- --------------------------------------------------------------------------------
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------

FORM 10-Q
------------------------

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________ .

COMMISSION FILE NUMBER 000-29667

VOICESTREAM WIRELESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<Table>

DELAWARE 91-1983600
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

12920 -- 38TH STREET S.E
BELLEVUE, WASHINGTON 98006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</Table>

(425) 378-4000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT.)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

<Table>
<Caption>
TITLE SHARES OUTSTANDING AS OF AUGUST 14, 2001
----- ----------------------------------------

Common Stock, $0.000001 par value 268,862,185
</Table>

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2

VOICESTREAM WIRELESS CORPORATION

FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001

TABLE OF CONTENTS

<Table>
<Caption>
PAGE
----

PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets................................. 3
Consolidated Statements of Operations and Comprehensive
Loss........................................................ 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statements.................. 6
Management's Discussion and Analysis of Financial Condition
Item 2. and Results of Operations................................... 16

PART II -- OTHER INFORMATION
Item 1. Legal Proceedings........................................... 24
Item 2. Changes in Securities....................................... 24
Item 3. Defaults Upon Senior Securities............................. 24
Item 4. Submission of Matters to a Vote of Security Holders......... 24
Item 5. Other Information........................................... 24
Item 6. Exhibits and Reports on Form 8-K............................ 24
</Table>

2
3

VOICESTREAM WIRELESS CORPORATION

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)

Current assets:
Cash and cash equivalents................................. $ 56,935 $ 1,154,896
Short-term investments.................................... -- 1,175,636
Accounts receivable, net of allowance for doubtful
accounts of $101,623 and $100,600, respectively........ 489,356 469,475
Inventory................................................. 198,668 340,284
FCC license deposits and other current assets............. 272,562 223,634
----------- -----------
Total current assets.............................. 1,017,521 3,363,925
Property and equipment, net of accumulated depreciation of
$65,197 and $740,956, respectively........................ 4,004,266 3,467,550
Goodwill, net of accumulated amortization of $66,061 and
$348,575, respectively.................................... 15,774,964 9,075,605
Licensing costs and other intangible assets, net of
accumulated amortization of $94,546 and $118,923,
respectively.............................................. 20,500,724 3,827,317
Investments in and advances to unconsolidated affiliates.... 431,543 498,869
Other assets and investments................................ 38,262 44,477
----------- -----------
$41,767,280 $20,277,743
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 76,960 $ 150,632
Accrued liabilities....................................... 488,197 404,621
Deferred revenue.......................................... 69,590 60,272
Construction accounts payable............................. 101,073 207,462
Current portion of long-term debt......................... 350,000 32,113
----------- -----------
Total current liabilities......................... 1,085,820 855,100
Long-term debt.............................................. 5,483,717 5,719,886
Deferred tax liability...................................... 4,536,298 --
Other long-term liabilities................................. 13,624 --
Minority interest in equity of consolidated subsidiaries.... 50,763 16,563
Preferred stock of consolidated subsidiary.................. -- 312,513
VoiceStream voting preferred stock; $0.001 par value;
100,000,000 shares authorized; 3,906,250 shares issued and
outstanding............................................... 5,000,000 5,000,000
Commitments and contingencies (see Note 8)
Shareholders' equity:
Common stock, $0.000001 and $0.001 par value,
respectively, and paid-in capital; 1.0 billion shares
authorized, 268,862,185 and 250,791,145 shares issued
and outstanding, respectively.......................... 25,859,658 11,572,083
Deferred compensation..................................... (43,317) (8,412)
Accumulated other comprehensive loss...................... -- (45,238)
Deficit................................................... (219,283) (3,144,752)
----------- -----------
Total shareholders' equity........................ 25,597,058 8,373,681
----------- -----------
$41,767,280 $20,277,743
=========== ===========
</Table>

See accompanying notes to consolidated financial statements.
3
4

VOICESTREAM WIRELESS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<Table>
<Caption>
THREE MONTH PERIODS SIX MONTH PERIODS
------------------------------------------- ----------------------------------------
JUNE 1, 2001 APRIL 1, 2001 THREE MONTHS JUNE 1, 2001 JANUARY 1, SIX MONTHS
THROUGH THROUGH ENDED THROUGH 2001 THROUGH ENDED
JUNE 30, MAY 31, JUNE 30, JUNE 30, MAY 31, JUNE 30,
2001 2001 2000 2001 2001 2000
------------ ------------- ------------ ------------ ------------ ----------

Revenues:
Subscriber revenues.................... $ 183,224 $ 368,464 $ 273,711 $ 183,224 $ 868,667 $ 444,461
Prepaid revenues....................... 34,763 64,984 67,434 34,763 158,893 92,636
Roamer revenues........................ 16,850 29,113 28,146 16,850 73,128 38,330
Equipment sales........................ 33,642 68,525 55,846 33,642 150,958 89,756
Affiliate and other revenues........... 10,245 7,428 31,119 10,245 18,922 49,517
--------- --------- --------- --------- ----------- ----------
Total revenues................... 278,724 538,514 456,256 278,724 1,270,568 714,700
--------- --------- --------- --------- ----------- ----------
Operating expenses:
Cost of service (excludes stock-based
compensation of $297, $244, $1,023,
$297, $610 and $1,712,
respectively)........................ 70,550 122,410 124,083 70,550 286,897 187,846
Cost of equipment sales................ 62,161 107,135 103,765 62,161 265,629 162,667
General and administrative (excludes
stock-based compensation of $449,
$813, $2,063, $449, $2,298 and
$6,396, respectively)................ 94,675 191,368 147,189 94,675 466,641 226,816
Sales and marketing (excludes
stock-based compensation of $248,
$203, $853, $248, $508 and $1,427,
respectively)........................ 102,171 185,547 142,617 102,171 466,513 230,197
Depreciation and amortization.......... 225,804 228,238 198,812 225,804 559,409 280,904
Stock-based compensation............... 994 1,260 3,939 994 3,416 9,535
--------- --------- --------- --------- ----------- ----------
Total operating expenses......... 556,355 835,958 720,405 556,355 2,048,505 1,097,965
--------- --------- --------- --------- ----------- ----------
Operating loss........................... (277,631) (297,444) (264,149) (277,631) (777,937) (383,265)
--------- --------- --------- --------- ----------- ----------
Other income (expense):
Interest and financing expense......... (39,433) (88,826) (120,868) (39,433) (224,471) (202,099)
Equity in net losses of unconsolidated
affiliates........................... (4,789) (20,561) (30,963) (4,789) (63,477) (47,247)
Interest income and other, net......... 1,791 6,813 6,946 1,791 35,968 21,990
T-Mobile merger related costs.......... (477) (102,271) -- (477) (118,885) --
Accretion of preferred stock of
consolidated subsidiary.............. -- -- (5,190) -- (4,699) (6,933)
--------- --------- --------- --------- ----------- ----------
Total other income (expense)..... (42,908) (204,845) (150,075) (42,908) (375,564) (234,289)
--------- --------- --------- --------- ----------- ----------
Net loss before income taxes............. (320,539) (502,289) (414,224) (320,539) (1,153,501) (617,554)
Income tax benefit....................... 101,256 -- -- 101,256 -- --
--------- --------- --------- --------- ----------- ----------
Net loss................................. (219,283) (502,289) (414,224) (219,283) (1,153,501) (617,554)
2.5% junior preferred stock dividends.... -- -- (5,463) -- -- (6,338)
--------- --------- --------- --------- ----------- ----------
Net loss attributable to common
shareholders........................... (219,283) (502,289) (419,687) (219,283) (1,153,501) (623,892)
Other comprehensive income (loss):
Foreign currency translation
adjustment........................... -- (4,308) -- -- (8,013) --
Equity in net unrealized income on
investment in securities held by
unconsolidated
affiliate............................ -- 791 -- -- 21,727 --
Net unrealized income (loss) on
available-for-sale securities........ -- (139) -- -- 15,333 --
--------- --------- --------- --------- ----------- ----------
Total other comprehensive income
(loss)......................... -- (3,656) -- -- 29,047 --
--------- --------- --------- --------- ----------- ----------
Comprehensive loss....................... $(219,283) $(505,945) $(419,687) $(219,283) $(1,124,454) $ (623,892)
========= ========= ========= ========= =========== ==========
</Table>

