SUPERCHARGING
THE UN-CARRIER®
2019 ANNUAL REPORT
ONCE AGAIN,
SETTING
NEW RECORDS
MIKE SIEVERT
President and Chief Executive Offi cer
Seven years ago we set out to disrupt the wireless industry and change the status quo by
Changing Wireless for Good
listening to our customers and solving their pain points through our signature Un-carrier
As the Un-carrier, weʼve built a differentiated brand that is backed by a culture centered around
moves. It’s this Un-carrier strategy and our unrivaled customer-experience obsession that
caring about our customers. It’s these tens of thousands of crazy-talented, customer-obsessed
are the driving force of our success.
employees who are the secret sauce to our success.
Year after year T-Mobile continues to fi re on all cylinders, and 2019 was no different. In 2019
All the while, T-Mobile has been working diligently over the last two years to effectively close our merger
we delivered record fi nancial results and strong customer growth. On top of that, we launched
with Sprint to create New T-Mobile on April 1, 2020, while simultaneously delivering record business
America’s fi rst nationwide 5G network with our 600 MHz spectrum. This 5G network is the
results. With New T-Mobile, we will create the world’s most transformative 5G network—supercharging
foundational layer of 5G coverage, and it’s just the beginning of our 5G journey! In addition,
innovation in the U.S. and connecting people throughout the country. Ultimately, the merger allows
we continue to expand our footprint and improve network performance, because customers
us to unlock the potential of massive scale, enabling us to support better services at lower prices.
shouldn’t have to sacrifi ce network quality for a better value.
Together we have the brand, the people, and the network to SUPERCHARGE
our Un-carrier strategy!
CUSTOMER CONNECTIONS (END OF YEAR)
86.0M
79.7M
71.5M
72.6M
63.3M
55.0M
46.7M
33.4M
26.1M
37.4M
43.5M
49.3M
54.2M
58.7M
63.7M
67.9M
2012
2013
2014
2015
2016
2017
2018
2019
TOTAL CUSTOMER CONNECTIONS
BRANDED CUSTOMERS
2019 CUSTOMER HIGHLIGHTS
7.0M
TOTAL NET
ADDITIONS
4.9M
BRANDED NET
CUSTOMER ADDITIONS
4.5M
BRANDED POSTPAID NET
CUSTOMER ADDITIONS
6th year in a row >5M
customer connections
6th year in a row >4M
customer additions
5th year in a row
leading the industry
3.1M
BRANDED POSTPAID PHONE
NET CUSTOMER ADDITIONS
6th year in a row
leading the industry
339K
BRANDED PREPAID NET
CUSTOMER ADDITIONS
Larger branded prepaid
customer base than
AT&T and Verizon
0.89%
BRANDED POSTPAID
PHONE CHURN
Beat AT&T
5 quarters in a row
Note: The 2012 fi gures represent the standalone results of T-Mobile. The term customer connections is synonymous, and is used
interchangeably with, customers.
STRONG
CUSTOMER GROWTH
In 2019 T-Mobile continued its trend of strong customer growth, as more Americans chose to join the
Un-carrier movement. The company delivered 7 million total net additions, our sixth consecutive year
with more than 5 million. In addition, the company added 4.9 million branded customer additions,
our sixth year in a row with more than 4 million. T-Mobile led the industry, once again, with a total of
3.1 million branded postpaid phone net customer additions, further illustrating our ability to compete
and take share in a competitive marketplace. And not only have customers chosen to join the Un-carrier
movement—theyʼre staying longer than ever before, as refl ected by our low branded postpaid phone
churn. In total, approximately 53 million customers have joined T-Mobile since the launch of the
Un-carrier in 2013. Weʼll continue forward with our customer-experience obsession, determined
to bring the Un-carrier to every potential customer in the United States.
J. BRAXTON CARTER
Executive Vice President and Chief Financial Offi cer
RECORD-HIGH
FINANCIALS
T-Mobile’s 2019 full-year fi nancial performance proved that putting customers fi rst is also benefi cial
to stockholders. Once again we successfully translated strong customer growth into record fi nancial
performance—including industry-leading Service Revenue percentage growth, as well as record Total
Revenues, strong Net Cash Provided by Operating Activities, and record Free Cash Flow. All the while
continuing our virtuous circle of translating strong customer growth into revenue growth and using
those profi ts to further invest back into our customers. It’s a win-win!
TMUS STOCK PRICE +23.3% IN 2019!
12.31.18
$63.61
2019 FINANCIAL RESULTS
12.31.19
$78.42
Total Revenue
$45.0B
+3.9%
YEAR
OVER
YEAR
• Record high
• 7th year in a row growing YoY
Service Revenue
$34.0B
+6.3%
YEAR
OVER
YEAR
• Record high
• 6th year in a row leading the
industry in percentage growth
Net Income
$3.5B
+20.1%
YEAR
OVER
YEAR
• Strong net income
and YoY growth
Adjusted EBITDA
$13.4B
+7.9%
YEAR
OVER
YEAR
• Record high
• Leading the industry
in percentage growth
Net Cash
Provided by
Operating Activities
$6.8B
+75.0%
YEAR
OVER
YEAR
• Record high
• 3rd year in a row growing YoY
Free Cash Flow
$4.3B
+21.6% YEAR
OVER
YEAR
• Record high
• 4th year in a row growing YoY
Note: Adjusted EBITDA and Free Cash Flow are non-GAAP fi nancial measures. Defi nitions, explanations, and reconciliations to the
most directly comparable GAAP metrics are provided in our annual report on Form 10-K for the year ended December 31, 2019.
NEVILLE RAY
President of Technology
AMERICA’S FIRST,
LARGEST AND ONLY
NATIONWIDE 5G NETWORK
In December 2019 T-Mobile launched America’s fi rst, largest, and only nationwide 5G network.
Covering more than 200 million people and more than 5,000 cities and towns across the United
States with 5G—that’s more people and more places compared to anyone else! This network
is our foundational layer of 5G coverage on 600 MHz low-band spectrum—and we’re just getting
started! As we believe, 5G should be for everyone, everywhere.
BIGGER
BETTER
FARTHER
OUR 5G COVERS MORE PEOPLE
AND PLACES THAN ANYONE ELSE.
COVERING 200M POPS
NO OTHER 5G SIGNAL IS MORE
RELIABLE INDOORS AND OUT.
>5,000 CITIES & TOWNS
OTHER 5G ONLY COVERS CITY BLOCKS.
OURS COVERS THOUSANDS OF MILES.
>1M SQ. MILES
600 MHz Spectrum
T-Mobile continues its rapid deployment of 4G LTE on 600 MHz spectrum using 5G-ready equipment,
with 1.5 million square miles already lit up. By the end of 2019, we covered 248 million people in nearly
8,900 cities and towns in 49 states and Puerto Rico. Combining 600 MHz spectrum and 700 MHz
spectrum, we’ve deployed low-band spectrum to 316 million people.
248M POPS
4G LTE
NEARLY 8,900
CITIES & TOWNS
IN 49 STATES + PUERTO RICO,
1.5M SQ. MILES
We continue to expand our footprint and improve the quality of our network to better serve our customers.
By the end of 2019 T-Mobile covered 327 million Americans with 4G LTE—that’s approximately 99% of
Americans! We’ve effectively caught up to Verizon and AT&T’s network population coverage.
CUSTOMER-EXPERIENCE
OBSESSION
Customers have shown that they want to do business with a company that treats them right, eliminates
their pain points, and changes the rules of the industry in their favor—and thatʼs the Un-carrier way!
At T-Mobile weʼre unabashedly customer-experience obsessed. Every decision we make is centered
around doing what’s right for our customers and putting them fi rst. It’s this unrivaled level of customer
service that serves as our key differentiator and sets us apart from the competition.
We continue to raise the bar and usher in a new era of customer experience—not just in our industry,
but in every industry.
Expanding Retail and
Delighting Customers
In 2019 we increased our retail store footprint
by 1 million people, and now cover more than
270 million people nationwide with our T-Mobile
and Metro by T-Mobile stores, allowing even more
customers to join the Un-carrier revolution!
Customers have been so satisfi ed with our
store experience that T-Mobile received
record-breaking customer satisfaction scores,
with an all-time-high Net Promoter Score
of 82 for full-year 2019. In addition, in August
2019 T-Mobile received the number-one spot
according to the J.D. Power 2019 U.S. Wireless
Purchase Experience Full-Service Performance
Study—Volume 2. This was our fourth consecutive
win in delivering the best customer experience
in our branded retail stores, leading the full-
service wireless industry for two straight years!
Famous for Customer Care
JON A. FREIER
Executive Vice President, Consumer Markets
Two years ago we launched Team of Experts—a radical re-invention of the broken wireless customer
service model, bringing a dedicated team of highly trained experts assigned to customer accounts.
And the results speak for themselves! Customers are happier, staying longer, and deepening their
relationships with T-Mobile—all while experiencing record customer satisfaction levels. In fact, T-Mobile
received the highest score in both volumes of the J.D. Power 2019 U.S. Wireless Customer Care
Full-Service Study and, most recently, received the highest score from J.D. Power for their
J.D. Power 2020 U.S. Wireless Customer Care Full-Service Performance Study—Volume 1.
CALLIE R. FIELD
Executive Vice President, Customer Care
MATTHEW A. STANEFF
Executive Vice President and Chief Marketing Offi cer
MICHAEL J. KATZ
Executive Vice President, T-Mobile for Business
Essentials Unlimited 55+
After two years of continued success with T-Mobile’s Magenta Unlimited 55+ plan, we decided to up the
ante. In September 2019 T-Mobile launched Essentials Unlimited 55+—the Un-carrier’s best deal for
customers age 55 and up, with two lines of unlimited talk, text, and high-speed data for $55 plus tax.
Magenta Military
In April 2018 T-Mobile launched the Magenta Military plan, delivering one of the biggest discounts
ever for active duty military, veterans, and their families, by offering them 50% off family lines.
Magenta Military forced AT&T and Verizon to respond and altogether created a wave of change,
potentially saving military families more than a billion dollars every year.
Magenta First Responder
In October 2019 T-Mobile launched Magenta First Responder—the best discount in wireless for fi rst
responders and their families, with 50% off family lines! With Magenta First Responder, we’re putting
money right back in the pockets of our nationʼs fi rst responders and their families.
EXPANDING IN
UNDERPENETRATED
CUSTOMER SEGMENTS
T-Mobile for Business
Five years ago T-Mobile went after the business market with our Un-carrier move 9.0—Business
Unleashed. Since then T-Mobile for Business has more than tripled its subscriber base and
continues to be a driving force in our success. In fact, we swept the highly coveted annual
J.D. Power 2019 Business Wireless Customer Satisfaction Study for businesses of all sizes,
for the last three years!
JANICE KAPNER
Executive Vice President and Chief Communications Offi cer
FOSTERING A CULTURE
BUILT ON VALUES
Community
T-Mobile continues to disrupt the wireless industry by staking our business on putting people fi rst.
Now we’re applying our Un-carrier spirit to tackle the most pressing problems facing our communities.
That means connecting the disconnected, investing in youth, serving our veterans, aiding in disaster
response, and empowering employees to give back to local communities. We’re mobilizing for good.
Sustainability
We’re actively renewing our commitment to the planet. T-Mobile has a long and strong history
of disrupting the status quo, and now we’re getting real about doing good for our environment.
We’re regreening our planet, one tree at a time, through our partnership with The Nature Conservancy.
We’re going green at our headquarters, and shaking up the industry as the fi rst carrier to set science-based
targets for curbing our carbon emissions. And as our boldest move yet—we’ve set an industry-leading
commitment to renewable energy. Where we lead, others follow.
Diversity and Inclusion
Diversity and inclusion have been in the Un-carrierʼs DNA since day one—and weʼve been making
signifi cant strides ever since. Today our culture is an undeniable differentiator. It’s our commitment to
inclusion across race, gender, age, religion, identity, and experience that drives us to challenge the
status quo every day. Diversity brings fresh perspectives. Inclusion enables new and different thinking.
They are key to our culture and our success, and they will continue as key aspects of who we are.
THANK YOU,
JOHN LEGERE
Effective April 1, 2020, Mike Sievert succeeded John Legere as Chief Executive Offi cer of T-Mobile,
pursuant to previously announced leadership transition plans. John will continue in his role as a
member of T-Mobile’s Board of Directors through the 2020 Annual Meeting of Shareholders.
From all of us at T-Mobile, we are grateful to John Legere for his incredible leadership over the last
seven years. John has led an unprecedented turnaround and success story that have positioned
T-Mobile toward an even brighter future, and greatly impacted the lives of customers, employees,
partners, and investors.
COMPANY AWARDS
16 UN-CARRIER MOVES
Glassdoor Best Places to Work (2020, 2019, 2018, 2017)
Glassdoor Top CEOs (2019, 2018, 2017)
Comparably Top CEOs for Diversity (2019, 2018)
SIMPLE
CHOICE
SIMPLE
GLOBAL
CARRIER
FREEDOM
Fortune 100 Best Companies to Work For (2019, 2018)
TEST DRIVE
WI-FI
UNLEASHED
Fortune Best Places to Work for Women (2019, 2018)
Fortune Best Places to Work for Millennials (2019, 2018)
Best Places to Work for Disability and Inclusion (2019)
Best CEOs for Minority Workers (2019)
100 on the HRC Corporate Equality Index (2019, 2017)
Forbes America’s Best Employers for Diversity (2020)
UN-CARRIER
FOR BUSINESS
UN-CARRIER
NEXT
TEAM OF
EXPERTS
NEW T-MOBILE
5G FOR GOOD
7 YEARS OF UN-CARRIER®
7 YEARS OF
UN-CARRIER
John Legere joined T-Mobile in September 2012 as President
and Chief Executive Offi cer, and found a stupid, broken,
arrogant wireless industry that was in desperate need of a
customer advocate. Since then, John and his leadership team
have crisscrossed the nation, listening to customers and
employees, attacking their pain points, forcing the industry
to respond and, ultimately, changing wireless for good!
Carrier Freedom
Test Drive
Music Freedom
Simple Choice
“A break from industry norms, the Simple Choice Plan eliminates
restrictive annual contracts, taking pain and confusion out of
the wireless experience.”
New T-Mobile 5G for Good
First, Largest, and Only
Nationwide 5G Network
Jump!
Wi-Fi Unleashed
Un-carrier for Business
T-Mobile Tuesday
Un-carrier Next
Simple Global
Data Stash
Binge On
T-Mobile ONE
Netfl ix On Us
Team of Experts
CEO Transition
2013
2014
2015
2016
2017
2018
2019
33M
2012
86M
2019
2.6x
$45.0B
$34.0B
$19.8B
$17.2B
$3.5B
-$7.3B
2012
2019
2.3x
TOTAL REVENUE
2012
2019
2.0x
SERVICE REVENUE
2012
2019
FROM - TO +
NET INCOME
$13.4B
$5.0B
2012
2019
2.7x
ADJ. EBITDA
$4.3B
$78.42
$6.8B
$3.9B
2012
2019
1.8x
NET CASH PROVIDED BY
OPERATING ACTIVITIES
$961M
$16.52
2012
2019
4.5x
FREE CASH FLOW
5.1.2013
12.31.2019
4.7x
TMUS STOCK PRICE FROM
METRO PCS MERGER
TOTAL CUSTOMER CONNECTIONS!
INCREDIBLE FINANCIAL GROWTH
Notes:
1 The 2012 fi gures represent the stand-alone results of
T-Mobile.
2 Adjusted EBITDA and Free Cash Flow are non-GAAP
financial measures. Definitions, explanations and
reconciliations to the most directly comparable GAAP
measures are provided in this annual report, including
the 10-K for the year ended December 31, 2019.
3 Effective January 1, 2017, we changed an accounting
principle. The imputed discount on Equipment
Installment Plan receivables, which is amortized
over the fi nanced installment term using the effective
interest method and was previously presented within
Interest income in our Consolidated Statements of
Comprehensive Income, is now presented within
Other revenues in our Consolidated Statements of
Comprehensive Income. We have applied this change
retrospectively and presented the effect of $72 million
on the year ended December 31, 2012.
FIRST, LARGEST, AND ONLY
NATIONWIDE 5G NETWORK
CREATING
NEW T-MOBILE
On April 29, 2018, T-Mobile and Sprint entered into a Business Combination Agreement to come together
New T-Mobile Un-carrier Move 1.0—5G for Good
On November 7, 2019, T-Mobile announced its plans for the fi rst Un-carrier move for New T-Mobile—
5G for Good! This move features three bold initiatives that harness the new company’s transformational
network capabilities to bring accessibility and connectivity to all Americans!
to form New T-Mobile. After nearly two years of tremendous hard work from both companies, T-Mobile
Connecting Heroes Initiative™
completed its acquisition of Sprint on April 1, 2020, to create New T-Mobile.
A 10-year commitment to provide free 5G service—unlimited talk, text, and smartphone data—to public
New T-Mobile is a bigger and stronger company, positioned as a fi erce competitor and formidable
disrupter in the wireless industry and beyond! With T-Mobile’s low-band and high-band spectrum,
and nonprofi t state and local fi rst-responder agencies, ensuring fi rst responders always maintain the
highest priority on T-Mobile’s network, regardless of data consumption.
and Sprint’s mid-band spectrum holdings, weʼre going to create the world’s most transformational
Project 10 Million
5G network. This will allow us to SUPERCHARGE the Un-carrier strategy and be a force for
An unprecedented $10 billion commitment to help eradicate the “homework gap” that exists for millions
good—as we work to unlock the potential of our massive scale. Backed by the additional capacity,
of children by offering free service, hotspots, and devices at a reduced cost to 10 million households
New T-Mobile’s network will be able to offer unmatched value to consumers, with better service
around the U.S. over fi ve years.
at lower prices—delivering substantial value to shareholders, employees, and the communities
we serve. New T-Mobile gives us the opportunity to become number one—in market share and
in our customers’ hearts—as we strive to be one of the most loved brands in the world, famous
for putting customers fi rst.
T-Mobile® Connect
In response to the COVID-19 pandemic, T-Mobile launched T-Mobile Connect ahead of schedule
in March 2020, because having a reliable, low-cost connection is critical for many Americans facing
fi nancial strain during a time of crisis. This groundbreaking prepaid service offer delivers a new,
Together we have the brand, the people, and the network to supercharge the Un-carrier—bringing
competitive $15 per month prepaid option to everyone, particularly lower-income consumers. That’s
more competition, more innovation, and even more customer-experience obsession! With New T-Mobile
half the price of T-Mobile’s lowest plan at the time of launch. New T-Mobile is not just a bigger company,
we have the scale and fi nancial fi repower to take on AT&T, Verizon, and big cable like never before!
we’re a BETTER company!
TRANSITIONING
LEADERSHIP
Mike Sievert CEO of T-Mobile, Effective April 1, 2020
Effective April 1, 2020, Mike Sievert, previously our President and Chief Operating Offi cer, stepped into
Unlock the Potential of Massive Scale
With the combined resources of T-Mobile and Sprint, we have the opportunity to unlock the potential
of massive scale. We plan to rapidly execute a seamless, high-quality integration plan, enabling us to
unleash an unprecedented $43 billion in synergies—creating a company with dramatically lower costs
thatʼs able to support better services at lower prices. In the end our competitors will be scrambling
to catch up, ultimately leaving consumers as the ultimate winners.
Build the World’s Most Transformative 5G Network
Together with T-Mobile’s low-band and high-band spectrum and Sprint’s mid-band spectrum holdings,
weʼll build the world’s most transformative 5G network, which will be our foundation for growth!
New T-Mobile will have the only 5G network thatʼs both broad and deep, reaching nearly everyone.
This network will have 14 times the capacity versus T-Mobile standalone, allowing us to leapfrog the
the role of Chief Executive Offi cer of T-Mobile, pursuant to previously announced leadership transition
competition in terms of network performance and capacity!
plans. This decision was made as part of a thorough, multi-year succession planning process, to ensure
a natural progression of the business and fi nd a next-generation leader who is committed to the strategic
direction of the company.
Mike Sievert joined T-Mobile in 2012 as Chief Marketing Offi cer, and he became Chief Operating Offi cer
in 2015. In 2018 he joined the Board of Directors and was appointed President of the company. Mike has
been instrumental in leading the design and execution of 16 Un-carrier moves, and is 100% committed to
continuing the Un-carrier strategy.
2020 Priorities with New T-Mobile
Become #1 for Customers
At T-Mobile we have a brand thatʼs second to none, and we have an opportunity to become number
one for customers—in market share and in our customers’ hearts. With New T-Mobile’s massive scale
and the world’s most transformative 5G network, enabling us to take on the competition like never
before. Our commitment to our customers is our key differentiator, and weʼll continue to strive to be one
of the most loved brands in the world and famous for our customer experience across all industries.
Create Substantial Value for Stakeholders
New T-Mobile is well positioned to create substantial value for all stakeholders —including shareholders,
employees, and the communities we serve. Armed with the massive capacity of our 5G network,
Looking ahead to 2020 and beyond, our long-term strategy remains to effectively balance growth and
customers will no longer have to choose between great service or a lower price—with New T-Mobile
profi tability. To get there, our strategy is simple:
theyʼll get both!
#AREYOUWITHUS?
#WEWONTSTOP
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 1-33409
☒
☐
T-MOBILE US, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
20-0836269
m
(I.R.S. Employer
Identification No.)
12920 SE 38th Street
Bellevue, Washington
(Address of principal executive offiff ces)
98006-1350
(Zip Code)
(425) 378-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.00001 per share
Trading Symbol
TMUS
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange on which registered
The NASDAQ Stock Market LLC
ff
d
in Rule 405 of the Securities Act. Yes ☒ No □
the preceding 12 months (or forff
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined
Indicate by check mark if the registrant is not required to filff e reports pursuant to Section 13 or 15(d) of the Act. Yes □ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filff ed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every I
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) durd ing the preceding 12 months (or forff
registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filff er,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
nteractive Data File required to be submitted
such shorter period that the registrant was required to file such reports),
such shorter period that the
rr
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell companym
As of June 28, 2019, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $23.2 billion
based on the closing sale price as reported on the NASDAQ Global Select Market. As of January 3rr
shares of common stock outstanding.
(as definff ed in Rule 12b-2 of the Exchange Act).
1, 2020, there were 856,932,845
Yes ☐ No ☒
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K will be incorporated by reference froff m certain portions of the definiti
ve Proxy Statement
for the Registrant’s Annual Meeting of Stockholders, which definitive Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A or will be included in an amendment to this Report.
ff
T-Mobile US, Inc.
Form 10-K
For the Year Ended December 31, 2019
Table of Contents
PART I.
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
PART II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
INDEX TO EXHIBITS
SIGNATURE
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9
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27
28
30
53
55
111
111
112
112
112
112
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113
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123
Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K (“Form 10-K”) includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including information
concerning our future results of operations, are forward-looking statements. These forward-looking statements are generally
identified by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “could” or similar expressions. Forward-
looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties and may
cause actual results to differ materially from the forward-looking statements. The following important factors, along with the
Risk Factors included in Part I, Item 1A of this Form 10-K, could affect future results and cause those results to differ
materially from those expressed in the forward-looking statements:
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•
the failure to obtain, or delays in obtaining, regulatory approval for the merger (the “Merger”) with Sprint Corporation
(“Sprint”), pursuant to the Business Combination Agreement with Sprint and other parties therein (as amended, the
“Business Combination Agreement”) and the other transactions contemplated by the Business Combination
Agreement (collectively, the “Transactions”), risks associated with the actions and conditions we have agreed to in
connection with regulatory approval for the Transactions, and the risk that such regulatory approval may result in the
imposition of additional conditions that, if accepted by the parties, could adversely affect the combined company or the
expected benefits of the Transactions, or the failure to satisfy any of the other conditions to the Transactions on a
timely basis or at all;
the risk that the antitrust litigation related to the Transactions brought by the attorneys general of certain states and the
District of Columbia will result in an order preventing the completion of the Transactions and the risk of other
litigation or regulatory actions related to the Transactions;
the exercise by one or both parties of a right to terminate the Business Combination Agreement;
adverse effects on the market price of our common stock or on our operating results because of a failure to complete
the Merger in the anticipated timeframe, on the anticipated terms or at all;
inability to obtain the financing contemplated to be obtained in connection with the Transactions on the expected terms
or timing or at all;
the ability of us, Sprint and the combined company to make payments on debt or to repay existing or future
indebtedness when due or to comply with the covenants contained therein;
adverse changes in the ratings of our or Sprint’s debt securities or adverse conditions in the credit markets;
negative effects of the announcement, pendency or consummation of the Transactions on the market price of our
common stock and on our or Sprint’s operating results, including as a result of changes in key customer, supplier,
employee or other business relationships;
the assumption of significant liabilities in connection with, and significant costs related to, the Transactions, including
liabilities of Sprint that may become liabilities of the combined company or that may otherwise arise and financing
costs;
failure to realize the expected benefits and synergies of the Transactions in the expected timeframes, in part or at all;
costs or difficulties related to the integration of Sprint’s network and operations into our network and operations,
including intellectual property and communications systems, administrative and information technology infrastructure
and accounting, financial reporting and internal control systems;
differences with Sprint’s control environments, cultures, and auditor expectations may result in future material
weaknesses, significant deficiencies, and/or control deficiencies while we work to integrate the companies and align
guidelines and practices;
costs or difficulties related to the completion of the Divestiture Transaction and the satisfaction of the Government
Commitments (each as defined below);
the inability of us, Sprint or the combined company to retain and hire key personnel;
the risk that certain contractual restrictions contained in the Business Combination Agreement during the pendency of
the Transactions could adversely affect our or Sprint’s ability to pursue business opportunities or strategic transactions;
adverse economic, political or market conditions in the U.S. and international markets;
competition, industry consolidation, and changes in the market for wireless services, which could negatively affect our
ability to attract and retain customers;
the effects of any future merger, investment, or acquisition involving us, as well as the effects of mergers, investments,
or acquisitions in the technology, media and telecommunications industry;
3
•
•
•
challenges in implementing our business strategies or funding our operations, including payment for additional
spectrum or network upgrades;
the possibility that we may be unable to renew our spectrum licenses on attractive terms or acquire new spectrum
licenses at reasonable costs and terms;
difficulties in managing growth in wireless data services, including network quality;
• material changes in available technology and the effects of such changes, including product substitutions and
deployment costs and performance;
•
•
•
•
•
•
•
•
the timing, scope and financial impact of our deployment of advanced network and business technologies;
the impact on our networks and business from major technology equipment failures;
inability to implement and maintain effective cyber security measures over critical business systems;
breaches of our and/or our third-party vendors’ networks, information technology and data security, resulting in
unauthorized access to customer confidential information;
natural disasters, terrorist attacks or similar incidents;
unfavorable outcomes of existing or future litigation;
any changes in the regulatory environments in which we operate, including any increase in restrictions on the ability to
operate our networks and changes in data privacy laws;
any disruption or failure of our third parties’ or key suppliers’ provisioning of products or services;
• material adverse changes in labor matters, including labor campaigns, negotiations or additional organizing activity,
and any resulting financial, operational and/or reputational impact;
•
•
•
•
•
•
•
changes in accounting assumptions that regulatory agencies, including the Securities and Exchange Commission
(“SEC”), may require, which could result in an impact on earnings;
changes in tax laws, regulations and existing standards and the resolution of disputes with any taxing jurisdictions;
the possibility that the reset process under our trademark license results in changes to the royalty rates for our
trademarks;
the possibility that we may be unable to adequately protect our intellectual property rights or be accused of infringing
the intellectual property rights of others;
our business, investor confidence in our financial results and stock price may be adversely affected if our internal
controls are not effective;
the occurrence of high fraud rates related to device financing, credit cards, dealers, or subscriptions; and
interests of our majority stockholder may differ from the interests of other stockholders.
Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We
undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as
required by law. In this Form 10-K, unless the context indicates otherwise, references to “T-Mobile,” “T-Mobile US,” “our
Company,” “the Company,” “we,” “our,” and “us” refer to T-Mobile US, Inc., a Delaware corporation, and its wholly-owned
subsidiaries.
Investors and others should note that we announce material financial and operational information to our investors using our
investor relations website, press releases, SEC filings and public conference calls and webcasts. We intend to also use certain
social media accounts as means of disclosing information about us and our services and for complying with our disclosure
obligations under Regulation FD (the @TMobileIR Twitter account (https://twitter.com/TMobileIR) and through April 30,
2020, the @JohnLegere Twitter (https://twitter.com/JohnLegere), Facebook and Periscope accounts, which Mr. Legere also
uses as means for personal communications and observations, and on and after May 1, 2020 the @SievertMike Twitter (https://
twitter.com/SievertMike) account, which Mr. Sievert also uses as a means for personal communications and observations). The
information we post through these social media channels may be deemed material. Accordingly, investors should monitor these
social media channels in addition to following our press releases, SEC filings and public conference calls and webcasts. The
social media channels that we intend to use as a means of disclosing the information described above may be updated from time
to time as listed on our investor relations website.
4
PART I.
Item 1. Business
Business Overview and Strategy
Un-carrier Strategy
We are the Un-carrier. Through our Un-carrier strategy, we have disrupted the wireless communications services industry, by
actively engaging with and listening to our customers and eliminating their existing pain points, including providing them with
added value, an exceptional experience and implementing signature Un-carrier initiatives that have changed wireless for good.
We ended annual service contracts, overages, unpredictable international roaming fees, data buckets and so much more. We are
inspired by a relentless customer experience focus, consistently leading the wireless industry in customer care by delivering an
excellent customer experience with our “Team of Experts,” which drives our record-high customer satisfaction levels while
enabling operational efficiencies. Since the launch of the Un-carrier in 2013, approximately 53 million customers have joined
the Un-carrier movement, and we will continue forward with our customer experience focus, determined to bring the Un-carrier
to every potential customer in the United States.
Our network is the foundation of our success and everything we do is powered by our nationwide 4G Long-Term Evolution
(“LTE”) network, which covers 327 million Americans (99% of the U.S. population) and our recently launched nationwide 5G
network. We continue to expand the footprint and improve the quality of our network, providing outstanding wireless
experiences for customers who will not have to compromise on quality and value. Going forward, it is this network that will
allow us to deliver new, innovative products and services with the same customer experience focus and industry-disrupting
mentality that has redefined the wireless communications services industry in the United States in the customers’ favor.
History
T-Mobile USA, Inc. (“T-Mobile USA”), a Delaware corporation, was formed in 1994 as VoiceStream Wireless PCS
(“VoiceStream”), a subsidiary of Western Wireless Corporation (“Western Wireless”). VoiceStream was spun off from Western
Wireless in 1999, acquired by Deutsche Telekom AG (“DT”) in 2001 and renamed T-Mobile USA, Inc. in 2002.
In 2013, T-Mobile US, Inc., a Delaware corporation, was formed through the business combination of T-Mobile USA and
MetroPCS Communications, Inc. (“MetroPCS”). The business combination was accounted for as a reverse acquisition with T-
Mobile USA as the accounting acquirer. Accordingly, T-Mobile USA’s historical financial statements became the historical
financial statements of the combined company.
Proposed Sprint Transactions
On April 29, 2018, we entered into the Business Combination Agreement with Sprint to merge in an all-stock transaction at a
fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or 9.75 shares of
Sprint common stock for each share of T-Mobile common stock. If the Merger closes, the combined company will be named
“T-Mobile,” and as a result of the Merger, is expected to be able to build upon our recently launched foundational 5G network
of 600 MHz spectrum to deliver transformational broad, deep and nationwide 5G for all, accelerate innovation and increase
competition in the U.S. wireless, video and broadband industries. If the Merger closes, we expect to be able to combine Sprint’s
2.5 GHz mid-band spectrum with our foundational layer of 5G and millimeter-wave spectrum, completing the “layer cake” of
spectrum and providing customers with an unmatched 5G experience at lower prices.
The consummation of the Merger remains subject to certain closing conditions, as well as pending judicial and regulatory
proceedings. We expect the Merger will be permitted to close in early 2020. For more information regarding our Business
Combination Agreement, see Note 2 – Business Combinations of the Notes to the Consolidated Financial Statements.
Business
We provide wireless services to 86.0 million postpaid, prepaid and wholesale customers and generate revenue by providing
affordable wireless communications services to these customers, as well as a wide selection of wireless devices and accessories.
Our most significant expenses relate to acquiring and retaining high-quality customers, providing a full range of devices,
compensating employees, and operating and expanding our network. We provide service, devices and accessories across our
flagship brands, T-Mobile and Metro by T-Mobile, through our owned and operated retail stores, as well as through our
5
websites (www.T-Mobile.com and www.metrobyt-mobile.com), T-Mobile app and customer care channels. In addition, we sell
devices to dealers and other third-party distributors for resale through independent third-party retail outlets and a variety of
third-party websites. The information on our websites is not part of this Form 10-K. See Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations for additional information.
Customers
We provide wireless communications services to three primary categories of customers:
•
•
Branded postpaid customers generally include customers who are qualified to pay after receiving wireless
communications services utilizing phones, wearables, DIGITS or other connected devices which includes tablets and
SyncUp DRIVE™;
Branded prepaid customers generally include customers who pay for wireless communications services in advance.
Our branded prepaid customers include customers of T-Mobile and Metro by T-Mobile; and
• Wholesale customers include Machine-to-Machine (“M2M”) and Mobile Virtual Network Operator (“MVNO”)
customers that operate on our network but are managed by wholesale partners.
We generate the majority of our service revenues by providing wireless communications services to branded postpaid and
branded prepaid customers. Our ability to acquire and retain branded postpaid and prepaid customers is important to our
business in the generation of service revenues, equipment revenues and other revenues. In 2019, our service revenues generated
by providing wireless communications services by customer category were:
•
•
•
67% Branded postpaid customers;
28% Branded prepaid customers; and
5% Wholesale customers and Roaming and other services.
Starting with the three months ended March 31, 2020, we plan to discontinue reporting wholesale customers and instead focus
on branded customers and wholesale revenues, which we consider more relevant than the number of wholesale customers given
the expansion of M2M and Internet of Things (“IoT”) products.
All of our revenues for the years ended December 31, 2019, 2018, and 2017 were earned in the United States, including Puerto
Rico and the U.S. Virgin Islands.
Services and Products
We provide wireless communications services through a variety of service plan options. We also offer a wide selection of
wireless devices, including smartphones, wearables, tablets and other mobile communication devices, which are manufactured
by various suppliers.
Our primary service plan offering, which allows customers to subscribe for wireless communications services separately from
the purchase of a device, is our signature Magenta plan (“Magenta”) and is packed with exclusive benefits, including unlimited
talk, text and smartphone data on our network, free stuff, discounts, and more every week from T-Mobile Tuesdays and “Team
of Experts,” our dedicated customer care team. Customers also have the ability to choose additional features for an additional
cost on Magenta Plus.
We also offer an Essentials rate plan, for customers who want the basics, as well as specific rate plans to qualifying customers,
including Unlimited 55+, Military, First Responder, and Business.
