 28, 2016.26, 2019. This Proxy Statement describes the proposals to be voted on at the Annual Meeting by the holders of record of our common stock on the record date and includes information required to be disclosed to our stockholders.
Who may vote at the Annual Meeting?
If you are a holder of record of our common stock as of the record date (April 19, 2016)18, 2019), you may vote your shares on the matters to be voted on at the Annual Meeting. You will receive only one proxy card for all the shares of common stock you hold in certificate and book-entry form.
If, as of the record date, you hold shares of our common stock in “street name” – that is, through an account with a bank, broker or other institution – you may direct the registered holder how to vote your shares at the Annual Meeting by following the instructions that you will receive from the registered holder.
How do proxies work?
You may vote by authorizing the persons selected by us as your proxy to vote your shares at the Annual Meeting according to your instructions on the matters discussed in this Proxy Statement, and according to their discretion on any other business that may properly
come before the Annual Meeting. We have designated two of our executive officers as proxies for the Annual Meeting: John J. Legere, our President and Chief Executive Officer, and J. Braxton Carter, our Executive Vice President and Chief Financial Officer.
How do I vote?
By InternetInternet.. Go towww.proxyvote.com, available 24 hours a day, seven days a week, and follow theon-screen instructions to submit your proxy. You will need to have your proxy card available and use the Company number and account number shown on your proxy card to cast your vote. This method of voting will be available until 11:59 p.m. Eastern Daylight Time, or EDT, on June 15, 2016,12, 2019, or the date immediately before any date to which the Annual Meeting may be continued, adjourned or postponed.
By Mail.Mail. You may submit your proxy by mail by returning your executed proxy card. You should sign your proxy card using exactly the same name
as appears on the card, date your proxy card and indicate your voting preference on each proposal. You should mail your proxy card in plenty of time to allow delivery prior to the Annual Meeting. Proxy cards received after 9:308:00 a.m. Pacific Daylight Time
on June 16, 201613, 2019 may not be considered unless the Annual Meeting is continued, adjourned or postponed and then only if such proxy cards are received before the date and time the continued, adjourned or postponed Annual Meeting is held.
By Phone.Phone. You also may submit your proxy by phone from the United States and Canada, using the toll-free number on the proxy card and the procedures and instructions described on the proxy card. Telephone voting will be considered at the Annual Meeting if completed prior to 11:59 p.m. EDT on June 15, 2016,12, 2019, or the date immediately before any date to which the Annual Meeting may be continued, adjourned or postponed.
In Person.Person. You also may vote in person at the Annual Meeting. See “What do I need in order to attend the Annual Meeting?” below.
How are the votes recorded? What is the effect if I do not vote?
If you are a registered holder and we receive a valid proxy card from you by mail or receive your vote by phone or Internet, your shares will be voted by the named proxy holders as indicated in your voting preference selection.
∎ | If you are a registered holder and we receive a valid proxy card from you by mail or receive your vote by phone or internet, your shares will be voted by the named proxy holders as indicated in your voting preference selection. |