See accompanying notes to consolidated financial statements.
4
5

VOICESTREAM WIRELESS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<Table>
JUNE 1, 2001 JANUARY 1, 2001
THROUGH THROUGH SIX MONTHS ENDED
JUNE 30, MAY 31, JUNE 30,
2001 2001 2000
--------- ----------- -----------

Operating activities:
Net loss.................................................. $(219,283) $(1,153,501) $ (617,554)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 225,804 559,409 280,904
Income tax benefit...................................... (101,256) -- --
Amortization of debt discount and premium............... 610 22,783 20,240
Equity in net losses of unconsolidated affiliates....... 4,789 63,477 47,247
Stock-based compensation................................ 994 3,416 9,535
Allowance for bad debts................................. (2,053) 1,776 (1,681)
Other, net.............................................. (1,712) (25,119) 6,742
Changes in operating assets and liabilities, net of
effects of purchase accounting:
Accounts receivable................................... (13,869) (6,264) (23,078)
Inventory............................................. 33,659 107,957 (102,319)
Other current assets.................................. (1,920) 1,766 (5,238)
Accounts payable...................................... (21,683) (52,429) 92,712
Accrued liabilities................................... (383) 56,797 61,197
--------- ----------- -----------
Net cash used in operating activities............... (96,303) (419,932) (231,293)
--------- ----------- -----------
Investing activities:
Purchases of property and equipment....................... (123,347) (809,983) (469,832)
Acquisitions of wireless properties, net of cash
acquired................................................ (205,079) (299,292) (469,366)
Sales of short-term investments, net...................... -- 1,175,636 --
Investments in and advances to affiliates................. 8,919 (37,193) (364,158)
Refund of deposit held by FCC............................. -- 49,589 --
Other..................................................... 47 26,863 (2,252)
--------- ----------- -----------
Net cash provided by (used in) investing
activities........................................ (319,460) 105,620 (1,305,608)
--------- ----------- -----------
Financing activities:
Net proceeds from issuance of common and preferred
stock................................................... -- 43,468 1,331,099
Long-term debt borrowings................................. -- -- 2,740,000
Long-term debt repayments................................. (325,000) (32,113) (2,668,688)
Other..................................................... -- 27,470 38,677
Cash entitlements on conversion of preferred stock of
consolidated subsidiary................................. -- (81,711) --
Deferred financing costs.................................. -- -- (68,142)
--------- ----------- -----------
Net cash provided by (used in) financing
activities........................................ (325,000) (42,886) 1,372,946
--------- ----------- -----------
Change in cash and cash equivalents......................... (740,763) (357,198) (163,955)
Cash and cash equivalents, beginning of period.............. 797,698 1,154,896 235,433
--------- ----------- -----------
Cash and cash equivalents, end of period.................... $ 56,935 $ 797,698 $ 71,478
========= =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest)...... $ (40,700) $ (221,800) $ (149,100)
Non-cash investing and financing activities:
Capital contribution of license to unconsolidated
affiliate............................................. $ -- $ 7,500 $ --
Capital contribution to CIVS IV......................... $ -- $ 38,000 $ --
Exchange rights granted to CIVS V from additional
paid-in capital....................................... $ -- $ 17,400 $ --
Stock dividend issued from additional paid-in capital... $ -- $ 173,300 $ --
Conversion of preferred stock of consolidated
subsidiary............................................ $ -- $ 235,900 $ 3,715
</Table>

See accompanying notes to consolidated financial statements.
5
6

VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

VoiceStream Wireless Corporation ("VoiceStream" or "we") provides personal
communication services ("PCS") in urban markets in the United States using the
Global System for Mobile Communications, or GSM, technology. VoiceStream was
incorporated in June 1999 as a Delaware corporation to act as the parent company
for business combinations involving our predecessor, now named VS Washington
Corporation ("VS Washington").

On February 25, 2000, pursuant to a reorganization agreement approved by
the shareholders of VS Washington and Omnipoint Corporation ("Omnipoint"),
VoiceStream, as a holding company, became the parent of VS Washington and of
Omnipoint. On May 4, 2000, VoiceStream completed the acquisition by merger of
Aerial Communications, Inc. ("Aerial").

On December 14, 2000, we acquired controlling interests in the following
entities in exchange for approximately 7.9 million VoiceStream common shares and
$51 million in cash: VoiceStream PV/SS PCS, L.P. ("VS PCS"); VoiceStream GSM I,
LLC ("VS GSM"); VoiceStream GSM II Holdings, LLC ("VS GSM II"); and VoiceStream
GSM III Holdings, LLC ("VS GSM III"). On February 14, 2001 we acquired the
remaining minority interest in VS PCS and VS GSM in exchange for approximately
4.3 million VoiceStream common shares.

On May 31, 2001 Deutsche Telekom AG ("Deutsche Telekom") acquired 100% of
the common shares of VoiceStream. The merger qualified as a tax-free
reorganization. VoiceStream shareholders received for each VoiceStream common
share either 3.6693 shares of Deutsche Telekom stock and $15.7262 in cash,
3.6683 shares of Deutsche Telekom stock and $15.9062 or 3.7647 shares of
Deutsche Telekom stock. Deutsche Telekom transferred all of its VoiceStream
shares to T-Mobile International AG ("T-Mobile"). T-Mobile is a wholly owned
subsidiary of Deutsche Telekom and is the holding company for Deutsche Telekom's
GSM wireless operations primarily in Europe and the United States. Upon
consummation of the merger (hereafter referred to as "the T-Mobile merger"),
VoiceStream common shares were deregistered and delisted from NASDAQ and are no
longer publicly traded.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation and Financial Statement Presentation

The unaudited consolidated financial statements of VoiceStream and its
consolidated subsidiaries include the accounts of all majority and
minority-owned subsidiaries that are controlled by VoiceStream. Affiliates that
are 20 percent to 50 percent owned are generally accounted for on an equity
basis. Intercompany accounts and transactions have been eliminated in
consolidation. The unaudited consolidated financial statements of VoiceStream
for the three and six months ended June 30, 2001 and 2000 reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods. Such adjustments include those of a normal, recurring
nature and those related to the T-Mobile merger as described below. The
operating results for the interim periods presented herein are not necessarily
indicative of results of operations for the entire year. Reference should be
made to the consolidated financial statements included in the Annual Report on
Form 10-K for the year ended December 31, 2000. Certain amounts for 2000 have
been reclassified to conform with current period classifications.

6
7
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

each presented as two distinct periods, the two and five months prior to the
merger, and the period from June 1, 2001 to June 30, 2001, subsequent to the
merger.

Loss per common share

VoiceStream no longer presents loss per share information as all of
VoiceStream's common shares are owned by T-Mobile.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133", and SFAS 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". The statements establish
accounting and reporting standards for derivative instruments and hedging
activities and require recognition of all derivatives as either assets or
liabilities measured at fair value. Changes to the fair value of derivatives are
recognized in earnings unless specific hedge accounting criteria are met. We
adopted the provisions of these accounting standards as of January 1, 2001 with
no material impact on our financial position and results of operations.

In June 2001 the FASB approved No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 requires companies to cease amortizing goodwill and other
intangible assets with indefinite lives that existed at June 30, 2001. The
amortization of existing goodwill will cease on December 31, 2001. Any goodwill
and other intangible assets with indefinite lives resulting from acquisitions
completed after June 30, 2001 will not be amortized. SFAS No. 142 also
establishes a new method of testing goodwill for impairment on an annual basis
or on an interim basis if an event occurs or circumstances change that would
reduce the fair value of a reporting unit below its carrying value. The adoption
of SFAS No. 142 will result in the discontinuation of amortization of our
goodwill and any intangible assets with indefinite lives; however, we will be
required to test goodwill for impairment under the new standard beginning in the
first quarter of 2002, which could have an adverse effect on our future results
of operations if an impairment occurs.