Our device options for qualifying customers on Magenta, and previously on T-Mobile ONE and Simple Choice plans, include:
•
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The option of financing all or a portion of the individual device or accessory purchase price at the time of sale over an
installment period of up to 36 or 12 months, respectively, using an Equipment Installment Plan ("EIP");
For qualifying customers who finance their initial device with an EIP, an option to enroll in our Just Upgrade My
Phone (“JUMP!®”) program to later upgrade their device; and
The option to lease a device over a period of up to 18 months and upgrade it for a new device up to one time per month
with JUMP! On Demand™.
6
5G
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In December 2019, T-Mobile launched America’s first nationwide 5G network, including prepaid 5G with Metro by
T-Mobile, covering more than 200 million people and more than 5,000 cities and towns across the United States with
5G. In addition, we introduced two new 600 MHz 5G capable superphones, the exclusive OnePlus 7T Pro 5G
McLaren and the Samsung Galaxy Note10+ 5G and anticipate offering an industry-leading smartphone portfolio built
to work on nationwide 5G in 2020. This 5G network is our foundational layer of 5G coverage on 600 MHz low-band
spectrum.
T-Mobile’s 5G network is not just bigger, it’s better. T-Mobile’s 5G is based on real, standards-based 5G and covers
more than 60% of the population across more than 1 million square miles. T-Mobile’s 5G network works indoors and
is available to anyone with a capable device.
Spectrum Position
We provide wireless communications services utilizing mid-band spectrum licenses, such as Advanced Wireless Services
(“AWS”) and Personal Communications Service (“PCS”), low-band spectrum licenses utilizing our 600 MHz and 700 MHz
spectrum, and mmWave spectrum.
• We owned an average of 111 MHz of spectrum nationwide as of December 31, 2019, not including mmWave
spectrum. The spectrum comprises an average of 31 MHz in the 600 MHz band, 10 MHz in the 700 MHz band, 29
MHz in the 1900 MHz PCS band and 41 MHz in the AWS band.
• We have cleared 600 MHz spectrum covering approximately 275 million POPs as of December 31, 2019 and
expect to clear the remaining 600 MHz spectrum POPs in 2020.
• We continue our deployment of LTE on 600 MHz spectrum using 5G-ready equipment. As of December 31,
2019, we were live with 4G LTE in nearly 8,900 cities and towns in 49 states and Puerto Rico covering 1.5
million square miles and 248 million POPs.
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Combining 600 and 700 MHz spectrum, we have deployed 4G LTE in low-band spectrum to 316 million
POPs.
Currently, more than 33 million devices on T-Mobile’s network are compatible with 600 MHz spectrum.
•
On June 3, 2019, the Federal Communications Commission (“FCC”) announced the results of Auctions 101 (28 GHz
spectrum) and 102 (24 GHz spectrum). In the combined auctions, T-Mobile spent $842 million to more than quadruple
its nationwide average total mmWave spectrum holdings from 104 MHz to 471 MHz.
• We will evaluate future spectrum purchases in current and upcoming auctions and in the secondary market to further
augment our current spectrum position. We are not aware of any such spectrum purchase options that come close to
matching the efficiencies and synergies possible from the Merger.
Network Coverage Growth
• We continue to expand our coverage breadth and covered 327 million people with 4G LTE as of December 31, 2019;
•
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Our nationwide 5G network covered more than 200 million people as of December 31, 2019; and
As of December 31, 2019, we had equipment deployed on approximately 66,000 macro cell sites and 25,000 small
cell/distributed antenna system sites.
Network Capacity Growth
Due to industry spectrum limitations (especially in mid-band), we continue to make efforts to expand our capacity and increase
the quality of our network through the re-farming of existing spectrum and implementation of new technologies including
Voice over LTE (“VoLTE”), Carrier Aggregation, 4x4 multiple-input and multiple-output (“MIMO”), 256 Quadrature
Amplitude Modulation (“QAM”) and Licensed Assisted Access (“LAA”).
•
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•
VoLTE comprised 90% of total voice calls in the fourth quarter of 2019, compared to 87% in the fourth quarter of
2018.
Carrier aggregation is live for our customers in 969 markets as of December 31, 2019, up from 923 markets as of
December 31, 2018.
4x4 MIMO is currently available in 708 markets as of December 31, 2019, up from 564 markets as of December 31,
2018.
7
•
Our customers have 256 QAM available across the Un-carrier's entire 4G LTE footprint.
• We are the first carrier globally to have rolled out the combination of carrier aggregation, 4x4 MIMO and 256 QAM.
This trifecta of standards has been rolled out to 701 markets as of December 31, 2019, up from 549 markets as of
December 31, 2018.
•
LAA has been deployed to 30 cities including Atlanta, Austin, Chicago, Denver, Houston, Las Vegas, Los Angeles,
Miami, New Orleans, New York, Philadelphia, Sacramento, San Diego, Seattle, and Washington DC.
Competition
The wireless communications services industry is highly competitive. We are the third largest provider of postpaid service plans
and the second largest provider of prepaid service plans in the U.S. as measured by customers. Our competitors include other
national carriers, such as AT&T Inc. (“AT&T”), Verizon Communications, Inc. (“Verizon”) and Sprint. AT&T and Verizon are
significantly larger than we are and enjoy greater resources and scale advantages as compared to us. In addition, our
competitors include numerous smaller regional carriers, mobile virtual network operators (“MVNOs”), including TracFone
Wireless, Inc., Comcast Corporation, Charter Communications, Inc., and Altice USA, Inc., many of which offer no-contract,
postpaid and prepaid service plans. Competitors also include providers who offer similar communication services, such as
voice, messaging and data services, using alternative technologies or services. Competitive factors within the wireless
communications services industry include pricing, market saturation, service and product offerings, customer experience,
network investment and quality, development and deployment of technologies, availability of additional spectrum licenses and
regulatory changes. Some competitors have shown a willingness to use aggressive pricing as a source of differentiation. Other
competitors have sought to add ancillary services, like mobile video or music streaming services, to enhance their offerings.
Taken together, the competitive factors we face continue to put pressure on growth and margins as companies compete to retain
the current customer base and continue to add new customers.
Employees
As of December 31, 2019, we employed approximately 53,000 full-time and part-time employees, including network, retail,
administrative and customer support functions.
Regulation
The FCC regulates many key aspects of our business, including licensing, construction, the operation and use of our network,
modifications of our network, control and ownership of our licenses and authorizations, the sale, transfer and acquisition of
certain licenses, domestic roaming arrangements and interconnection agreements, pursuant to its authority under the
Communications Act of 1934, as amended (“Communications Act”). The FCC has a number of complex requirements that
affect our operations and pending proceedings regarding additional or modified requirements that could increase our costs or
diminish our revenues. For example, the FCC has rules regarding provision of 911 and E-911 services, porting telephone
numbers, interconnection, roaming, internet openness or net neutrality, disabilities access, privacy and cybersecurity, consumer
protection, and the universal service and Lifeline programs. Many of these and other issues are being considered in ongoing
proceedings, and we cannot predict whether or how such actions will affect our business, financial condition or results of
operations. Our ability to provide services and generate revenues could be harmed by adverse regulatory action or changes to
existing laws and regulations. In addition, regulation of companies that offer competing services can impact our business
indirectly.
Except for operations in certain unlicensed frequency bands, wireless communications services providers generally must be
licensed by the FCC to provide communications services at specified spectrum frequencies within specified geographic areas
and must comply with the rules and policies governing the use of the spectrum as adopted by the FCC. The FCC issues each
license for a fixed period of time, typically 10-15 years depending on the particular licenses. While the FCC has generally
renewed licenses given to operating companies like us, the FCC has authority to both revoke a license for cause and to deny a
license renewal if a renewal is not in the public interest. Furthermore, we could be subject to fines, forfeitures and other
penalties for failure to comply with FCC regulations, even if any such non-compliance was unintentional. In extreme cases,
penalties can include revocation of our licenses. The loss of any licenses, or any related fines or forfeitures, could adversely
affect our business, results of operations and financial condition.
Additionally, Congress’ and the FCC’s allocation of additional spectrum for broadband commercial mobile radio service
(“CMRS”), which includes cellular, PCS, miscellaneous wireless services and specialized mobile radio, could significantly
increase and intensify competition. We cannot assess the impact that any developments that may occur in the U.S. economy or
any future spectrum allocations by the FCC may have on license values. FCC spectrum auctions and other market
8
developments may adversely affect the market value of our licenses in the future. A significant decline in the value of our
licenses could adversely affect our financial condition and results of operations. In addition, the FCC periodically reviews its
policies on how to evaluate carriers’ spectrum holdings. A change in these policies could affect spectrum resources and
competition among us and other carriers.
Congress and the FCC have imposed limitations on foreign ownership of CMRS licensees that exceed 20% direct ownership or
25% indirect ownership through an entity controlling the licensee. The FCC has ruled that higher levels of indirect foreign
ownership, even up to 100%, are presumptively consistent with the public interest, but must be reviewed and approved.
Consistent with that established policy, the FCC has issued a declaratory ruling authorizing up to 100% ownership of our
Company by DT. This declaratory ruling, and our licenses, are conditioned on DT’s and the Company’s compliance with a
network security agreement with the Department of Justice, the Federal Bureau of Investigation and the Department of
Homeland Security. Failure to comply with the terms of this agreement could result in fines, injunctions and other penalties,
including potential revocation of our spectrum licenses.
While the Communications Act generally preempts state and local governments from regulating the entry of, or the rates
charged by, wireless communications services providers, certain state and local governments regulate other terms and
conditions of wireless service, including billing, termination of service arrangements and the imposition of early termination
fees, advertising, network outages, the use of devices while driving, zoning and land use. Additionally, after the FCC’s adoption
of the 2017 “Restoring Internet Freedom” (RIF) Order reclassifying broadband internet access services as Title I (non-common
carrier services), a number of states have sought to impose state-specific net neutrality and privacy requirements on providers’
broadband services. The FCC ruling broadly preempted such state efforts, which are inconsistent with the FCC’s federal
deregulatory approach. Recently, however, the DC Circuit issued a ruling largely upholding the RIF Order, but also vacating
the portion of the ruling broadly preempting state/local net neutrality laws. The court left open the prospect that particular state
laws could still unlawfully conflict with the FCC net neutrality rules and be preempted. A petition seeking rehearing of the
decision has been filed. Court challenges to some of the state enactments also remain pending.
While most states are largely seeking to codify the repealed federal rules, there are differences in some states, notably
California, which has passed separate privacy and net neutrality legislation. There are also efforts within Congress to pass
federal legislation to codify uniform federal privacy and net neutrality requirements, while also ensuring the preemption of
separate state requirements, including the California laws. If not rescinded, separate state requirements will impose significant
business costs and could also result in increased litigation costs and enforcement risks. State authority over wireless broadband
services will remain unsettled until final action by the courts or Congress.
In addition, the Federal Trade Commission (“FTC”) and other federal agencies have jurisdiction over some consumer protection
and elimination and prevention of anticompetitive business practices with respect to the provision of non-common carrier
services. Further, the FCC and the Federal Aviation Administration regulate the siting, lighting and construction of transmitter
towers and antennae. Tower siting and construction are also subject to state and local zoning, as well as federal statutes
regarding environmental and historic preservation. The future costs to comply with all relevant regulations are to some extent
unknown and changes to regulations, or the applicability of regulations, could result in higher operating and capital expenses, or
reduced revenues in the future.
Available Information
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically at www.sec.gov. Our Form 10-K and all other reports and amendments filed with or furnished to
the SEC are also publicly available free of charge on the investor relations section of our website at investor.t-mobile.com as
soon as reasonably practicable after these materials are filed with or furnished to the SEC. Our corporate governance guidelines,
code of ethics for senior financial officers, code of business conduct, speak-up policy, supplier code of conduct, and charters for
the audit, compensation, nominating and corporate governance and executive committees of our Board of Directors are also
posted on the investor relations section of our website at investor.t-mobile.com. The information on our websites is not part of
this or any other report we file with, or furnish to, the SEC.
Item 1A. Risk Factors
In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in
evaluating T-Mobile. Our business, financial condition, liquidity, or operating results, as well as the price of our common stock
and other securities, could be materially adversely affected by any of these risks.
9
Risks Related to Our Business and the Wireless Industry
Competition, industry consolidation, and changes in the market for wireless services could negatively affect our ability
to attract and retain customers and adversely affect our business, financial condition, and operating results.
We have multiple wireless competitors, some of which have greater resources than we have and compete for customers based
principally on service/device offerings, price, network coverage, speed and quality and customer service. We expect market
saturation to continue to cause the wireless industry’s customer growth rate to be moderate in comparison with historical
growth rates, or possibly negative, leading to ongoing competition for customers. We also expect that our customers’ appetite
for data services will place increasing demands on our network capacity. This competition and our capacity will continue to put
pressure on pricing and margins as companies compete for potential customers. Our ability to compete will depend on, among
other things, continued absolute and relative improvement in network quality and customer service, effective marketing and
selling of products and services, innovation, attractive pricing, and cost management, all of which will involve significant
expenses.
Joint ventures, mergers, acquisitions and strategic alliances in the wireless sector have resulted in and are expected to result in
larger competitors competing for a limited number of customers. The two largest national wireless communications services
providers currently serve a significant percentage of all wireless customers and hold significant spectrum and other resources.
Our largest competitors may be able to enter into exclusive handset, device, or content arrangements, execute pervasive
advertising and marketing campaigns, or otherwise improve their cost position relative to ours. In addition, refusal of our large
competitors to provide critical access to resources and inputs, such as roaming services on reasonable terms could improve their
position within the wireless broadband mobile services industry.
We face intense and increasing competition from other service providers as industry sectors converge, such as cable, telecom
services and content, satellite, and other service providers. Companies like Comcast and AT&T (with acquisitions of DirecTV
and Time Warner, Inc.) will have the scale and assets to aggressively compete in a converging industry. Verizon, through its
acquisitions of AOL, Inc. and Yahoo! Inc. is also a significant competitor focusing on premium content offerings to diversify
outside of core wireless. Further, some of our competitors now provide content services in addition to voice and broadband
services, and consumers are increasingly accessing video content from Internet-based providers and applications, all of which
create increased competition in this area. These factors, together with the effects of the increasing aggregate penetration of
wireless services in all metropolitan areas and the ability of our larger competitors to use resources to build out their networks
and to quickly deploy advanced technologies, such as 5G, could make it more difficult for us to continue to attract and retain
customers, and may adversely affect our competitive position and ability to grow, which would have a material adverse effect
on our business, financial condition and operating results.
The scarcity and cost of additional wireless spectrum, and regulations relating to spectrum use, may adversely affect our
business, financial condition and operating results.
We will need to acquire additional spectrum in order to continue our customer growth, expand and deepen our coverage,
maintain our quality of service, meet increasing customer demands, and deploy new technologies. We will be at a competitive
disadvantage and possibly experience erosion in the quality of service in certain geographic areas if we fail to gain access to
necessary spectrum before reaching network capacity. As a result, we are actively seeking to make additional investment in
spectrum, which could be significant.
The continued interest in, and acquisition of, spectrum by existing carriers and others may reduce our ability to acquire and/or
increase the cost of acquiring spectrum in the secondary market or negatively impact our ability to gain access to spectrum
through other means, including government auctions. We may need to enter into spectrum sharing or leasing arrangements,
which are subject to certain risks and uncertainties and may involve significant expenditures. In addition, our return on
investment in spectrum depends on our ability to attract additional customers and to provide additional services and usage to
existing customers. As a result, the return on any investment in spectrum that we make may not be as much as we anticipate or
take longer than expected. Additionally, the FCC may not be able to provide sufficient additional spectrum to auction or we
may be unable to secure the spectrum we need in any auction we may elect to participate in or in the secondary market, on
favorable terms or at all.
The FCC may impose conditions on the use of new wireless broadband mobile spectrum that may negatively impact our ability
to obtain spectrum economically or in appropriate configurations or coverage areas. Additional conditions that may be imposed
by the FCC include heightened build-out requirements, limited license terms or renewal rights, and clearing obligations that
may make it less attractive or less economical to acquire spectrum. In addition, rules may be established for future government
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spectrum auctions that may negatively impact our ability to obtain spectrum economically or in appropriate configurations or
coverage areas.
If we cannot acquire needed spectrum from the government or otherwise, if competitors acquire spectrum that will allow them
to provide services competitive with our services, or if we cannot deploy services over acquired spectrum on a timely basis
without burdensome conditions, at reasonable cost, and while maintaining network quality levels, then our ability to attract and
retain customers and our business, financial condition and operating results could be materially adversely affected.
If we are unable to take advantage of technological developments on a timely basis, we may experience a decline in
demand for our services or face challenges in implementing or evolving our business strategy.
Significant technological changes continue to impact the communications industry. In general, these technological changes
enhance communications and enable a broader array of companies to offer services competitive with ours. In order to grow and
remain competitive with new and evolving technologies in our industry, we will need to adapt to future changes in technology,
continually invest in our network, increase network capacity, enhance our existing offerings, and introduce new offerings to
address our current and potential customers’ changing demands. Enhancing our network, including our 5G network, is subject
to risk from equipment changes and migration of customers from older technologies and the potential inability to secure mid-
band 5G spectrum that is necessary to add capacity to advanced technologies. Adopting new and sophisticated technologies
may result in implementation issues such as scheduling and supplier delays, unexpected or increased costs, technological
constraints, regulatory permitting issues, customer dissatisfaction, and other issues that could cause delays in launching new
technological capabilities, which in turn could result in significant costs or reduce the anticipated benefits of the upgrades. In
general, the development of new services in the wireless telecommunications industry will require us to anticipate and respond
to the continuously changing demands of our customers, which we may not be able to do accurately or timely. If our new
services fail to retain or gain acceptance in the marketplace or if costs associated with these services are higher than anticipated,
this could have a material adverse effect on our business, financial condition and operating results.
We could be harmed by data loss or other security breaches, whether directly or indirectly.
Our business, like that of most retailers and wireless companies, involves the receipt, storage, and transmission of our
customers’ confidential information, including sensitive personal information and payment card information, confidential
information about our employees and suppliers, and other sensitive information about our Company, such as our business plans,
transactions and intellectual property (“Confidential Information”). Unauthorized access to Confidential Information may be
difficult to anticipate, detect, or prevent, particularly given that the methods of unauthorized access constantly change and
evolve. We are subject to the threat of unauthorized access or disclosure of Confidential Information by state-sponsored parties,
malicious actors, third parties or employees, errors or breaches by third-party suppliers, or other security incidents that could
compromise the confidentiality and integrity of Confidential Information. In August 2018 and November 2019, we notified
affected customers of incidents involving unauthorized access to certain customer information (not involving credit card
information, financial data, social security numbers or passwords). While we do not believe these security incidents were
material, we expect to continue to be the target of cyber-attacks, data breaches, or security incidents, which may in the future
have a material adverse effect on our business, reputation, financial condition, and operating results.
Cyber-attacks, such as denial of service and other malicious attacks, could disrupt our internal systems and applications, impair
our ability to provide services to our customers, and have other adverse effects on our business and that of others who depend
on our services. As a telecommunications carrier, we are considered a critical infrastructure provider and therefore may be more
likely to be the target of such attacks. Such attacks against companies may be perpetrated by a variety of groups or persons,
including those in jurisdictions where law enforcement measures to address such attacks are ineffective or unavailable, and such
attacks may even be perpetrated by or at the behest of foreign governments.
In addition, we provide confidential, proprietary and personal information to third-party service providers as part of our
business operations. These third-party service providers have experienced data breaches and other attacks that included
unauthorized access to Confidential Information in the past, and face security challenges common to all parties that collect and
process information. Past data breaches include a breach of the networks of one of our credit decisioning providers in
September 2015, during which a subset of records containing current and potential customer information was acquired by an
external party.
Our procedures and safeguards to prevent unauthorized access to sensitive data and to defend against attacks seeking to disrupt
our services must be continually evaluated and revised to address the ever-evolving threat landscape. We cannot make
assurances that all preventive actions taken will adequately repel a significant attack or prevent information security breaches or
the misuses of data, unauthorized access by third parties or employees, or exploits against third-party supplier environments. If
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we or our third-party suppliers are subject to such attacks or security breaches, we may incur significant costs or other material
financial impacts, which may not be covered by, or may exceed the coverage limits of, our cyber insurance, be subject to
regulatory investigations, sanctions and private litigation, experience disruptions to our operations or suffer damage to our
reputation. Any future cyber-attacks, data breaches, or security incidents may have a material adverse effect on our business,
financial condition, and operating results.
System failures and business disruptions may allow unauthorized use of or interference with our network and other
systems which could materially adversely affect our reputation and financial condition.
To be successful, we must provide our customers with reliable, trustworthy service and protect the communications, location,
and personal information shared or generated by our customers. We rely upon both our systems and networks and the systems
and networks of other providers and suppliers to provide and support our services and, in some cases, protect our customers’
information and our information. Failure of our or others’ systems, networks, or infrastructure may prevent us from providing
reliable service or may allow for the unauthorized use of or interference with our networks and other systems or for the
compromise of customer information. Examples of these risks include:
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human error such as responding to deceptive communications or unintentionally executing malicious code;
physical damage, power surges or outages, or equipment failure, including those as a result of severe weather, natural
disasters, terrorist attacks, political instability and volatility, and acts of war;
theft of customer and/or proprietary information offered for sale for competitive advantage or corporate extortion;
unauthorized access to our IT and business systems or to our network and critical infrastructure and those of our
suppliers and other providers;
supplier failures or delays; and
system failures or outages of our business systems or communications network.
Such events could cause us to lose customers, lose revenue, incur expenses, suffer reputational damage, and subject us to
litigation or governmental investigation. Remediation costs could include liability for information loss, repairing infrastructure
and systems, and/or costs of incentives offered to customers. Our insurance may not cover, or be adequate to fully reimburse us
for, costs and losses associated with such events.
We continue implementing a new billing system, which will support a portion of our subscribers, while maintaining our
legacy billing systems. Any unanticipated difficulties, disruption, or significant delays could have adverse operational,
financial, and reputational effects on our business.
We continue implementing a new customer billing system, that involves a new third-party supported platform and utilization of
a phased deployment approach. Elements of the billing system have been placed into service and are operational and we plan to
operate both the existing and new billing systems in parallel to aid in the transition to the new system until all phases of the
conversion are complete.
The ongoing implementation may cause major system or business disruptions, or we may fail to implement the new billing
system in its entirety or in a timely or effective manner. In addition, we or the supporting vendor may experience errors, cyber-
attacks, or other operational disruptions that could negatively impact us and over which we may have limited control.
Interruptions and/or failure of this billing services system could disrupt our operations and impact our ability to provide or bill
for our services, retain customers, attract new customers, or negatively impact overall customer experience. Any occurrence of
the foregoing could cause material adverse effects on our operations and financial condition, material weaknesses in our
internal control over financial reporting, and reputational damage.
We rely on third parties to provide products and services for the operation of our business, and the failure or inability of
such parties to provide these products or services could adversely affect our business, financial condition, and operating
results.
We depend heavily on suppliers, service providers, their subcontractors and other third parties for us to efficiently operate our
business. Due to the complexity of our business, it is not unusual to engage a diverse set of suppliers to help us develop,
maintain, and troubleshoot products and services such as network components, software development services, and billing and
customer service support. Some of our suppliers may provide services from outside of the United States, which carries
additional regulatory and legal obligations. We commonly rely on suppliers to provide us with contractual assurances and to
disclose accurate information regarding risks associated with their provision of products or services in accordance with our
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policies and standards, including our Supplier Code of Conduct and our third party-risk management practices. The failure of
our suppliers to comply with our expectations and policies could have a material adverse effect on our business, financial
condition, and operating results.
Many of the products and services we use are available through multiple sources and suppliers. However, there are a limited
number of suppliers who can support or provide billing services, voice and data communications transport services, network
infrastructure, equipment, handsets, other devices, and payment processing services, among other products and services.
Disruptions or failure of such suppliers to adequately perform could have a material adverse effect on our business, financial
condition, and operating results.
In the past, our suppliers, service providers and their subcontractors may not have always performed at the levels we expected
or at the levels required by their contracts. Our business could be severely disrupted if critical suppliers or service providers fail
to comply with their contracts or if we experience delays or service degradation during any transition to a new outsourcing
provider or other supplier or if we are required to replace the supplied products or services with those from another source,
especially if the replacement becomes necessary on short notice. Any such disruptions could have a material adverse effect on
our business, financial condition, and operating results.
Economic, political, and market conditions may adversely affect our business, financial condition, and operating results,
as well as our access to financing on favorable terms or at all.
Our business, financial condition, and operating results are sensitive to changes in general economic conditions, including
interest rates, consumer credit conditions, consumer debt levels, consumer confidence, rates of inflation (or concerns about
deflation), unemployment rates, economic growth, energy costs, and other macro-economic factors. Difficult, or worsening,
general economic conditions could have a material adverse effect on our business, financial condition, and operating results.
Market volatility, political and economic uncertainty, and weak economic conditions, such as a recession or economic
slowdown, may materially adversely affect our business, financial condition, and operating results in a number of ways. Our
services and device financing plans are available to a broad customer base, a significant segment of which may be more
vulnerable to weak economic conditions, particularly our subprime customers. We may have greater difficulty in gaining new
customers within this segment, and existing customers may be more likely to terminate service and default on device financing
plans due to an inability to pay.
Weak economic conditions and credit conditions may also adversely impact our suppliers, dealers, and MVNOs, some of which
may file for or may be considering bankruptcy, or may experience cash flow or liquidity problems, or may be unable to obtain
or refinance credit such that they may no longer be able to operate. Any of these could adversely impact our ability to distribute,
market, or sell our products and services.
In addition, instability in the global financial markets could lead to periodic volatility in the credit, equity, and fixed income
markets. This volatility could limit our access to the credit markets, leading to higher borrowing costs or, in some cases, the
inability to obtain financing on terms that are acceptable to us or at all.
The agreements governing our indebtedness and other financing arrangements include restrictive covenants that limit
our operating flexibility.
The agreements governing our indebtedness and other financing arrangements impose significant operating and financial
restrictions on us. These restrictions, subject in certain cases to customary baskets, exceptions, and incurrence-based ratio tests,
may limit our or our subsidiaries’ ability to pursue strategic business opportunities and engage in certain transactions, including
the following:
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incurring additional indebtedness and issuing preferred stock;
paying dividends, redeeming capital stock, or making other restricted payments or investments;
selling or buying assets, properties, or licenses;
developing assets, properties, or licenses that we have or in the future may procure;
creating liens on assets securing indebtedness or other obligations;
participating in future FCC auctions of spectrum or private sales of spectrum;
engaging in mergers, acquisitions, business combinations, or other transactions;
entering into transactions with affiliates; and
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placing restrictions on the ability of subsidiaries to pay dividends or make other payments.
These restrictions could limit our ability to obtain debt financing, engage in share repurchases, refinance or pay principal on our
outstanding indebtedness, complete acquisitions for cash or indebtedness or react to business, economic, market and industry
conditions and other changes in our operating environment or the economy. Any future indebtedness that we incur may contain
similar or more restrictive covenants. Any failure to comply with the restrictions of our debt agreements and other financing
arrangements may result in an event of default under these agreements, which in turn may result in defaults or acceleration of
obligations under these and other agreements, giving our lenders the right to terminate any commitments they had made to
provide us with further funds and to require us to repay all amounts then outstanding plus any interest, fees, penalties or
premiums, which may require us to sell certain assets securing indebtedness. Any of these events could have a material adverse
effect on our business, financial condition, and operating results.
Our significant indebtedness could adversely affect our business, financial condition and operating results.
Our ability to make payments on our debt, to repay our existing indebtedness when due, to fund our capital-intensive business
and operations, and to make significant planned capital expenditures will depend on our ability to generate cash in the future,
which is in turn subject to the operational risks described elsewhere in this report. Our debt service obligations could have
material adverse effects on our business, financial condition, and operating results, including by:
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limiting our flexibility in planning for, or reacting to, changes in our business or the communications industry or
pursuing growth opportunities;
reducing the amount of cash available for other operational or strategic needs; and
placing us at a competitive disadvantage to competitors who are less leveraged than we are.
Any hedging agreements we have and may continue to enter into to limit our exposure to interest rate increases or foreign
currency fluctuations may not offer complete protection from these risks or may be unsuccessful, and consequently may
effectively increase the interest rate we pay on our debt or the exchange rate with respect to such debt, and any portion not
subject to such hedging agreements would have full exposure to interest rate increases or foreign currency fluctuations, as
applicable.
We are exposed to credit-related losses in the event of nonperformance by counterparties to our hedging agreements. The
primary credit exposure that we have with respect to our hedging agreements is that a counterparty will default on payments
due, which could result in us having to acquire a replacement derivative from a different counterparty at a higher cost or we
may be unable to find a suitable replacement. The counterparties to our hedging agreements are all major financial institutions;
however, this does not eliminate our exposure to credit risk with these institutions. In addition, any netting and/or set off rights
we may have through master netting arrangements with these counterparties may not apply to affiliates of a counterparty with
whom we may have various other financial arrangements. If any financial institutions that are parties to our hedging agreements
were to default on their payment obligations to us, declare bankruptcy or become insolvent, we would be unhedged against the
underlying exposures. Any of these risks could have a material adverse effect on our business, financial condition and operating
results. Additionally, under some of our hedging agreements, the counterparties’ and our obligations are required to be secured
by cash or U.S. Treasury securities, subject to defined thresholds. Any additional posting of collateral by us under these
arrangements would negatively impact our liquidity. The modification or termination of our hedging agreements could also
negatively impact our liquidity or other financial metrics.
Some of our debt has a variable rate of interest linked to various indices. If the changes in indices result in interest rate
increases, our debt service requirements will increase, which could adversely affect our cash flow and operating results. In
particular, some or all of our variable-rate indebtedness may use the London Inter-Bank Offered Rate (“LIBOR”) or similar
rates as a benchmark for establishing the rate. LIBOR will be discontinued after 2021 and will be replaced with an alternative
reference rate. The consequence of this development cannot be entirely predicted but could include an increase in the cost of
our variable rate indebtedness.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could result in
a loss of investor confidence regarding our financial statements or may have a material adverse effect on our business.
Under Section 404 of the Sarbanes-Oxley Act of 2002, we along with our independently registered public accounting firm are
required to report on the effectiveness of our internal control over financial reporting. We rely heavily on IT systems and,
manual and automated processes as an important part of our internal controls in order to operate, transact, and otherwise
manage our business, as well as provide effective and timely reporting of our financial results. Failure to design and maintain
effective internal controls, including those over our IT systems, could constitute a material weakness that could result in
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inaccurate financial statements, inaccurate disclosures, or failure to prevent fraud. If we or our independent registered public
accounting firm were unable to conclude that we have effective internal control over financial reporting, investor confidence
regarding our financial statements and our business could be materially adversely affected.
Our financial condition and operating results will be impaired if we experience high fraud rates related to device
financing, credit cards, dealers, or subscriptions.
Our operating costs could increase substantially as a result of fraud, including any fraud related to device financing, customer
credit card, subscriptions, or dealers. If our fraud detection strategies and processes are not successful in detecting and
controlling fraud, whether directly or by way of the systems, processes, and operations of third parties such as national retailers,
dealers, and others, the resulting loss of revenue or increased expenses could have a material adverse effect on our financial
condition and operating results.
We rely on highly skilled personnel throughout all levels of our business. Our business could be harmed if we are unable
to retain or motivate key personnel, hire qualified personnel or maintain our corporate culture.
The market for highly skilled workers and leaders in our industry is extremely competitive. We believe that our future success
depends in substantial part on our ability to recruit, hire, motivate, develop, and retain talented and highly-skilled personnel for
all areas of our organization, including our CEO, the other members of our senior leadership team and highly skilled employees
in technical, marketing and staff positions. Doing so may be difficult due to many factors, including fluctuations in economic
and industry conditions, changes to U.S. immigration policy, competitors’ hiring practices, employee tolerance for the
significant amount of change within and demands on our Company and our industry, and the effectiveness of our compensation
programs. Our continued ability to compete effectively depends on our ability to retain and motivate our existing employees
and to attract new employees. If we do not succeed in retaining and motivating our existing key employees and attracting new
key personnel, we may not be able to meet our business plan and, as a result, our revenue growth and profitability may be
materially adversely affected. In addition, certain members of our senior leadership team, including our CEO, have term
employment agreements with us. Our inability to extend the terms of these employment agreements or to replace these
members or our senior leadership team at the end of their terms with qualified and capable successors could hinder our strategic
planning and execution. In November 2019, we announced that John Legere would retire as our Chief Executive Officer on
April 30, 2020. Our ability to execute our business strategies and retain key executives may be adversely affected by the
transition to our successor, Michael Sievert.
Any acquisition, investment, or merger may subject us to significant risks, any of which may harm our business.
We may pursue acquisitions of, investments in or mergers with businesses, technologies, services and/or products that
complement or expand our business. Some of these potential transactions could be significant relative to the size of our business
and operations. Any such transaction would involve a number of risks and could present financial, managerial and operational
challenges, including:
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diversion of management attention from running our existing business;
increased costs to integrate the networks, spectrum, technology, personnel, customer base and business practices of the
business involved in any such transaction with our business;
difficulties in effectively integrating the financial and operational systems of the business involved in any such
transaction into (or supplanting such systems with) our financial and operational reporting infrastructure and internal
control framework in an effective and timely manner;
potential exposure to material liabilities not discovered in the due diligence process or as a result of any litigation
arising in connection with any such transaction;
significant transaction expenses in connection with any such transaction, whether consummated or not;
risks related to our ability to obtain any required regulatory approvals necessary to consummate any such transaction;
acquisition financing may not be available on reasonable terms or at all and any such financing could significantly
increase our outstanding indebtedness or otherwise affect our capital structure or credit ratings; and
any business, technology, service, or product involved in any such transaction may significantly under-perform relative
to our expectations, and we may not achieve the benefits we expect from the transaction, which could, among other
things, also result in a write-down of goodwill and other intangible assets associated with such transaction.
For any or all of these reasons, our pursuit of an acquisition, investment, or merger may have a material adverse effect on our
business, financial condition, and operating results.
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Risks Related to Legal and Regulatory Matters
Changes in regulations or in the regulatory framework under which we operate could adversely affect our business,
financial condition and operating results.
The FCC regulates the licensing, construction, modification, operation, ownership, sale, and interconnection of wireless
communications systems, as do some state and local regulatory agencies. In particular, the FCC imposes significant regulation
on licensees of wireless spectrum with respect to how radio spectrum is used by licensees, the nature of the services that
licensees may offer and how the services may be offered, and the resolution of issues of interference between spectrum bands.
Additionally, the FTC and other federal and state agencies have asserted that they have jurisdiction over some consumer
protection, and elimination and prevention of anticompetitive business practices with respect to the provision of wireless
products and services. We are subject to regulatory oversight by various federal, state and local agencies, as well as judicial
review and actions, on issues related to the wireless industry that include, but are not limited to: roaming, interconnection,
spectrum allocation and licensing, facilities siting, pole attachments, intercarrier compensation, Universal Service Fund
(“USF”), net neutrality, 911 services, consumer protection, consumer privacy, and cybersecurity. We are also subject to
regulations in connection with other aspects of our business, including handset financing and insurance activities.