7
8
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. BUSINESS COMBINATIONS AND OTHER TRANSACTIONS

T-Mobile Merger

As a result of the T-Mobile merger, we adjusted the basis of our assets,
liabilities and shareholder's equity to reflect the purchase allocations
recorded by T-Mobile (see Note 2). These non-cash adjustments, which have not
been finalized and may be subject to change, resulted in the following changes
to our balance sheet at May 31, 2001(dollars in thousands):

<Table>

ASSETS
Other current assets........................................ $ (16,878)
Licenses and other intangibles (excluding goodwill)......... 15,953,562
Goodwill.................................................... 6,961,764
Other long-term assets...................................... (22,046)
-----------
$22,876,402
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Other current liabilities................................... $ 36,151
Long-term debt.............................................. 426,840
Deferred tax liability...................................... 4,637,554
Common stock and additional paid in capital................. 13,326,758
Deferred compensation....................................... (38,686)
Accumulated other comprehensive loss........................ 16,191
Deficit..................................................... 4,471,594
-----------
$22,876,402
===========
</Table>

Other Acquisitions and License Exchanges

The following acquisitions and license exchanges either closed during the
second quarter of 2001 or were pending as of June 30, 2001.

License exchange between VoiceStream and Cingular Wireless

On May 11, 2001, we completed the exchange of licenses covering
approximately 35 million people with Cingular Wireless ("Cingular"). Cingular
acquired from VoiceStream 10 MHz of spectrum for the New York, NY Major Trading
Area ("MTA"), as well as 10 MHz in each of the St. Louis, MO and Detroit, MI
Basic Trading Areas ("BTAs"). VoiceStream acquired from Cingular 10 MHz of
spectrum in the Los Angeles and San Francisco MTAs, that covers most of
California and Nevada. No gain or loss was recorded in this transaction.

FCC Auction #35

On January 26, 2001, upon completion of the FCC Auction # 35 bid process,
we were the high bidder on 19 PCS licenses for $482.7 million. Additionally,
through CIVS V (see Note 6), a CIRI Designated Entity, we were the high bidder
on 22 PCS licenses for $506.4 million. The FCC announced on July 27, 2001, that
it was prepared to grant seven of the 19 PCS licenses for which VoiceStream was
the high bidder, and one of the 22 PCS licenses for which CIVS V was the high
bidder. VoiceStream and CIVS V submitted their payments for the remaining
balances outstanding for those licenses to the FCC on August 10, 2001.

8
9
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

licenses previously acquired by NextWave Communications, Inc. in earlier
auctions, when NextWave, upon declaring bankruptcy, failed to make installment
payments for those licenses. Auction #35 included the cancelled NextWave
licenses as well as other cancelled licenses previously held by companies that
also declared bankruptcy. The FCC plans to petition the United States Supreme
Court for a writ of certiorari of the Court of Appeals' decision, and has
requested that the Court of Appeals stay the effectiveness of its decision until
the Supreme Court has considered the FCC's petition. In light of the pending
litigation, it is uncertain whether the FCC will issue the remaining Auction #35
licenses to the high bidders.

UbiquiTel

On February 22, 2001, we signed a definitive agreement with UbiquiTel (a
Sprint PCS Affiliate) to purchase licenses in Bakersfield (10 MHz of A Block),
Fresno, Merced, Modesto, Stockton, and Visalia (F Blocks) for approximately $50
million. This transaction is subject to FCC approval and is anticipated to close
in 2001.

Verizon (Trustee)

On June 14, 2001, we purchased licenses and operating assets located
primarily in Cincinnati and Dayton, OH (both 20 MHz of B Block) for
approximately $200 million from the Department of Justice-appointed Trustee
overseeing the operation and divestiture of the former GTE Cincinnati-Dayton PCS
properties.

Carolina PCS

On May 1, 2001, we entered into an agreement to purchase certain 10 MHz C
Block licenses in Anderson, Charleston, Columbia, Florence, Greenville,
Greenwood, Myrtle Beach, Orangeburg and Sumter, SC from Carolina PCS for
approximately $85 million. This transaction is subject to FCC approval and is
anticipated to close in 2001.

Unaudited Pro Forma Operating Results

The following are the unaudited pro forma operating results, assuming that
VoiceStream's business combinations occurred on January 1 of each of the
respective years (dollars in thousands):

<Table>
<Caption>
FOR THE SIX MONTHS ENDED JUNE 30,
----------------------------------
2001 2000
-------------- --------------

Total revenues.................................. $ 1,549,000 $ 1,418,000
Net loss........................................ $(1,452,468) $(1,414,821)
</Table>

9
10
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. PROPERTY AND EQUIPMENT

Our property and equipment were adjusted to fair value at May 31, 2001 (see
Note 2). The accumulated depreciation balance at June 30, 2001 includes
depreciation expense for one month.

<Table>
<Caption>
JUNE 30, DECEMBER 31,
USEFUL LIVES 2001 2000
------------- ----------- ------------
(DOLLARS IN THOUSANDS) (UNAUDITED)

Land, buildings and improvements............ 5 - 40 years $ 103,081 $ 108,510
Wireless communications systems............. 5 - 10 years 2,411,561 2,444,112
Furniture and equipment..................... 3 - 5 years 404,434 361,909
---------- ----------
2,919,076 2,914,531
Accumulated depreciation.................... (65,197) (740,956)
---------- ----------
2,853,879 2,173,575
Construction in progress.................... 1,150,387 1,293,975
---------- ----------
$4,004,266 $3,467,550
========== ==========
</Table>

Depreciation expense was $191.8 million and $91.6 million for the three
months ended June 30, 2001 and 2000, respectively, and $371.0 million and $149.8
million during the six months ended June 30, 2001 and 2000, respectively.

5. LICENSING COSTS AND OTHER INTANGIBLE ASSETS

Our intangible assets were adjusted to fair value at May 31, 2001 (see Note
2). The accumulated amortization at June 30, 2001 includes amortization expense
for one month. Also, effective June 1, 2001 we have changed our amortization
period for licenses from 40 to 20 years to conform with T-Mobile policy.

<Table>
<Caption>
JUNE 30, DECEMBER 31,
USEFUL LIVES 2001 2000
------------ ----------- ------------
(DOLLARS IN THOUSANDS) (UNAUDITED)

Licensing costs............................. 20 years $19,011,574 $3,714,051
Lease rights................................ 10 years 3,411 57,066
Subscriber list............................. 3 years 579,630 --
Tradename................................... 7 years 1,000,000 --
Other intangible assets..................... 3 - 40 years 655 175,123
----------- ----------
20,595,270 3,946,240
Accumulated amortization.................... (94,546) (118,923)
----------- ----------
$20,500,724 $3,827,317
=========== ==========
</Table>

Amortization expense, excluding goodwill amortization, was $118.0 million
and $11.9 million for the three months ended June 30, 2001 and 2000,
respectively, and $151.8 million and $18.6 million during the six months ended
June 30, 2001 and 2000, respectively. Goodwill amortization was $144.2 million
and $95.3 million for the three months ended June 30, 2001 and 2000,
respectively, and $262.4 million and $112.5 million during the six months ended
June 30, 2001 and 2000, respectively.

10
11
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Our investments in and advances to unconsolidated affiliates were adjusted
to fair value at May 31, 2001 (see Note 2).

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------
(DOLLARS IN THOUSANDS) (UNAUDITED)

CIVS IV............................................. $333,239 $212,209
CIVS V.............................................. -- 74,915
Microcell Telekommunications, Inc................... 84,112 209,758
Other............................................... 14,192 1,987
-------- --------
$431,543 $498,869
======== ========
</Table>

Designated Entities

In connection with its authority to regulate the sale and use of radio wave
spectrum used to provide PCS service in the United States, the FCC adopted rules
that granted a narrow category of entities ("Designated Entities") the exclusive
right to bid for and own C and F Block licenses for the initial five year period
following award of the licenses. VoiceStream does not qualify as a Designated
Entity. In order to continue expansion of service to our customers, we obtained
49.9% ownership interests in certain Designated Entities controlled by Cook
Inlet Region, Inc. ("CIRI") directly and through its affiliates (collectively
the "CIRI Designated Entities"). At December 31, 2000 and June 30, 2001, we had
minority ownership interests in two such CIRI Designated Entities controlled by
CIRI: Cook Inlet/VS GSM IV PCS Holdings, LLC ("CIVS IV") and Cook Inlet/VS GSM V
PCS Holdings LLC, ("CIVS V"). VoiceStream customers are able to obtain service
in the Designated Entities' territories through reseller and other contractual
arrangements between VoiceStream and these entities or their affiliates.