We cannot assure you that the FCC or any other federal, state or local agencies will not adopt regulations or take enforcement
or other actions that would adversely affect our business, impose new costs, or require changes in current or planned operations.
For example, under the Obama administration, the FCC established net neutrality and privacy regimes that applied to our
operations. Both sets of rules potentially subjected some of our initiatives and practices to more burdensome requirements and
heightened scrutiny by federal and state regulators, the public, edge providers, and private litigants regarding whether such
initiatives or practices are compliant. While the FCC rules are now largely rolled back under the Trump administration, some
states and other jurisdictions have enacted, or are considering enacting, laws in these areas (including for example the CCPA
cited below), perpetuating the risk and uncertainty regarding the regulatory environment and compliance around these issues.
In addition, states are increasingly focused on the quality of service and support that wireless communications services
providers provide to their customers and several states have proposed or enacted new and potentially burdensome regulations in
this area. We also face potential investigations by, and inquiries from or actions by state public utility commissions. We also
cannot assure you that Congress will not amend the Communications Act, from which the FCC obtains its authority, and which
serves to limit state authority, or enact other legislation in a manner that could be adverse to our business.
Additionally, in June 2018, California passed the California Consumer Privacy Act (the “CCPA”) effective January 2020,
creating new data privacy rights for California residents and new compliance obligations for us. We have incurred and will
continue to incur significant implementation costs to ensure compliance with the CCPA, and we could see increased litigation
costs with the law now in effect. The California Attorney General has proposed related CCPA regulations, which could be
adopted in a form that increases our costs and/or litigation exposure. If we are unable to put proper controls and procedures in
place to ensure compliance, it could have an adverse effect on our business. A California ballot initiative has recently been
introduced by the original proponent of the CCPA that would provide additional data privacy rights and require additional
implementation processes if passed. Other states, such as Nevada and Washington, have passed or are considering similar
legislation, which, if passed, could create more risks and potential costs for us, especially to the extent the specific requirements
of these laws vary significantly from those in California, Nevada and other existing laws.
Failure to comply with applicable regulations could have a material adverse effect on our business, financial condition and
operating results. We could be subject to fines, forfeitures, and other penalties (including, in extreme cases, revocation of our
spectrum licenses) for failure to comply with FCC or other governmental regulations, even if any such non-compliance was
unintentional. The loss of any licenses, or any related fines or forfeitures, could adversely affect our business, financial
condition, and operating results.
Unfavorable outcomes of legal proceedings may adversely affect our business, financial condition and operating results.
We are regularly involved in a number of legal proceedings before various state and federal courts, the FCC, the FTC, other
federal agencies, and state and local regulatory agencies, including state attorneys general. Such legal proceedings can be
complex, costly, and highly disruptive to our business operations by diverting the attention and energy of management and
other key personnel. The assessment of the outcome of legal proceedings, including our potential liability, if any, is a highly
subjective process that requires judgments about future events that are not within our control. The amounts ultimately received
or paid upon settlement or pursuant to final judgment, order or decree may differ materially from amounts accrued in our
financial statements. In addition, litigation or similar proceedings could impose restraints on our current or future manner of
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doing business. Such potential outcomes including judgments, awards, settlements or orders could have a material adverse
effect on our business, financial condition and operating results.
We offer highly regulated financial services products. These products expose us to a wide variety of state and federal
regulations.
The financing of devices, through our EIP and JUMP! On Demand programs, has expanded our regulatory compliance
obligations. Failure to remain compliant with applicable regulations, may increase our risk exposure in the following areas:
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consumer complaints and potential examinations or enforcement actions by federal and state regulatory agencies,
including but not limited to the Consumer Financial Protection Bureau, state attorneys general, the FCC and the FTC;
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regulatory fines, penalties, enforcement actions, civil litigation, and/or class action lawsuits.
Failure to comply with applicable regulations and the realization of any of these risks could have a material adverse effect on
our business, financial condition, and operating results.
We may not be able to adequately protect the intellectual property rights on which our business depends or may be
accused of infringing intellectual property rights of third parties.
We rely on a combination of patent, service mark, trademark, and trade secret laws and contractual restrictions to establish and
protect our proprietary rights, all of which offer only limited protection. The steps we have taken to protect our intellectual
property may not prevent the misappropriation of our proprietary rights. We may not have the ability in certain jurisdictions to
adequately protect intellectual property rights. Moreover, others may independently develop processes and technologies that are
competitive to ours. Also, we may not be able to discover or determine the extent of any unauthorized use of our proprietary
rights. Unauthorized use of our intellectual property rights may increase the cost of protecting these rights or reduce our
revenues. We cannot be sure that any legal actions against such infringers will be successful, even when our rights have been
infringed. We cannot assure you that our pending or future patent applications will be granted or enforceable, or that the rights
granted under any patent that may be issued will provide us with any competitive advantages. In addition, we cannot assure you
that any trademark or service mark registrations will be issued with respect to pending or future applications or will provide
adequate protection of our brands. We do not have insurance coverage for intellectual property losses, and as such, a charge for
an anticipated settlement or an adverse ruling awarding damages represents an unplanned loss event. Any of these factors could
have a material adverse effect on our business, financial condition, and operating results.
Third parties may claim we infringe their intellectual property rights. We are a defendant in numerous intellectual property
lawsuits, including patent infringement lawsuits, which exposes us to the risk of adverse financial impact either by way of
significant settlement amounts or damage awards. As we adopt new technologies and new business systems and provide
customers with new products and/or services, we may face additional infringement claims. These claims could require us to
cease certain activities or to cease selling relevant products and services. These claims can be time-consuming and costly to
defend, and divert management resources, and expose us to significant damages awards or settlements, any or all of which
could have a material adverse effect on our operations and financial condition. In addition to litigation directly involving our
Company, our vendors and suppliers can be threatened with patent litigation and/or subjected to the threat of disruption or
blockage of sale, use, or importation of products, posing the risk of supply chain interruption to particular products and
associated services which could have a material adverse effect on our business, financial condition and operating results.
Our business may be impacted by new or amended tax laws or regulations, judicial interpretations of same or
administrative actions by federal, state, and/or local taxing authorities.
In connection with the products and services we sell, we calculate, collect, and remit various federal, state, and local taxes, fees
and regulatory charges (“tax” or “taxes”) to numerous federal, state and local governmental authorities, including federal USF
contributions and common carrier regulatory fees. In addition, we incur and pay state and local taxes and fees on purchases of
goods and services used in our business.
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. In
many cases, the application of existing, newly enacted or amended tax laws (such as the U.S. Tax Cuts and Jobs Act of 2017)
may be uncertain and subject to differing interpretations, especially when evaluated against new technologies and
telecommunications services, such as broadband internet access and cloud related services. Changes in tax laws could also
impact revenue reported on tax inclusive plans.
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In the event that we have incorrectly described, disclosed, determined, calculated, assessed, or remitted amounts that were due
to governmental authorities, we could be subject to additional taxes, fines, penalties, or other adverse actions, which could
materially impact our business, financial condition and operating results. In the event that federal, state, and/or local
municipalities were to significantly increase taxes on our network, operations, or services, or seek to impose new taxes, it could
have a material adverse effect on our business, financial condition and operating results.
Our wireless licenses are subject to renewal and may be revoked in the event that we violate applicable laws.
Our existing wireless licenses are subject to renewal upon the expiration of the 10-year or 15-year period for which they are
granted. Historically, the FCC has approved our license renewal applications. However, the Communications Act provides that
licenses may be revoked for cause and license renewal applications denied if the FCC determines that a renewal would not
serve the public interest. In addition, our licenses are subject to our compliance with the terms set forth in the agreement
pertaining to national security among us, DT, the Federal Bureau of Investigation, the Department of Justice and the
Department of Homeland Security. The failure of DT or the Company to comply with the terms of this agreement could result
in fines, injunctions and other penalties, including potential revocation or non-renewal of our spectrum licenses. If we fail to
timely file to renew any wireless license or fail to meet any regulatory requirements for renewal, including construction and
substantial service requirements, we could be denied a license renewal. Many of our wireless licenses are subject to interim or
final construction requirements and there is no guarantee that the FCC will find our construction, or the construction of prior
licensees, sufficient to meet the build-out or renewal requirements. Accordingly, we cannot assure you that the FCC will renew
our wireless licenses upon their expiration. If any of our wireless licenses were to be revoked or not renewed upon expiration,
we would not be permitted to provide services under that license, which could have a material adverse effect on our business,
financial condition, and operating results.
Our business could be adversely affected by findings of product liability for health or safety risks from wireless devices
and transmission equipment, as well as by changes to regulations or radio frequency emission standards.
We do not manufacture the devices or other equipment that we sell, and we depend on our suppliers to provide defect-free and
safe equipment. Suppliers are required by applicable law to manufacture their devices to meet certain governmentally imposed
safety criteria. However, even if the devices we sell meet the regulatory safety criteria, we could be held liable with the
equipment manufacturers and suppliers for any harm caused by products we sell if such products are later found to have design
or manufacturing defects. We generally seek to enter into indemnification agreements with the manufacturers who supply us
with devices to protect us from losses associated with product liability, but we cannot guarantee that we will be protected in
whole or in part against losses associated with a product that is found to be defective.
Allegations have been made that the use of wireless handsets and wireless transmission equipment, such as cell towers, may be
linked to various health concerns, including cancer and brain tumors. Lawsuits have been filed against manufacturers and
carriers in the industry claiming damages for alleged health problems arising from the use of wireless handsets. In addition, the
FCC has from time to time gathered data regarding wireless handset emissions and its assessment of this issue may evolve
based on its findings. The media has also reported incidents of handset battery malfunction, including reports of batteries that
have overheated. These allegations may lead to changes in regulatory standards. There have also been other allegations
regarding wireless technology, including allegations that wireless handset emissions may interfere with various electronic
medical devices (including hearing aids and pacemakers), airbags and anti-lock brakes. Defects in the products of our suppliers,
such as the 2016 recall by a handset original equipment manufacturer of one of its smartphone devices, could have a material
adverse effect on our business, financial condition and operating results. Any of these allegations or risks could result in
customers purchasing fewer devices and wireless services, and could also result in significant legal and regulatory liability.
Additionally, there are safety risks associated with the use of wireless devices while operating vehicles or equipment. Concerns
over any of these risks and the effect of any legislation, rules or regulations that have been and may be adopted in response to
these risks could limit our ability to sell our wireless services.
Risks Related to Ownership of our Common Stock
We are controlled by DT, whose interests may differ from the interests of our other stockholders.
DT beneficially owns and possesses majority voting power of the fully diluted shares of our common stock. Through its control
of the voting power of our common stock and the rights granted to DT in our certificate of incorporation and the Stockholder’s
Agreement, DT controls the election of our directors and all other matters requiring the approval of our stockholders. By virtue
of DT’s voting control, we are a “controlled company,” as defined in The NASDAQ Stock Market LLC (“NASDAQ”) listing
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rules, and are not subject to NASDAQ requirements that would otherwise require us to have a majority of independent
directors, a nominating committee composed solely of independent directors or a compensation committee composed solely of
independent directors. Accordingly, our stockholders will not be afforded the same protections generally as stockholders of
other NASDAQ-listed companies with respect to corporate governance for so long as we rely on these exemptions from the
corporate governance requirements.
In addition, our certificate of incorporation and the Stockholder’s Agreement restrict us from taking certain actions without
DT’s prior written consent as long as DT beneficially owns 30% or more of the outstanding shares of our common stock,
including:
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the incurrence of debt (excluding certain permitted debt) if our consolidated ratio of debt to cash flow, as defined in the
indenture dated April 28, 2013, 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 $1.0 billion;
the sale of any of our or our subsidiaries’ divisions, businesses, operations or equity interests for consideration in
excess of $1.0 billion;
the incurrence of secured debt (excluding certain permitted secured debt);
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 DT;
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; and
the termination or hiring of our chief executive officer.
These restrictions could prevent us from taking actions that our Board of Directors may otherwise determine are in the best
interests of the Company and our stockholders or that may be in the best interests of our other stockholders.
DT effectively has control over all matters submitted to our stockholders for approval, including the election or removal of
directors, changes to our certificate of incorporation, a sale or merger of our Company and other transactions requiring
stockholder approval under Delaware law. DT’s controlling interest may have the effect of making it more difficult for a third
party to acquire, or discouraging a third party from seeking to acquire, the Company. DT may have strategic, financial, or other
interests different from our other stockholders, including as the holder of a substantial amount of our indebtedness and as the
counter-party in a number of commercial arrangements, and may make decisions adverse to the interests of our other
stockholders.
In addition, we license certain trademarks from DT, including the right to use the trademark “T-Mobile” as a name for the
Company and our flagship brand, under a trademark license agreement with DT. As described in more detail in our proxy
statement under the heading “Transactions with Related Persons and Approval,” we are obligated under the trademark license
agreement to pay DT a royalty in an amount equal to 0.25%, which we refer to as the royalty rate, of the net revenue (as defined
in the trademark license) generated by products and services we sell under the licensed trademarks. The trademark license
agreement includes a royalty rate adjustment mechanism that would have occurred in early 2018 and potentially resulted in a
new royalty rate effective in January 2019. The license agreement includes a royalty rate adjustment mechanism that has been
postponed until the conclusion of the proposed Sprint Merger. The current royalty rate will remain effective until that time. The
royalty rate under the license agreement will be adjusted retroactively if the Business Combination Agreement is terminated.
We also have the right to terminate the trademark license upon one year’s prior notice. An increase in the royalty rate or
termination of the trademark license could have a material adverse effect on our business, financial condition and operating
results.
Future sales or issuances of our common stock, including sales by DT, could have a negative impact on our stock price.
We cannot predict the effect, if any, that market sales of shares or the availability of shares of our common stock will have on
the prevailing trading price of our common stock from time to time. Sales or issuances of a substantial number of shares of our
common stock could cause our stock price to decline and could result in dilution of your shares.
We and DT are parties to the Stockholder’s Agreement pursuant to which DT is free to transfer its shares in public sales without
notice, as long as such transactions would not result in the transferee owning 30% or more of the outstanding shares of our
common stock. If a transfer would exceed the 30% threshold, it is prohibited unless the transferee makes a binding offer to
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purchase all of the other outstanding shares on the same price and terms. The Stockholder’s Agreement does not otherwise
impose any other restrictions on the sales of common stock by DT. Moreover, we may be required to file a shelf registration
statement with respect to the common stock and certain debt securities held by DT, which would facilitate the resale by DT of
all or any portion of the shares of our common stock it holds. The sale of shares of our common stock by DT (other than in
transactions involving the purchase of all of our outstanding shares) could significantly increase the number of shares available
in the market, which could cause a decrease in our stock price. In addition, even if DT does not sell a large number of its shares
into the market, its right to transfer a large number of shares into the market may depress our stock price.
Our stock price may be volatile and may fluctuate based upon factors that have little or nothing to do with our business,
financial condition and operating results.
The trading prices of the securities of communications companies historically have been highly volatile, and the trading price of
our common stock may be subject to wide fluctuations. Our stock price may fluctuate in reaction to a number of events and
factors that may include, among other things:
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our or our competitors’ actual or anticipated operating and financial results;
introduction of new products and services by us or our competitors or changes in service plans or pricing by us or our
competitors;
analyst projections, predictions and forecasts, analyst target prices for our securities and changes in, or our failure to
meet, securities analysts’ expectations;
transaction in our common stock by major investors;
share repurchases by us or purchases by DT;
DT’s financial performance, results of operation, or actions implied or taken by DT;
entry of new competitors into our markets or perceptions of increased price competition, including a price war;
our performance, including subscriber growth, and our financial and operational performance;
• market perceptions relating to our services, network, handsets, and deployment of our LTE and 5G platforms and our
access to iconic handsets, services, applications, or content;
• market perceptions of the wireless communications services industry and valuation models for us and the industry;
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conditions or trends in the Internet and the industry sectors in which we operate;
changes in our credit rating or future prospects;
changes in interest rates;
changes in our capital structure, including issuance of additional debt or equity to the public;
the availability or perceived availability of additional capital in general and our access to such capital;
actual or anticipated consolidation, or other strategic mergers or acquisition activities involving us or our competitors,
or other participants in related or adjacent industries, or market speculations regarding such activities, including the
pending Merger and views of market participants regarding the likelihood the conditions to the Merger will be satisfied
and the anticipated benefits of the Merger will be realized;
disruptions of our operations or service providers or other vendors necessary to our network operations;
the general state of the U.S. and world politics and economies; and
availability of additional spectrum, whether by the announcement, commencement, bidding and closing of auctions for
new spectrum or the acquisition of companies that own spectrum, and the extent to which we or our competitors
succeed in acquiring additional spectrum.
In addition, the stock market has been volatile in the recent past and has experienced significant price and volume fluctuations,
which may continue for the foreseeable future. This volatility has had a significant impact on the trading price of securities
issued by many companies, including companies in the communications industry. These changes frequently occur irrespective
of the operating performance of the affected companies. Hence, the trading price of our common stock could fluctuate based
upon factors that have little or nothing to do with our business, financial condition and operating results.
We have never paid or declared any cash dividends on our common stock, and we do not intend to declare or pay any
cash dividends on our common stock in the foreseeable future.
We have never paid or declared any cash dividends on our common stock, and we do not intend to declare or pay any cash
dividends on our common stock in the foreseeable future. Our credit facilities and the indentures and supplemental indentures
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governing our long-term debt to affiliates and third parties contain covenants that, among other things, restrict our ability to
declare or pay dividends on our common stock. We currently intend to use future earnings, if any, to invest in our business and
to fund our previously authorized stock repurchase program if the Merger fails to close.
Our previously announced stock repurchase program, and any subsequent stock purchase program put in place from
time to time, could affect the price of our common stock, increase the volatility of our common stock and could diminish
our cash reserves. Such repurchase program may be suspended or terminated at any time, which may result in a
decrease in the trading price of our common stock.
We may have in place from time to time, a stock repurchase program. Any such stock repurchase program adopted will not
obligate the Company to repurchase any dollar amount or number of shares of common stock and may be suspended or
discontinued at any time, which could cause the market price of our common stock to decline. The timing and actual number of
shares repurchased under any such stock repurchase program depends on a variety of factors including the timing of open
trading windows, the price of our common stock, corporate and regulatory requirements and other market conditions. We may
effect repurchases under any stock repurchase program from time to time in the open market, in privately negotiated
transactions or otherwise, including accelerated stock repurchase arrangements. Repurchases pursuant to any such stock
repurchase program could affect our stock price and increase its volatility. The existence of a stock repurchase program could
also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the
market liquidity for our stock. There can be no assurance that any stock repurchases will enhance stockholder value because the
market price of our common stock may decline below the levels at which we repurchased shares of common stock. Although
our stock repurchase program is intended to enhance stockholder value, short-term stock price fluctuations could reduce the
program’s effectiveness. Additionally, our share repurchase program could diminish our cash reserves, which may impact our
ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. See Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources for
additional information.
Risks Related to the Proposed Transactions
The closing of the Transactions is subject to a number of conditions, including the receipt of approval from, and the
absence of any order preventing the closing issued by, governmental entities, which may not approve the Transactions,
may delay the approval for, or may impose conditions or restrictions on, jeopardize or delay completion of, or reduce or
delay the anticipated benefits of, the Transactions, and if these conditions are not satisfied or waived, the Transactions
will not be completed.
The completion of the Transactions is subject to a number of conditions, including, among others, the receipt of approval from,
and the absence of any legal requirements preventing the completion of the Transactions enacted or enforced by, governmental
entities, including courts. As noted below, while the parties have obtained a number of approvals from governmental entities to
date, the Transactions remain subject to various judicial proceedings, and the California Public Utility Commission review
remains pending.
In connection with the required approval for the Transactions, we have agreed to significant actions and conditions, including
the planned Prepaid Transaction (as defined below) and ongoing commercial and transition services arrangements to be entered
into in connection with such Prepaid Transaction, which we and Sprint announced on July 26, 2019 (collectively, the
“Divestiture Transaction”), a stipulation and order and proposed final judgment with the U.S. Department of Justice, which we
and Sprint announced on July 26, 2019 (the “Consent Decree”), the proposed commitments contained in the ex parte
presentation filed with the Secretary of the FCC, which we and Sprint announced on May 20, 2019 (the “FCC Commitments”)
and commitments and undertakings we have entered into at the federal and state level (collectively, with the Consent Decree,
the FCC Commitments and any other commitments or undertakings that we have entered into and may in the future enter into
with governmental authorities (including but not limited to those we have made to certain states) and nongovernmental
organizations, the “Government Commitments”). All state public utility commission proceedings have been completed other
than the California Public Utility Commission review, which remains pending.
While the parties have received approval from the FCC, the DOJ and the Committee on Foreign Investment in the United States
for the Transactions to proceed subject to the above-described commitments and undertakings, the Transactions remain subject
to several judicial proceedings. The Consent Decree is subject to judicial approval, which proceeding is underway. The
attorneys general of certain states and the District of Columbia filed a lawsuit in New York federal court seeking an order
prohibiting the consummation of the Transactions. The trial in that case has concluded and the parties are awaiting the judge’s
ruling. Another case seeking to prohibit the Transactions was filed in California federal court on behalf of individual
consumers, and has been stayed pending the outcome of the New York case. Appeals of any or all of these judicial and agency
actions could be filed, which could further delay the Transactions or, if the Transactions close over a pending proceeding, create
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risk and uncertainty after the Transactions close. The ultimate outcome of these matters is uncertain and there is no assurance
that we will prevail or prevail in a timely manner, or whether remaining required approvals will be subject to additional
required actions, conditions, limitations or restrictions on the combined company’s business, operations or assets. Such
litigation, and any such additional required actions, conditions, limitations or restrictions, may prevent the completion of the
Transactions, or, even if they do not prevent the completion of the Transactions, they may delay such completion, or reduce or
delay the anticipated benefits of the Transactions, which could result in a material adverse effect on our or the combined
company’s business, financial condition or operating results. In particular, the substantial delay in the completion of the
Transactions may delay, reduce or eliminate synergies and other benefits anticipated to be realized from the Transactions and/or
increase costs and expenses associated with the Transactions.
In addition, because the Transactions were not completed by the “outside date” provided in the Business Combination
Agreement, each of T-Mobile and Sprint may terminate the Business Combination Agreement unless the parties agree to extend
such outside date, and there can be no assurance that the parties will not exercise this termination right or will agree to extend
the outside date. Furthermore, the completion of the Transactions is also subject to T-Mobile USA having specified minimum
credit ratings on the closing date of the Transactions (after giving effect to the Merger) from at least two of three specified
credit rating agencies, subject to certain qualifications. There is no assurance that the required ratings will be obtained or that
they will be obtained in a timely manner. In the event that we terminate the Business Combination Agreement in connection
with a failure to satisfy the closing condition related to the specified minimum credit ratings, then in certain circumstances, we
may be required to pay Sprint an amount equal to $600 million. The Business Combination Agreement may also be terminated
if there is a final and non-appealable order or injunction preventing the consummation of the Transactions or the other
conditions to closing are not satisfied, and we and Sprint may also mutually decide to terminate or amend the Business
Combination Agreement.
Failure to complete, or additional delay in the completion of, the Merger could negatively impact us and our business,
assets, liabilities, prospects, outlook, financial condition or results of operations.
If the completion of the Merger is prevented or continues to be delayed, or if the Merger is not completed for any other reason,
we may be subject to a number of material risks. The price of our common stock may decline to the extent that its current
market price reflects a market assumption that the Merger will or may be completed. In addition, significant costs related to the
Transactions must be paid by us whether or not the Transactions are completed. Furthermore, we may experience negative
reactions from our stockholders, customers, employees, suppliers, distributors, retailers, dealers and others who deal with us,
which could have an adverse effect on our business, financial condition and results of operations.
In addition, it is expected that if the Merger is not completed, we will continue to lack the network, scale and financial resources
of the current market share leaders in, and other companies that have more recently begun providing, wireless services. Further,
if the Merger is not completed, we will need to seek access to additional wireless spectrum, in particular mid-band wireless
spectrum through other sources, which if we are not successful, in turn would impact our ability to maintain (or improve)
service from current levels, and to deploy a broad and deep nationwide 5G network on the same scale and on the same timeline
as the combined company, and therefore limit our ability to compete effectively in the 5G era.
We are subject to various uncertainties, including litigation and contractual restrictions and requirements while the
Transactions are pending that could disrupt our or the combined company’s business and adversely affect our or the
combined company’s business, assets, liabilities, prospects, outlook, financial condition and results of operations.
Uncertainty about whether the Transactions will be completed and/or the effect of the Transactions on employees, customers,
suppliers, vendors, distributors, dealers and retailers may have an adverse effect on us or the combined company. These
uncertainties may impair the ability to attract, retain and motivate key personnel during the pendency of the Transactions and,
whether or not the Transactions are completed, for a period of time thereafter, as existing and prospective employees may
experience uncertainty about their future roles with us or the combined company. If key employees, including key employees of
Sprint, depart because of issues related to the uncertainty and difficulty of integration or a desire not to remain with the
combined company, the combined company’s business following the completion of the Transactions could be negatively
impacted. We or the combined company may have to incur significant costs in identifying, hiring and retaining replacements
for departing employees and may lose significant expertise and talent. Additionally, these uncertainties could cause customers,
suppliers, distributors, dealers, retailers and others to seek to change or cancel existing business relationships with us or the
combined company or fail to renew existing relationships. Suppliers, distributors and content and application providers may
also delay or cease developing for us or the combined company new products that are necessary for the operations of its
business due to the uncertainty created by the Transactions. Competitors may also target our existing customers by highlighting
potential uncertainties and integration difficulties that may result from the Transactions.
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The Business Combination Agreement also restricts us, without Sprint’s consent, from taking certain actions outside of the
ordinary course of business while the Transactions are pending, including, among other things, certain acquisitions or
dispositions of businesses and assets, entering into or amending certain contracts, repurchasing or issuing securities, making
capital expenditures, incurring indebtedness, and refinancing existing indebtedness, in each case subject to certain exceptions.
These restrictions and the inability to independently access the debt capital markets during the pendency of the Merger may
have a significant negative impact on our business, results of operations and financial condition.
Management and financial resources have been diverted and will continue to be diverted toward the completion of the
Transactions. We have incurred, and expect to incur, significant costs, expenses and fees for professional services and other
transaction costs in connection with the Transactions. These costs could adversely affect our or the combined company’s
financial condition and results of operations.
In addition, we and our affiliates are involved in various disputes, governmental and/or regulatory inspections, investigations
and proceedings and litigation matters, including for example the antitrust litigation related to the Transactions brought by the
attorneys general of certain states and the District of Columbia, and it is possible that an unfavorable resolution of these matters
or other future matters, could prevent the consummation of the Transactions and/or adversely affect us and our results of
operations, financial condition and cash flows and the results of operations, financial condition and cash flows of the combined
company.
The Business Combination Agreement contains provisions that restrict the ability of our Board to pursue alternatives to
the Transactions.
The Business Combination Agreement contains non-solicitation provisions that restrict our ability to solicit, initiate, knowingly
encourage or knowingly take any other action designed to facilitate, any inquiries regarding, or the making of, any proposal the
completion of which would constitute an alternative transaction for purposes of the Business Combination Agreement. In
addition, the Business Combination Agreement does not permit us to terminate the Business Combination Agreement in order
to enter into an agreement providing for, or to complete, such an alternative transaction. Furthermore, if the completion of the
Transactions continues to be delayed, we or the combined company may be unable to pursue strategic opportunities or business
transactions that we may otherwise pursue, such as spectrum acquisitions, share buybacks and/or debt transactions.
Our directors and officers may have interests in the Transactions different from the interests of our stockholders.
Certain of our directors and executive officers negotiated the terms of the Business Combination Agreement. Our directors and
executive officers may have interests in the Transactions that are different from, or in addition to, those of our stockholders.
These interests include, but are not limited to, the continued service of certain of our directors as directors of the combined
company, the continued employment of certain of our executive officers by the combined company, severance arrangements
and employment terms linked to the Transactions and other rights held by our directors and executive officers, and provisions in
the Business Combination Agreement regarding continued indemnification of and advancement of expenses to our directors
and officers.
Risks Related to Integration and the Combined Company
Although we expect that the Transactions will result in synergies and other benefits, those synergies and benefits may
not be realized or may not be realized within the expected time frame, and risks associated with the foregoing may
increase as a result of the extended delay in the completion of the Transactions.
Our ability to realize the anticipated benefits of the Transactions will depend, to a large extent, on the combined company’s
ability to integrate our and Sprint’s businesses in a manner that facilitates growth opportunities and achieves the projected
standalone cost savings and revenue growth trends identified by each company without adversely affecting current revenues
and investments in future growth. In addition, some of the anticipated synergies are not expected to occur for a significant time
period following the completion of the Transactions and will require substantial capital expenditures in the near term to be fully
realized. Moreover, additional delay in the completion of the Transactions may delay, reduce or eliminate the anticipated
synergies and other benefits of the Transactions, including as a result of the delay in the integration of, or inability to integrate,
the networks of T-Mobile and Sprint to launch a broad and deep nationwide 5G network and increasing costs and expenses
incurred by T-Mobile and Sprint during the pendency of the Transactions. Even if the combined company is able to integrate
the two companies successfully, the anticipated benefits of the Transactions, including the expected synergies and network
benefits, may not be realized fully or at all or may take longer to realize than expected.
Our business and Sprint’s business may not be integrated successfully or such integration may be more difficult, time
consuming or costly than expected. Operating costs, customer loss and business disruption, including difficulties in
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completing the Divestiture Transaction, satisfying all of the Government Commitments and maintaining relationships
with employees, customers, suppliers or vendors, may be greater than expected following the Transactions. Revenues
following the Transactions may be lower than expected.
The combination of two independent businesses is complex, costly and time-consuming and may divert significant management
attention and resources to combining our and Sprint’s business practices and operations. This process, as well as the Divestiture
Transaction and the Government Commitments, may disrupt our business or otherwise impact our ability to compete. The
failure to meet the challenges involved in combining our and Sprint’s businesses and to realize the anticipated benefits of the
Transactions could cause an interruption of, or a loss of momentum in, the activities of the combined company and could
adversely affect the results of operations of the combined company. The overall combination of our and Sprint’s businesses, the
completion of the Divestiture Transaction and compliance with the Government Commitments may also result in material
unanticipated problems, expenses, liabilities, competitive responses and impacts, and loss of customer and other business
relationships. The difficulties of combining the operations of the companies, completing the Divestiture Transaction and
satisfying all of the Government Commitments include, among others:
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the diversion of management attention to integration matters;
difficulties in integrating operations and systems, including intellectual property and communications systems,
administrative and information technology infrastructure and financial reporting and internal control systems;
challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and
compensation structures between the two companies;
differences in control environments, cultures, and auditor expectations may result in future material weaknesses,
significant deficiencies, and/or control deficiencies while we work to integrate the companies and align guidelines
and practices;
alignment of key performance measurements may result in a greater need to communicate and manage clear
expectations while we work to integrate the companies and align guidelines and practices;
difficulties in integrating employees and attracting and retaining key personnel;
challenges in retaining existing customers and obtaining new customers;
difficulties in achieving anticipated cost savings, synergies, accretion targets, business opportunities, financing
plans and growth prospects from the combination;
difficulties in managing the expanded operations of a significantly larger and more complex company;
the impact of the additional debt financing expected to be incurred in connection with the Transactions;
the transition of management to the combined company management team, and the need to address possible
differences in corporate cultures and management philosophies;
challenges in managing the divestiture process for the Divestiture Transaction and the ongoing commercial and
transition services arrangements to be entered into in connection with the Divestiture Transaction;
known or potential unknown liabilities arising in connection with the Divestiture Transaction that are larger than
expected;
an increase in competition from DISH and other third parties that DISH may enter into commercial agreements
with, who are significantly larger than we are and enjoy greater resources and scale advantages as compared to us;
difficulties in satisfying the large number of Government Commitments in the required timeframes and cost
incurred in the tracking and monitoring of them, including the network build-out obligations under the
Government Commitments;
known or potential unknown liabilities of Sprint that are larger than expected; and
other potential adverse consequences and unforeseen increased expenses or liabilities associated with the
Transactions, the Divestiture Transaction and the Government Commitments.
Some of these factors are outside of our control and/or will be outside the control of the combined company, and any one of
them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact
the business, financial condition and results of operations of the combined company. In addition, even if the operations of our
and Sprint’s businesses are integrated successfully, the full benefits of the Merger may not be realized, including, among others,
the synergies, cost savings or sales or growth opportunities that are expected, including as a result of the Divestiture
Transaction, the Government Commitments and/or the other actions and conditions we have agreed to in connection with the
Transactions, or otherwise. These benefits may not be achieved within the anticipated time frame or at all. Further, additional
unanticipated costs may be incurred in the integration of our and Sprint’s businesses and in connection with the Divestiture
Transaction and the Government Commitments, including potential penalties that could arise if we fail to fulfill our obligations
thereunder. All of these factors could suppress the earnings per share of the combined company, decrease or delay the projected
accretive effect of the Merger, and negatively impact the price of our common stock following the Merger. As a result, it cannot
be assured that the combination of T-Mobile and Sprint will result in the realization of the full benefits expected from the
Transactions within the anticipated time frames or at all.
24
The indebtedness of the combined company following the completion of the Transactions will be substantially greater
than the indebtedness of each of T-Mobile and Sprint on a standalone basis prior to the execution of the Business
Combination Agreement. This increased level of indebtedness could adversely affect the combined company’s business
flexibility and increase its borrowing costs.
In connection with the Transactions, we and Sprint have conducted, and expect to conduct, certain pre-Merger financing
transactions, which will be used in part to prepay a portion of our and Sprint’s existing indebtedness and to fund liquidity needs.
After giving effect to the pre-Merger financing transactions and the Transactions, we anticipate that the combined company will
have consolidated indebtedness of up to approximately $69.0 billion to $71.0 billion, based on estimated December 31,
2019 debt and cash balances, and excluding tower obligations and operating lease liabilities.
Our substantially increased indebtedness following the Transactions could have the effect, among other things, of reducing our
flexibility to respond to changing business, economic, market and industry conditions and increasing the amount of cash
required to meet interest payments. In addition, this increased level of indebtedness following the Transactions may reduce
funds available to support efforts to combine our and Sprint’s businesses and realize the expected benefits of the Transactions,
and may also reduce funds available for capital expenditures, share repurchases and other activities that may put the combined
company at a competitive disadvantage relative to other companies with lower debt levels. Further, it may be necessary for the
combined company to incur substantial additional indebtedness in the future, subject to the restrictions contained in its debt
instruments, which could increase the risks associated with the capital structure of the combined company.
Because of the substantial indebtedness of the combined company following the completion of the Transactions, there is
a risk that the combined company may not be able to service its debt obligations in accordance with their terms.