CIVS IV

CIVS IV, a Delaware limited liability company, was formed in October 2000
for the purpose of acquiring and operating licenses subject to the FCC's
Designated Entity rules. CIVS IV is managed by Cook Inlet Mobile Corporation
("Cook Inlet Mobile"), a subsidiary of CIRI, which owns a 50.1% interest in CIVS
IV. Through a subsidiary, VoiceStream holds a 49.9% ownership interest in CIVS
IV. In October 2000, VoiceStream, through its subsidiary, and Cook Inlet Mobile
made capital investments in CIVS IV commensurate with their respective ownership
percentages. At June 30, 2001, CIVS IV had assets totaling $275.7 million,
primarily made up of licenses.

On entering into the agreement, we granted Cook Inlet Mobile exchange
rights entitling Cook Inlet Mobile to certain rights, but no obligation, to
exchange its ownership interest in CIVS IV for VoiceStream common shares. As a
result of the T-Mobile merger, the consideration Cook Inlet Mobile will be
entitled to receive will be calculated based on (i) the merger consideration
Cook Inlet Mobile would have been entitled to receive if it had owned the number
of VoiceStream common shares specified in the agreement at the time the T-Mobile
merger was completed, plus (ii) the value of dividends and distributions paid or
payable with respect to the stock portion of such consideration from the date of
the closing of the T-Mobile merger to the date of the closing of the exchange,
plus (iii) interest on the cash portion of such consideration at the rate
specified in the agreement from the date of the closing of the T-Mobile merger
to the date of the closing of the exchange. Any stock portion would be paid in
Deutsche Telekom shares. Cook Inlet Mobile's exchange rights are conditioned by
the FCC's Designated Entity rules and our legal ability to hold C and F block
licenses at the time of the exchange under such rules. Additionally, VoiceStream
loaned $195 million to CIVS IV as evidenced by promissory notes, bearing
interest at the higher of 10% or LIBOR plus 5%, to fund the purchase

11
12
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of certain C block licenses. Our total investment in CIVS IV, including advances
under such promissory notes, was $333.2 million at June 30, 2001. We use the
equity method to account for our investment in CIVS IV.

CIVS V

CIVS V, a Delaware limited liability company, was formed in October 2000
for the purposes of acquiring and operating licenses subject to the FCC's
Designated Entity rules. CIVS V is managed by Cook Inlet Wireless, Inc. ("Cook
Wireless"), a subsidiary of CIRI, which owns a 50.1% interest in CIVS V. Through
a subsidiary, VoiceStream holds a 49.9% ownership interest in CIVS V. In
November 2000, VoiceStream, through its subsidiary, and Cook Wireless made
capital investments in CIVS V commensurate with their respective ownership
percentages. At June 30, 2001, CIVS V had assets totaling $101.4 million
primarily made up of FCC deposits.

On February 12, 2001, VoiceStream and Cook Wireless entered into an
agreement that granted Cook Wireless certain rights, but no obligation, to
exchange its ownership interest in CIVS V for VoiceStream common shares or cash,
at VoiceStream's option. The value of the consideration Cook Wireless will be
entitled to receive if it exercises its exchange rights pursuant to the
agreement will be the greater of (i) the sum of the amount Cook Wireless
contributes to CIVS V, plus interest of 10% per annum, compounded annually, on
such amount from the date or dates of contribution to the date of the closing of
the exchange and (ii) the value of (a) the merger consideration Cook Wireless
would have received if at the time the T-Mobile merger was completed, Cook
Wireless owned a number of VoiceStream common shares equal to the amount Cook
Wireless contributes to CIVS V divided by a fixed price set forth in the
agreement, plus (b) the value of dividends and distributions paid or payable to
holders of such consideration from the date of the closing of the T-Mobile
merger to the date of the closing of the exchange plus (c) interest on the cash
portion of such consideration at the rate specified in the agreement from the
date of the closing of the T-Mobile merger to the date of the closing of the
exchange. The consideration may be paid in cash or stock. Any stock portion
would be paid in Deutsche Telekom shares. These exchange rights are conditioned
on the FCC's Designated Entity rules and VoiceStream's legal ability to hold C
and F block licenses at the time of the exchange under such rules. VoiceStream
used the equity method to account for its investment in CIVS V through 2000, and
began consolidating CIVS V in 2001 based on the terms of the exchange rights
agreement.

12
13
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. LONG-TERM DEBT

Long-term debt was adjusted to fair value at May 31, 2001 (see Note 2). The
adjustment resulted in a premium of $426 million to the carrying value of our
fixed rate long-term debt. This premium will be amortized to reduce interest
expense over the remaining term of the related debt.

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

Credit facilities:
Term loans....................................... $2,100,000 $2,425,000
Vendor facility.................................. 750,000 750,000
Revolvers........................................ 150,000 150,000
Senior Notes:
10 3/8% Senior Notes, due in 2009................ 1,727,904 1,727,904
11 7/8% Senior Discount Notes, due in 2009....... 720,000 720,000
11 5/8% Senior Notes, due in 2006................ 4,582 4,582
11 1/2% Senior Notes, due in 2009................ 205,000 205,000
FCC license obligations............................ -- 32,113
---------- ----------
5,657,486 6,014,599
Unamortized premium (discount), net................ 176,231 (262,600)
Current portion of long-term debt.................. (350,000) (32,113)
---------- ----------
$5,483,717 $5,719,886
========== ==========
</Table>

VoiceStream's credit agreement permits borrowings up to $4.75 billion of
which $4.0 billion are currently committed and $2.65 billion are outstanding at
June 30, 2001. The agreement includes a revolving credit facility of $1.35
billion, term loans of $1.9 billion, a vendor facility of up to $1.0 billion and
an incremental vendor facility of up to $500 million. The $2.65 billion of
borrowings outstanding consist of $1.9 billion of term loans and $750 million of
the vendor facility. Committed but undrawn facilities consist of the $1.35
billion revolver. The $500 million incremental vendor facility and $250 million
of the $1.0 billion vendor facility are currently not committed. The repayment
of the facilities is secured by, among other things, the grant of a security
interest in certain assets of VoiceStream and certain of its subsidiaries and in
the capital stock of certain of VoiceStream's subsidiaries.

Borrowings under the credit facilities bear interest, at our option, at
annual rates of interest ranging up to either (1) the greater of (a) the prime
rate, or (b) the Federal Funds rate plus 5/8%, or (2) a Eurodollar rate, in
each instance plus applicable margins. Such applicable margins will range to a
maximum of 2.75%, in the case of loans based on the prime rate or Federal Funds
rate, and to a maximum of 4.0%, in the case of loans based on a Eurodollar rate,
in each case based upon certain factors including the borrower's leverage ratio,
as defined in each of the credit facilities.

On August 10, 2001, we repaid the $350 million outstanding under the VS GSM
II loan facility. This loan facility is no longer available for future
borrowings.

On June 29, 2001 VS GSM repaid the outstanding balance of $325 million on
its credit facility. This credit facility is no longer available for future
borrowings.

13
14
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Maturities

The aggregate amounts of principal maturities of long-term debt at June 30,
2001 are as follows (dollars in thousands):

<Table>

Twelve months ending June 30, 2002....................... $ 350,000
Remainder of 2002...................................... --
Year ending:
2003................................................ 100,000
2004................................................ 145,000
2005................................................ 190,000
Thereafter............................................. 4,872,486
----------
$5,657,486
==========
</Table>

8. COMMITMENTS AND CONTINGENCIES

Commitments

Future minimum payments required under operating leases and agreements that
have initial or remaining non-cancelable terms in excess of one year as of June
30, 2001, are summarized below (dollars in thousands):

<Table>

Twelve months ending June 30, 2002....................... $ 175,410
Remainder of 2002...................................... 88,002
Year ending:
2003................................................ 174,970
2004................................................ 176,533
2005................................................ 176,529
Thereafter............................................. 329,931
----------
$1,121,375
==========
</Table>

Aggregate rental expense for all operating leases was $64.6 million and
$25.3 million for the three months ended June 30, 2001 and 2000, respectively,
and $126.8 million and $52.8 million during the six months ended June 30, 2001
and 2000, respectively.