The ability of the combined company to service its substantial debt obligations following the Transactions will depend on future
performance, which will be affected by business, economic, market and industry conditions and other factors, including the
ability of the combined company to achieve the expected benefits of the Transactions. There is no guarantee that the combined
company will be able to generate sufficient cash flow to service its debt obligations when due. If the combined company is
unable to meet such obligations or fails to comply with the financial and other restrictive covenants contained in the agreements
governing such debt obligations, it may be required to refinance all or part of its debt, sell important strategic assets at
unfavorable prices or make additional borrowings. The combined company may not be able to, at any given time, refinance its
debt, sell assets or make additional borrowings on commercially reasonable terms or at all, which could have a material adverse
effect on its business, financial condition and results of operations after the Transactions.
Some or all of the combined company’s variable-rate indebtedness may use LIBOR as a benchmark for establishing the rate.
LIBOR will be discontinued after 2021 and will be replaced with an alternative reference rate. The consequence of this
development cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness. In addition,
any hedging agreements we have and may continue to enter into to limit our exposure to interest rate increases or foreign
currency fluctuations may not offer complete protection from these risks or may be unsuccessful, and consequently may
effectively increase the interest rate we pay on our debt or the exchange rate with respect to such debt, and any portion not
subject to such hedging agreements would have full exposure to interest rate increases or foreign currency fluctuations, as
applicable. If any financial institutions that are parties to our hedging agreements were to default on their payment obligations
to us, declare bankruptcy or become insolvent, we would be unhedged against the underlying exposures. Any posting of
collateral by us under our hedging agreements and the modification or termination of any of our hedging agreements could
negatively impact our liquidity or other financial metrics. Any of these risks could have a material adverse effect on our
business, financial condition and operating results.
The agreements governing the combined company’s indebtedness and other financings will include restrictive covenants
that limit the combined company’s operating flexibility.
The agreements governing the combined company’s indebtedness and other financings will impose material operating and
financial restrictions on the combined company. These restrictions, subject in certain cases to customary baskets, exceptions
and maintenance and incurrence-based financial tests, may limit the combined company’s ability to engage in transactions and
pursue strategic business opportunities, including the following:
•
•
•
•
incurring additional indebtedness and issuing preferred stock;
paying dividends, redeeming capital stock or making other restricted payments or investments;
selling or buying assets, properties or licenses;
developing assets, properties or licenses which the combined company has or in the future may procure;
25
•
•
•
•
•
creating liens on assets securing indebtedness or other obligations;
participating in future FCC auctions of spectrum or private sales of spectrum;
engaging in mergers, acquisitions, business combinations or other transactions;
entering into transactions with affiliates; and
placing restrictions on the ability of subsidiaries to pay dividends or make other payments.
These restrictions could limit the combined company’s ability to obtain debt financing, make share repurchases, refinance or
pay principal on its outstanding indebtedness, complete acquisitions for cash or indebtedness or react to business, economic,
market and industry conditions and other changes in its operating environment or the economy. Any future indebtedness that
the combined company incurs may contain similar or more restrictive covenants. Any failure to comply with the restrictions of
the combined company’s debt agreements may result in an event of default under these agreements, which in turn may result in
defaults or acceleration of obligations under these and other agreements, giving the combined company’s lenders the right to
terminate any commitments they had made to provide it with further funds and to require the combined company to repay all
amounts then outstanding plus any interest, fees, penalties or premiums, and which may include requiring the combined
company to sell certain assets securing indebtedness.
The financing of the Transactions is not assured.
We have received commitments for $27.0 billion in debt financing to fund the Transactions, which is comprised of (i) a $4.0
billion secured revolving credit facility, (ii) a $4.0 billion term loan credit facility and (iii) a $19.0 billion secured bridge loan
facility. Furthermore, the Merger financing commitments currently expire on May 1, 2020, and if the completion of the
Transactions continues to be delayed, any extension of the financing commitments or new financing commitments may not be
obtained on the expected terms or at all. Our reliance on the financing from the $19.0 billion secured bridge loan facility
commitment is intended to be reduced through one or more secured note offerings or other long-term financings prior to the
Merger closing. However, there can be no assurance that we will be able to issue any such secured notes or other long-term
financings on terms we find acceptable or at all, especially in light of recent debt market volatility, in which case we may have
to exercise some or all of the commitments under the secured bridge facility to fund the Transactions.
The obligation of the lenders to provide these debt financing facilities is subject to a number of conditions and the financing of
the Transactions may not be obtained on the expected terms or at all. Accordingly, the costs of financing for the Transactions
may be higher than expected.
Credit rating downgrades could adversely affect the businesses, cash flows, financial condition and operating results of
T-Mobile and, following the Transactions, the combined company.
Credit ratings impact the cost and availability of future borrowings, and, as a result, cost of capital. Our current ratings reflect
each rating agency’s opinion of our financial strength, operating performance and ability to meet our debt obligations or,
following the completion of the Transactions, obligations to the combined company’s obligors. Each rating agency reviews
these ratings periodically and there can be no assurance that such ratings will be maintained in the future. A downgrade in the
rating of us and/or Sprint could adversely affect the businesses, cash flows, financial condition and operating results of T-
Mobile and, following the Transactions, the combined company.
We have incurred, and will incur, direct and indirect costs as a result of the Transactions.
We have incurred, and will incur, substantial expenses in connection with and as a result of completing the Transactions, the
Divestiture Transaction and compliance with the Government Commitments, and over a period of time following the
completion of the Transactions, the combined company also expects to incur substantial expenses in connection with
integrating and coordinating our and Sprint’s businesses, operations, policies and procedures. A portion of the transaction costs
related to the Transactions will be incurred regardless of whether the Transactions are completed. While we have assumed that
a certain level of transaction expenses will be incurred, factors beyond our control could affect the total amount or the timing of
these expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately. These expenses
will exceed the costs historically borne by us. These costs could adversely affect our financial condition and results of
operations prior to the Transactions and the financial condition and results of operations of the combined company following
the Transactions.
Item 1B. Unresolved Staff Comments
None.
26
Item 2. Properties
As of December 31, 2019, our significant properties that we primarily lease and use in connection with switching centers, data
centers, call centers and warehouses were as follows:
Switching centers
Data centers
Call center
Warehouses
As of December 31, 2019, we primarily leased:
Approximate Number
Approximate Size in Square Feet
62
7
17
17
1,400,000
600,000
1,500,000
500,000
•
•
•
•
Approximately 66,000 macro towers and 25,000 distributed antenna system and small cell sites.
Approximately 2,200 T-Mobile and Metro by T-Mobile retail locations, including stores and kiosks ranging in size
from approximately 100 square feet to 17,000 square feet.
Office space totaling approximately 1,200,000 square feet for our corporate headquarters in Bellevue, Washington. We
use these offices for engineering and administrative purposes.
Office space throughout the U.S., totaling approximately 1,700,000 square feet, for use by our regional offices
primarily for administrative, engineering and sales purposes.
Item 3. Legal Proceedings
See Note 2 - Business Combinations and Note 16 – Commitments and Contingencies of the Notes to the Consolidated Financial
Statements for information regarding certain legal proceedings in which we are involved.
Item 4. Mine Safety Disclosures
None.
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock is traded on the NASDAQ Global Select Market under the symbol “TMUS.” T-Mobile was added to the
S&P 500 Index effective prior to the open of trading on July 15, 2019. We were added to the S&P 500 GICS (Global Industry
Classification Standard) Wireless Telecommunication Services Sub-Industry index. As of December 31, 2019, there were 258
registered stockholders of record of our common stock, but we estimate the total number of stockholders to be much higher as a
number of our shares are held by brokers or dealers for their customers in street name.
27
Performance Graph
The graph below compares the five-year cumulative total returns of T-Mobile, the S&P 500 index, the NASDAQ Composite
index and the Dow Jones US Mobile Telecommunications TSM index. The graph tracks the performance of a $100 investment,
with the reinvestment of all dividends, from December 31, 2014 to December 31, 2019.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among T-Mobile US, Inc., the S&P 500 Index, the NASDAQ Composite Index
and the Dow Jones US Mobile Telecommunications TSM Index
$350
$300
$250
$200
$150
$100
$50
$0
2014
2015
2016
2017
2018
2019
T-Mobile US, Inc.
S&P 500
NASDAQ Composite
Dow Jones US Mobile Telecommunications TSM
*$100 invested on 12/31/14 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2020 Standard & Poor’s, a division of S&P Global. All rights reserved.
Copyright© 2020 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.
The five-year cumulative total returns of T-Mobile, the S&P 500 index, the NASDAQ Composite index and the Dow Jones US
Mobile Telecommunications TSM index, as illustrated in the graph above, are as follows:
T-Mobile US, Inc.
S&P 500
NASDAQ Composite
Dow Jones US Mobile Telecommunications TSM
At December 31,
2014
2015
2016
2017
2018
2019
$
100.00
$
145.21
$
213.47
$
235.75
$
236.12
$
100.00
100.00
100.00
101.38
106.96
104.87
113.51
116.45
133.65
138.29
150.96
136.66
132.23
146.67
162.64
291.09
173.86
200.49
184.44
The stock price performance included in this graph is not necessarily indicative of future
ff
stock price performance.
Item 6. Selected Financial Data
The following selected financial data are derived from our consolidated financial statements. The data below should be read
together with Risk Factors included in Part I, Item 1A, Management’s Discussion and Analysis of Financial Condition and
Results of Operations included in Part II, Item 7 and Financial Statements and Supplementary Data included in Part II, Item 8
of this Form 10-K.
28
Selected Financial Data
(in millions, except per share and customer
amounts)
Statement of Operations Data
Total service revenues
Total revenues
Operating income
Total other expense, net
Income tax (expense) benefit (3)
Net income
Net income attributable to common stockholders
Earnings per share
Basic
Diluted
Balance Sheet Data
Cash and cash equivalents
Property and equipment, net (1)
Spectrum licenses
Total assets (1)
Total debt and financing lease liabilities,
excluding tower obligations (1)
Stockholders' equity
Statement of Cash Flows and Operational
Data
Net cash provided by operating activities (4)
Purchases of property and equipment
Purchases of spectrum licenses and other
intangible assets, including deposits
Proceeds related to beneficial interests in
securitization transactions (4)
Net cash (used in) provided by financing
activities (4)
Total customers (in thousands) (5)
2019 (1)
2018 (2)
2017
2016
2015
As of and for the Year Ended December 31,
$
33,994
$
31,992
$
30,160
$
27,844
$
$
$
$
$
44,998
5,722
(1,119)
(1,135)
3,468
3,468
4.06
4.02
1,528
21,984
36,465
86,921
27,272
28,789
$
$
$
43,310
5,309
(1,392)
(1,029)
2,888
2,888
3.40
3.36
1,203
23,359
35,559
72,468
27,547
24,718
$
$
$
40,604
4,888
(1,727)
1,375
4,536
4,481
5.39
5.20
1,219
22,196
35,366
70,563
28,319
22,559
$
$
$
37,490
4,050
(1,723)
(867)
1,460
1,405
1.71
1.69
5,500
20,943
27,014
65,891
27,786
18,236
$
$
$
6,824
$
(6,391)
3,899
$
(5,541)
3,831
$
(5,237)
2,779
$
(4,702)
(967)
3,876
(2,374)
86,046
(127)
5,406
(3,336)
79,651
(5,828)
4,319
(1,367)
72,585
(3,968)
3,356
463
71,455
24,821
32,467
2,479
(1,501)
(245)
733
678
0.83
0.82
4,582
20,000
23,955
62,413
26,243
16,557
1,877
(4,724)
(1,935)
3,537
3,413
63,282
(1) On January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” and all the related amendments (collectively, the
“new lease standard”), using the modified retrospective method with the cumulative effect of initially applying the guidance recognized at the date of
initial application. Comparative information has not been restated and continues to be reported under the standards in effect for those periods. See Note 1
– Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for
further information.
(2) On January 1, 2018, we adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” and all the related amendments (collectively, the
“new revenue standard”), using the modified retrospective method with the cumulative effect of initially applying the guidance recognized at the date of
initial application. Comparative information has not been restated and continues to be reported under the standards in effect for those periods. See Note 1
– Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for
further information.
(3)
In December 2017, the Tax Cuts and Jobs Act of 2017 (“TCJA”) was signed into legislation. The TCJA included numerous changes to existing tax law,
including a permanent reduction in the federal corporate income tax rate from 35% to 21%. The rate reduction took place on January 1, 2018. We
recognized a net tax benefit of $2.2 billion associated with the enactment of the TCJA in Income tax (expense) benefit in our Consolidated Statements of
Comprehensive Income in the fourth quarter of 2017, primarily due to a re-measurement of deferred tax assets and liabilities.
(4) On January 1, 2018, we adopted ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (the
“new cash flow standard”) which impacted the presentation of our cash flows related to our beneficial interests in securitization transactions, which is the
deferred purchase price, resulting in a reclassification of cash inflows from Operating activities to Investing activities of approximately $4.3 billion, $3.4
billion and $3.5 billion for the years ended December 31, 2017, 2016 and 2015, respectively, in our Consolidated Statements of Cash Flows. The new
cash flow standard also impacted the presentation of our cash payments for debt prepayment and debt extinguishment costs, resulting in a reclassification
of cash outflows from Operating activities to Financing activities of $188 million for the year ended December 31, 2017, in our Consolidated Statements
of Cash Flows. There were no cash payments for debt prepayment and debt extinguishment costs during the years ended December 31, 2016 and 2015.
We have applied the new cash flow standard retrospectively to all periods presented.
(5) We believe current and future regulatory changes have made the Lifeline program offered by our wholesale partners uneconomical. We will continue to
support our wholesale partners offering the Lifeline program, but have excluded the Lifeline customers from our reported wholesale subscriber base
resulting in the removal of 4,528,000 reported wholesale customers in 2017.
29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The objectives of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are
to provide users of our Consolidated Financial Statements with the following:
•
•
•
A narrative explanation from the perspective of management of our financial condition, results of operations, cash
flows, liquidity and certain other factors that may affect future results;
Context to the financial statements; and
Information that allows assessment of the likelihood that past performance is indicative of future performance.
Our MD&A is provided as a supplement to, and should be read together with, our audited Consolidated Financial Statements
for the three years ended December 31, 2019, included in Part II, Item 8 of this Form 10-K. Except as expressly stated, the
financial condition and results of operations discussed throughout our MD&A are those of T-Mobile US, Inc. and its
consolidated subsidiaries.
Business Overview
Un-carrier Strategy
We are the Un-carrier. Through our Un-carrier strategy, we have disrupted the wireless communications services industry,
rattling the status quo, by actively engaging with and listening to our customers and eliminating their existing pain points,
including providing them with an unrivaled value, an exceptional experience and implementing signature Un-carrier initiatives
that have changed wireless for good.
Proposed Sprint Transactions
On April 29, 2018, we entered into the Business Combination Agreement with Sprint to merge in an all-stock transaction at a
fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or 9.75 shares of
Sprint common stock for each share of T-Mobile common stock. If the Merger closes, the combined company will be named
“T-Mobile” and, as a result of the Merger, is expected to be able to build upon our recently launched foundational 5G network
600 MHz spectrum to deliver transformational broad, deep and nationwide 5G for all, accelerate innovation and increase
competition in the U.S. wireless, video and broadband industries. Immediately following the Merger, it is anticipated that DT
and SoftBank Group Corp. (“SoftBank”) will hold, directly or indirectly, on a fully diluted basis, approximately 41.5% and
27.2%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 31.3% of the outstanding
T-Mobile common stock held by other stockholders, based on closing share prices and certain other assumptions as of
December 31, 2019. The consummation of the Merger remains subject to certain closing conditions. We expect the Merger will
be permitted to close in early 2020.
For more information regarding our Business Combination Agreement, see Note 2 – Business Combinations of the Notes to the
Consolidated Financial Statements.
5G Launch
In December 2019, T-Mobile launched America’s first nationwide 5G network, including prepaid 5G with Metro by T-Mobile,
covering more than 200 million people and more than 5,000 cities and towns across the United States with 5G.
Magenta Plans
In June 2019, we rebranded our T-Mobile ONE and ONE Plus plans to Magenta and Magenta Plus.
TVision Home
In April 2019, we introduced TVisionTM Home, a rebranded and upgraded version of Layer3 TV. TVisionTM Home delivers
what customers want most from high-end home TV, including a premium TV experience and HD and 4K channels. TVisionTM
Home launched in eight markets.
30
T-Mobile MONEY
In April 2019, we launched T-Mobile MONEY nationwide, offering customers a no-fee, interest-earning, mobile-first checking
account which can be opened and managed from customers’ smartphones. Accounts are held at BankMobile, a Division of
Customers Bank, member Federal Deposit Insurance Corporation.
Our ability to acquire and retain branded customers is important to our business in the generation of revenues and we believe
our Un-carrier strategy, along with ongoing network improvements, has been successful in attracting and retaining customers as
evidenced by continued branded customer growth and improved branded postpaid phone and branded prepaid customer churn.
(in thousands)
Net customer additions
Branded postpaid customers
Branded prepaid customers
Total branded customers
Branded postpaid phone churn
Branded prepaid churn
Year Ended December 31,
2019 Versus 2018
2018 Versus 2017
2019
2018
2017
# Change
% Change
# Change
% Change
4,515
339
4,854
4,459
460
4,919
3,620
855
4,475
56
(121)
(65)
1 %
(26)%
(1)%
839
(395)
444
23 %
(46)%
10 %
Year Ended December 31,
2019
2018
2017
Bps Change
2019 Versus
2018
Bps Change
2018 Versus
2017
0.89 %
3.82 %
1.01 %
3.96 %
1.18 %
4.04 %
-12 bps
-14 bps
-17 bps
-8 bps
Accounting Pronouncements Adopted During the Current Year
Leases
On January 1, 2019, we adopted the new lease standard. See Note 1 – Summary of Significant Accounting Policies of the Notes
to the Consolidated Financial Statements for information regarding the impact of our adoption of the new lease standard.
31
Results of Operations
Highlights for the year ended December 31, 2019, compared to the same period in 2018
•
•
•
•
Total revenues of $45.0 billion for the year ended December 31, 2019, increased $1.7 billion, or 4%, primarily driven
by growth in Service revenues, partially offset by a decrease in Equipment revenues, as further discussed below.
Service revenues of $34.0 billion for the year ended December 31, 2019, increased $2.0 billion, or 6%, primarily due
to growth in our average branded customer base driven by the continued growth in existing and Greenfield markets,
including the growing success of new customer segments and rate plans such as Unlimited 55+, Military, Business and
Essentials and growth in other connected devices and wearables, specifically the Apple Watch, partially offset by
lower postpaid phone and prepaid Average Revenue Per User (“ARPU”).
Equipment revenues of $9.8 billion for the year ended December 31, 2019, decreased $169 million, or 2%, primarily
due to a decrease in the number of devices sold, excluding purchased leased devices, and a decrease in lease revenues,
partially offset by higher average revenue per device sold, excluding purchased leased devices.
Operating income of $5.7 billion for the year ended December 31, 2019, increased $413 million, or 8%, primarily due
to higher Service revenues, partially offset by higher Selling, general and administrative expenses and higher Cost of
services. Operating income included the following:
•
•
•
•
The impact of Merger-related costs was $620 million for the year ended December 31, 2019, compared to
$196 million for the year ended December 31, 2018.
The impact from commission costs capitalized and amortized beginning upon the adoption of ASC 606 on
January 1, 2018, reduced Operating income by $337 million for the year ended December 31, 2019,
compared to year ended December 31, 2018.
The positive impact of hurricane-related reimbursements, net of costs, was $158 million for the year ended
December 31, 2018. There were no significant impacts from hurricanes for the year ended December 31,
2019.
The positive impact of the new lease standard of approximately $195 million for the year ended December
31, 2019.
•
Net income of $3.5 billion for the year ended December 31, 2019, increased $580 million, or 20%, primarily due to
higher Operating income and lower Interest expense to affiliates and Interest expense, partially offset by higher
Income tax expense. Net income included the following:
•
•
•
•
The impact of Merger-related costs was $501 million, net of tax, for the year ended December 31, 2019,
compared to $180 million, net of tax, for the year ended December 31, 2018.
The impact from commission costs capitalized and amortized, beginning upon the adoption of ASC 606 on
January 1, 2018, reduced Net income by $249 million for the year ended December 31, 2019, compared to
year ended December 31, 2018.
The positive impact of hurricane-related reimbursements, net of costs, was $99 million, net of tax, for the year
ended December 31, 2018. There were no significant impacts from hurricanes for the year ended December
31, 2019.
The positive impact of the new lease standard of approximately $175 million, net of tax, for the year ended
December 31, 2019.
•
•
•
Adjusted EBITDA, a non-GAAP financial measure, of $13.4 billion for the year ended December 31, 2019, increased
$985 million, or 8%, primarily due to higher Operating income driven by the factors described above. Merger-related
costs are excluded from Adjusted EBITDA. See “Performance Measures” for additional information.
Net cash provided by operating activities of $6.8 billion for the year ended December 31, 2019, increased $2.9 billion,
or 75%. See “Liquidity and Capital Resources” for additional information.
Free Cash Flow, a non-GAAP financial measure, of $4.3 billion for the year ended December 31, 2019, increased
$767 million, or 22%. Free Cash Flow includes $442 million and $86 million in payments for Merger-related costs for
the years ended December 31, 2019 and 2018, respectively. See “Liquidity and Capital Resources” for additional
information.
32
Summary of our consolidated financial results:
(in millions)
Revenues
Branded postpaid revenues
Branded prepaid revenues
Wholesale revenues
Roaming and other service revenues
Total service revenues
Equipment revenues
Other revenues
Total revenues
Operating expenses
Cost of services, exclusive of depreciation and
amortization shown separately below
Cost of equipment sales, exclusive of depreciation
and amortization shown separately below
Selling, general and administrative
Depreciation and amortization
Gains on disposal of spectrum licenses
Total operating expenses
Operating income
Other income (expense)
Interest expense
Interest expense to affiliates
Interest income
Other expense, net
Total other expense, net
Income before income taxes
Income tax (expense) benefit
Net income
Statement of Cash Flows Data
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Non-GAAP Financial Measures
Adjusted EBITDA
Free Cash Flow
Year Ended December 31,
2019 Versus 2018
2018 Versus 2017
2019
2018
2017
$ Change % Change
$ Change % Change
$
22,673
$
20,862
$
19,448
$
1,811
9 % $
1,414
9,543
1,279
499
33,994
9,840
1,164
44,998
9,598
1,183
349
31,992
10,009
1,309
43,310
9,380
1,102
230
30,160
9,375
1,069
40,604
6,622
6,307
6,100
11,899
14,139
6,616
—
39,276
5,722
(727)
(408)
24
(8)
(1,119)
4,603
(1,135)
3,468
6,824
(4,125)
(2,374)
$
$
12,047
13,161
6,486
—
38,001
5,309
(835)
(522)
19
(54)
(1,392)
3,917
(1,029)
2,888
3,899
(579)
(3,336)
$
$
11,608
12,259
5,984
(235)
35,716
4,888
(1,111)
(560)
17
(73)
(1,727)
3,161
1,375
4,536
3,831
(6,745)
(1,367)
$
$
$
$
$
13,383
$
12,398
$
11,213
$
4,319
3,552
2,725
(55)
96
150
2,002
(169)
(145)
1,688
315
(148)
978
130
—
1,275
413
108
114
5
46
273
686
(106)
580
2,925
(3,546)
962
985
767
(1)%
8 %
43 %
6 %
(2)%
(11)%
4 %
5 %
(1)%
7 %
2 %
NM
3 %
8 %
(13)%
(22)%
26 %
(85)%
(20)%
18 %
10 %
218
81
119
1,832
634
240
2,706
207
439
902
502
235
2,285
421
276
38
2
19
335
756
(2,404)
20 % $
(1,648)
75 % $
68
612 %
(29)%
6,166
(1,969)
8 % $
1,185
22 %
827
7 %
2 %
7 %
52 %
6 %
7 %
22 %
7 %
3 %
4 %
7 %
8 %
(100)%
6 %
9 %
(25)%
(7)%
12 %
(26)%
(19)%
24 %
(175)%
(36)%
2 %
(91)%
144 %
11 %
30 %
33
The following discussion and analysis are for the year ended December 31, 2019, compared to the same period in 2018
unless otherwise stated. For a discussion and analysis of the year ended December 31, 2018, compared to the same period in
2017 please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part
II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 7, 2019.
Total revenues increased $1.7 billion, or 4%, as discussed below.
Branded postpaid revenues increased $1.8 billion, or 9%, primarily from:
•
•
•
Higher average branded postpaid phone customers, primarily from growth in our customer base driven by the
continued growth in existing and Greenfield markets, including the growing success of new customer segments and
rate plans such as Unlimited 55+, Military, Business and Essentials; and
Higher average branded postpaid other customers, driven by higher other connected devices and wearables,
specifically the Apple Watch; partially offset by
Lower branded postpaid phone ARPU. See “Branded Postpaid Phone ARPU” in the “Performance Measures” section
of this MD&A.
Branded prepaid revenues were essentially flat.
Wholesale revenues increased $96 million, or 8%, primarily from the continued success of our MVNO partnerships.
Roaming and other service revenues increased $150 million, or 43%, primarily from increases in domestic and international
roaming revenues, including growth from Sprint.
Equipment revenues decreased $169 million, or 2%, primarily from:
•
•
A decrease of $94 million in device sales revenues, excluding purchased leased devices, primarily from:
•
•
A 7% decrease in the number of devices sold, excluding purchased leased devices; partially offset by
Higher average revenue per device sold primarily due to an increase in the high-end device mix; and
A decrease of $93 million in lease revenues primarily due to a lower number of customer devices under lease, partially
offset by higher revenue per device under lease.
Other revenues decreased $145 million, or 11%, primarily from:
•
•
•
•
A decrease of $185 million for the year ended December 31, 2019, in co-location rental revenue from the adoption of
the new lease standard; and
Hurricane-related reimbursements of $71 million included in the year ended December 31, 2018, compared to no
impact from hurricanes in the year ended December 31, 2019; partially offset by
Higher advertising revenues; and
Higher spectrum lease revenue from the reciprocal long-term lease agreement with Sprint executed during the three
months ended December 31, 2018.
Our operating expenses consist of the following categories:
•
Cost of services primarily includes costs directly attributable to providing wireless service through the operation of
our network, including direct switch and cell site costs, such as rent, network access and transport costs, utilities,
maintenance, associated labor costs, long distance costs, regulatory program costs, roaming fees paid to other carriers
and data content costs. In addition, certain costs for customer appreciation programs are included in Cost of services.
34
•
•
Cost of equipment sales primarily includes costs of devices and accessories sold to customers and dealers, device
costs to fulfill insurance and warranty claims, costs related to returned and purchased leased devices, write-downs of
inventory related to shrinkage and obsolescence, and shipping and handling costs.
Selling, general and administrative primarily includes costs not directly attributable to providing wireless service for
the operation of sales, customer care and corporate activities. These include commissions paid to dealers and retail
employees for customer activations and upgrades, labor and facilities costs associated with retail sales force and
administrative space, marketing and promotional costs, customer support and billing, bad debt expense, losses from
sales of receivables and back office administrative support activities.
Operating expenses increased $1.3 billion, or 3%, primarily from higher Selling, general and administrative expenses and Cost
of services as discussed below.
Cost of services, exclusive of depreciation and amortization, increased $315 million, or 5%, primarily from:
•
•
•
•
•
Higher costs for employee-related expenses, network expansion, expenses from new leases and repair and
maintenance;
Hurricane-related reimbursements, net of costs, of $76 million included in the year ended December 31, 2018,
compared to no significant impact from hurricanes in the year ended December 31, 2019; and
Higher spectrum lease expense from the reciprocal long-term lease agreement with Sprint executed during the three
months ended December 31, 2018; partially offset by
The positive impact of the new lease standard of approximately $380 million in the year ended December 31, 2019,
resulting from the decrease in the average lease term and the change in accounting conclusion for certain sale-
leaseback sites; and
Lower regulatory program costs.
Cost of equipment sales, exclusive of depreciation and amortization, decreased $148 million, or 1%, primarily from:
•
•
•
•
•
A decrease of $98 million in device cost of equipment sales, excluding purchased leased devices, primarily from:
•
•
A 7% decrease in the number of devices sold, excluding purchased leased devices, partially offset by
Higher average cost per device sold due to an increase in the high-end device mix;
A decrease of $30 million in returned handset expenses due to reduced device sales;
A decrease in leased device cost of equipment sales, primarily due to lower leased device returns; and
A decrease in extended warranty costs, primarily due to a lower volume of purchased handsets for warranty
replacement; partially offset by
An increase in costs related to the liquidation of inventory.
Selling, general and administrative expenses increased $978 million, or 7%, primarily from:
•
•
•
•
•
•
An increase of $424 million in Merger-related costs;
Higher commissions expense resulting from an increase of $337 million in amortization expense related to commission
costs that were capitalized beginning upon the adoption of ASC 606 on January 1, 2018;
Higher employee-related costs primarily due to annual pay increases and growth in headcount; and
Higher costs related to outsourced functions; partially offset by
Lower commissions expense from lower branded prepaid customer additions and compensation structure changes; and
Lower advertising costs.
35
Depreciation and amortization increased $130 million or 2%, primarily from:
•
•
•
Network expansion, including the continued deployment of low band spectrum, including 600 MHz, and the
nationwide launch of our 5G network; and
Higher costs related to the acceleration of depreciation for certain assets due to our accelerated 600 MHz build-out and
5G nationwide launch; partially offset by
Lower depreciation expense resulting from a lower total number of customer devices under lease.
Operating income, the components of which are discussed above, increased $413 million, or 8%.
Interest expense decreased $108 million, or 13%, primarily from:
•
•
•
An increase of $43 million in capitalized interest costs, primarily due to the build-out of our network to utilize our 600
MHz spectrum licenses and the nationwide launch of our 5G network;
The redemption in April 2018 of an aggregate principal amount of $2.4 billion of Senior Notes, with various interest
rates and maturity dates; and
A $34 million reduction in interest expense from the change in accounting conclusion related to the reassessment of
previously failed sale-leasebacks of certain T-Mobile-owned wireless communications tower sites associated with the
adoption of the new lease standard.
Interest expense to affiliates decreased $114 million, or 22%, primarily from:
•
•
•
An increase of $67 million in capitalized interest costs, primarily due to the build-out of our network to utilize our 600
MHz spectrum licenses and the nationwide launch of our 5G network;
Lower interest on $600 million aggregate principal amount of Senior Reset Notes retired in April 2019; and
Lower interest rates achieved through refinancing a total of $2.5 billion of Senior Reset Notes in April 2018.
Other expense, net decreased $46 million, or 85%, primarily from:
•
•
•
•
•
An $86 million loss during the year ended December 31, 2018, on the early redemption of $2.5 billion of DT Senior
Reset Notes due 2021 and 2022; and
A $32 million loss during the year ended December 31, 2018, on the early redemption of $1.0 billion of 6.125% Senior
Notes due 2022; partially offset by
A $30 million gain during the year ended December 31, 2018, on the sale of auction rate securities which were
originally acquired with MetroPCS;
A $25 million bargain purchase gain as part of our purchase price allocation related to the acquisition of Iowa Wireless
Services, LLC (“IWS”) and a $15 million gain on our previously held equity interest in IWS, both recognized during
the year ended December 31, 2018; and
A $28 million redemption premium on the DT Senior Reset Notes; partially offset by the write-off of embedded
derivatives upon redemption of the debt which resulted in a gain of $11 million during the year ended December 31,
2019.
Income tax expense increased $106 million, or 10%, primarily from:
•
•
Higher income before taxes; partially offset by
A reduction of the effective income tax rate to 24.7% for the year ended December 31, 2019, compared to 26.3% for
the year ended December 31, 2018, primarily from:
•
•
A $115 million increase in income tax expense during the year ended December 31, 2018, due to a tax regime
change in certain state tax jurisdictions; and
The favorable rate impact of certain non-recurring legal entity restructuring in 2019.
36
Net income, the components of which are discussed above, increased $580 million, or 20%, primarily due to higher Operating
income and lower interest expense to affiliates and interest expense. Net income included the following:
• Merger-related costs of $501 million, net of tax, for the year ended December 31, 2019, compared to Merger-related
costs of $180 million, net of tax, for the year ended December 31, 2018;
•
•
•
The negative impact from commission costs capitalized and amortized beginning upon the adoption of ASC 606 on
January 1, 2018, net of tax, of $249 million for the year ended December 31, 2019, compared to year ended
December 31, 2018;
Hurricane-related reimbursements, net of costs, of $99 million, net of tax, for the year ended December 31, 2018.
There were no significant impacts from hurricanes for the year ended December 31, 2019; and
The positive impact of the new lease standard of approximately $175 million, net of tax, for the year ended December
31, 2019.
Guarantor Subsidiaries
Pursuant to the applicable indentures and supplemental indentures, the long-term debt to affiliates and third parties issued by T-
Mobile USA (“Issuer”) is fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by T-Mobile
(“Parent”) and certain of the Issuer’s 100% owned subsidiaries (“Guarantor Subsidiaries”). The financial condition and results
of operations of the Parent, Issuer and Guarantor Subsidiaries is substantially similar to our consolidated financial condition. In
2019, certain Non-Guarantor Subsidiaries became Guarantor Subsidiaries. Certain prior period amounts have been reclassified
to conform to the current period’s presentations. The most significant components of the financial condition of our Non-
Guarantor Subsidiaries were as follows:
(in millions)
Other current assets
Property and equipment, net
Tower obligations
Total stockholders' deficit
December 31,
2019
December 31,
2018
Change
$
%
$
$
684
194
2,161
(1,620)
$
644
246
2,173
(1,454)
40
(52)
(12)
(166)
6 %
(21)%
(1)%
11 %
The most significant components of the results of operations of our Non-Guarantor Subsidiaries were as follows:
(in millions)
Service revenues
Cost of equipment sales, exclusive of depreciation and amortization
Selling, general and administrative
Total comprehensive income
Year Ended December 31,
Change
2019
2018
$
%
$
3,003
$
2,333
$
1,207
989
608
1,010
892
301
670
197
97
307
29 %
20 %
11 %
102 %
The change to the results of operations of our Non-Guarantor Subsidiaries was primarily from:
•
•
•
Higher Service revenues, primarily due to an increase in activity of the Non-Guarantor Subsidiary that provides
premium services, primarily driven by a net increase in rates as well as growth in our customer base related to a
premium service that launched at the end of August 2018 and sales of a new product; partially offset by
Higher Cost of equipment sales, exclusive of depreciation and amortization, primarily due to higher cost devices used
for device insurance claims fulfillment, partially offset by an increase in device liquidations; and
Higher Selling, general and administrative expenses, primarily due to higher costs related to outsourced functions.
All other results of operations of the Parent, Issuer and Guarantor Subsidiaries are substantially similar to the Company’s
consolidated results of operations. See Note 18 – Guarantor Financial Information of the Notes to the Consolidated Financial
Statements.
37
Performance Measures
In managing our business and assessing financial performance, we supplement the information provided by our financial
statements with other operating or statistical data and non-GAAP financial measures. These operating and financial measures
are utilized by our management to evaluate our operating performance and, in certain cases, our ability to meet liquidity
requirements. Although companies in the wireless industry may not define each of these measures in precisely the same way,
we believe that these measures facilitate comparisons with other companies in the wireless industry on key operating and
financial measures.