In order to ensure adequate supply and availability of certain
infrastructure equipment and services, VoiceStream has committed to purchase PCS
equipment from various suppliers. These commitments total approximately $3.2
billion as of June 30, 2001. At June 30, 2001, VoiceStream has ordered
approximately $1.4 billion under all of these agreements, of which approximately
$124.3 million has not been delivered.

VoiceStream and its affiliates have various other purchase commitments for
materials, supplies and other items incidental to the ordinary course of
business which are neither significant individually nor in the aggregate. Such
commitments are not at prices in excess of current market value.

Contingencies

On May 3, 1999, Western Wireless Corporation ("Western Wireless")
distributed its entire 80.1% interest in VoiceStream's common shares to its
stockholders. Prior to this "spin-off," Western Wireless obtained a favorable
ruling from the IRS indicating that the spin-off would not result in the
recognition of gain or taxable income to Western Wireless or its stockholders.
However, Western Wireless could still recognize gain upon the spin-off,
notwithstanding the favorable IRS ruling, if it is determined that the spin-off
was part of a "prohibited plan," that is, a plan or series of related
transactions in which one or more persons acquire, directly or indirectly 50% or
more of VoiceStream's stock. Acquisitions of 50% or more of VoiceStream's stock

14
15
VOICESTREAM WIRELESS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

occurring during the four year period beginning two years before the spin-off
would give rise to a rebuttable presumption that the spin-off was part of a
prohibited plan. Although it is not assured, VoiceStream believes it should be
able to establish that the spin-off, the subsequent Omnipoint, Aerial and
T-Mobile mergers, and certain investments by Hutchison Telekommunications PCS
(USA) Limited, a subsidiary of Hutchison Whampoa Limited, a Hong Kong company,
and Sonera, Ltd. are not pursuant to a "prohibited plan."

VoiceStream has agreed to indemnify Western Wireless on an after-tax basis
for any taxes, penalties, interest and various other expenses incurred by
Western Wireless if it is required to recognize such a gain. The amount of such
gain that Western Wireless would recognize would be equal to the difference
between the fair market value of VoiceStream common shares at the time of the
spin-off and Western Wireless' adjusted tax basis in such shares at the time.
The estimated range of possible liability of VoiceStream, not including interest
and penalties, if any, is from zero to $400 million.

9. PREFERRED STOCK

Voting preferred stock

On September 6, 2000, VoiceStream issued and sold to Deutsche Telekom
3,906,250 shares of its Voting Preferred Stock, par value $0.001 per share, for
an aggregate purchase price of $5 billion. Each share has a liquidation
preference of $1,280 per share. Following the T-Mobile merger, the conversion
feature was eliminated and VoiceStream has the option of redeeming these shares
beginning December 31, 2020. The shares are redeemable at the option of the
holder beginning December 31, 2030.

Preferred stock of consolidated subsidiary

Preferred stock of consolidated subsidiary represents Omnipoint's 7%
Cumulative Convertible Preferred Stock all of which was converted into
VoiceStream common shares in April and May, 2001.

10. RELATED PARTY TRANSACTIONS

VoiceStream is party to technical services agreements and reciprocal resale
agreements with the CIRI Designated Entities. These agreements entitle each
party to utilize airtime on the other's spectrum, and/or utilize wireless system
infrastructure, in certain agreed upon markets. The agreements are structured
such that each party performs as a reseller for the other and related fees are
charged and paid between the parties. The following summarizes the revenues and
expenses VoiceStream earned or incurred relative to these agreements for the
periods indicated (dollars in millions):

<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000
------------- ------------- ------------- -------------

Revenues.............................. $ 9.2 $26.8 $10.9 $43.7
Expenses.............................. $12.1 $31.8 $12.1 $51.3
</Table>

15
16

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
LITIGATION REFORM ACT OF 1995.

Information contained or incorporated by reference herein that is not based
on historical fact, including without limitation, statements containing the
words "believes," "may," "will," "estimate," "continue," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, events or
developments to be materially different from any future results, events or
developments expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which VoiceStream operates;
technology changes; competition; changes in business strategy or development
plans; the high leverage of VoiceStream; the ability to attract and retain
qualified personnel; existing governmental regulations and changes in, or the
failure to comply with, governmental regulations; liability and other claims
asserted against VoiceStream; and other factors referenced in VoiceStream's
filings with the Securities and Exchange Commission. GIVEN THESE UNCERTAINTIES,
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING
STATEMENTS. VoiceStream disclaims any obligation to update any such factors or
to publicly announce the result of any revisions to any of the forward-looking
statements contained herein to reflect future results, events or developments.

The following is a discussion and analysis of the consolidated financial
condition and results of operations of VoiceStream and should be read in
conjunction with our consolidated financial statements and notes thereto and
other financial information included herein and in our Form 10-K for the year
ended December 31, 2000. Due to the stage of development of our Personal
Communications Services ("PCS") operations and the significance of recent
mergers, including the change in control due to the T-Mobile merger, and other
transactions, our operating results for prior periods may not be indicative of
future performance.

Unless the context requires otherwise, "VoiceStream", "we", "our" and "us"
include us and our predecessors and subsidiaries.

OVERVIEW

We provide PCS service in urban markets in the United States through the
ownership and operation of PCS licenses and through our minority interests in
entities that own and operate similar licenses. The following chronology
highlights the key events in the periods covered by these financial statements:

- On February 25, 2000, we merged with Omnipoint, a PCS service provider in
urban markets, including New York, NY, Detroit, MI, Boston, MA,
Philadelphia, PA, Miami, FL, and Indianapolis, IN. Our reported results
of operations began including Omnipoint's results in March 2000.

- On May 4, 2000, we merged with Aerial, a PCS service provider in urban
markets including Columbus, OH, Houston, TX, Kansas City, MO,
Minneapolis, MN, Pittsburgh, PA, and Tampa-St. Petersburg, FL. Our
reported results of operations began including Aerial's results in May
2000.

- In connection with its authority to regulate the sale and use of radio
wave spectrum used to provide PCS service in the United States, the FCC
adopted rules that granted a narrow category of entities ("Designated
Entities") the exclusive right to bid for and own C and F Block licenses
for the initial five year period following award of the licenses.
VoiceStream does not qualify as a Designated Entity but has owned or
currently owns non-controlling interests in a number of Designated
Entities controlled by Cook Inlet Region, Inc. (collectively the "CIRI
Designated Entities"). In December 2000 and February 2001, our partners
in VoiceStream PV/SS PCS, L.P. ("VS PCS"), formerly known as Cook
Inlet/VoiceStream PV/SS PCS L.P.; VoiceStream GSM I, LLC ("VS GSM"),
formerly known as Cook Inlet/VoiceStream PCS, LLC; VoiceStream GSM II
Holdings, LLC ("VS GSM II"), formerly known as Cook Inlet/VS GSM II PCS
Holdings, LLC; and VoiceStream GSM III Holdings, LLC ("VS GSM III"),
formerly known as Cook Inlet/VS GSM III PCS
16
17

Holdings, LLC, elected to exercise their respective exchange rights,
whereby they exchanged their interests in these entities for VoiceStream
common shares. Subsequent to the acquisition dates our consolidated
results include the results of VS PCS, VS GSM, VS GSM II and VS GSM III.

- On May 31, 2001, Deutsche Telekom AG ("Deutsche Telekom") acquired 100%
of the common shares of VoiceStream. The merger qualified as a tax-free
reorganization. VoiceStream shareholders received for each VoiceStream
common share either 3.6693 shares of Deutsche Telekom stock and $15.7262
in cash, 3.6683 shares of Deutsche Telekom stock and $15.9062 or 3.7647
shares of Deutsche Telekom stock. Deutsche Telekom transferred all of its
VoiceStream shares to T-Mobile International AG ("T-Mobile"). T-Mobile is
a wholly owned subsidiary of Deutsche Telekom and is the holding company
for Deutsche Telekom's GSM wireless operations primarily in Europe and
the United States. Upon consummation of the merger, VoiceStream common
shares were deregistered and delisted from NASDAQ and are no longer
publicly traded.

As a result of the T-Mobile merger and the push down accounting that
resulted, we have adjusted the basis of our assets, liabilities and
shareholder's equity to reflect fair value on the closing date of the merger. As
a result of this new basis, our consolidated balance sheets, results of
operations and cash flows for periods subsequent to May 31, 2001, the closing
date of the merger are not comparable to those prior to the merger. The
consolidated financial statements of VoiceStream for the three and six months
ended June 30, 2001 are each presented as two distinct periods, the two and five
months prior to the merger, and the period from June 1, 2001 to June 30, 2001,
subsequent to the merger. The following discussion and analysis refers to the
results and activities for the three months and six months ended June 30, 2001.
Where necessary, we have provided explanations to improve comparability between
the pre-merger and post-merger activity.

Operating markets

We did not commence operations in any of our markets until February 1996.
After that date, service was launched in the following markets in the years
indicated:

<Table>
<Caption>
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----

Albuquerque Boise Phoenix/Tucson San Antonio/ Dallas(3) Chicago
Des Moines Denver Boston(1) Austin Milwaukee
Honolulu El Paso Miami/ Seattle/Tacoma St. Louis
Oklahoma City Albany(1) Ft. Lauderdale(1) Washington DC/ Cincinnati
Portland Hartford(1) Indianapolis(1) Baltimore
Salt Lake City New Haven(1) Detroit(1) Spokane(3)
Columbus(2) New York(1)
Houston(2) Atlantic City(3)
Tampa/ Philadelphia/
St. Petersburg(2) Dover(3)
Minneapolis(2) Tulsa(3)
Pittsburgh(2)
Kansas City(2)
</Table>

- ---------------
(1) Operational markets acquired from Omnipoint in 2000, which were initially
launched in the years indicated.

(2) Operational markets acquired from Aerial in 2000, which were initially
launched in the years indicated.

(3) Operational markets acquired through our acquisitions of controlling
interests in four former CIRI Designated Entities in December 2000, which
were initially launched in the years indicated.

Due to the varying dates at which each of the markets became operational or
were acquired, the revenues and expenses recognized during any period may not be
comparable to another period and may not be representative of future operations.
Additionally, during each period being discussed, a portion of the operating
expenses were start-up costs incurred before the commencement of operations in
each of the markets. Exclusive of depreciation and amortization expense, which
was not material, approximately $0.2 million and $3.6 million of start-up costs
were incurred for the three months and six months ended June 30, 2001,
respectively, as compared to $0.4 million and $1.2 million for the same periods
in 2000, respectively.
17
18

RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001
AND 2000

The following table sets forth certain financial data as it relates to our
operations:

<Table>
<Caption>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------------- ------------------------------------
2001 2000 CHANGE 2001 2000 CHANGE
---------- --------- ------ ----------- ----------- ------

Revenues:
Subscriber revenues.......... $ 551,688 $ 273,711 101.6% $ 1,051,891 $ 444,461 136.7%
Prepaid revenues............. 99,747 67,434 47.9% 193,656 92,636 109.1%
Roamer revenues.............. 45,963 28,146 63.3% 89,978 38,330 134.7%
Equipment sales.............. 102,167 55,846 82.9% 184,600 89,756 105.7%
Affiliate and other
revenues................... 17,673 31,119 (43.2)% 29,167 49,517 (41.1)%
---------- --------- ----------- -----------
Total revenues........ 817,238 456,256 79.1% 1,549,292 714,700 116.8%
---------- --------- ----------- -----------
Operating expenses:
Cost of service.............. 192,960 124,083 55.5% 357,447 187,846 90.3%
Cost of equipment sales...... 169,296 103,765 63.2% 327,790 162,667 101.5%
General and administrative... 286,043 147,189 94.3% 561,316 226,816 147.5%
Sales and marketing.......... 287,718 142,617 101.7% 568,684 230,197 147.0%
Depreciation and
amortization............... 454,042 198,812 128.4% 785,213 280,904 179.5%
Stock-based compensation..... 2,254 3,939 (42.8)% 4,410 9,535 (53.7)%
---------- --------- ----------- -----------
Total operating
expenses............ 1,392,313 720,405 93.3% 2,604,860 1,097,965 137.2%
---------- --------- ----------- -----------
Operating loss................. (575,075) (264,149) 117.7% (1,055,568) (383,265) 175.4%
Other income (expense)......... (247,753) (150,075) 65.1% (418,472) (234,289) 78.6%
Income tax benefit............. 101,256 -- 100.0% 101,256 -- 100.0%
---------- --------- ----------- -----------
Net loss....................... $ (721,572) $(414,224) 74.2% $(1,372,784) $ (617,554) 122.3%
========== ========= =========== ===========
Adjusted EBITDA................ $ (118,779) $ (61,398) 93.5% $ (265,945) $ (92,826) 186.5%
========== ========= =========== ===========
Cash flows provided by (used
in):
Operating activities......... $ (338,615) $(134,980) 150.9% $ (516,235) (231,293) 123.2%
Investing activities......... $ (395,816) $(424,439) (6.7)% $ (213,840) (1,305,608) (83.6)%
Financing activities......... $ (285,860) $ 454,639 (162.9)% $ (367,886) 1,372,946 (126.8)%
</Table>

REVENUES

The overall increase in service revenues (subscriber, prepaid and roamer
revenues) for the three and six months ended June 30, 2001 as compared to the
same period in 2000 is primarily due to the acquisitions of Omnipoint on
February 25, 2000, Aerial on May 4, 2000, and controlling interests in four of
the CIRI Designated Entities on December 14, 2000. Service revenues have also
grown due to the expansion of our wireless network in the existing and acquired
markets and the launch of our services in new markets.

We had 4,770,900 customers at June 30, 2001, representing an increase of
380,800 or 8.7% from March 31, 2001, and an increase of 891,900 or 23.0% from
December 31, 2000. Included in our 2001 customer growth were 26,400 customers
added through acquisitions for the six months ended June 30, 2001 respectively.
During the three months and six months ended June 30, 2000 we added 755,100 and
1,721,000 net customers, respectively, which include 465,800 and 1,218,800
subscribers acquired through acquisitions.

We believe our "Get More" marketing strategy, including our advertising
campaign featuring Jamie Lee Curtis, and associated pricing strategy that was
initiated in the second quarter of 1998 has contributed to the rapid customer
growth throughout all of our markets. We intend to continue the "Get More"
marketing strategy and expect a continued positive effect on customer growth.

Total service revenue per average customer ("ARPU") was $50.66 and $54.30
for the three months ended June 30, 2001 and 2000, respectively, and $51.36 and
$54.53 for the six months ended June 30, 2001 and 2000, respectively. The
decline in ARPU in the three and six months ended June 30, 2001 as compared to
the same periods in 2000 is largely due to the timing of the increase in the
prepaid component of our customer

18
19

base resulting from our recent acquisitions. We expect that prepaid customers
will decrease as a percentage of our total customer base in the future as our
primary focus for growth is post pay subscribers.

Roamer revenues increased to $46.0 million and $90.0 million for the three
months and six months ended June 30, 2001, respectively, from $28.1 million and
$38.3 million for the same periods in 2000. The increase is primarily due to our
expanded coverage area in 2001 as compared to 2000.

Equipment revenues increased in 2001 as a result of the growth in the
number of handsets sold. This volume increase is correlated to our customer base
growth as described above. We anticipate continued equipment sales growth in
2001 in conjunction with our increasing customer base and as next generation
products are introduced.

Other revenue decreased 43.2% and 41.1% in the three months and six months
ended June 30, 2001, respectively, as compared to the same periods in 2000. The
decrease is primarily due to the elimination of technical services agreements
and reciprocal resale agreements revenues from four of our CIRI Designated
Entities which we acquired in December 2000. The parties to these agreements are
able to utilize air time on each other's spectrum, and/or utilize wireless
system infrastructure, in certain agreed upon markets with each party acting as
a reseller for the other with related fees charged and paid between the parties.