Total Customers
A customer is generally defined as a SIM number with a unique T-Mobile identifier which is associated with an account that
generates revenue. Branded customers generally include customers that are qualified either for postpaid service utilizing
phones, wearables, DIGITS or other connected devices which includes tablets and SyncUp DRIVE™, where they generally pay
after receiving service, or prepaid service, where they generally pay in advance. Our branded prepaid customers include
customers of T-Mobile and Metro by T-Mobile. Wholesale customers include M2M and MVNO customers that operate on our
network but are managed by wholesale partners.
Starting with the three months ended March 31, 2020, we plan to discontinue reporting wholesale customers and instead focus
on branded customers and wholesale revenues, which we consider more relevant than the number of wholesale customers given
the expansion of M2M and IoT products.
On July 18, 2019, we entered into an agreement whereby certain T-Mobile branded prepaid products will now be offered and
distributed by a current MVNO partner. Upon the effective date, the agreement resulted in a base adjustment to reduce branded
prepaid customers by 616,000, as we no longer actively support the branded product offering. Prospectively, new customer
activity associated with these products is recorded within wholesale customers and revenue for these customers is recorded
within Wholesale revenues in our Consolidated Statements of Comprehensive Income.
The following table sets forth the number of ending customers:
(in thousands)
Customers, end of period
Branded postpaid phone customers
Branded postpaid other customers
Total branded postpaid customers
Branded prepaid customers (1)
Total branded customers
Wholesale customers (1)
Total customers, end of period
Adjustment to branded prepaid customers (1)
As of December 31,
2019 Versus 2018
2018 Versus 2017
2019
2018
2017
# Change % Change
# Change % Change
40,345
6,689
47,034
20,860
67,894
18,152
86,046
(616)
37,224
5,295
42,519
21,137
63,656
15,995
79,651
—
34,114
3,933
38,047
20,668
58,715
13,870
72,585
—
3,121
1,394
4,515
(277)
4,238
2,157
6,395
(616)
8 %
26 %
11 %
(1)%
7 %
13 %
8 %
NM
3,110
1,362
4,472
469
4,941
2,125
7,066
—
9 %
35 %
12 %
2 %
8 %
15 %
10 %
— %
(1) On July 18, 2019, we entered into an agreement whereby certain T-Mobile branded prepaid products will now be offered and distributed by a current
MVNO partner. As a result, we included a base adjustment in Q3 2019 to reduce branded prepaid customers by 616,000. Prospectively, new customer activity
associated with these products is recorded within wholesale customers.
Branded Customers
Total branded customers increased 4,238,000, or 7%, primarily from:
•
•
•
Higher branded postpaid phone customers driven by the growing success of new customer segments and rate plans
such as Unlimited 55+, Military, Business and Essentials and continued growth in existing and Greenfield markets,
along with promotional activities and lower churn; and
Higher branded postpaid other customers, primarily due to strength in additions from other connected devices;
partially offset by
Lower branded prepaid customers driven primarily by a reduction of 616,000 customers resulting from a base
adjustment for certain T-Mobile branded prepaid products now being offered and distributed by a current MVNO
partner, partially offset by the continued success of our prepaid brands due to promotional activities and rate plan
offers.
38
Wholesale
Wholesale customers increased 2,157,000, or 13%, primarily due to the continued success of our M2M and MVNO
partnerships.
Net Customer Additions
The following table sets forth the number of net customer additions:
(in thousands)
Net customer additions
Branded postpaid phone customers
Branded postpaid other customers
Total branded postpaid customers
Branded prepaid customers (1)
Total branded customers
Wholesale customers (1)
Total net customer additions
Year Ended December 31,
2019 Versus 2018
2018 Versus 2017
2019
2018
2017
# Change % Change
# Change % Change
3,121
1,394
4,515
339
4,854
2,157
7,011
3,097
1,362
4,459
460
4,919
2,125
7,044
2,817
803
3,620
855
4,475
1,183
5,658
24
32
56
(121)
(65)
32
(33)
1 %
2 %
1 %
(26)%
(1)%
2 %
— %
280
559
839
(395)
444
942
1,386
10 %
70 %
23 %
(46)%
10 %
80 %
24 %
(1) On July 18, 2019, we entered into an agreement whereby certain T-Mobile branded prepaid products will now be offered and distributed by a current
MVNO partner. As a result, we included a base adjustment in Q3 2019 to reduce branded prepaid customers by 616,000. Prospectively, new customer activity
associated with these products is recorded within wholesale customers.
Branded Customers
Total branded net customer additions decreased 65,000, or 1%, primarily from:
•
•
•
Lower branded prepaid net customer additions primarily due to the impact of continued competitor promotional
activities in the marketplace, partially offset by lower churn; partially offset by
Higher branded postpaid other net customer additions primarily due to additions from other connected devices,
partially offset by higher deactivations from a growing customer base; and
Higher branded postpaid phone net customer additions primarily due to lower churn.
Wholesale
Wholesale net customer additions increased 32,000, or 2%, primarily due to higher additions from the continued success of our
M2M and MVNO partnerships.
Customers Per Account
Customers per account is calculated by dividing the number of branded postpaid customers as of the end of the period by the
number of branded postpaid accounts as of the end of the period. An account may include branded postpaid phone customers
and branded postpaid other customers which includes wearables, DIGITS, and other connected devices such as tablets and
SyncUp DRIVE™. We believe branded postpaid customers per account provides management, investors and analysts with
useful information to evaluate our branded postpaid customer base.
The following table sets forth the branded postpaid customers per account:
Branded postpaid customers per account
3.13
3.03
2.93
0.10
3 %
0.10
3 %
As of December 31,
2019 Versus 2018
2018 Versus 2017
2019
2018
2017
# Change % Change
# Change % Change
Branded postpaid customers per account increased 3% primarily from continued growth of new customer segments and rate
plans such as Unlimited 55+, Military, Business and Essentials, promotional activities targeting families and the continued
success of other connected devices and wearables, specifically tablets and the Apple Watch.
39
Starting with the three months ended March 31, 2020, we plan to report Average Revenue per Postpaid Account or Postpaid
ARPA, in addition to our existing ARPU metrics, reflecting the increasing importance of non-phone devices to our customers.
We also plan to discontinue reporting branded postpaid customers per account.
Churn
Churn represents the number of customers whose service was disconnected as a percentage of the average number of customers
during the specified period. The number of customers whose service was disconnected is presented net of customers that
subsequently have their service restored within a certain period of time. We believe that churn provides management, investors
and analysts with useful information to evaluate customer retention and loyalty.
The following table sets forth the churn:
Branded postpaid phone churn
Branded prepaid churn
Year Ended December 31,
2019
2018
2017
Bps Change
2019 Versus
2018
Bps Change
2018 Versus
2017
0.89 %
3.82 %
1.01 %
3.96 %
1.18 %
4.04 %
-12 bps
-14 bps
-17 bps
-8 bps
Branded postpaid phone churn decreased 12 basis points, primarily from increased customer satisfaction and loyalty from
ongoing improvements to network quality, industry-leading customer service and the overall value of our offerings.
Branded prepaid churn decreased 14 basis points, primarily from increased customer satisfaction and loyalty from ongoing
improvements to network quality and the continued success of our prepaid brands due to promotional activities and rate plan
offers.
Average Revenue Per User
ARPU represents the average monthly service revenue earned from customers. We believe ARPU provides management,
investors and analysts with useful information to assess and evaluate our service revenue per customer and assist in forecasting
our future service revenues generated from our customer base. Branded postpaid phone ARPU excludes Branded postpaid other
customers and related revenues which includes wearables, DIGITS and other connected devices such as tablets and SyncUp
DRIVE™.
The following table illustrates the calculation of our operating measure ARPU and reconciles this measure to the related service
revenues:
Year Ended December 31,
2019 Versus 2018
2018 Versus 2017
2019
2018
2017
$ Change
% Change
$ Change
% Change
(in millions, except average number of
customers and ARPU)
Calculation of Branded Postpaid Phone
ARPU
Branded postpaid service revenues
Less: Branded postpaid other revenues
Branded postpaid phone service revenues
Divided by: Average number of branded
postpaid phone customers (in thousands) and
number of months in period
Branded postpaid phone ARPU
Calculation of Branded Prepaid ARPU
Branded prepaid service revenues
Divided by: Average number of branded prepaid
customers (in thousands) and number of months
in period
$
$
$
$
22,673
(1,344)
21,329
38,602
46.04
9,543
$
$
$
$
20,862
(1,117)
19,745
35,458
46.40
9,598
$
$
$
$
19,448
(1,077)
18,371
32,596
46.97
9,380
$
$
$
$
1,811
(227)
1,584
3,144
(0.36)
9 % $
1,414
20 %
(40)
8 % $
1,374
9 %
(1)% $
2,862
(0.57)
(55)
(1)% $
218
20,955
20,761
20,204
194
(0.58)
1 %
(2)% $
557
(0.16)
7 %
4 %
7 %
9 %
(1)%
2 %
3 %
— %
Branded prepaid ARPU
$
37.95
$
38.53
$
38.69
$
40
Branded Postpaid Phone ARPU
Branded postpaid phone ARPU decreased $0.36, or 1%, primarily due to:
•
•
•
•
•
An increase in promotional activities, including the ongoing growth in our Netflix offering, which totaled $0.54 for the
year ended December 31, 2019, and decreased branded postpaid phone ARPU by $0.19 compared to the year ended
December 31, 2018;
A reduction in regulatory program revenues from the continued adoption of tax inclusive plans; and
A reduction in certain non-recurring charges; partially offset by
Higher premium services revenue; and
The growing success of new customer segments and rate plans.
We expect Branded postpaid phone ARPU in full-year 2020 to be generally stable compared to full-year 2019 within a range of
plus 1% to minus 1%.
Branded Prepaid ARPU
Branded prepaid ARPU decreased $0.58, or 2%, primarily due to:
•
•
•
Dilution from promotional activity; and
Growth in our Amazon Prime offering - included as a benefit with certain Metro by T-Mobile unlimited rate plans as
of the fourth quarter of 2018 - which impacted branded prepaid ARPU by $0.39 for the year ended December 31,
2019, and decreased branded prepaid ARPU by $0.36 compared to the year ended December 31, 2018; partially offset
by
The removal of certain branded prepaid customers associated with products now offered and distributed by a current
MVNO partner as those customers had lower ARPU.
Adjusted EBITDA
Adjusted EBITDA represents earnings before Interest expense, net of Interest income, Income tax expense, Depreciation and
amortization, non-cash Stock-based compensation and certain income and expenses not reflective of our operating performance.
Net income margin represents Net income divided by Service revenues. Adjusted EBITDA margin represents Adjusted
EBITDA divided by Service revenues.
Adjusted EBITDA is a non-GAAP financial measure utilized by our management to monitor the financial performance of our
operations. We use Adjusted EBITDA internally as a measure to evaluate and compensate our personnel and management for
their performance, and as a benchmark to evaluate our operating performance in comparison to our competitors. Management
believes analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate overall operating performance and
facilitate comparisons with other wireless communications services companies because it is indicative of our ongoing operating
performance and trends by excluding the impact of interest expense from financing, non-cash depreciation and amortization
from capital investments, non-cash stock-based compensation, network decommissioning costs and costs related to the
Transactions, as they are not indicative of our ongoing operating performance, as well as certain other nonrecurring income and
expenses. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for
income from operations, net income or any other measure of financial performance reported in accordance with U.S. Generally
Accepted Accounting Principles (“GAAP”).
41
The following table illustrates the calculation of Adjusted EBITDA and reconciles Adjusted EBITDA to Net income, which we
consider to be the most directly comparable GAAP financial measure:
Year Ended December 31,
2019 Versus 2018
2018 Versus 2017
2019
2018
2017
$ Change % Change
$ Change % Change
$
3,468
$
2,888
$
4,536
$
580
20 % $
(1,648)
(36)%
(in millions)
Net income
Adjustments:
Interest expense
Interest expense to affiliates
Interest income
Other expense, net
Income tax expense (benefit)
Operating income
Depreciation and amortization
Stock-based compensation (1)
Merger-related costs
Other, net (2)
727
408
(24)
8
1,135
5,722
6,616
423
620
2
835
522
(19)
54
1,029
5,309
6,486
389
196
18
1,111
560
(17)
73
(1,375)
4,888
5,984
307
—
34
(108)
(114)
(5)
(46)
106
413
130
34
424
(16)
985
(13)%
(22)%
26 %
(85)%
10 %
8 %
2 %
9 %
216 %
(89)%
(276)
(38)
(2)
(19)
2,404
421
502
82
196
(16)
8 % $
1,185
100 bps
— bps
(25)%
(7)%
12 %
(26)%
(175)%
9 %
8 %
27 %
NM
(47)%
11 %
-600 bps
200 bps
Adjusted EBITDA
$
13,383
$
12,398
$
11,213
$
Net income margin (Net income divided by
service revenues)
Adjusted EBITDA margin (Adjusted
EBITDA divided by service revenues)
10 %
39 %
9 %
39 %
15 %
37 %
(1) Stock-based compensation includes payroll tax impacts and may not agree to stock-based compensation expense in the Consolidated Financial Statements.
Additionally, certain stock-based compensation expenses associated with the Transactions have been included in Merger-related costs.
(2) Other, net may not agree to the Consolidated Statements of Comprehensive Income primarily due to certain non-routine operating activities, such as other
special items that would not be expected to reoccur or are not reflective of T-Mobile’s ongoing operating performance, and are therefore excluded in
Adjusted EBITDA.
Adjusted EBITDA increased $985 million, or 8%, primarily due to:
•
•
•
•
•
•
Higher service revenues, as further discussed above; and
The positive impact of the new lease standard of approximately $195 million; partially offset by
Higher Selling, general and administrative expenses, excluding Merger-related costs;
Higher Cost of services expenses; and
The impact from hurricane-related reimbursements, net of costs, of $158 million for the year ended December 31,
2018. There were no significant impacts from hurricanes for the year ended December 31, 2019.
The impact from commission costs capitalized and amortized beginning upon the adoption of ASC 606 on January 1,
2018, reduced Adjusted EBITDA by $337 million for the year ended December 31, 2019, compared to year ended
December 31, 2018.
Liquidity and Capital Resources
Our principal sources of liquidity are our cash and cash equivalents and cash generated from operations, proceeds from issuance
of long-term debt and common stock, financing leases, the sale of certain receivables, financing arrangements of vendor
payables which effectively extend payment terms and secured and unsecured revolving credit facilities with DT. Upon
consummation of the Transactions, we will incur substantial third-party indebtedness which will increase our future financial
commitments, including aggregate interest payments on higher total indebtedness, and may adversely impact our liquidity.
Further, the incurrence of additional indebtedness may inhibit our ability to incur new debt under the terms governing our
existing and future indebtedness, which may make it more difficult for us to incur new debt in the future to finance our business
strategy.
42
Cash Flows
The following is a condensed schedule of our cash flows for the years ended December 31, 2019 and 2018:
Year Ended December 31,
2019 Versus 2018
2018 Versus 2017
(in millions)
2019
2018
2017
$ Change
% Change
$ Change
% Change
Net cash provided by operating activities
$
6,824
$
3,899
$
3,831
$
Net cash used in investing activities
Net cash used in financing activities
(4,125)
(2,374)
(579)
(3,336)
(6,745)
(1,367)
2,925
(3,546)
962
75 % $
612 %
(29)%
68
6,166
(1,969)
2 %
(91)%
144 %
Operating Activities
Net cash provided by operating activities increased $2.9 billion, or 75%, from:
•
•
A $2.0 billion decrease in net cash outflows from changes in working capital, primarily due to lower use from
Accounts receivable, Accounts payable and accrued liabilities and Equipment installment plan receivables, partially
offset by higher use from Inventories; and
A $951 million increase in Net income and net non-cash adjustments to Net income.
With the adoption of the new lease standard, changes in Operating lease right-of-use assets and Short and long-term operating
lease liabilities are now presented in Changes in operating assets and liabilities. The net impact of changes in these accounts
decreased Net cash provided by operating activities by $235 million for the year ended December 31, 2019.
Investing Activities
Net cash used in investing activities increased $3.5 billion, or 612%. The use of cash for the year ended December 31, 2019,
was primarily from:
•
•
•
•
$6.4 billion in Purchases of property and equipment, including capitalized interest, primarily driven by growth in
network build as we continued deployment of low band spectrum, including 600 MHz, and launched our nationwide
5G network;
$967 million in Purchases of spectrum licenses and other intangible assets, including deposits; and
$632 million in Net cash related to derivative contracts under collateral exchange arrangements, see Note 7 - Fair
Value Measurements of the Notes to the Consolidated Financial Statements for further information; partially offset by
$3.9 billion in Proceeds related to beneficial interests in securitization transactions.
Financing Activities
Net cash used in financing activities decreased $1.0 billion, or 29%. The use of cash for the year ended December 31, 2019,
was primarily from:
•
•
•
•
•
$798 million for Repayments of financing lease obligations;
$775 million for Repayments of short-term debt for purchases of inventory, property and equipment;
$600 million for Repayments of long-term debt; and
$156 million for Tax withholdings on share-based awards.
Activity under the revolving credit facility included borrowing and full repayment of $2.3 billion, for a net of $0
impact.
Cash and Cash Equivalents
As of December 31, 2019, our Cash and cash equivalents were $1.5 billion compared to $1.2 billion at December 31, 2018.
Free Cash Flow
Free Cash Flow represents Net cash provided by operating activities less payments for Purchases of property and equipment,
including Proceeds from sales of tower sites and Proceeds related to beneficial interests in securitization transactions, less Cash
43
payments for debt prepayment or debt extinguishment costs. Free Cash Flow is a non-GAAP financial measure utilized by our
management, investors and analysts of our financial information to evaluate cash available to pay debt and provide further
investment in the business.
In 2019, we sold tower sites for proceeds of $38 million which are included in Proceeds from sales of tower sites within Net
cash used in investing activities in our Consolidated Statements of Cash Flows. As these proceeds were from the sale of fixed
assets and are used by management to assess cash available for capital expenditures during the year, we determined the
proceeds are relevant for the calculation of Free Cash Flow and included them in the table below. Other proceeds from the sale
of fixed assets for the periods presented are not significant. We have presented the impact of the sales in the table below, which
illustrates the calculation of Free Cash Flow and reconciles Free Cash Flow to Net cash provided by operating activities, which
we consider to be the most directly comparable GAAP financial measure.
(in millions)
2019
2018
2017
$ Change
% Change
$ Change
% Change
Year Ended December 31,
2019 Versus 2018
2018 Versus 2017
Net cash provided by operating activities
$
6,824
$
3,899
$
3,831
$
Cash purchases of property and equipment
(6,391)
(5,541)
(5,237)
Proceeds from sales of tower sites
38
—
—
2,925
(850)
38
Proceeds related to beneficial interests in
securitization transactions
Cash payments for debt prepayment or debt
extinguishment costs
3,876
5,406
4,319
(1,530)
(28)
(212)
(188)
184
767
Free Cash Flow
$
4,319
$
3,552
$
2,725
$
Free Cash Flow increased $767 million, or 22%, primarily from:
75 % $
15 %
NM
(28)%
(87)%
22 % $
68
(304)
—
1,087
(24)
827
2 %
6 %
NM
25 %
13 %
30 %
•
•
•
•
•
Higher Net cash provided by operating activities, as described above; and
Lower Cash payments for debt prepayment or debt extinguishment costs; partially offset by
Lower Proceeds related to our deferred purchase price from securitization transactions; and
Higher Cash purchases of property and equipment, including capitalized interest of $473 million and $362 million for
the years ended December 31, 2019 and 2018, respectively.
Free Cash Flow includes $442 million and $86 million in payments for Merger-related costs for the years ended
December 31, 2019 and 2018, respectively.
Borrowing Capacity and Debt Financing
As of December 31, 2019, our total debt and financing lease liabilities were $27.3 billion, excluding our tower obligations, of
which $24.9 billion was classified as long-term debt.
Effective April 28, 2019, we redeemed $600 million aggregate principal amount of our DT Senior Reset Notes. The notes were
redeemed at a redemption price equal to 104.666% of the principal amount of the notes (plus accrued and unpaid interest
thereon) and were paid on April 29, 2019. The redemption premium was $28 million and was included in Other expense, net in
our Consolidated Statements of Comprehensive Income and in Cash payments for debt prepayment or debt extinguishment
costs in our Consolidated Statements of Cash Flows.
Certain components of the reset features were required to be bifurcated from the DT Senior Reset Notes and were separately
accounted for as embedded derivatives. The write-off of embedded derivatives upon redemption resulted in a gain of $11
million, which was included in Other expense, net in our Consolidated Statements of Comprehensive Income. See Note 7 - Fair
Value Measurements of the Notes to the Consolidated Financial Statements for further information.
We maintain a $2.5 billion revolving credit facility with DT which is comprised of a $1.0 billion unsecured revolving credit
agreement and a $1.5 billion secured revolving credit agreement. In December 2019, we amended the terms of the revolving
credit facility with DT to extend the maturity date to December 29, 2022. As of December 31, 2019 and 2018, there were no
outstanding borrowings under the revolving credit facility.
We maintain a financing arrangement with Deutsche Bank AG, which allows for up to $108 million in borrowings. Under the
financing arrangement, we can effectively extend payment terms for invoices payable to certain vendors. As of December 31,
2019 and 2018, there were no outstanding balances.
44
We maintain vendor financing arrangements with our primary network equipment suppliers. Under the respective agreements,
we can obtain extended financing terms. During the year ended December 31, 2019, we utilized $800 million and repaid $775
million under the vendor financing arrangements. Invoices subject to extended payment terms have various due dates through
the first quarter of 2020. Payments on vendor financing agreements are included in Repayments of short-term debt for
purchases of inventory, property and equipment, net, in our Consolidated Statements of Cash Flows. As of December 31, 2019,
there were $25 million in outstanding borrowings under the vendor financing agreements which were included in Short-term
debt in our Consolidated Balance Sheets. As of December 31, 2018, there was no outstanding balance.
Consents on Debt
On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement dated as of May 14, 2018, we
obtained consents necessary to effect certain amendments to certain of our existing debt and certain existing debt of our
subsidiaries. If the Merger is consummated, we will make payments for requisite consents to third-party note holders. There
was no payment accrued as of December 31, 2019.
In connection with the entry into the Business Combination Agreement, DT and T-Mobile USA entered into a financing matters
agreement, dated as of April 29, 2018, pursuant to which DT agreed, among other things, to consent to the incurrence by
T-Mobile USA of secured debt in connection with and after the consummation of the Merger. If the Merger is consummated,
we will make payments for requisite consents to DT. There was no payment accrued as of December 31, 2019. See Note 8 -
Debt of the Notes to the Consolidated Financial Statements for further information.
Commitment Letter
In connection with the entry into the Business Combination Agreement, T-Mobile USA entered into a commitment letter, dated
as of April 29, 2018 (as amended and restated on May 15, 2018 and on September 6, 2019, the “Commitment Letter”). In
connection with the financing provided for in the Commitment Letter, we expect to incur certain fees payable to the financial
institutions, including certain financing fees on the secured term loan commitment. If the Merger closes, we will incur
additional fees for the financial institutions structuring and providing the commitments and certain take-out fees associated with
the issuance of permanent secured bond debt in lieu of the secured bridge loan. In total, we may incur up to approximately $340
million in fees associated with the Commitment Letter. We began incurring certain Commitment Letter fees on November 1,
2019, which were recognized in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive
Income. There were $12 million of fees accrued as of December 31, 2019. See Note 8 - Debt of the Notes to the Consolidated
Financial Statements for further information.
Future Sources and Uses of Liquidity
We may seek additional sources of liquidity, including through the issuance of additional long-term debt in 2020, to continue to
opportunistically acquire spectrum licenses or other assets in private party transactions or for the refinancing of existing long-
term debt on an opportunistic basis. Excluding liquidity that could be needed for spectrum acquisitions, or for other assets, we
expect our principal sources of funding to be sufficient to meet our anticipated liquidity needs for business operations for the
next 12 months as well as our longer-term liquidity needs. Our intended use of any such funds is for general corporate purposes,
including for capital expenditures, spectrum purchases, opportunistic investments and acquisitions, redemption of high yield
callable debt and stock purchases.
In October 2018, we entered into interest rate lock derivatives with notional amounts of $9.6 billion. The fair value of interest
rate lock derivatives was a liability of $1.2 billion and $447 million as of December 31, 2019 and 2018, respectively, and was
included in Other current liabilities in our Consolidated Balance Sheets.
In November 2019, we extended the mandatory termination date on our interest rate lock derivatives to June 3, 2020. In
December 2019, we made net collateral transfers to certain of our derivative counterparties totaling $632 million, which
included variation margin transfers to (or from) such derivative counterparties based on daily market movements. These
collateral transfers are included in Other current assets in our Consolidated Balance Sheets and in Net cash related to derivative
contracts under collateral exchange arrangements within Net cash used in investing activities in our Consolidated Statements of
Cash Flows. The interest rate lock derivatives will be settled upon the earlier of the issuance of fixed-rate debt or the current
mandatory termination date. Upon settlement of the interest rate lock derivatives, we will receive, or make, a cash payment in
the amount of the fair value of the cash flow hedge as of the settlement date. We expect our existing sources of liquidity to be
sufficient to meet the requirements of the interest rate lock derivatives.
45
We determine future liquidity requirements, for both operations and capital expenditures, based in large part upon projected
financial and operating performance, and opportunities to acquire additional spectrum. We regularly review and update these
projections for changes in current and projected financial and operating results, general economic conditions, the competitive
landscape and other factors. There are a number of risks and uncertainties that could cause our financial and operating results
and capital requirements to differ materially from our projections, which could cause future liquidity to differ materially from
our assessment.
The indentures and credit facilities governing our long-term debt to affiliates and third parties, excluding capital leases, contain
covenants that, among other things, limit the ability of the Issuer and the Guarantor Subsidiaries to incur more debt, pay
dividends and make distributions on our common stock, make certain investments, repurchase stock, create liens or other
encumbrances, enter into transactions with affiliates, enter into transactions that restrict dividends or distributions from
subsidiaries, and merge, consolidate or sell, or otherwise dispose of, substantially all of their assets. Certain provisions of each
of the credit facilities, indentures and supplemental indentures relating to the long-term debt to affiliates and third parties
restrict the ability of the Issuer to loan funds or make payments to the Parent. However, the Issuer is allowed to make certain
permitted payments to the Parent under the terms of each of the credit facilities, indentures and supplemental indentures relating
to the long-term debt to affiliates and third parties. We were in compliance with all restrictive debt covenants as of December
31, 2019.
Financing Lease Facilities
We have entered into uncommitted financing lease facilities with certain partners, which provide us with the ability to enter into
financing leases for network equipment and services. As of December 31, 2019, we have committed to $3.9 billion of financing
leases under these financing lease facilities, of which $898 million was executed during the year ended December 31, 2019.
Capital Expenditures
Our liquidity requirements have been driven primarily by capital expenditures for spectrum licenses and the construction,
expansion and upgrading of our network infrastructure. Property and equipment capital expenditures primarily relate to our
network transformation, including the build-out of our network to utilize our 600 MHz spectrum licenses and the deployment of
5G. We expect cash purchases of property and equipment, including capitalized interest of approximately $400 million, to be
$5.9 to $6.2 billion and cash purchases of property and equipment, excluding capitalized interest, to be $5.5 to $5.8 billion in
2020. This includes expenditures for 600 MHz and 5G deployment. This does not include property and equipment obtained
through financing lease agreements, vendor financing agreements, leased wireless devices transferred from inventory or any
additional purchases of spectrum licenses.
Share Repurchases
On December 6, 2017, our Board of Directors authorized a stock repurchase program for up to $1.5 billion of our common
stock through December 31, 2018 (the “2017 Stock Repurchase Program”). Repurchased shares are retired. The 2017 Stock
Repurchase Program was completed on April 29, 2018.
On April 27, 2018, our Board of Directors authorized an increase in the total stock repurchase program to $9.0 billion,
consisting of the $1.5 billion in repurchases previously completed and up to an additional $7.5 billion of repurchases of our
common stock through the year ending December 31, 2020 (the "2018 Stock Repurchase Program"). The additional $7.5 billion
repurchase authorization is contingent upon the termination of the Business Combination Agreement and the abandonment of
the Transactions contemplated under the Business Combination Agreement. There were no repurchases of our common stock
under the 2018 Stock Repurchase Program in 2019 or 2018. See Note 12 - Repurchases of Common Stock of the Notes to the
Consolidated Financial Statements for further information.
Dividends
We have never paid or declared any cash dividends on our common stock, and we do not intend to declare or pay any cash
dividends on our common stock in the foreseeable future. Our credit facilities and the indentures and supplemental indentures
governing our long-term debt to affiliates and third parties, excluding financing leases, contain covenants that, among other
things, restrict our ability to declare or pay dividends on our common stock.
46
Contractual Obligations
The following table summarizes our contractual obligations and borrowings as of December 31, 2019 and the timing and effect
that such commitments are expected to have on our liquidity and capital requirements in future periods:
25,000
6,606
2,447
1,268
14,968
9,850
60,139
(in millions)
Long-term debt (1)
Interest on long-term debt
Financing lease liabilities, including imputed
interest
Tower obligations (2)
Operating lease liabilities, including imputed
interest
Purchase obligations (3)
Less Than 1
Year
1 - 3 Years
4 - 5 Years
More Than 5
Years
Total
$
— $
5,500
$
1,282
1,013
160
2,754
3,603
2,365
1,147
321
4,894
3,263
7,300
$
1,796
12,200
$
1,163
172
320
3,523
1,597
115
467
3,797
1,387
Total contractual obligations
$
8,812
$
17,490
$
14,708
$
19,129
$
(1) Represents principal amounts of long-term debt to affiliates and third parties at maturity, excluding unamortized premium from purchase price allocation
fair value adjustment, financing lease obligations and vendor financing arrangements. See Note 8 – Debt of the Notes to the Consolidated Financial
Statements for further information.
(2) Future minimum payments, including principal and interest payments and imputed lease rental income, related to the tower obligations. See Note 9 –
Tower Obligations of the Notes to the Consolidated Financial Statements for further information.
(3) The minimum commitment for certain obligations is based on termination penalties that could be paid to exit the contracts. Termination penalties are
included in the above table as payments due as of the earliest we could exit the contract, typically in less than one year. For certain contracts that include
fixed volume purchase commitments and fixed prices for various products, the purchase obligations are calculated using fixed volumes and contractually
fixed prices for the products that are expected to be purchased. This table does not include open purchase orders as of December 31, 2019 under normal
business purposes. See Note 16 – Commitments and Contingencies of the Notes to the Consolidated Financial Statements for further information.
Certain commitments and obligations are included in the table based on the year of required payment or an estimate of the year
of payment. Other long-term liabilities have been omitted from the table above due to the uncertainty of the timing of payments,
combined with the absence of historical trending to be used as a predictor of such payments. See Note 17 – Additional Financial
Information of the Notes to the Consolidated Financial Statements for further information.
The purchase obligations reflected in the table above are primarily commitments to purchase and lease spectrum licenses,
wireless devices, network services, equipment, software, marketing sponsorship agreements and other items in the ordinary
course of business. These amounts do not represent our entire anticipated purchases in the future, but represent only those items
for which we are contractually committed. Where we are committed to make a minimum payment to the supplier regardless of
whether we take delivery, we have included only that minimum payment as a purchase obligation. The acquisition of spectrum
licenses is subject to regulatory approval and other customary closing conditions.
In October 2018, we entered into interest rate lock derivatives with notional amounts of $9.6 billion. The fair value of interest
rate lock derivatives was a liability of $1.2 billion and $447 million as of December 31, 2019 and 2018, respectively, and was
included in Other current liabilities in our Consolidated Balance Sheets. Balances related to the cash flow hedges have been
omitted from the table above due to the uncertainty of the amount and timing of settlements. See Note 7 – Fair Value
Measurements of the Notes to the Consolidated Financial Statements for further information.
Related Party Transactions
We have related party transactions associated with DT or its affiliates in the ordinary course of business, including
intercompany servicing and licensing. See Note 17 - Additional Financial Information of the Notes to the Consolidated
Financial Statements for further information.
Disclosure of Iranian Activities under Section 13(r) of the Securities Exchange Act of 1934
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Exchange Act of
1934, as amended (“Exchange Act”). Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable,
whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with
designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction. Disclosure is
required even where the activities, transactions or dealings are conducted outside the U.S. by non-U.S. affiliates in compliance
with applicable law, and whether or not the activities are sanctionable under U.S. law.
47
As of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the year
ended December 31, 2019, that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth
below with respect to affiliates that we do not control and that are our affiliates solely due to their common control with DT.
We have relied upon DT for information regarding their activities, transactions and dealings.
DT, through certain of its non-U.S. subsidiaries, is party to roaming and interconnect agreements with the following mobile and
fixed line telecommunication providers in Iran, some of which are or may be government-controlled entities: MTN Irancell,
Telecommunication Kish Company, Mobile Telecommunication Company of Iran, and Telecommunication Infrastructure
Company of Iran. In addition, during the year ended December 31, 2019, DT, through certain of its non-U.S. subsidiaries,
provided basic telecommunications services to three customers in Germany identified on the Specially Designated Nationals
and Blocked Persons List maintained by the U.S. Department of Treasury’s Office of Foreign Assets Control: Bank Melli, Bank
Sepah, and Europäisch-Iranische Handelsbank. These services have been terminated or are in the process of being terminated.
For the year ended December 31, 2019, gross revenues of all DT affiliates generated by roaming and interconnection traffic and
telecommunications services with the Iranian parties identified herein were less than $0.1 million, and the estimated net profits
were less than $0.1 million.
In addition, DT, through certain of its non-U.S. subsidiaries that operate a fixed-line network in their respective European home
countries (in particular Germany), provides telecommunications services in the ordinary course of business to the Embassy of
Iran in those European countries. Gross revenues and net profits recorded from these activities for the year ended December 31,
2019 were less than $0.1 million. We understand that DT intends to continue these activities.
Off-Balance Sheet Arrangements
We have arrangements, as amended from time to time, to sell certain EIP accounts receivable and service accounts receivable
on a revolving basis as a source of liquidity. As of December 31, 2019, we derecognized net receivables of $2.6 billion upon
sale through these arrangements. See Note 4 – Sales of Certain Receivables of the Notes to the Consolidated Financial
Statements for further information.
Critical Accounting Policies and Estimates
Our significant accounting policies are fundamental to understanding our results of operations and financial condition as they
require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. See Note
1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further information.
Eight of these policies, discussed below, are critical because they require management to make difficult, subjective and
complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would
be reported under different conditions or using different assumptions. Actual results could differ from those estimates.
Management and the Audit Committee of the Board of Directors have reviewed and approved these critical accounting policies.
Leases
We adopted the new lease standard on January 1, 2019 and recognized right-of-use assets and lease liabilities for operating
leases that have not previously been recorded.