OPERATING EXPENSES

Cost of service expenses represent network operating expenses incurred in
operational markets. The increases in the three months and six months ended June
30, 2001 of $68.9 million and $169.6 million, respectively, as compared to the
same periods in 2000, are primarily due to the growth in our customer base. Cost
of service as a percentage of service revenue decreased to 27.7% and 26.8% for
the three months and six months ended June 30, 2001, respectively, from 33.6%
and 32.6% for the same periods in 2000. The cost of service expenses also
include fees related to the technical services agreements and reciprocal resale
agreements with certain CIRI Designated Entities. Excluding the technical
services and reciprocal resale agreements described above, these percentages
were 25.9% for both the three months and six months ended June 30, 2001, as
compared to 25.0% and 23.7% for the same periods ended June 30, 2000. While cost
of service expenses are expected to increase due to continuing growth in
customers and their usage, we expect the cost of service as a percentage of
service revenue to trend downward as greater economies of scale are realized.

Cost of equipment sales increased primarily due to the increase in the
number of handsets sold. The volume increase is correlated to our customer base
growth. Although subscribers generally are responsible for purchasing or
otherwise obtaining their own handsets, we sell handsets below cost to respond
to competition for new subscribers. Such handset subsidies are common industry
practice and we expect it to remain so for the foreseeable future.

General and administrative cost per average customer was $20.78 and $21.59
for the three months and six months ended June 30, 2001, respectively, as
compared to $21.31 and $21.88 for the same periods in 2000. The decrease is
primarily attributable to improved economies of scale realized in our
administrative functions. While general and administrative expenses are expected
to increase due to continuing growth in subscribers, we expect the cost per
customer to trend downward as greater economies of scale are realized.

The increase in sales and marketing costs is associated with the continued
subscriber growth in VoiceStream's markets. Sales and marketing cost per gross
customer added, including loss on equipment sales, totaled $350 and $342 for the
three months and six months ended June 30, 2001, respectively, as compared to
$355 and $349 for the same periods in 2000. The increases in the second quarters
of 2001 and 2000 relate to seasonal fluctuations in customer growth, but
generally have been on a downward trend since 1998. Sales and marketing cost per
net customer added, including loss on equipment sales, was $932 and $823 for the
three months and six months ended June 30, 2001, respectively, as compared to
$659 and $615 for the same periods in 2000. The increase in 2001 is largely due
to higher customer turnover especially with respect to prepaid customers.

Depreciation and amortization expense increased $118.1 million in the month
of June, 2001 primarily due to the adjustments to the cost of our intangible
assets, including licenses, goodwill, tradename and subscriber
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list relating to purchase accounting for the of T-Mobile merger. Amortization
also increased due to the change in the amortization period of licenses from 40
years prior to the T-Mobile merger to 20 years subsequent to the merger.
Depreciation and amortization charges are also trending upwards due to our
increasing asset base arising from acquisitions and expansion of our wireless
network.

Stock-based compensation expense was $2.3 million and $4.4 million for the
three months and six months ended June 30, 2001, respectively. In 2001, a
non-cash accrual for stock-based compensation of $44.6 million was established
to record the fair value of stock options as a result of the T-Mobile merger.
The deferred compensation is being amortized over the vesting period of the
related stock options. As of June 30, 2001, approximately $43.3 million remains
unamortized.

ADJUSTED EBITDA

Adjusted EBITDA represents operating loss before interest, taxes,
depreciation, amortization and non-cash stock-based compensation. We believe
Adjusted EBITDA provides meaningful additional information on our operating
results and on our ability to service our long-term debt and other fixed
obligations, and to fund our continued growth. Adjusted EBITDA is considered by
many financial analysts to be a meaningful indicator of an entity's ability to
meet its future financial obligations, and growth in Adjusted EBITDA is
considered to be an indicator of future profitability, especially in a
capital-intensive industry such as wireless telecommunications. Adjusted EBITDA
should not be construed as an alternative to operating income (loss) as
determined in accordance with United States generally accepted accounting
principles ("GAAP"), as an alternate to cash flows from operating activities (as
determined in accordance with GAAP), or as a measure of liquidity. Because
Adjusted EBITDA is not calculated in the same manner by all companies, our
presentation may not be comparable to other similarly titled measures reported
by other companies.

Adjusted EBITDA loss increased to $118.8 million and $265.9 million for the
three months and six months ended June 30, 2001, respectively, as compared to
$61.4 million and $92.8 million for the same periods in 2000. The increase in
2001 is primarily due to the incremental cost of customer growth together with
the related expenditures necessary to support this growth. Cost of customer
growth includes increased sales and marketing expenses, handset equipment losses
and general and administrative expenses.

OTHER INCOME (EXPENSE)

Interest and financing expense, net of capitalized interest, increased to
$128.3 million and $263.9 million for the three months and six months ended June
30, 2001, respectively, as compared to $120.9 million and $202.1 million for the
same periods in 2000, primarily due to debt acquired through acquisitions. The
weighted average effective interest rate before capitalized interest was 9.2%
and 9.8% for the three months and six months ended June 30, 2001, respectively,
as compared to 9.6% and 10.6% for the same periods in 2000.

Also included in other income (expense) is $102.7 million and $119.4
million in expenses related to the T-Mobile merger for the three and six months
ended June 30, 2001, respectively. Equity in net losses of unconsolidated
affiliates totaled $25.4 million and $68.3 million for the three months and six
months ended June 30, 2001, respectively, as compared to $31.0 million and $47.2
million for the same periods in 2000. The increase in 2001 is due primarily to
increased losses recorded by Microcell Telekommunications Inc. ("Microcell").
Microcell's losses increased due to a write-down in its own equity investments.

NET LOSS

Our net loss was $721.6 million and $1.4 billion for the three months and
six months ended June 30, 2001, respectively, compared to $414.2 million and
$617.6 million for the same periods in 2000. The increase in 2001 is due
primarily to the costs associated with the T-Mobile Merger and the resulting
increases to the cost basis of our assets as a result of the T-Mobile merger
which in turn resulted in increases in depreciation and amortization expense. In
addition the incremental costs of continued high customer growth together with
the related expenditures necessary to support this growth and the costs
associated with integrating our acquisitions were significant.

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LIQUIDITY AND CAPITAL RESOURCES

Mergers, Acquisitions, Investments and Capital Expenditures

On January 22, 2001, we purchased the assets of STPCS Joint Venture, LLC
("STPCS"). Through its operating company, SOL Communications Inc., STPCS held
licenses and assets in South Texas. Pursuant to the terms of the agreement, we
purchased STPCS's licenses and related assets for $297 million in cash. In
addition, STPCS's F block licenses were purchased by Cook Inlet/VS GSM IV PCS
Holdings, LLC ("CIVS IV"), a CIRI Designated Entity, for $9 million.

On February 12, 2001, CIVS IV purchased FCC PCS licenses formerly held by
Pocket Communications for $195 million.

On January 26, 2001, upon completion of the FCC Auction #35 bid process, we
were the high bidder on 19 PCS licenses for $482.7 million. Additionally,
through CIVS V, a CIRI Designated Entity, we were the high bidder on 22 PCS
licenses for $506.4 million. The FCC announced on July 27, 2001, that it was
prepared to grant seven of the 19 PCS licenses for which VoiceStream was the
high bidder, and one of the 22 PCS licenses for which CIVS V was the high
bidder. VoiceStream and CIVS V submitted their payments for the remaining
balances for these licenses to the FCC on August 10, 2001.

The FCC has not granted the remaining licenses due to pending
administrative and judicial challenges related to the auction process, including
a decision issued by the United States Court of Appeals for the District of
Columbia Circuit on June 22, 2001. The Court held that the FCC had erroneously
cancelled licenses previously held by NextWave Communications, Inc. in earlier
auctions, when NextWave, upon declaring bankruptcy, failed to make installment
payments for those licenses. Auction #35 included the cancelled NextWave
licenses as well as other cancelled licenses previously held by companies that
also declared bankruptcy. The FCC plans to petition the United States Supreme
Court for a writ of certiorari of the Court of Appeals' decision, and has
requested that the Court of Appeals stay the effectiveness of its decision until
the Supreme Court has considered the FCC's petition. In light of the pending
litigation, it is uncertain whether the FCC will issue the remaining Auction #35
licenses to the high bidders.