Significant Judgments:
The most significant judgments and impacts upon adoption of the standard include the following:
•
In evaluating contracts to determine if they qualify as a lease, we consider factors such as if we have obtained or
transferred substantially all of the rights to the underlying asset through exclusivity, if we can or if we have transferred
the ability to direct the use of the asset by making decisions about how and for what purpose the asset will be used and
if the lessor has substantive substitution rights. Identification of a lease may require significant judgment.
• We recognized right-of-use assets and operating lease liabilities for operating leases that have not previously been
recorded. The lease liability for operating leases is based on the net present value of future minimum lease payments.
The right-of-use asset for operating leases is based on the lease liability adjusted for the reclassification of certain
balance sheet amounts such as prepaid rent and deferred rent which we remeasured at adoption due to the application
of hindsight to our lease term estimates. Deferred and prepaid rent will no longer be presented separately.
48
•
•
•
•
Capital lease assets previously included within Property and equipment, net were reclassified to financing lease right-
of-use assets, and capital lease liabilities previously included in Short-term debt and Long-term debt were reclassified
to financing lease liabilities in our Consolidated Balance Sheet.
Certain line items in the Consolidated Statements of Cash Flows and the “Supplemental disclosure of cash flow
information” have been renamed to align with the new terminology presented in the new lease standard; “Repayment
of capital lease obligations” is now presented as “Repayments of financing lease obligations” and “Assets acquired
under capital lease obligations” is now presented as “Financing lease right-of-use assets obtained in exchange for lease
obligations.” In the “Operating Activities” section of the Consolidated Statements of Cash Flows we have added
“Operating lease right-of-use assets” and “Short and long-term operating lease liabilities” which represent the change
in the operating lease asset and liability, respectively. Additionally, in the “Supplemental disclosure of cash flow
information” section of the Consolidated Statements of Cash Flows we have added “Operating lease payments,” and in
the “Noncash investing and financing activities” section we have added “Operating lease right-of-use assets obtained
in exchange for lease obligations.”
In determining the discount rate used to measure the right-of-use asset and lease liability, we use rates implicit in the
lease, or if not readily available, we use our incremental borrowing rate. Our incremental borrowing rate is based on an
estimated secured rate comprised of a risk-free LIBOR rate plus a credit spread as secured by our assets. Determining
a credit spread as secured by our assets may require significant judgment.
Certain of our lease agreements include rental payments based on changes in the consumer price index (“CPI”). Lease
liabilities are not remeasured as a result of changes in the CPI; instead, changes in the CPI are treated as variable lease
payments and are excluded from the measurement of the right-of-use asset and lease liability. These payments are
recognized in the period in which the related obligation was incurred. Our lease agreements do not contain any
material residual value guarantees or material restrictive covenants.
• We elected the use of hindsight whereby we applied current lease term assumptions that are applied to new leases in
determining the expected lease term period for all cell sites. Upon adoption of the new lease standard and application
of hindsight our expected lease term has shortened to reflect payments due for the initial non-cancelable lease term
only. This assessment corresponds to our lease term assessment for new leases and aligns with the payments that have
been disclosed as lease commitments in prior years. As a result, the average remaining lease term for cell sites has
decreased from approximately nine to five years based on lease contracts in effect at transition on January 1, 2019. The
aggregate impact of using hindsight is an estimated decrease in Total operating expenses of $240 million in fiscal year
2019.
• We were also required to reassess the previously failed sale-leasebacks of certain T-Mobile-owned wireless
communications tower sites and determine whether the transfer of the assets to the tower operator under the
arrangement met the transfer of control criteria in the revenue standard and whether a sale should be recognized.
Determining whether the transfer of control criteria has been met requires significant judgement.
• We concluded that a sale has not occurred for the 6,200 tower sites transferred to Crown Castle International
Corp. (“CCI”) pursuant to a master prepaid lease arrangement; therefore, these sites will continue to be
accounted for as failed sale-leasebacks.
• We concluded that a sale should be recognized for the 900 tower sites transferred to CCI pursuant to the sale
of a subsidiary and for the 500 tower sites transferred to Phoenix Tower International (“PTI”). Upon adoption
on January 1, 2019, we derecognized our existing long-term financial obligation and the tower-related
property and equipment associated with these 1,400 previously failed sale-leaseback tower sites and
recognized a lease liability and right-of-use asset for the leaseback of the tower sites. The impacts from the
change in accounting conclusion are primarily a decrease in Other revenues of $44 million and a decrease in
Interest expense of $34 million in fiscal year 2019.
•
Rental revenues and expenses associated with co-location tower sites are presented on a net basis under the new lease
standard. These revenues and expenses were presented on a gross basis under the former lease standard.
49
Lease Expense
We have operating leases for cell sites, retail locations, corporate offices and dedicated transportation lines, some of which have
escalating rentals during the initial lease term and during subsequent optional renewal periods. We recognize a right-of-use
asset and lease liability for operating leases based on the net present value of future minimum lease payments. Lease expense is
recognized on a straight-line basis over the non-cancelable lease term and renewal periods that are considered reasonably
certain.
We consider several factors in assessing whether renewal periods are reasonably certain of being exercised, including the
continued maturation of our network nationwide, technological advances within the telecommunications industry and the
availability of alternative sites.
See Note 1 - Summary of Significant Accounting Policies and Note 15 - Leases of the Notes to the Consolidated Financial
Statements for further information.
Revenue Recognition
We primarily generate our revenue from providing wireless services to customers and selling or leasing devices and
accessories. Our contracts with customers may involve multiple performance obligations, which include wireless services,
wireless devices or a combination thereof, and we allocate the transaction price between each performance obligation based on
its relative standalone selling price.
Significant Judgments
The most significant judgments affecting the amount and timing of revenue from contracts with our customers include the
following items:
•
•
•
•
•
•
Revenue for service contracts that we assess are not probable of collection is not recognized until the contract is
completed or terminated and cash is received. Collectibility is re-assessed when there is a significant change in facts or
circumstances. Our assessment of collectibility considers whether we may limit our exposure to credit risk through our
right to stop transferring additional service in the event the customer is delinquent as well as certain contract terms
such as down payments that reduce our exposure to credit risk. Customer credit behavior is inherently uncertain. See
“Allowances,” below, for more discussion on how we assess credit risk.
Promotional EIP bill credits offered to a customer on an equipment sale that are paid over time and are contingent on
the customer maintaining a service contract may result in an extended service contract based on whether a substantive
penalty is deemed to exist. Determining whether contingent EIP bill credits result in a substantive termination penalty
may require significant judgment.
The identification of distinct performance obligations within our service plans may require significant judgment.
Revenue is recorded net of costs paid to another party for performance obligations where we arrange for the other
party to transfer goods or services to the customer (i.e., when we are acting as an agent). For example, performance
obligations relating to services provided by third-party content providers where we neither control a right to the
content provider’s service nor control the underlying service itself are presented net because we are acting as an agent.
The determination of whether we control the underlying service or right to the service prior to our transfer to the
customer requires, at times, significant judgment.
For transactions where we recognize a significant financing component, judgment is required to determine the discount
rate. For EIP sales, the discount rate used to adjust the transaction price primarily reflects current market interest rates
and the estimated credit risk of the customer. Customer credit behavior is inherently uncertain. See “Allowances”,
below, for more discussion on how we assess credit risk.
Our products are generally sold with a right of return, which is accounted for as variable consideration when
estimating the amount of revenue to recognize. Device return levels are estimated based on the expected value method
as there are a large number of contracts with similar characteristics and the outcome of each contract is independent of
the others. Historical return rate experience is a significant input to our expected value methodology.
50
•
•
•
Sales of equipment to indirect dealers who have been identified as our customer (referred to as the sell-in model) often
include credits subsequently paid to the dealer as a reimbursement for any discount promotions offered to the end
consumer. These credits (payments to a customer) are accounted for as variable consideration when estimating the
amount of revenue to recognize from the sales of equipment to indirect dealers and are estimated based on historical
experience and other factors, such as expected promotional activity.
The determination of the standalone selling price for contracts that involve more than one performance obligation may
require significant judgment, such as when the selling price of a good or service is not readily observable.
For capitalized contract costs, determining the amortization period over which such costs are recognized as well as
assessing the indicators of impairment may require significant judgment.
See Note 1 - Summary of Significant Accounting Policies and Note 10 - Revenue From Contracts with Customers of the Notes
to the Consolidated Financial Statements for further information.
Allowances
We maintain an allowance for credit losses, which is management’s estimate of such losses inherent in our receivables
portfolio, comprised of accounts receivable and EIP receivable segments. Changes in the allowance for credit losses and,
therefore, in related provision for credit losses (“bad debt expense”) can materially affect earnings. Credit risk characteristics
are assessed for each receivable segment. In applying the judgment and review required to determine the allowance for credit
losses, management considers a number of factors, including receivable volumes, receivable delinquency status, historical loss
experience and other conditions influencing loss expectations, such as macro-economic conditions. While our methodology
attributes portions of the allowance to specific portfolio segments, the entire allowance for credit losses is available to absorb
credit losses inherent in the total receivables portfolio.
Management also considers an amount that represents management’s judgment of risks inherent in the process and assumptions
used in establishing the allowance for credit losses, including process risk and other subjective factors, including industry trends
and emerging risk assessments.
To the extent that actual loss experience differs significantly from historical trends or assumptions, the appropriate allowance
levels for realized credit losses could differ from the estimate. We write off account balances if collection efforts are
unsuccessful and the receivable balance is deemed uncollectible, based on factors such as customer credit ratings and the length
of time from the original billing date.
We offer certain retail customers the option to pay for their devices and other purchases in installments over a period of up to
36 months using an EIP. EIP receivables not held for sale are reported in our Consolidated Balance Sheets at outstanding
principal adjusted for any charge-offs, allowance for credit losses and unamortized discounts. Receivables held for sale are
reported at the lower of amortized cost or fair value. At the time of an installment sale, we impute a discount for interest if the
EIP term exceeds 12 months as there is no stated rate of interest on the EIP receivables. The EIP receivables are recorded at
their present value, which is determined by discounting future cash payments at the imputed interest rate. The difference
between the recorded amount of the EIP receivables and their unpaid principal balance (i.e., the contractual amount due from
the customer) results in a discount which is allocated to the performance obligations of the arrangement and recorded as a
reduction in transaction price. We determine the imputed discount rate based primarily on current market interest rates and the
estimated credit risk on the EIP receivables. As a result, we do not recognize a separate credit loss allowance at the time of
issuance as the effects of uncertainty about future cash flows resulting from credit risk are included in the initial present value
measurement of the receivable. The imputed discount on EIP receivables is amortized over the financed installment term using
the effective interest method and recognized as Other revenues in our Consolidated Statements of Comprehensive Income.
Subsequent to the initial determination of the imputed discount, we assess the need for and, if necessary, recognize an
allowance for credit losses to the extent the amount of estimated probable losses on the gross EIP receivable balances exceed
the remaining unamortized imputed discount balances.
Deferred Purchase Price Assets
In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred
purchase price assets measured at fair value that are based on a discounted cash flow model using unobservable Level 3 inputs,
including customer default rates and credit worthiness, dilutions and recoveries. See Note 4 – Sales of Certain Receivables of
the Notes to the Consolidated Financial Statements for further information.
51
Depreciation
Depreciation commences once assets have been placed in service. We generally depreciate property and equipment over the
period the property and equipment provide economic benefit. Leased wireless devices are depreciated to their estimated residual
value over the period expected to provide utility to us, which is generally shorter than the lease term and considers expected
losses. Depreciable life studies are performed periodically to confirm the appropriateness of depreciable lives for certain
categories of property, plant and equipment. These studies consider actual usage, physical wear and tear, replacement history
and assumptions about technology evolution. When these factors indicate that the useful life of an asset is different from the
previous assessment, the remaining book values are depreciated prospectively over the adjusted remaining estimated useful life.
See Note 1 – Summary of Significant Accounting Policies and Note 5 – Property and Equipment of the Notes to the
Consolidated Financial Statements for information regarding depreciation of assets, including management’s underlying
estimates of useful lives.
Evaluation of Goodwill and Indefinite-Lived Intangible Assets for Impairment
We assess the carrying value of our goodwill and other indefinite-lived intangible assets, such as our spectrum licenses, for
potential impairment annually as of December 31, or more frequently if events or changes in circumstances indicate such assets
might be impaired.
We have identified two reporting units for which discrete financial information is available and results are regularly reviewed
by management: wireless and Layer3. The Layer3 reporting unit consists of the assets and liabilities of Layer3 TV, Inc., which
was acquired in January 2018. The wireless reporting unit consists of the remaining assets and liabilities of T-Mobile US, Inc.,
excluding Layer3 TV, Inc. We separately evaluate these reporting units for impairment.
When assessing goodwill for impairment we may elect to first perform a qualitative assessment for a reporting unit to determine
if the quantitative impairment test is necessary. If we do not perform a qualitative assessment, or if the qualitative assessment
indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we perform a
quantitative test. We recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s
fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.
We employed a qualitative approach to assess the wireless reporting unit. The fair value of the wireless reporting unit is
determined using a market approach, which is based on market capitalization. We recognize market capitalization is subject to
volatility and will monitor changes in market capitalization to determine whether declines, if any, necessitate an interim
impairment review. In the event market capitalization does decline below its book value, we will consider the length, severity
and reasons for the decline when assessing whether potential impairment exists, including considering whether a control
premium should be added to the market capitalization. We believe short-term fluctuations in share price may not necessarily
reflect the underlying aggregate fair value.
We employed a quantitative approach to assess the Layer3 reporting unit. The fair value of the Layer3 reporting unit is
determined using an income approach, which is based on estimated discounted future cash flows.
We made estimates and assumptions regarding future cash flows, discount rates and long-term growth rates to determine the
reporting unit’s estimated fair value. The key assumptions used were as follows:
•
•
Expected cash flows underlying the Layer3 business plan for the periods 2020 through 2024, which took into account
estimates of subscribers for TVision services, average revenue and content cost per subscriber, operating costs and
capital expenditures.
Cash flows beyond 2024 were projected to grow at a long-term growth rate estimated at 3%. Estimating a long-term
growth rate requires significant judgment about future business strategies as well as micro- and macro-economic
environments that are inherently uncertain.
• We used a discount rate of 32% to risk adjust the cash flow projections in determining the estimated fair value.
The estimated fair value of the Layer3 reporting unit exceeded its carrying value by approximately 3% as of December 31,
2019. Delays in the national launch of TVision services or cash flows that do not meet our projections could result in a goodwill
impairment of Layer3 in the future. The carrying value of the goodwill associated with the Layer3 reporting unit was $218
million as of December 31, 2019.
52
We test our spectrum licenses for impairment on an aggregate basis, consistent with our management of the overall business at
a national level. We may elect to first perform a qualitative assessment to determine whether it is more likely than not that the
fair value of an intangible asset is less than its carrying value. If we do not perform the qualitative assessment, or if the
qualitative assessment indicates it is more likely than not that the fair value of the intangible asset is less than its carrying
amount, we calculate the estimated fair value of the intangible asset. If the estimated fair value of the spectrum licenses is lower
than their carrying amount, an impairment loss is recognized for the difference. We estimate fair value using the Greenfield
methodology, which is an income approach, to estimate the price at which an orderly transaction to sell the asset would take
place between market participants at the measurement date under current market conditions. The Greenfield methodology
values the spectrum licenses by calculating the cash flow generating potential of a hypothetical start-up company that goes into
business with no assets except the asset to be valued (in this case, spectrum licenses). The value of the spectrum licenses can be
considered as equal to the present value of the cash flows of this hypothetical start-up company. We base the assumptions
underlying the Greenfield methodology on a combination of market participant data and our historical results, trends and
business plans. Future cash flows in the Greenfield methodology are based on estimates and assumptions of market participant
revenues, EBITDA margin, network build-out period and a long-term growth rate for a market participant. The cash flows are
discounted using a weighted average cost of capital.
The valuation approaches utilized to estimate fair value for the purposes of the impairment tests of goodwill and spectrum
licenses require the use of assumptions and estimates, which involve a degree of uncertainty. If actual results or future
expectations are not consistent with the assumptions, this may result in the recording of significant impairment charges on
goodwill or spectrum licenses. The most significant assumptions within the valuation models are the discount rate, revenues,
EBITDA margins, capital expenditures and the long-term growth rate. See Note 1 – Summary of Significant Accounting
Policies and Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets of the Notes to the Consolidated
Financial Statements for information regarding our annual impairment test and impairment charges.
Income Taxes
Deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax bases
of assets and liabilities using enacted tax rates expected to be in effect when these differences are realized. A valuation
allowance is recorded when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The
ultimate realization of a deferred tax asset depends on the ability to generate sufficient taxable income of the appropriate
character and in the appropriate taxing jurisdictions within the carryforward periods available.
We account for uncertainty in income taxes recognized in the financial statements in accordance with the accounting guidance
for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We
assess whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of
the position and adjust the unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law,
interactions with taxing authorities and developments in case law.
Accounting Pronouncements Not Yet Adopted
See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for
information regarding recently issued accounting standards.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to economic risks in the normal course of business, primarily from changes in interest rates, including changes
in investment yields and changes in spreads due to credit risk and other factors. These risks, along with other business risks,
impact our cost of capital. Our policy is to manage exposure related to fluctuations in interest rates in order to manage capital
costs, control financial risks and maintain financial flexibility over the long term. We have established interest rate risk limits
that are closely monitored by measuring interest rate sensitivities of our debt portfolio. We do not foresee significant changes in
the strategies used to manage market risk in the near future.
We are exposed to changes in interest rates on our Incremental Term Loan Facility with DT, our majority stockholder. See Note
8 – Debt of the Notes to the Consolidated Financial Statements for further information.
To perform the sensitivity analysis, we selected hypothetical changes in market rates that are expected to reflect reasonably
possible near-term changes in those rates. We assessed the risk of a change in the fair value from the effect of a hypothetical
interest rate change for 30-day LIBOR rates of positive 150 and negative 50 basis points. In cases where the debt is redeemable
and the fair value calculation results in a liability greater than the cost to replace the debt, the maximum liability is assumed to
53
be no greater than the current cost to redeem the debt. As of December 31, 2019, the change in the fair value of our Incremental
Term Loan Facility, based on this hypothetical change, is shown in the table below:
(in millions)
Carrying Amount
Fair Value
+150 Basis Point Shift
-50 Basis Point Shift
LIBOR plus 1.50% Senior Secured Term Loan due 2022 $
LIBOR plus 1.75% Senior Secured Term Loan due 2024
2,000
$
2,000
2,000
$
2,000
1,966
$
1,956
2,000
2,000
Fair Value Assuming
We are exposed to changes in the benchmark interest rate associated with our interest rate lock derivatives. See Note 7 – Fair
Value Measurements of the Notes to the Consolidated Financial Statements for further information.
To perform the sensitivity analysis, we selected hypothetical changes in market rates that are expected to reflect reasonably
possible near-term changes in those rates. We assessed the risk of a change in fair value from the effect of a hypothetical
interest rate change for eight and 10-year LIBOR swap rates of positive 200 and negative 100 basis points. As of December 31,
2019, the change in the fair value of our interest rate lock derivatives, based on this hypothetical change, is shown in the table
below:
(in millions)
Interest rate lock derivatives
Fair Value Assuming
Fair Value
+200 Basis Point Shift
-100 Basis Point Shift
$
(1,170) $
410
$
(2,077)
54
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of T-Mobile US, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of T-Mobile US, Inc. and its subsidiaries (the “Company”) as
of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of stockholders’ equity and
of cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively
referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial
reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in 2019 and the manner in which it accounts for revenues in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
55
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Adoption of Leases Standard
As described in Notes 1 and 15 to the consolidated financial statements, the Company has adopted the new accounting standard
on Leases, on January 1, 2019, by recognizing and measuring leases at the adoption date with a cumulative effect of initially
applying the guidance recognized at the date of initial application. As a result, among other adjustments, the Company
recognized operating lease right-of-use assets of $9,251 million and operating lease liabilities of $11,364 million on the balance
sheet on the date of adoption. As of December 31, 2019, the carrying amounts of operating and finance lease right-of-use assets
were $10,933 million and $2,715 million respectively and operating and finance lease liabilities were $12,826 million and
$2,303 million respectively. The Company recorded $3,406 million of lease expense during the year. Management also
reassessed the previously failed sale-leasebacks of certain T-Mobile-owned wireless communication tower sites to determine
whether the transfer of the assets to the tower operator under the arrangement met the transfer of control criteria in the revenue
standard and whether a sale should be recognized. This reassessment resulted in (i) assets relating to 6,200 tower sites
transferred pursuant to a master prepaid lease arrangement continuing to be accounted for as failed sale-leasebacks; (ii) a sale
being recognized for 1,400 tower sites sold that were not associated with the master prepaid lease. Upon adoption, the Company
derecognized its existing long-term financial obligation and the tower-related property and equipment associated with these
1,400 previously failed sale-leaseback tower sites and recognized a lease liability and right-of-use asset for the leaseback of the
tower sites.
The principal considerations for our determination that performing procedures relating to the adoption of the lease standard is a
critical audit matter are (i) there was significant judgment by management in applying the lease standard to a large volume of
leases in the company’s lease portfolio; (ii) implementation of new lease accounting systems resulted in material changes to the
Company’s internal control over financial reporting; and (iii) significant judgment in the application of the standard relating to
sale-leaseback accounting. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing
procedures and evaluating audit evidence related to the implementation of new lease accounting systems and management’s
significant judgments, including the assessment of the previously failed sale-leaseback tower sites. The audit effort involved the
use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from the
procedures.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
adoption of the new standard on the Company’s various lease portfolios, including those associated with previously failed sale-
leaseback transactions and testing of controls over the implementation and functionality of the new lease accounting systems.
The procedures also included, among others, testing the completeness and accuracy of management’s identification of the
leases in the Company’s lease portfolios and evaluating the reasonableness of significant judgments made by management to
identify contractual terms in lease arrangements that impact the determination of the right-of-use asset and lease liability
amount recognized. Professionals with specialized skill and knowledge were used to assist with the evaluation of previous
failed sales-leaseback tower sites.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
February 6, 2020
We have served as the Company’s auditor since 2001.
56
T-Mobile US, Inc.
Consolidated Balance Sheets
(in millions, except share and per share amounts)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, net of allowances of $61 and $67
Equipment installment plan receivables, net
Accounts receivable from affiliates
Inventory
Other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Financing lease right-of-use assets
Goodwill
Spectrum licenses
Other intangible assets, net
Equipment installment plan receivables due after one year, net
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities
Payables to affiliates
Short-term debt
Deferred revenue
Short-term operating lease liabilities
Short-term financing lease liabilities
Other current liabilities
Total current liabilities
Long-term debt
Long-term debt to affiliates
Tower obligations
Deferred tax liabilities
Operating lease liabilities
Financing lease liabilities
Deferred rent expense
Other long-term liabilities
Total long-term liabilities
Commitments and contingencies (Note 16)
Stockholders' equity
Common Stock, par value $0.00001 per share, 1,000,000,000 shares authorized; 858,418,615 and 851,675,119
shares issued, 856,905,400 and 850,180,317 shares outstanding
Additional paid-in capital
Treasury stock, at cost,1,513,215 and 1,494,802 shares issued
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
December 31,
2019
December 31,
2018
$
$
$
$
1,528
1,888
2,600
20
964
2,305
9,305
21,984
10,933
2,715
1,930
36,465
115
1,583
1,891
86,921
$
1,203
1,769
2,538
11
1,084
1,676
8,281
23,359
—
—
1,901
35,559
198
1,547
1,623
72,468
6,746
$
7,741
187
25
631
2,287
957
1,673
12,506
10,958
13,986
2,236
5,607
10,539
1,346
—
954
45,626
—
38,498
(8)
(868)
(8,833)
28,789
$
86,921
$
200
841
698
—
—
787
10,267
12,124
14,582
2,557
4,472
—
—
2,781
967
37,483
—
38,010
(6)
(332)
(12,954)
24,718
72,468
The accompanying notes are an integral part of these Consolidated Financial Statements.
57
T-Mobile US, Inc.
Consolidated Statements of Comprehensive Income
(in millions, except share and per share amounts)
Year Ended December 31,
2019
2018
2017
Revenues
Branded postpaid revenues
Branded prepaid revenues
Wholesale revenues
Roaming and other service revenues
Total service revenues
Equipment revenues
Other revenues
Total revenues
Operating expenses
Cost of services, exclusive of depreciation and amortization shown separately below
Cost of equipment sales, exclusive of depreciation and amortization shown separately below
Selling, general and administrative
Depreciation and amortization
Gains on disposal of spectrum licenses
Total operating expenses
Operating income
Other income (expense)
Interest expense
Interest expense to affiliates
Interest income
Other expense, net
Total other expense, net
Income before income taxes
Income tax (expense) benefit
Net income
Dividends on preferred stock
Net income attributable to common stockholders
Net income
Other comprehensive (loss) income, net of tax
Unrealized gain on available-for-sale securities, net of tax effect of $0, $0, and $2
Unrealized loss on cash flow hedges, net of tax effect of $(187), $(115), and $0
Other comprehensive (loss) income
Total comprehensive income
Earnings per share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
$
22,673
$
20,862
$
9,543
1,279
499
33,994
9,840
1,164
44,998
6,622
11,899
14,139
6,616
—
39,276
5,722
(727)
(408)
24
(8)
(1,119)
4,603
(1,135)
3,468
—
3,468
3,468
—
(536)
(536)
2,932
4.06
4.02
$
$
$
$
$
$
9,598
1,183
349
31,992
10,009
1,309
43,310
6,307
12,047
13,161
6,486
—
38,001
5,309
(835)
(522)
19
(54)
(1,392)
3,917
(1,029)
2,888
—
2,888
2,888
—
(332)
(332)
2,556
3.40
3.36
$
$
$
$
$
$
$
$
$
$
$
$
19,448
9,380
1,102
230
30,160
9,375
1,069
40,604
6,100
11,608
12,259
5,984
(235)
35,716
4,888
(1,111)
(560)
17
(73)
(1,727)
3,161
1,375
4,536
(55)
4,481
4,536
7
—
7
4,543
5.39
5.20
854,143,751
863,433,511
849,744,152
858,290,174
831,850,073
871,787,450
The accompanying notes are an integral part of these Consolidated Financial Statements.
58
T-Mobile US, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
2019
2018
2017
$
3,468
$
2,888
$
(in millions)
Operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
Stock-based compensation expense
Deferred income tax expense (benefit)
Bad debt expense
Losses from sales of receivables
Deferred rent expense
Losses on redemption of debt
Gains on disposal of spectrum licenses
Changes in operating assets and liabilities
Accounts receivable
Equipment installment plan receivables
Inventories
Operating lease right-of-use assets
Other current and long-term assets
Accounts payable and accrued liabilities
Short and long-term operating lease liabilities
Other current and long-term liabilities
Other, net
Net cash provided by operating activities
Investing activities
Purchases of property and equipment, including capitalized interest of $473, $362 and $136
Purchases of spectrum licenses and other intangible assets, including deposits
Proceeds from sales of tower sites
Proceeds related to beneficial interests in securitization transactions
Net cash related to derivative contracts under collateral exchange arrangements
Acquisition of companies, net of cash acquired
Other, net
Net cash used in investing activities
Financing activities
Proceeds from issuance of long-term debt
Proceeds from borrowing on revolving credit facility
Repayments of revolving credit facility
Repayments of financing lease obligations
Repayments of short-term debt for purchases of inventory, property and equipment, net
Repayments of long-term debt
Repurchases of common stock
Tax withholdings on share-based awards
Dividends on preferred stock
Cash payments for debt prepayment or debt extinguishment costs
Other, net
Net cash used in financing activities
Change in cash and cash equivalents
Cash and cash equivalents
Beginning of period
End of period
Supplemental disclosure of cash flow information
Interest payments, net of amounts capitalized
Operating lease payments (1)
Income tax payments
Non-cash investing and financing activities
Non-cash beneficial interest obtained in exchange for securitized receivables
(Decrease) increase in accounts payable for purchases of property and equipment
Leased devices transferred from inventory to property and equipment
Returned leased devices transferred from property and equipment to inventory
Short-term debt assumed for financing of property and equipment
Operating lease right-of-use assets obtained in exchange for lease obligations
Financing lease right-of-use assets obtained in exchange for lease obligations
$
$
$
6,616
495
1,091
307
130
—
19
—
(3,709)
(1,015)
(617)
1,896
(144)
17
(2,131)
144
257
6,824
(6,391)
(967)
38
3,876
(632)
(31)
(18)
(4,125)
—
2,340
(2,340)
(798)
(775)
(600)
—
(156)
—
(28)
(17)
(2,374)
325
1,203
1,528
1,128
2,783
88
6,509
(935)
1,006
(267)
800
3,621
1,041
$
$
$
6,486
424
980
297
157
26
122
—
(4,617)
(1,598)
(201)
—
(181)
(867)
—
(69)
52
3,899
(5,541)
(127)
—
5,406
—
(338)
21
(579)
2,494
6,265
(6,265)
(700)
(300)
(3,349)
(1,071)
(146)
—
(212)
(52)
(3,336)
(16)
1,219
1,203
1,525
—
51
4,972
65
1,011
(326)
291
—
885
$
$
$
4,536
5,984
306
(1,404)
388
299
76
86
(235)
(3,931)
(1,812)
(844)
—
(575)
1,079
—
(233)
111
3,831
(5,237)
(5,828)
—
4,319
—
—
1
(6,745)
10,480
2,910
(2,910)
(486)
(300)
(10,230)
(427)
(166)
(55)
(188)
5
(1,367)
(4,281)
5,500
1,219
2,028
—
31
4,063
313
1,131
(742)
292
—
887
(1) On January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” which requires certain supplemental cash flow
disclosures. Where these disclosures or a comparable figure were not required under the former lease standard, we have not retrospectively presented
historical amounts. See Note 1 – Summary of Significant Accounting Policies for additional details.
The accompanying notes are an integral part of these Consolidated Financial Statements.
59
T-Mobile US, Inc.
Consolidated Statement of Stockholders’ Equity
(in millions, except shares)
Preferred
Stock
Outstanding
Common
Stock
Outstanding
Treasury
Shares at
Cost
Par Value
and
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Balance as of December 31, 2016
20,000,000
826,357,331
$
(1) $
38,846
$
Net income
Other comprehensive income
Stock-based compensation
Exercise of stock options
Stock issued for employee stock
purchase plan
Issuance of vested restricted stock
units
Shares withheld related to net share
settlement of stock awards and stock
options
Mandatory conversion of preferred
shares to common shares
Repurchases of common stock
Transfer RSU to NQDC plan
Dividends on preferred stock
—
—
—
—
—
—
—
—
—
450,493
1,832,043
8,338,271
—
(2,754,721)
(20,000,000)
32,237,983
—
—
—
(7,010,889)
(43,860)
—
Balance as of December 31, 2017
— 859,406,651
Net income
Other comprehensive loss
Stock-based compensation
Exercise of stock options
Stock issued for employee stock
purchase plan
Issuance of vested restricted stock
units
Issuance of restricted stock awards
Shares withheld related to net share
settlement of stock awards and stock
options
Repurchases of common stock
Transfer RSU from NQDC plan
Prior year Retained Earnings(1)
Balance as of December 31, 2018
Net income
Other comprehensive loss
Stock-based compensation
Exercise of stock options
Stock issued for employee stock
purchase plan
Issuance of vested restricted stock
units
Forfeiture of restricted stock awards
Shares withheld related to net share
settlement of stock awards and stock
options
Transfer RSU from NQDC plan
Prior year Retained Earnings(1)
Balance as of December 31, 2019
—
—
—
—
—
—
—
—
—
—
—
—
—
—
187,965
2,011,794
7,448,148
225,799
(2,321,827)
(16,738,758)
(39,455)
—
— 850,180,317
—
—
—
—
—
—
—
—
—
—
—
—
—
85,083
2,091,650
6,685,950
(24,682)
(2,094,555)
(18,363)
—
—
—
—
—
—
—
—
—
—
(3)
—
(4)
—
—
—
—
—
—
—
—
—
(2)
—
(6)
—
—
—
—
—
—
—
—
(2)
—
—
—
344
19
82
—
(166)
—
(444)
3
(55)
38,629
—
—
473
3
103
—
—
(146)
(1,054)
2
—
38,010
—
—
517
1
124
—
—
(156)
2
—
Accumulated
Deficit
Total
Stockholders'
Equity
$
(20,610) $
4,536
18,236
4,536
—
—
—
—
—
—
—
—
—
—
(16,074)
2,888
—
—
—
—
—
—
—
—
—
232
(12,954)
3,468
—
—
—
—
—
—
—
—
653
7
344
19
82
—
(166)
—
(444)
—
(55)
22,559
2,888
(332)
473
3
103
—
—
(146)
(1,054)
—
224
24,718
3,468
(536)
517
1
124
—
—
(156)
—
653
1
—
7
—
—
—
—
—
—
—
—
—
8
—
(332)
—
—
—
—
—
—
—
—
(8)
(332)
—
(536)
—
—
—
—
—
—
—
—
— 856,905,400
$
(8) $
38,498
$
(868) $
(8,833) $
28,789
(1) Prior year Retained Earnings represents the impact of the adoption of new accounting standards on beginning Accumulated Deficit and Accumulated
Other Comprehensive Loss. See Note 1 – Summary of Significant Accounting Policies for further information.
The accompanying notes are an integral part of these Consolidated Financial Statements
60
T-Mobile US, Inc.
Index for Notes to the Consolidated Financial Statements
Summary of Significant Accounting Policies
Business Combinations
Receivables and Allowance for Credit Losses
Sales of Certain Receivables
Property and Equipment
Goodwill, Spectrum License Transactions and Other Intangible Assets
Fair Value Measurements
Debt
Tower Obligations
Revenue from Contracts with Customers
Employee Compensation and Benefit Plans
Repurchases of Common Stock
Income Taxes
Earnings Per Share
Leases
Commitments and Contingencies
Additional Financial Information
Guarantor Financial Information
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10
Note 11
Note 12
Note 13
Note 14
Note 15
Note 16
Note 17
Note 18
62
74
76
77
80
81
82
85
88
89
91
92
93
96
97
99
101
101
61
T-Mobile US, Inc.
Notes to the Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies
Description of Business
T-Mobile US, Inc. (“T-Mobile,” “we,” “our,” “us” or the “Company”), together with its consolidated subsidiaries, is a leading
provider of mobile communications services, including voice, messaging and data, under its flagship brands, T-Mobile and
Metro™ by T-Mobile ("Metro by T-Mobile"), in the United States (“U.S.”), Puerto Rico and the U.S. Virgin Islands. All of our
revenues were earned in, and all of our long-lived assets are located in, the U.S., Puerto Rico and the U.S. Virgin Islands. We
provide mobile communications services primarily using our 4G Long-Term Evolution (“LTE”) network and our newly
deployed 5G technology network. We also offer a wide selection of wireless devices, including handsets, tablets and other
mobile communication devices, and accessories for sale, as well as financing through Equipment Installment Plans (“EIP”) and
leasing through JUMP! On Demand™. Additionally, we provide reinsurance for handset insurance policies and extended
warranty contracts offered to our mobile communications customers.
Basis of Presentation
The consolidated financial statements include the balances and results of operations of T-Mobile and our consolidated
subsidiaries. We consolidate majority-owned subsidiaries over which we exercise control, as well as variable interest entities
(“VIE”) where we are deemed to be the primary beneficiary and VIEs, which cannot be deconsolidated, such as those related to
Tower obligations. Intercompany transactions and balances have been eliminated in consolidation. We operate as a single
operating segment.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires
our management to make estimates and assumptions which affect the financial statements and accompanying notes. Estimates
are based on historical experience, where applicable, and other assumptions which our management believes are reasonable
under the circumstances. These estimates are inherently subject to judgment and actual results could differ from these estimates.
Certain prior year amounts have been reclassified to conform to the current year's presentation. See “Accounting
Pronouncements Adopted During the Current Year” below.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid money market funds and U.S. Treasury securities with remaining maturities of three
months or less at the date of purchase.
Receivables and Allowance for Credit Losses
Accounts receivable consist primarily of amounts currently due from customers, other carriers and third-party retail channels.
Accounts receivable not held for sale are reported in the balance sheet at outstanding principal adjusted for any charge-offs and
the allowance for credit losses. Accounts receivable held for sale are reported at the lower of amortized cost or fair value. We
have an arrangement to sell the majority of service accounts receivable on a revolving basis, which are treated as sales of
financial assets.
We offer certain retail customers the option to pay for their devices and certain other purchases in installments typically over a
period of 24, but up to 36, months using an EIP. EIP receivables not held for sale are reported in our Consolidated Balance
Sheets at outstanding principal adjusted for any charge-offs, allowance for credit losses and unamortized discounts. At the time
of an installment sale, we impute a discount for interest if the EIP term exceeds 12 months as there is no stated rate of interest
on the EIP receivables. The EIP receivables are recorded at their present value, which is determined by discounting future cash
payments at the imputed interest rate. The difference between the recorded amount of the EIP receivables and their unpaid
principal balance (i.e., the contractual amount due from the customer) results in a discount which is allocated to the
performance obligations in the arrangement and recorded as a reduction in transaction price in Total service revenues and
Equipment revenues in our Consolidated Statements of Comprehensive Income. We determine the imputed discount rate based
primarily on current market interest rates and the estimated credit risk on the EIP receivables. As a result, we do not recognize a
separate credit loss allowance at the time of issuance as the effects of uncertainty about future cash flows resulting from credit
risk are included in the initial present value measurement of the receivable. The imputed discount on EIP receivables is
62
amortized over the financed installment term using the effective interest method and recognized as Other revenues in our
Consolidated Statements of Comprehensive Income.
Subsequent to the initial determination of the imputed discount, we assess the need for and, if necessary, recognize an
allowance for credit losses to the extent the amount of estimated probable losses on the gross EIP receivable balances exceed
the remaining unamortized imputed discount balances.
Total imputed discount and allowances were approximately 7.0% and 8.1% of the total amount of gross accounts receivable,
including EIP receivables, at December 31, 2019 and 2018, respectively.
The current portion of the EIP receivables is included in Equipment installment plan receivables, net and the long-term portion
of the EIP receivables is included in Equipment installment plan receivables due after one year, net in our Consolidated Balance
Sheets. We have an arrangement to sell certain EIP receivables on a revolving basis, which are treated as sales of financial
assets.
We maintain an allowance for credit losses and determine its appropriateness through an established process that assesses the
losses inherent in our receivables portfolio. We develop and document our allowance methodology at the portfolio segment
level - accounts receivable portfolio and EIP receivable portfolio segments. While we attribute portions of the allowance to our
respective accounts receivable and EIP portfolio segments, the entire allowance is available to absorb credit losses inherent in
the total receivables portfolio.
Our process involves procedures to appropriately consider the unique risk characteristics of our accounts receivable and EIP
receivable portfolio segments. For each portfolio segment, losses are estimated collectively for groups of receivables with
similar characteristics. Our allowance levels are influenced by receivable volumes, receivable delinquency status, historical loss
experience and other conditions influencing loss expectations, such as macro-economic conditions.
Inventories
Inventories consist primarily of wireless devices and accessories, which are valued at the lower of cost or net realizable value.
Cost is determined using standard cost which approximates average cost. Shipping and handling costs paid to wireless device
and accessories vendors, and costs to refurbish used devices recovered through our device upgrade programs are included in the
standard cost of inventory. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably
predictable costs of completion, disposal, and transportation. We record inventory write-downs to net realizable value for
obsolete and slow-moving items based on inventory turnover trends and historical experience.
Long-Lived Assets
Long-lived assets include assets that do not have indefinite lives, such as property and equipment and other intangible assets.
All of our long-lived assets are located in the U.S., including Puerto Rico and the U.S. Virgin Islands. We assess potential
impairments to our long-lived assets when events or changes in circumstances indicate the carrying amount of the asset may not
be recoverable. If any indicators of impairment are present, we test recoverability. The carrying value of a long-lived asset or
asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated from the use and
eventual disposition of the asset or asset group. If the undiscounted cash flows do not exceed the asset or asset group’s carrying
amount, then an impairment loss is recorded, measured as the amount by which the carrying amount of a long-lived asset or
asset group exceeds its fair value.
Property and Equipment
Property and equipment consists of buildings and equipment, wireless communications systems, leasehold improvements,
capitalized software, leased wireless devices and construction in progress. Buildings and equipment include certain network
server equipment. Wireless communications systems include assets to operate our wireless network and IT data centers,
including tower assets and leasehold improvements and assets related to the liability for the retirement of long-lived assets.
Leasehold improvements include asset improvements other than those related to the wireless network.
Property and equipment are recorded at cost less accumulated depreciation and impairments, if any, in Property and equipment,
net on our Consolidated Balance Sheets. We generally depreciate property and equipment over the period the property and
equipment provide economic benefit. Depreciable life studies are performed periodically to confirm the appropriateness of
depreciable lives for certain categories of property and equipment. These studies take into account actual usage, physical wear
63
and tear, replacement history and assumptions about technology evolution. When these factors indicate the useful life of an
asset is different from the previous assessment, the remaining book value is depreciated prospectively over the adjusted
remaining estimated useful life. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the
related lease term.
JUMP! On Demand allows customers to lease a device over a period of up to 18 months and upgrade it for a new device up to
one time per month. To date, all of our leased devices were classified as operating leases. At operating lease inception, leased
wireless devices are transferred from inventory to property and equipment. Leased wireless devices are depreciated to their
estimated residual value over the period expected to provide utility to us, which is generally shorter than the lease term and
considers expected losses. Revenues associated with the leased wireless devices, net of incentives, are generally recognized
over the lease term. Upon device upgrade or at lease end, customers must return or purchase their device. Returned devices
transferred from Property and equipment, net are recorded as inventory and are valued at the lower of cost or net realizable
value with any write-down recognized as Cost of equipment sales in our Consolidated Statements of Comprehensive Income.
Costs of major replacements and improvements are capitalized. Repair and maintenance expenditures which do not enhance or
extend the asset’s useful life are charged to operating expenses as incurred. Construction costs, labor and overhead incurred in
the expansion or enhancement of our wireless network are capitalized. Capitalization commences with pre-construction period
administrative and technical activities, which includes obtaining leases, zoning approvals and building permits, and ceases at
the point at which the asset is ready for its intended use. We capitalize interest associated with the acquisition or construction of
certain property and equipment. Capitalized interest is reported as a reduction in interest expense and depreciated over the
useful life of the related assets.
We record an asset retirement obligation for the fair value of legal obligations associated with the retirement of tangible long-
lived assets and a corresponding increase in the carrying amount of the related asset in the period in which the obligation is
incurred. In periods subsequent to initial measurement, we recognize changes in the liability resulting from the passage of time
and revisions to either the timing or the amount of the original estimate. Over time, the liability is accreted to its present value
and the capitalized cost is depreciated over the estimated useful life of the asset. Our obligations relate primarily to certain legal
obligations to remediate leased property on which our network infrastructure and administrative assets are located.
We capitalize certain costs incurred in connection with developing or acquiring internal use software. Capitalization of software
costs commences once the final selection of the specific software solution has been made and management authorizes and
commits to funding the software project. Capitalized software costs are included in Property and equipment, net in our
Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life of the asset. Costs incurred
during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.
Other Intangible Assets
Intangible assets that do not have indefinite useful lives are amortized over their estimated useful lives. Customer lists are
amortized using the sum-of-the-years'-digits method over the expected period in which the relationship is expected to contribute
to future cash flows. The remaining finite-lived intangible assets are amortized using the straight-line method.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill
Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets acquired in a business
combination. Goodwill is allocated to our two reporting units, wireless and Layer3.
Spectrum Licenses
Spectrum licenses are carried at costs incurred to acquire the spectrum licenses and the costs to prepare the spectrum licenses
for their intended use, such as costs to clear acquired spectrum licenses. The Federal Communications Commission (“FCC”)
issues spectrum licenses which provide us with the exclusive right to utilize designated radio frequency spectrum within
specific geographic service areas to provide wireless communications services. While spectrum licenses are issued for a fixed
period of time, typically for up to fifteen years, the FCC has granted license renewals routinely and at a nominal cost. The
spectrum licenses held by us expire at various dates. We believe we will be able to meet all requirements necessary to secure
renewal of our spectrum licenses at nominal costs. Moreover, we determined there are currently no legal, regulatory,
contractual, competitive, economic or other factors that limit the useful lives of our spectrum licenses. Therefore, we
determined the spectrum licenses should be treated as indefinite-lived intangible assets.
64
At times, we enter into agreements to sell or exchange spectrum licenses. Upon entering into the arrangement, if the transaction
has been deemed to have commercial substance, spectrum licenses are reviewed for impairment and transferred at their carrying
value, net of any impairment, to assets held for sale included in Other current assets in our Consolidated Balance Sheets until
approval and completion of the exchange or sale. Upon closing of the transaction, spectrum licenses acquired as part of an
exchange of nonmonetary assets are valued at fair value and the difference between the fair value of the spectrum licenses
obtained, book value of the spectrum licenses transferred and cash paid, if any, is recognized as a gain and included in Gains on
disposal of spectrum licenses in our Consolidated Statements of Comprehensive Income. Our fair value estimates of spectrum
licenses are based on information for which there is little or no observable market data. If the transaction lacks commercial
substance or the fair value is not measurable, the acquired spectrum licenses are recorded at the book value of the assets
transferred or exchanged.
Impairment
We assess the carrying value of our goodwill and other indefinite-lived intangible assets, such as our spectrum licenses, for
potential impairment annually as of December 31, or more frequently if events or changes in circumstances indicate such assets
might be impaired.
When assessing goodwill for impairment we may elect to first perform a qualitative assessment for a reporting unit to determine
if the quantitative impairment test is necessary. If we do not perform a qualitative assessment, or if the qualitative assessment
indicates it is more likely than not that the fair value of the two reporting units, wireless and Layer3, is less than its carrying
amount, we perform a quantitative test. We recognize an impairment charge for the amount by which the carrying amount
exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to
that reporting unit.
We test our spectrum licenses for impairment on an aggregate basis, consistent with our management of the overall business at
a national level. We may elect to first perform a qualitative assessment to determine whether it is more likely than not that the
fair value of an intangible asset is less than its carrying value. If we do not perform the qualitative assessment, or if the
qualitative assessment indicates it is more likely than not that the fair value of the intangible asset is less than its carrying
amount, we calculate the estimated fair value of the intangible asset. If the estimated fair value of the spectrum licenses is lower
than their carrying amount, an impairment loss is recognized for the difference. We estimate fair value using the Greenfield
methodology, which is an income approach based on discounted cash flows associated with the intangible asset, to estimate the
price at which an orderly transaction to sell the asset would take place between market participants at the measurement date
under current market conditions.
Guarantee Liabilities
We offer a device trade-in program, Just Upgrade My Phone (“JUMP!”), which provides eligible customers a specified-price
trade-in right to upgrade their device. Upon enrollment, participating customers must finance the purchase of a device on an EIP
and have a qualifying T-Mobile monthly wireless service plan, which is treated as an arrangement with multiple performance
obligations when entered into at or near the same time. Upon a qualifying JUMP! program upgrade, the customer’s remaining
EIP balance is settled provided they trade-in their eligible used device in good working condition and purchase a new device
from us on a new EIP.
For customers who enroll in JUMP!, we recognize a liability and reduce revenue for the portion of revenue which represents the
estimated fair value of the specified-price trade-in right guarantee. The guarantee liability is valued based on various economic
and customer behavioral assumptions, which requires judgment, including estimating the customer's remaining EIP balance at
trade-in, the expected fair value of the used device at trade-in, and the probability and timing of trade-in. When customers
upgrade their device, the difference between the EIP balance credit to the customer and the fair value of the returned device is
recorded against the guarantee liabilities. All assumptions are reviewed periodically.
Fair Value Measurements
We carry certain assets and liabilities at fair value. Fair value is defined as an exit price, representing the amount that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs based on the observability as
of the measurement date, is as follows:
65
Level 1
Level 2
Level 3
Quoted prices in active markets for identical assets or liabilities;
Observable inputs other than the quoted prices in active markets for identical assets and liabilities; and
Unobservable inputs for which there is little or no market data, which require us to develop assumptions of what
market participants would use in pricing the asset or liability.
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and
may affect the placement of assets and liabilities being measured within the fair value hierarchy.
The carrying values of cash and cash equivalents, short-term investments, accounts receivable, accounts receivable from
affiliates and accounts payable approximate fair value due to the short-term maturities of these instruments. The carrying values
of EIP receivables approximate fair value as the receivables are recorded at their present value, net of unamortized discount and
allowance for credit losses. There were no financial instruments with a carrying value materially different from their fair value,
based on quoted market prices or rates for the same or similar instruments, or internal valuation models.
Derivative Financial Instruments
Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value. We do not use
derivatives for trading or speculative purposes.
For derivative instruments designated as cash flow hedges associated with forecasted debt issuances, changes in fair value are
reported as a component of Accumulated other comprehensive loss until reclassified into Interest expense in the same period
the hedged transaction affects earnings, generally over the life of the related debt. Unrealized gains on derivatives designated as
cash flow hedges are recorded at fair value as assets, and unrealized losses on derivatives designated as cash flow hedges are
recorded at fair value as liabilities.
Revenue Recognition (effective January 1, 2018)
We primarily generate our revenue from providing wireless services to customers and selling or leasing devices and
accessories. Our contracts with customers may involve multiple performance obligations, which include wireless services,
wireless devices or a combination thereof, and we allocate the transaction price between each performance obligation based on
its relative standalone selling price.
Significant Judgments
The most significant judgments affecting the amount and timing of revenue from contracts with our customers include the
following items:
•
•
•
•
Revenue for service contracts that we assess are not probable of collection is not recognized until the contract is
completed or terminated and cash is received. Collectibility is re-assessed when there is a significant change in facts or
circumstances. Our assessment of collectibility considers whether we may limit our exposure to credit risk through our
right to stop transferring additional service in the event the customer is delinquent as well as certain contract terms
such as down payments that reduce our exposure to credit risk. Customer credit behavior is inherently uncertain. See
“Receivables and Allowance for Credit Losses”, above, for more discussion on how we assess credit risk.
Promotional EIP bill credits offered to a customer on an equipment sale that are paid over time and are contingent on
the customer maintaining a service contract may result in an extended service contract based on whether a substantive
penalty is deemed to exist. Determining whether contingent EIP bill credits result in a substantive termination penalty
may require significant judgment.
The identification of distinct performance obligations within our service plans may require significant judgment.
Revenue is recorded net of costs paid to another party for performance obligations where we arrange for the other
party to transfer goods or services to the customer (i.e., when we are acting as an agent). For example, performance
obligations relating to services provided by third-party content providers where we neither control a right to the
content provider’s service nor control the underlying service itself are presented net because we are acting as an agent.
The determination of whether we control the underlying service or right to the service prior to our transfer to the
customer requires, at times, significant judgment.
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•
•
•
•
•
For transactions where we recognize a significant financing component, judgment is required to determine the discount
rate. For EIP sales, the discount rate used to adjust the transaction price primarily reflects current market interest rates
and the estimated credit risk of the customer. Customer credit behavior is inherently uncertain. See “Receivables and
Allowance for Credit Losses”, above, for more discussion on how we assess credit risk.
Our products are generally sold with a right of return, which is accounted for as variable consideration when
estimating the amount of revenue to recognize. Device return levels are estimated based on the expected value method
as there are a large number of contracts with similar characteristics and the outcome of each contract is independent of
the others. Historical return rate experience is a significant input to our expected value methodology.
Sales of equipment to indirect dealers who have been identified as our customer (referred to as the sell-in model) often
include credits subsequently paid to the dealer as a reimbursement for any discount promotions offered to the end
consumer. These credits (payments to a customer) are accounted for as variable consideration when estimating the
amount of revenue to recognize from the sales of equipment to indirect dealers and are estimated based on historical
experience and other factors, such as expected promotional activity.
The determination of the standalone selling price for contracts that involve more than one performance obligation may
require significant judgment, such as when the selling price of a good or service is not readily observable.
For capitalized contract costs, determining the amortization period over which such costs are recognized as well as
assessing the indicators of impairment may require significant judgment.
Wireless Services Revenue
We generate our wireless services revenues from providing access to, and usage of, our wireless communications network.
Service revenues also include revenues earned for providing value added services to customers, such as handset insurance
services. Service contracts are billed monthly either in advance or arrears, or are prepaid. Generally, service revenue is
recognized as we satisfy our performance obligation to transfer service to our customers. We typically satisfy our stand-ready
performance obligations, including unlimited wireless services, evenly over the contract term. For usage-based and prepaid
wireless services, we satisfy our performance obligations when services are rendered.
Consideration payable to a customer is treated as a reduction of the total transaction price, unless the payment is in exchange for
a distinct good or service, such as certain commissions paid to dealers.
Federal Universal Service Fund (“USF”) and other fees are assessed by various governmental authorities in connection with the
services we provide to our customers and are included in Cost of services. When we separately bill and collect these regulatory
fees from customers, they are recorded gross in Total service revenues in our Consolidated Statements of Comprehensive
Income. For the years ended December 31, 2019, 2018 and 2017, we recorded approximately $93 million, $161 million and
$258 million, respectively, of USF fees on a gross basis.
We have made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a
governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by
us from a customer (e.g., sales, use, value added, and some excise taxes).
Equipment Revenues
We generate equipment revenues from the sale or lease of mobile communication devices and accessories. For performance
obligations related to equipment contracts, we typically transfer control at a point in time when the device or accessory is
delivered to, and accepted by, the customer or dealer. We have elected to account for shipping and handling activities that occur
after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.
We estimate variable consideration (e.g., device returns or certain payments to indirect dealers) primarily based on historical
experience. Equipment sales not probable of collection are generally recorded as payments are received. Our assessment of
collectibility considers contract terms such as down payments that reduce our exposure to credit risk.
We offer certain customers the option to pay for devices and accessories in installments using an EIP. Generally, we recognize
as a reduction of the total transaction price the effects of a financing component in contracts where customers purchase their
devices and accessories on an EIP with a term of more than one year, including those financing components that are not
considered to be significant to the contract. However, we have elected the practical expedient to not recognize the effects of a
67
significant financing component for contracts where we expect, at contract inception, that the period between the transfer of a
performance obligation to a customer and the customer’s payment for that performance obligation will be one year or less.
In addition, for customers who enroll in our JUMP! program, we recognize a liability based on the estimated fair value of the
specified-price trade-in right guarantee. The fair value of the guarantee is deducted from the transaction price and the remaining
transaction price is allocated to other elements of the contract, including service and equipment performance obligations. See
“Guarantee Liabilities” above for further information.
JUMP! On Demand allows customers to lease a device over a period of up to 18 months and upgrade it for a new device up to
one time per month. To date, all of our leased wireless devices are accounted for as operating leases and estimated contract
consideration is allocated between lease elements and non-lease elements (such as service and equipment performance
obligations) based on the relative standalone selling price of each performance obligation in the contract. Lease revenues are
recorded as equipment revenues and recognized as earned on a straight-line basis over the lease term. Lease revenues on
contracts not probable of collection are limited to the amount of payments received. See “Property and Equipment” above for
further information.
Contract Balances
Generally, our devices and service plans are available at standard prices, which are maintained on price lists and published on
our website and/or within our retail stores.
For contracts that involve more than one product or service that are identified as separate performance obligations, the
transaction price is allocated to the performance obligations based on their relative standalone selling prices. The standalone
selling price is the price at which we would sell the good or service separately to a customer and is most commonly evidenced
by the price at which we sell that good or service separately in similar circumstances and to similar customers.
A contract asset is recorded when revenue is recognized in advance of our right to receive consideration (i.e., we must perform
additional services in order to receive consideration). Amounts are recorded as receivables when our right to consideration is
unconditional. When consideration is received, or we have an unconditional right to consideration in advance of delivery of
goods or services, a contract liability is recorded. The transaction price can include non-refundable upfront fees, which are
allocated to the identifiable performance obligations.
Contract assets are included in Other current assets and Other assets and contract liabilities are included in Deferred revenue in
our Consolidated Balance Sheets.
Contract Modifications
Our service contracts allow customers to frequently modify their contracts without incurring penalties in many cases. Each time
a contract is modified, we evaluate the change in scope or price of the contract to determine if the modification should be
treated as a separate contract, as if there is a termination of the existing contract and creation of a new contract, or if the
modification should be considered a change associated with the existing contract. We typically do not have significant impacts
from contract modifications.
Contract Costs
We incur certain incremental costs to obtain a contract that we expect to recover, such as sales commissions. We record an asset
when these incremental costs to obtain a contract are incurred and amortize them on a systematic basis that is consistent with
the transfer to the customer of the goods or services to which the asset relates.
We amortize deferred costs incurred to obtain service contracts on a straight-line basis over the term of the initial contract and
anticipated renewal contracts to which the costs relate, currently 24 months for postpaid service contracts. However, we have
elected the practical expedient permitting expensing of costs to obtain a contract when the expected amortization period is one
year or less for prepaid service contracts.
Incremental costs to obtain equipment contracts (e.g., commissions paid on device and accessory sales) are recognized when the
equipment is transferred to the customer.
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See Note 1 - Summary of Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended
December 31, 2017 for more discussion regarding the accounting policies that governed revenue recognition prior to January 1,
2018.
Advertising Expense
We expense the cost of advertising and other promotional expenditures to market our services and products as incurred. For the
years ended December 31, 2019, 2018 and 2017, advertising expenses included in Selling, general and administrative expenses
in our Consolidated Statements of Comprehensive Income were $1.6 billion, $1.7 billion and $1.8 billion, respectively.
Income Taxes
Deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax bases
of assets and liabilities using enacted tax rates expected to be in effect when these differences are realized. A valuation
allowance is recorded when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The
ultimate realization of a deferred tax asset depends on the ability to generate sufficient taxable income of the appropriate
character and in the appropriate taxing jurisdictions within the carryforward periods available.
We account for uncertainty in income taxes recognized in the financial statements in accordance with the accounting guidance
for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We
assess whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of
the position and adjust the unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law,
interactions with taxing authorities and developments in case law.
Other Comprehensive Income (Loss)
Other comprehensive income (loss) consists of adjustments, net of tax, related to unrealized gains (losses) on cash flow hedges
and available-for-sale securities. This is reported in Accumulated other comprehensive loss as a separate component of
stockholders’ equity until realized in earnings.
Stock-Based Compensation
Stock-based compensation cost for stock awards, which include restricted stock units (“RSUs”) and performance-based
restricted stock units (“PRSUs”), is measured at fair value on the grant date and recognized as expense, net of expected
forfeitures, over the related service period. The fair value of stock awards is based on the closing price of our common stock on
the date of grant. RSUs are recognized as expense using the straight-line method. PRSUs are recognized as expense following a
graded vesting schedule with their performance re-assessed and updated on a quarterly basis, or more frequently as changes in
facts and circumstances warrant.
Earnings Per Share
Basic earnings per share is computed by dividing Net income attributable to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per share is computed by giving effect to all potentially
dilutive common shares outstanding during the period. Potentially dilutive common shares consist of outstanding stock options,
RSUs and PRSUs, calculated using the treasury stock method, and prior to the conversion of our preferred stock in December
2017, potentially dilutive common shares included mandatory convertible preferred stock calculated using the if-converted
method. See Note 14 - Earnings Per Share for further information.
Variable Interest Entities
VIEs are entities that lack sufficient equity to permit the entity to finance its activities without additional subordinated financial
support from other parties, have equity investors that do not have the ability to make significant decisions relating to the entity's
operations through voting rights, do not have the obligation to absorb the expected losses or do not have the right to receive the
residual returns of the entity. The most common type of VIE is a special purpose entity (“SPE”). SPEs are commonly used in
securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. SPEs are
generally structured to insulate investors from claims on the SPE's assets by creditors of other entities, including the creditors of
the seller of the assets.
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The primary beneficiary is required to consolidate the assets and liabilities of the VIE. The primary beneficiary is the party
which has both the power to direct the activities of an entity that most significantly impact the VIE's economic performance,
and through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE which could
potentially be significant to the VIE. We consolidate VIEs when we are deemed to be the primary beneficiary or when the VIE
cannot be deconsolidated.
In assessing which party is the primary beneficiary, all the facts and circumstances are considered, including each party’s role in
establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that
most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those
activities. In general, the parties that make the most significant decisions affecting the VIE (such as asset managers and
servicers) or have the right to unilaterally remove those decision-makers are deemed to have the power to direct the activities of
a VIE.
Accounting Pronouncements Adopted During the Current Year
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842),” and has
since modified the standard with several ASUs (collectively, the “new lease standard”). The new lease standard was effective
for us, and we adopted the standard, on January 1, 2019.
We adopted the standard by recognizing and measuring leases at the adoption date with a cumulative effect of initially applying
the guidance recognized at the date of initial application and as a result did not restate the prior periods presented in the
Consolidated Financial Statements.
The new lease standard provides for a number of optional practical expedients in transition. We did not elect the “package of
practical expedients” and as a result reassessed under the new lease standard our prior accounting conclusions about lease
identification, lease classification and initial direct costs. We elected to use hindsight for determining the reasonably certain
lease term. We did not elect the practical expedient pertaining to land easements as it is not applicable to us.
The new lease standard provides practical expedients and policy elections for an entity’s ongoing accounting. Generally, we
elected the practical expedient to not separate lease and non-lease components in arrangements whereby we are the lessee. For
arrangements in which we are the lessor of wireless devices, we did not elect this practical expedient. We did not elect the
short-term lease recognition exemption, which includes the recognition of right-of-use assets and lease liabilities for existing
short-term leases at transition. We have also applied this election to all active leases at transition.
The most significant judgments and impacts upon adoption of the standard include the following:
•
In evaluating contracts to determine if they qualify as a lease, we consider factors such as if we have obtained or
transferred substantially all of the rights to the underlying asset through exclusivity, if we can or if we have transferred
the ability to direct the use of the asset by making decisions about how and for what purpose the asset will be used and
if the lessor has substantive substitution rights.
• We recognized right-of-use assets and operating lease liabilities for operating leases that have not previously been
recorded. The lease liability for operating leases is based on the net present value of future minimum lease payments.
The right-of-use asset for operating leases is based on the lease liability adjusted for the reclassification of certain
balance sheet amounts such as prepaid rent and deferred rent, which we remeasured at adoption due to the application
of hindsight to our lease term estimates. Deferred and prepaid rent are no longer presented separately.
•
•
Capital lease assets previously included within Property and equipment, net were reclassified to financing lease right-
of-use assets, and capital lease liabilities previously included in Short-term debt and Long-term debt were reclassified
to financing lease liabilities in our Consolidated Balance Sheet.
Certain line items in the Consolidated Statements of Cash Flows and the “Supplemental disclosure of cash flow
information” have been renamed to align with the new terminology presented in the new lease standard; “Repayment
of capital lease obligations” is now presented as “Repayments of financing lease obligations” and “Assets acquired
under capital lease obligations” is now presented as “Financing lease right-of-use assets obtained in exchange for lease
obligations.” In the “Operating Activities” section of the Consolidated Statements of Cash Flows we have added
“Operating lease right-of-use assets” and “Short and long-term operating lease liabilities” which represent the change
70
in the operating lease asset and liability, respectively. Additionally, in the “Supplemental disclosure of cash flow
information” section of the Consolidated Statements of Cash Flows we have added “Operating lease payments,” and in
the “Noncash investing and financing activities” section we have added “Operating lease right-of-use assets obtained
in exchange for lease obligations.”
In determining the discount rate used to measure the right-of-use asset and lease liability, we use rates implicit in the
lease, or if not readily available, we use our incremental borrowing rate. Our incremental borrowing rate is based on an
estimated secured rate comprised of a risk-free LIBOR rate plus a credit spread as secured by our assets. Determining
a credit spread as secured by our assets may require significant judgment.
Certain of our lease agreements include rental payments based on changes in the consumer price index (“CPI”). Lease
liabilities are not remeasured as a result of changes in the CPI; instead, changes in the CPI are treated as variable lease
payments and are excluded from the measurement of the right-of-use asset and lease liability. These payments are
recognized in the period in which the related obligation was incurred. Our lease agreements do not contain any
material residual value guarantees or material restrictive covenants.
•
•
• We elected the use of hindsight whereby we applied current lease term assumptions that are applied to new leases in
determining the expected lease term period for all cell sites. Upon adoption of the new lease standard and application
of hindsight, our expected lease term has shortened to reflect payments due for the initial non-cancelable lease term
only. This assessment corresponds to our lease term assessment for new leases and aligns with the payments that have
been disclosed as lease commitments in prior years. As a result, the average remaining lease term for cell sites has
decreased from approximately nine to five years based on lease contracts in effect at transition on January 1, 2019. The
aggregate impact of using hindsight is an estimated decrease in Total operating expenses of $240 million in fiscal year
2019.
• We were also required to reassess the previously failed sale-leasebacks of certain T-Mobile-owned wireless
communications tower sites and determine whether the transfer of the assets to the tower operator under the
arrangement met the transfer of control criteria in the revenue standard and whether a sale should be recognized.
Determining whether the transfer of control criteria has been met requires significant judgement.
• We concluded that a sale has not occurred for the 6,200 tower sites transferred to Crown Castle International
Corp. (“CCI”) pursuant to a master prepaid lease arrangement; therefore, these sites will continue to be
accounted for as failed sale-leasebacks.
• We concluded that a sale should be recognized for the 900 tower sites transferred to CCI pursuant to the sale
of a subsidiary and for the 500 tower sites transferred to Phoenix Tower International (“PTI”). Upon adoption
on January 1, 2019, we derecognized our existing long-term financial obligation and the tower-related
property and equipment associated with these 1,400 previously failed sale-leaseback tower sites and
recognized a lease liability and right-of-use asset for the leaseback of the tower sites. The impacts from the
change in accounting conclusion are primarily a decrease in Other revenues of $44 million and a decrease in
Interest expense of $34 million in fiscal year 2019.
•
Rental revenues and expenses associated with co-location tower sites are presented on a net basis under the new lease
standard. These revenues and expenses were presented on a gross basis under the former lease standard.
71
Including the impacts from a change in the accounting conclusion on the 1,400 previously failed sale-leaseback tower sites, the
cumulative effect of initially applying the new lease standard on January 1, 2019 is as follows:
(in millions)
Assets
Other current assets
Property and equipment, net
Operating lease right-of-use assets
Financing lease right-of-use assets
Other intangible assets, net
Other assets
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities
Other current liabilities
Short-term and long-term debt
Tower obligations
Deferred tax liabilities
Deferred rent expense
Short-term and long-term operating lease liabilities
Short-term and long-term financing lease liabilities
Other long-term liabilities
Accumulated deficit
January 1, 2019
Beginning
Balance
Cumulative
Effect
Adjustment
Beginning
Balance, As
Adjusted
$
1,676
$
(78) $
23,359
—
—
198
1,623
7,741
787
12,965
2,557
4,472
2,781
—
—
967
(12,954)
(2,339)
9,251
2,271
(12)
(71)
(65)
28
(2,015)
(345)
231
(2,781)
11,364
2,016
(64)
653
1,598
21,020
9,251
2,271
186
1,552
7,676
815
10,950
2,212
4,703
—
11,364
2,016
903
(12,301)
Including the impacts from the change in the accounting conclusion on the 1,400 previously failed sale-leaseback tower sites
and the change in presentation on the income statement of the 6,200 tower sites for which a sale did not occur, the cumulative
effects of initially applying the new lease standard for the year ended December 31, 2019 are estimated as follows:
•
•
The aggregate impact is a decrease in Other revenues of $185 million, a decrease in Total operating expenses of $380
million, a decrease in Interest expense of $34 million and an increase to Net income of $175 million.
The impact on our Consolidated Statements of Cash Flows is a decrease in Net cash provided by operating activities of
$10 million and a decrease in Net cash used in financing activities of $10 million.
For arrangements where we are the lessor, including arrangements to lease devices to our service customers, the adoption of the
new lease standard did not have a material impact on our financial statements as these leases are classified as operating leases.
Device lease payments are presented as Equipment revenues and recognized as earned on a straight-line basis over the lease
term. Recognition of equipment revenue on lease contracts that are determined to not be probable of collection is limited to the
amount of payments received. We have made an accounting policy election to exclude from the consideration in the contract all
taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing
transaction and collected by us from a customer (e.g., sales, use, value added, and some excise taxes).
At operating lease inception, leased wireless devices are transferred from Inventory to Property and equipment, net. Leased
wireless devices are depreciated to their estimated residual value over the period expected to provide utility to us, which is
generally shorter than the lease term and considers expected losses. Returned devices transferred from Property and equipment,
net, are recorded as Inventory and are valued at the lower of cost or market with any write-down to market recognized as Cost
of equipment sales in our Consolidated Statements of Comprehensive Income.
We do not have any leasing transactions with related parties. See Note 15 - Leases for further information.
We have implemented significant new lease accounting systems, processes and internal controls over lease accounting to assist
us in the application of the new lease standard.
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Lease Expense
We have operating leases for cell sites, retail locations, corporate offices and dedicated transportation lines, some of which have
escalating rentals during the initial lease term and during subsequent optional renewal periods. We recognize a right-of-use
asset and lease liability for operating leases based on the net present value of future minimum lease payments. Lease expense is
recognized on a straight-line basis over the non-cancelable lease term and renewal periods that are considered reasonably
certain.
We consider several factors in assessing whether renewal periods are reasonably certain of being exercised, including the
continued maturation of our network nationwide, technological advances within the telecommunications industry and the
availability of alternative sites.
We have financing leases for certain network equipment. The financing leases do not have renewal options and contain a
bargain purchase option at the end of the lease. We recognize a right-of-use asset and lease liability for financing leases based
on the net present value of future minimum lease payments. Lease expense for our financing leases is comprised of the
amortization of the right-of-use asset and interest expense recognized based on the effective interest method.