Capital expenditures totaled $369.7 million and $933.3 million for the
three months and six months ended June 30, 2001, respectively, primarily for the
continuing build out of our wireless network including the Chicago Market, which
was launched on May 1, 2001. We expect to incur significant additional capital
expenditures through 2001, directly and through CIVS IV for license purchases,
capacity expansion of operating markets and the development and expansion of new
markets. Actual capital expenditures could vary considerably depending on
opportunities that arise over the course of the year and on funding
availability. Future funding of our on-going cash requirements will be provided
through Deutsche Telekom or its related parties.

Financing Activities

On August 10, 2001, we repaid the $350 million outstanding under the VS GSM
II loan facility. This loan facility is no longer available for future
borrowings.

In the third quarter of 2000, we received $5.0 billion from the sale of
preferred stock to Deutsche Telekom. We used $1.1 billion of the cash received
to pay down the existing indebtedness including $810 of

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the revolving credit portion of our credit facilities in 2000 and $325 million
to repay the VoiceStream GSM LLC credit facility in 2001. The remainder was used
to fund operating losses and additional expenditures to build-out our wireless
network and to acquire additional spectrum.

We expect continued use of cash in operating activities due to operating
losses and increased working capital requirements together with continuing
investments in network infrastructure and FCC licenses to grow and support our
customer base. The cost of completing the build-out in any particular market,
the magnitude of operating losses, debt service requirements and the funding
requirements of license or operating business acquisitions could vary
significantly from current estimates. We plan to use cash on hand and funding
from Deutsche Telekom or its related parties to fund these activities and
expenditures. We are a 100% owned subsidiary of T-Mobile and T-Mobile is a 100%
owned subsidiary of Deutsche Telekom. In the past we have received funding from
Deutsche Telekom. If such financing is not fully available we may be required to
curtail our rate of growth or our service operations.

Cash Flow Information

Net cash used in operating activities was $338.6 million and $516.2 million
for the three months and six months ended June 30, 2001, respectively.
Adjustments to the six month $1.4 billion net loss to reconcile net cash used in
operating activities included $785.2 million of non-cash depreciation and
amortization expenses related to network infrastructure, FCC licenses and
goodwill. The T-Mobile merger resulted in an increase of $22.9 billion in the
carrying value of our assets most of which is related to licenses and goodwill.
We recorded a $101.3 million non-cash income tax benefit based on our operating
loss for the period, and $68.3 million of non-cash equity in net losses of
unconsolidated affiliates primarily related to our investment in Microcell.
Other adjustments included changes in operating assets and liabilities including
decreases of $141.6 million in inventory and $74.1 million in accounts payable,
both of which relate primarily to reduced handset purchases during the six month
period and an increase of $56.4 million in accrued liabilities due primarily to
the timing of interest payments on long term debt. Net cash used in operating
activities was $135.0 million and $231.3 million for the three months and six
months ended June 30, 2000, respectively.

Net cash used in investing activities was $395.8 million and $213.8 million
for the three months and six months ended June 30, 2001, respectively. Investing
activities for the six months ended June 30, 2001 consisted primarily of
investments in property and equipment, of which $933.3 million were capital
expenditures and $504.4 million were licenses acquired through acquisitions.
Additionally, $1.2 billion of short-term investments were converted to cash and
used to fund the capital investments and the cash flow loss from operations. Net
cash used in investing activities was $424.4 million and $1.3 billion for the
three months and six months ended June 30, 2000, respectively.

Net cash used in financing activities was $285.9 million and $367.9 million
for the three months and six months ended June 30, 2001, respectively. Financing
activities for the six months ended June 30, 2001 consisted primarily of
repayment of $325 million of loans outstanding under a credit facility,
repayment of $32.1 million of FCC debt and payment of $81.7 million in cash
entitlements on conversions of preferred stock of consolidated subsidiary. Net
cash provided by financing activities was $454.6 million and $1.4 billion for
the three months and six months ended June 30, 2000, respectively.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133", and SFAS 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities". The statements establish
accounting and reporting standards for derivative instruments and hedging
activities and require recognition of all derivatives as either assets or
liabilities measured as fair value. Changes to the fair value of derivatives are
recognized in earnings unless specific hedge accounting criteria are met. We
adopted the provisions of these accounting standards as of January 1, 2001 with
no material impact on our financial position and results of operations.

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In June 2001 the FASB approved SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 requires companies to cease amortizing goodwill that
existed at June 30, 2001. The amortization of existing goodwill will cease on
December 31, 2001. Any goodwill resulting from acquisitions completed after June
30, 2001 will not be amortized. SFAS No. 142 also establishes a new method of
testing goodwill for impairment on an annual basis or on an interim basis if an
event occurs or circumstances change that would reduce the fair value of a
reporting unit below its carrying value. The adoption of SFAS No. 142 will
result in the discontinuation of amortization of our goodwill; however, we will
be required to test goodwill for impairment under the new standard beginning in
the first quarter of 2002, which could have an adverse effect on our future
results of operations if an impairment occurs.

MARKET SENSITIVE FINANCIAL INSTRUMENT RISK MANAGEMENT

During the six months ended June 30, 2001, there were no material changes
to the qualitative or quantitative disclosures about market risks presented in
the Annual Report on Form 10-K for the year ended December 31, 2000.

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PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Except as referenced in our Form 10-K for the year ended December 31, 2000
there are no material, pending legal proceedings to which we or any of our
subsidiaries or affiliates is a party or of which any of their property is
subject which, if adversely decided, would have a material adverse effect on
their financial position, results of operations or cash flows.

ITEM 2. CHANGES IN SECURITIES

(a) VoiceStream's Amended and Restated Certificate of Incorporation was
amended in connection with the T-Mobile merger. Among other changes,
the amendment changed the total number of shares of authorized stock to
$510,000,000, consisting of 500,000,000 shares of common stock,
$0.000001 par value per share and 10,000,000 shares of preferred stock,
$0.001 par value per share. The amendment also eliminated the
requirement that certain provisions of the Amended and Restated
Certificate of Incorporation relating to redemption, no preemptive
rights and no cumulative voting could only be repealed or amended upon
the affirmative vote of the holders of not less than 66 2/3% of the
total number of shares of capital stock of the corporation outstanding
and entitled to vote on any particular matter.

(b) None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

3.1 Amended and Restated Certificate of Incorporation of Bega II, Inc.
(became Amended and Restated Certificate of Incorporation of
VoiceStream as a result of the T-Mobile merger)

3.2 Amended and Restated By-Laws of Bega II, Inc. (became Amended and
Restated By-Laws of VoiceStream as a result of the T-Mobile merger)

(b) Reports on Form 8-K:

VoiceStream filed a Current Report on Form 8-K dated May 31, 2001, in which
VoiceStream reported under Item 1 that on May 31, 2001, a Delaware corporation
formed by Deutsche Telekom, was merged with and into VoiceStream with
VoiceStream continuing as the surviving corporation and as a wholly owned
subsidiary of Deutsche Telekom. VoiceStream also reported that the Board of
Directors of VoiceStream was changed as a result of the merger and listed the
new members of the Board of Directors of VoiceStream.

VoiceStream filed a Current Report on Form 8-K dated April 23, 2001, in
which VoiceStream reported under Item 5 that it added 484,700 subscribers during
the quarter ended March 31, 2001, bringing its total customer base to 4.4
million at March 31, 2001 and that it anticipated consolidated service revenues
for 2001 to increase by 120 to 125% over the full year 2000 consolidated service
revenues and for cash flow (operating income less non-cash expenses) losses to
be less than $300 million for the full year, with the majority of the losses
coming in the first quarter of the year.

VoiceStream filed a Current Report on Form 8-K dated April 9, 2001, in
which VoiceStream reported under Item 5 that Omnipoint Corporation, issued a
Notice of Redemption to the holders of Omnipoint's 7% Cumulative Convertible
Preferred Stock.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

VOICESTREAM WIRELESS CORPORATION

<Table>

By /s/ DONALD GUTHRIE By /s/ ALLYN P. HEBNER
- -------------------------------------------- --------------------------------------------
Donald Guthrie Allyn P. Hebner
Vice Chairman and Director Vice President and Controller
(Principal Financial Officer) (Principal Accounting Officer)
</Table>

Dated: August 14, 2001