Accounting Pronouncements Not Yet Adopted
Financial Instruments
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments,” and has since modified the standard with several ASUs (collectively, the “new credit loss
standard”). The new credit loss standard requires a financial asset (or a group of financial assets) measured at amortized cost
basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant
information about past events, including historical experience, current conditions and reasonable and supportable forecasts that
affect the collectibility of the reported amount. The new credit loss standard will become effective for us beginning on January
1, 2020, and requires a cumulative-effect adjustment to Accumulated deficit as of the beginning of the first reporting period in
which the guidance is effective (that is, a modified-retrospective approach).
We will adopt the new credit loss standard on January 1, 2020, and plan to recognize lifetime expected credit losses at the
inception of our credit risk exposures whereas we currently recognize credit losses only when it is probable that they have been
incurred. We will also recognize expected credit losses on our EIP receivables, excluding consideration of any unamortized
discount on those receivables resulting from the imputation of interest. We currently offset our estimate of incurred losses on
our EIP receivables by the amount of the related unamortized discounts on those receivables. We have developed an expected
credit loss model and are refining the inputs including the forward-looking loss indicators. The estimated impact of the new
credit loss standard on our receivables portfolio as of December 31, 2019, would be an increase to our allowance for credit
losses of $85 million to $95 million, a decrease to our net deferred tax liabilities of $22 million to $25 million and an increase
to our Accumulated deficit of $63 million to $70 million.
Cloud Computing Arrangements
In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Topic 350):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The
standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service
contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We
will adopt the standard on a prospective basis beginning on the effective date of January 1, 2020. Upon adoption of the
standard, implementation costs are capitalized in the period incurred, which will result in an increase to Other assets in our
Consolidated Balance Sheets. These capitalized amounts will be amortized over the term of the hosting arrangement to Cost of
services or Selling, general and administrative expenses in our Consolidated Statements of Comprehensive Income based on the
nature of the hosting arrangement. The impact of this standard on our Consolidated Financial Statements is dependent on the
nature and composition of the hosting arrangements entered into subsequent to adoption.
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Income Taxes
In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes." The standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in
Topic 740. The standard will become effective for us beginning January 1, 2021. Early adoption is permitted for us at any time.
We are currently evaluating the impact this guidance will have on our Consolidated Financial Statements and the timing of
adoption.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American
Institute of Certified Public Accountants, and the Securities and Exchange Commission (the “SEC”) did not have, or are not
expected to have, a significant impact on our present or future Consolidated Financial Statements.
Note 2 – Business Combinations
Proposed Sprint Transactions
On April 29, 2018, we entered into a Business Combination Agreement to merge with Sprint in an all-stock transaction at a
fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or 9.75 shares of
Sprint common stock for each share of T-Mobile common stock (the “Merger”). The combined company will be named “T-
Mobile” and, as a result of the Merger, is expected to be able to rapidly launch a broad and deep nationwide 5G network,
accelerate innovation and increase competition in the U.S. wireless, video and broadband industries. Neither T-Mobile nor
Sprint on its own could generate comparable benefits to consumers.
The Merger and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”)
have been approved by the boards of directors of T-Mobile and Sprint and the required approvals of the stockholders of each of
T-Mobile and Sprint have been obtained. Immediately following the Merger, it is anticipated that Deutsche Telekom AG
(“DT”) and SoftBank Group Corp. (“SoftBank”) will hold, directly or indirectly, on a fully diluted basis, approximately 41.5%
and 27.2%, respectively, of the outstanding T-Mobile common stock, with the remaining approximately 31.3% of the
outstanding T-Mobile common stock held by other stockholders, based on closing share prices and certain other assumptions as
of December 31, 2019.
In connection with the entry into the Business Combination Agreement, T-Mobile USA, Inc. (“T-Mobile USA”) entered into
commitment letter, dated as of April 29, 2018 (as amended and restated on May 15, 2018 and on September 6, 2019, the
“Commitment Letter”). The funding of the debt facilities provided for in the Commitment Letter is subject to the satisfaction of
the conditions set forth therein, including consummation of the Merger. The proceeds of the debt financing provided for in the
Commitment Letter will be used to refinance certain existing debt of us, Sprint and our and Sprint’s respective subsidiaries and
for post-closing working capital needs of the combined company. See Note 8 – Debt for further information.
In connection with the entry into the Business Combination Agreement, DT and T-Mobile USA entered into a Financing
Matters Agreement, dated as of April 29, 2018 (the “Financing Matters Agreement”), pursuant to which DT agreed, among
other things, to consent to, subject to certain conditions, certain amendments to certain existing debt owed to DT, in connection
with the Merger. If the Merger is consummated, we will make payments for requisite consents to DT of $13 million. There was
no payment accrued as of December 31, 2019. See Note 8 – Debt for further information.
On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement dated as of May 14, 2018 (the
"Consent Solicitation Statement"), we obtained consents necessary to effect certain amendments to certain existing debt of us
and our subsidiaries. If the Merger is consummated, we will make payments for requisite consents to third-party note holders of
$95 million. There were no consent payments accrued as of December 31, 2019.
Under the terms of the Business Combination Agreement, if the Business Combination Agreement is terminated, Sprint may be
required to reimburse us for 33% of the consent, bank, and other fees we paid or accrued, which totaled $18 million as of
December 31, 2019. There were no reimbursements accrued as of December 31, 2019. Sprint also obtained consents necessary
to effect certain amendments to certain existing debt of Sprint and its subsidiaries. In connection with receiving the requisite
consents, Sprint made upfront payments to third-party note holders and related bank fees of $242 million. Under the terms of
the Business Combination Agreement, if the Business Combination Agreement is terminated, we may also be required to
reimburse Sprint for 67% of the upfront consent and related bank fees it paid, which totaled $162 million as of December 31,
2019. There were no fees accrued as of December 31, 2019.
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We recognized Merger-related costs of $620 million and $196 million for the years ended December 31, 2019 and 2018,
respectively. These costs generally included consulting and legal fees and were recognized as Selling, general and
administrative expenses in our Consolidated Statements of Comprehensive Income. Payments for Merger-related costs were
$442 million and $86 million for the years ended December 31, 2019 and 2018, respectively, and were recognized within Net
cash provided by operating activities in our Consolidated Statements of Cash Flows.
The Business Combination Agreement contains certain termination rights for both Sprint and us. If we terminate the Business
Combination Agreement in connection with a failure to satisfy the closing condition related to specified minimum credit ratings
for the combined company on the closing date of the Merger (after giving effect to the Merger) from at least two of the three
credit rating agencies, then in certain circumstances, we may be required to pay Sprint an amount equal to $600 million.
On June 18, 2018, we filed a Public Interest Statement and applications for approval of the Merger with the FCC. On July 18,
2018, the FCC issued a Public Notice formally accepting our applications and establishing a period for public comment. On
May 20, 2019, to facilitate the FCC’s review and approval of the FCC license transfers associated with the proposed Merger,
we and Sprint filed with the FCC a written ex parte presentation (the “Presentation”) relating to the proposed Merger. The
Presentation included proposed commitments from us and Sprint. The FCC approved the Merger on November 5, 2019.
On June 11, 2019, a number of state attorneys general filed a lawsuit against us, DT, Sprint, and SoftBank in the U.S. District
Court for the Southern District of New York, alleging that the Merger, if consummated, would violate Section 7 of the Clayton
Act and so should be enjoined. After it was filed, several additional states joined the lawsuit. Of the states that joined the
lawsuit, two have subsequently withdrawn from the suit having resolved their concerns with the Merger. We believe the
plaintiffs’ claims are without merit, and have defended the case vigorously. Trial concluded after two weeks of witness
testimony and presentation of document evidence. We are now waiting for the trial court’s ruling. On November 25, 2019,
individual consumers filed a similar lawsuit in the Northern District of California. That case has been stayed pending the
outcome of the New York litigation.
On July 26, 2019, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Sprint and DISH
Network Corporation (“DISH”). We and Sprint are collectively referred to as the “Sellers.” Pursuant to the Asset Purchase
Agreement, upon the terms and subject to the conditions thereof, following the consummation of the Merger, DISH will acquire
Sprint’s prepaid wireless business, currently operated under the Boost Mobile and Sprint prepaid brands (excluding the
Assurance brand Lifeline customers and the prepaid wireless customers of Shenandoah Telecommunications Company and
Swiftel Communications, Inc.), including customer accounts, inventory, contracts, intellectual property and certain other
specified assets (the “Prepaid Business”), and will assume certain related liabilities (the “Prepaid Transaction”). DISH will pay
the Sellers $1.4 billion for the Prepaid Business, subject to a working capital adjustment. The consummation of the Prepaid
Transaction is subject to the consummation of the Merger and other customary closing conditions.
At the closing of the Prepaid Transaction, the Sellers and DISH will enter into (i) a License Purchase Agreement pursuant to
which (a) the Sellers will sell certain 800 MHz spectrum licenses held by Sprint to DISH for a total of approximately $3.6
billion in a transaction to be completed, subject to certain additional closing conditions, following an application for FCC
approval to be filed three years following the closing of the Merger and (b) the Sellers will have the option to lease back from
DISH, as needed, a portion of the spectrum sold for an additional two years following the closing of the spectrum sale
transaction, (ii) a Transition Services Agreement providing for the Sellers’ provision of transition services to DISH in
connection with the Prepaid Business for a period of up to three years following the closing of the Prepaid Transaction, (iii) a
Master Network Services Agreement providing for the Sellers’ provision of network services to customers of the Prepaid
Business for a period of up to seven years following the closing of the Prepaid Transaction, and (iv) an Option to Acquire
Tower and Retail Assets offering DISH the option to acquire certain decommissioned towers and retail locations from the
Sellers, subject to obtaining all necessary third-party consents, for a period of up to five years following the closing of the
Prepaid Transaction.
On July 26, 2019, in connection with the entry into the Asset Purchase Agreement, we and the other parties to the Business
Combination Agreement entered into Amendment No. 1 (the “Amendment”) to the Business Combination Agreement. The
Amendment extended the Outside Date (as defined in the Business Combination Agreement) to November 1, 2019, or, if the
Marketing Period (as defined in the Business Combination Agreement) had started and was in effect at such date, then January
2, 2020. Because the Transactions were not completed by the Outside Date, each of T-Mobile and Sprint currently has the right
to terminate the Business Combination Agreement or the terms may be amended.
On July 26, 2019, the U.S. Department of Justice (the “DOJ”) filed a complaint and a proposed final judgment (the “Proposed
Consent Decree”) agreed to by us, DT, Sprint, SoftBank and DISH with the U.S. District Court for the District of Columbia.
75
The Proposed Consent Decree would fully resolve DOJ’s investigation into the Merger and would require the parties to, among
other things, carry out the divestitures to be made pursuant to the Asset Purchase Agreement described above upon closing of
the Merger. The Proposed Consent Decree is subject to judicial approval.
The consummation of the Merger remains subject to certain closing conditions. We expect the Merger will be permitted to close
in early 2020.
Note 3 – Receivables and Allowance for Credit Losses
Our portfolio of receivables is comprised of two portfolio segments: accounts receivable and EIP receivables. Our accounts
receivable segment primarily consists of amounts currently due from customers, including service and leased device
receivables, other carriers and third-party retail channels.
Based upon customer credit profiles, we classify the EIP receivables segment into two customer classes of “Prime” and
“Subprime.” Prime customer receivables are those with lower delinquency risk and Subprime customer receivables are those
with higher delinquency risk. Customers may be required to make a down payment on their equipment purchases. In addition,
certain customers within the Subprime category are required to pay an advance deposit.
To determine a customer’s credit profile, we use a proprietary credit scoring model that measures the credit quality of a
customer using several factors, such as credit bureau information, consumer credit risk scores and service and device plan
characteristics.
The following table summarizes the EIP receivables, including imputed discounts and related allowance for credit losses:
(in millions)
EIP receivables, gross
Unamortized imputed discount
EIP receivables, net of unamortized imputed discount
Allowance for credit losses
EIP receivables, net
Classified on the balance sheet as:
Equipment installment plan receivables, net
Equipment installment plan receivables due after one year, net
EIP receivables, net
December 31,
2019
December 31,
2018
$
$
$
$
4,582
$
(299)
4,283
(100)
4,183
2,600
1,583
4,183
$
$
$
4,534
(330)
4,204
(119)
4,085
2,538
1,547
4,085
To determine the appropriate level of the allowance for credit losses, we consider a number of credit quality factors, including
historical credit losses and timely payment experience as well as current collection trends such as write-off frequency and
severity, aging of the receivable portfolio, credit quality of the customer base and other qualitative factors such as macro-
economic conditions.
We write off account balances if collection efforts are unsuccessful and the receivable balance is deemed uncollectible, based
on factors such as customer credit ratings and the length of time from the original billing date.
For EIP receivables, subsequent to the initial determination of the imputed discount, we assess the need for and, if necessary,
recognize an allowance for credit losses to the extent the amount of estimated incurred losses on the gross EIP receivable
balances exceed the remaining unamortized imputed discount balances.
The EIP receivables had weighted average effective imputed interest rates of 8.8% and 10.0% as of December 31, 2019, and
2018, respectively.
76
Activity for the years ended December 31, 2019, 2018 and 2017, in the allowance for credit losses and unamortized imputed
discount balances for the accounts receivable and EIP receivables segments were as follows:
December 31, 2019
December 31, 2018
December 31, 2017
(in millions)
Accounts
Receivable
Allowance
EIP
Receivables
Allowance
Accounts
Receivable
Allowance
EIP
Receivables
Allowance
Total
Accounts
Receivable
Allowance
EIP
Receivables
Allowance
Total
Total
Allowance for credit
losses and imputed
discount, beginning of
period
$
Bad debt expense
Write-offs, net of
recoveries
Change in imputed
discount on short-term
and long-term EIP
receivables
Impact on the imputed
discount from sales of
EIP receivables
Allowance for credit
losses and imputed
discount, end of
period
$
67
77
$
449
230
$
516
307
$
86
69
$
396
228
$
482
297
$
102
104
$
316
284
418
388
(83)
(249)
(332)
(88)
(240)
(328)
(120)
(273)
(393)
N/A
136
136
N/A
250
250
N/A
252
252
N/A
(167)
(167)
N/A
(185)
(185)
N/A
(183)
(183)
$
61
$
399
$
460
$
67
$
449
$
516
$
86
$
396
$
482
Management considers the aging of receivables to be an important credit indicator. The following table provides delinquency
status for the unpaid principal balance for receivables within the EIP portfolio segment, which we actively monitor as part of
our current credit risk management practices and policies:
December 31, 2019
December 31, 2018
Prime
Subprime
Total EIP
Receivables,
gross
Prime
Subprime
Total EIP
Receivables,
gross
$
$
2,384
$
2,108
$
4,492
$
1,987
$
2,446
$
4,433
13
7
7
28
17
18
41
24
25
15
6
7
32
19
22
47
25
29
2,411
$
2,171
$
4,582
$
2,015
$
2,519
$
4,534
(in millions)
Current - 30 days past due
31 - 60 days past due
61 - 90 days past due
More than 90 days past due
Total receivables, gross
Note 4 – Sales of Certain Receivables
We have entered into transactions to sell certain service and EIP receivables. The transactions, including our continuing
involvement with the sold receivables and the respective impacts to our Consolidated Financial Statements, are described
below.
Sales of Service Accounts Receivable
Overview of the Transaction
In 2014, we entered into an arrangement to sell certain service accounts receivable on a revolving basis (the “service receivable
sale arrangement”). The maximum funding commitment of the service receivable sale arrangement is $950 million. In February
2019, the service receivable sale arrangement was amended to extend the scheduled expiration date, as well as certain third-
party credit support under the arrangement, to March 2021. As of December 31, 2019 and 2018, the service receivable sale
arrangement provided funding of $924 million and $774 million, respectively. Sales of receivables occur daily and are settled
on a monthly basis. The receivables consist of service charges currently due from customers and are short-term in nature.
In connection with the service receivable sale arrangement, we formed a wholly-owned subsidiary, which qualifies as a
bankruptcy remote entity, to sell service accounts receivable (the “Service BRE”). The Service BRE does not qualify as a VIE,
and due to the significant level of control we exercise over the entity, it is consolidated. Pursuant to the service receivable sale
arrangement, certain of our wholly-owned subsidiaries transfer selected receivables to the Service BRE. The Service BRE then
sells the receivables to an unaffiliated entity (the “Service VIE”), which was established to facilitate the sale of beneficial
ownership interests in the receivables to certain third parties.
77
Variable Interest Entity
We determined that the Service VIE qualifies as a VIE as it lacks sufficient equity to finance its activities. We have a variable
interest in the Service VIE but are not the primary beneficiary as we lack the power to direct the activities that most
significantly impact the Service VIE’s economic performance. Those activities include committing the Service VIE to legal
agreements to purchase or sell assets, selecting which receivables are purchased in the service receivable sale arrangement,
determining whether the Service VIE will sell interests in the purchased service receivables to other parties, funding of the
entity and servicing of receivables. We do not hold the power to direct the key decisions underlying these activities. For
example, while we act as the servicer of the sold receivables, which is considered a significant activity of the Service VIE, we
are acting as an agent in our capacity as the servicer and the counterparty to the service receivable sale arrangement has the
ability to remove us as the servicing agent of the receivables at will with no recourse available to us. As we have determined we
are not the primary beneficiary, the balances and results of the Service VIE are not included in our Consolidated Financial
Statements.
The following table summarizes the carrying amounts and classification of assets, which consists primarily of the deferred
purchase price and liabilities included in our Consolidated Balance Sheets that relate to our variable interest in the Service VIE:
(in millions)
Other current assets
Accounts payable and accrued liabilities
Other current liabilities
Sales of EIP Receivables
Overview of the Transaction
December 31,
2019
December 31,
2018
$
350
$
25
342
339
59
149
In 2015, we entered into an arrangement to sell certain EIP accounts receivable on a revolving basis (the “EIP sale
arrangement”). The maximum funding commitment of the EIP sale arrangement is $1.3 billion, and the scheduled expiration
date is November 2020.
As of both December 31, 2019 and 2018, the EIP sale arrangement provided funding of $1.3 billion. Sales of EIP receivables
occur daily and are settled on a monthly basis.
In connection with this EIP sale arrangement, we formed a wholly-owned subsidiary, which qualifies as a bankruptcy remote
entity (the “EIP BRE”). Pursuant to the EIP sale arrangement, our wholly-owned subsidiary transfers selected receivables to the
EIP BRE. The EIP BRE then sells the receivables to a non-consolidated and unaffiliated third-party entity for which we do not
exercise any level of control, nor does the third-party entity qualify as a VIE.
Variable Interest Entity
We determined that the EIP BRE is a VIE as its equity investment at risk lacks the obligation to absorb a certain portion of its
expected losses. We have a variable interest in the EIP BRE and determined that we are the primary beneficiary based on our
ability to direct the activities which most significantly impact the EIP BRE’s economic performance. Those activities include
selecting which receivables are transferred into the EIP BRE and sold in the EIP sale arrangement and funding of the EIP BRE.
Additionally, our equity interest in the EIP BRE obligates us to absorb losses and gives us the right to receive benefits from the
EIP BRE that could potentially be significant to the EIP BRE. Accordingly, we include the balances and results of operations of
the EIP BRE in our Consolidated Financial Statements.
The following table summarizes the carrying amounts and classification of assets, which consists primarily of the deferred
purchase price, and liabilities included in our Consolidated Balance Sheets that relate to the EIP BRE:
(in millions)
Other current assets
Other assets
Other long-term liabilities
December 31,
2019
December 31,
2018
$
344
$
89
18
321
88
22
78
In addition, the EIP BRE is a separate legal entity with its own separate creditors who will be entitled, prior to any liquidation
of the EIP BRE, to be satisfied prior to any value in the EIP BRE becoming available to us. Accordingly, the assets of the EIP
BRE may not be used to settle our general obligations and creditors of the EIP BRE have limited recourse to our general credit.
Sales of Receivables
The transfers of service receivables and EIP receivables to the non-consolidated entities are accounted for as sales of financial
assets. Once identified for sale, the receivable is recorded at the lower of cost or fair value. Upon sale, we derecognize the net
carrying amount of the receivables.
We recognize the cash proceeds received upon sale in Net cash provided by operating activities in our Consolidated Statements
of Cash Flows. We recognize proceeds net of the deferred purchase price, consisting of a receivable from the purchasers that
entitles us to certain collections on the receivables. We recognize the collection of the deferred purchase price in Net cash used
in investing activities in our Consolidated Statements of Cash Flows as Proceeds related to beneficial interests in securitization
transactions.
The deferred purchase price represents a financial asset that is primarily tied to the creditworthiness of the customers and which
can be settled in such a way that we may not recover substantially all of our recorded investment, due to default by the
customers on the underlying receivables. We elected, at inception, to measure the deferred purchase price at fair value with
changes in fair value included in Selling, general and administrative expense in our Consolidated Statements of Comprehensive
Income. The fair value of the deferred purchase price is determined based on a discounted cash flow model which uses
primarily unobservable inputs (Level 3 inputs), including customer default rates. As of December 31, 2019, and 2018, our
deferred purchase price related to the sales of service receivables and EIP receivables was $781 million and $746 million,
respectively.
The following table summarizes the impact of the sale of certain service receivables and EIP receivables in our Consolidated
Balance Sheets:
(in millions)
Derecognized net service receivables and EIP receivables
Other current assets
of which, deferred purchase price
Other long-term assets
of which, deferred purchase price
Accounts payable and accrued liabilities
Other current liabilities
Other long-term liabilities
Net cash proceeds since inception
Of which:
Change in net cash proceeds during the year-to-date period
Net cash proceeds funded by reinvested collections
December 31,
2019
December 31,
2018
$
2,584
$
2,577
694
692
89
89
25
342
18
1,944
65
1,879
660
658
88
88
59
149
22
1,879
(179)
2,058
We recognized losses from sales of receivables, including adjustments to the receivables’ fair values and changes in fair value
of the deferred purchase price, of $130 million, $157 million and $299 million for the years ended December 31, 2019, 2018
and 2017, respectively, in Selling, general and administrative expense in our Consolidated Statements of Comprehensive
Income.
Continuing Involvement
Pursuant to the sale arrangements described above, we have continuing involvement with the service receivables and EIP
receivables we sell as we service the receivables and are required to repurchase certain receivables, including ineligible
receivables, aged receivables and receivables where write-off is imminent. We continue to service the customers and their
related receivables, including facilitating customer payment collection, in exchange for a monthly servicing fee. As the
receivables are sold on a revolving basis, the customer payment collections on sold receivables may be reinvested in new
receivable sales. While servicing the receivables, we apply the same policies and procedures to the sold receivables as we apply
to our owned receivables, and we continue to maintain normal relationships with our customers. Pursuant to the EIP sale
79
arrangement, under certain circumstances, we are required to deposit cash or replacement EIP receivables primarily for
contracts terminated by customers under our JUMP! Program.
In addition, we have continuing involvement with the sold receivables as we may be responsible for absorbing additional credit
losses pursuant to the sale arrangements. Our maximum exposure to loss related to the involvement with the service receivables
and EIP receivables sold under the sale arrangements was $1.1 billion as of December 31, 2019. The maximum exposure to
loss, which is a required disclosure under U.S. GAAP, represents an estimated loss that would be incurred under severe,
hypothetical circumstances whereby we would not receive the deferred purchase price portion of the contractual proceeds
withheld by the purchasers and would also be required to repurchase the maximum amount of receivables pursuant to the sale
arrangements without consideration for any recovery. We believe the probability of these circumstances occurring is remote and
the maximum exposure to loss is not an indication of our expected loss.
Note 5 – Property and Equipment
The components of property and equipment were as follows:
(in millions)
Buildings and equipment
Wireless communications systems
Leasehold improvements
Capitalized software
Leased wireless devices
Construction in progress
Accumulated depreciation and amortization
Property and equipment, net
Useful Lives
December 31,
2019
December 31,
2018
Up to 40 years
$
2,587
$
Up to 20 years
Up to 12 years
Up to 10 years
Up to 18 months
34,353
1,345
12,705
1,139
2,973
(33,118)
$
21,984
$
2,428
35,282
1,299
11,712
1,159
2,776
(31,297)
23,359
We capitalize interest associated with the acquisition or construction of certain property and equipment and spectrum intangible
assets. We recognized capitalized interest of $473 million, $362 million and $136 million for the years ended December 31,
2019, 2018 and 2017, respectively.
In December 2019, we sold 168 T-Mobile-owned wireless communications tower sites to an unrelated third party in exchange
for net proceeds of $38 million which are included in Proceeds from sales of tower sites within Net cash used in investing
activities in our Consolidated Statements of Cash Flows. A gain of $13 million was recognized as a reduction in Cost of
services, exclusive of depreciation and amortization, in our Consolidated Statements of Comprehensive Income. We lease back
space at certain of the sold tower sites for an initial term of ten years, followed by optional renewals.
Total depreciation expense relating to property and equipment was $6.0 billion, $6.4 billion and $5.8 billion for the years ended
December 31, 2019, 2018 and 2017, respectively. Included in the total depreciation expense for the years ended December 31,
2019, 2018 and 2017 was $543 million, $940 million and $1.0 billion, respectively, related to leased wireless devices.
Asset retirement obligations are primarily for certain legal obligations to remediate leased property on which our network
infrastructure and administrative assets are located.
Activity in our asset retirement obligations was as follows:
(in millions)
Asset retirement obligations, beginning of year
Liabilities incurred
Liabilities settled
Accretion expense
Changes in estimated cash flows
Asset retirement obligations, end of year
Classified on the balance sheet as:
Other long-term liabilities
December 31,
2019
December 31,
2018
$
$
$
609
$
35
(2)
32
(15)
659
659
$
$
562
26
(9)
30
—
609
609
The corresponding assets, net of accumulated depreciation, related to asset retirement obligations were $159 million and $194
million as of December 31, 2019 and 2018, respectively.
80
Note 6 – Goodwill, Spectrum License Transactions and Other Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2018, are as follows:
(in millions)
Historical goodwill
Goodwill from acquisition of Layer3 TV
Accumulated impairment losses at December 31, 2018
Balance as of December 31, 2018
Goodwill from acquisition in 2019
Balance as of December 31, 2019
Accumulated impairment losses at December 31, 2019
Goodwill
12,449
218
(10,766)
1,901
29
1,930
(10,766)
$
$
$
In July 2019, we completed our acquisition of a mobile marketing company, for cash consideration of $32 million. Upon
closing of the transaction, the acquired company became a wholly-owned consolidated subsidiary to T-Mobile. We recorded
Goodwill of approximately $29 million, calculated as the excess of the purchase price paid over the fair value of net assets
acquired. The acquired goodwill was allocated to our wireless reporting unit and will be tested for impairment at this level.
The assets acquired and liabilities assumed were not material to our Consolidated Balance Sheets. The financial results from the
acquisition closing date through December 31, 2019 were not material to our Consolidated Statements of Comprehensive
Income. The acquisition was not material to our prior period consolidated results on a pro forma basis.
Spectrum Licenses
The following table summarizes our spectrum license activity for the years ended December 31, 2019 and 2018:
(in millions)
Spectrum licenses, beginning of year
Spectrum license acquisitions
Spectrum licenses transferred to held for sale
Costs to clear spectrum
Spectrum licenses, end of year
2019
2018
35,559
$
35,366
857
—
49
138
(1)
56
36,465
$
35,559
$
$
The following is a summary of significant spectrum transactions for the year ended December 31, 2019:
•
In June 2019, the FCC announced that we were the winning bidder of 2,211 licenses in the 24 GHz and 28 GHz
spectrum auctions for an aggregate price of $842 million.
•
•
At the inception of the 28 GHz spectrum auction in October 2018, we deposited $20 million with the FCC.
Upon conclusion of the 28 GHz spectrum auction in February 2019, we made an additional payment of $19
million for the purchase price of licenses won in the auction.
At the inception of the 24 GHz spectrum auction in February 2019, we deposited $147 million with the FCC.
Upon conclusion of the 24 GHz spectrum auction in June 2019, we made an additional payment of $656
million for the purchase price of licenses won in the auction.
The licenses are included in Spectrum licenses as of December 31, 2019, in our Consolidated Balance Sheets. Cash payments to
acquire spectrum licenses and payments for costs to clear spectrum are included in Purchases of spectrum licenses and other
intangible assets, including deposits in our Consolidated Statements of Cash Flows for the year ended December 31, 2019.
The following is a summary of significant spectrum transactions for the year ended December 31, 2018:
• We recorded spectrum licenses received as part of our acquisition of the remaining equity interest in Iowa Wireless
Services, LLC, at their estimated fair value of approximately $87 million.
81
• We closed on multiple spectrum purchase agreements in which we acquired total spectrum licenses of approximately
$50 million for cash consideration.
•
In 2018, we signed a reciprocal long-term lease arrangement with Sprint in which both parties have the right to use a
portion of spectrum owned by the other party. This executory agreement does not qualify as an acquisition of spectrum
licenses, and we have not capitalized amounts related to the lease. The reciprocal long-term lease is a distinct
transaction from the Merger.
Goodwill and Other Intangible Assets Impairment Assessments
Our impairment assessment of goodwill and other indefinite-lived intangible assets (spectrum licenses) resulted in no
impairment as of December 31, 2019 and 2018.
Other Intangible Assets
The components of Other intangible assets were as follows:
(in millions)
Customer lists
Useful Lives
Up to 6 years
Trademarks and patents
Up to 19 years
Other
Up to 28 years
Other intangible assets
$
$
December 31, 2019
December 31, 2018
Gross
Amount
Accumulated
Amortization
Net Amount
Gross
Amount
Accumulated
Amortization
Net Amount
1,104
$
(1,104) $
— $
1,104
$
(1,086) $
323
100
(258)
(50)
65
50
312
149
(225)
(56)
1,527
$
(1,412) $
115
$
1,565
$
(1,367) $
18
87
93
198
Amortization expense for intangible assets subject to amortization was $82 million, $124 million and $163 million for the years
ended December 31, 2019, 2018 and 2017, respectively.
The estimated aggregate future amortization expense for intangible assets subject to amortization are summarized below:
(in millions)
Year Ending December 31,
2020
2021
2022
2023
2024
Thereafter
Total
Note 7 – Fair Value Measurements
Estimated
Future
Amortization
$
$
83
14
3
3
3
9
115
The carrying values of Cash and cash equivalents, Accounts receivable, Accounts receivable from affiliates, Accounts payable
and accrued liabilities, borrowings under vendor financing arrangements with our primary network equipment suppliers, and
borrowings under our revolving credit facility with DT, our majority stockholder, approximate fair value due to the short-term
maturities of these instruments.
Derivative Financial Instruments
Interest rate lock derivatives
Periodically, we use derivatives to manage exposure to market risk, such as interest rate risk. We designated certain derivatives
as hedging instruments in a qualifying hedge accounting relationship (cash flow hedge) to help minimize significant, unplanned
fluctuations in cash flows caused by interest rate volatility. We do not use derivatives for trading or speculative purposes.
We record interest rate lock derivatives on our Consolidated Balance Sheets at fair value that is derived primarily from
observable market data, including yield curves. Interest rate lock derivatives were classified as Level 2 in the fair value
82
hierarchy. Cash flows associated with qualifying hedge derivative instruments are presented in the same category on the
Consolidated Statements of Cash Flows as the item being hedged.
In October 2018, we entered into interest rate lock derivatives with notional amounts of $9.6 billion. The fair value of interest
rate lock derivatives was a liability of $1.2 billion and $447 million as of December 31, 2019 and 2018, respectively, and was
included in Other current liabilities in our Consolidated Balance Sheets. As of the years ended December 31, 2019 and 2018, no
amounts were accrued or amortized into Interest expense in the Consolidated Statements of Comprehensive Income. Aggregate
changes in fair value, net of tax, of $868 million and $332 million are presented in Accumulated other comprehensive loss as of
December 31, 2019, and 2018, respectively.
In November 2019, we extended the mandatory termination date on our interest rate lock derivatives to June 3, 2020. In
December 2019, we made net collateral transfers to certain of our derivative counterparties totaling $632 million, which
included variation margin transfers to (or from) such derivative counterparties based on daily market movements. These
collateral transfers are included in Other current assets in our Consolidated Balance Sheets and in Net cash related to derivative
contracts under collateral exchange arrangements within Net cash used in investing activities in our Consolidated Statements of
Cash Flows. The interest rate lock derivatives will be settled upon the earlier of the issuance of fixed-rate debt or the mandatory
termination date. Upon settlement of the interest rate lock derivatives, we will receive, or make, a cash payment in the amount
of the fair value of the cash flow hedge as of the settlement date.
Embedded derivatives
In connection with our business combination with MetroPCS, we issued senior reset notes to DT. We determined certain
components of the reset feature are required to be bifurcated from the senior reset notes and separately accounted for as
embedded derivative instruments.
The interest rates on our senior reset notes to DT were adjusted at the reset dates to rates defined in the applicable supplemental
indentures to manage interest rate risk related to the senior reset notes. Our embedded derivatives are recorded at fair value
primarily based on unobservable inputs and were classified as Level 3 in the fair value hierarchy for 2019 and 2018.
Effective April 28, 2019, we redeemed $600 million aggregate principal amount of our 9.332% Senior Reset Notes due 2023
held by DT. The notes were redeemed at a redemption price equal to 104.666% of the principal amount of the notes (plus
accrued and unpaid interest thereon) and were paid on April 29, 2019. The write-off of embedded derivatives upon redemption
of the DT Senior Reset Notes resulted in a gain of $11 million and is included in Other expense, net in our Consolidated
Statements of Comprehensive Income. The fair value of embedded derivative instruments was $19 million as of December 31,
2018, and is included in Other long-term liabilities in our Consolidated Balance Sheets. For the years ended December 31,
2019, 2018, and 2017, we recognized $8 million, $29 million and $52 million from the gain activity related to embedded
derivatives instruments in Interest expense to affiliates in our Consolidated Statements of Comprehensive Income.
Deferred Purchase Price Assets
In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred
purchase price assets measured at fair value that are based on a discounted cash flow model using unobservable Level 3 inputs,
including customer default rates. See Note 4 – Sales of Certain Receivables for further information.
The carrying amounts and fair values of our assets measured at fair value on a recurring basis included in our Consolidated
Balance Sheets were as follows:
(in millions)
Assets:
Level within the
Fair Value
Hierarchy
December 31, 2019
December 31, 2018
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Deferred purchase price assets
3
$
781
$
781
$
746
$
746
Long-term Debt
The fair value of our Senior Notes to third parties was determined based on quoted market prices in active markets, and
therefore was classified as Level 1 within the fair value hierarchy. The fair values of our Senior Notes to affiliates, Incremental
Term Loan Facility to affiliates and Senior Reset Notes to affiliates were determined based on a discounted cash flow approach
using market interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk.
83
Accordingly, our Senior Notes to affiliates, Incremental Term Loan Facility to affiliates and Senior Reset Notes to affiliates
were classified as Level 2 within the fair value hierarchy.
Although we have determined the estimated fair values using available market information and commonly accepted valuation
methodologies, considerable judgment was required in interpreting market data to develop fair value estimates for the Senior
Notes to affiliates, Incremental Term Loan Facility to affiliates and Senior Reset Notes to affiliates. The fair value estimates
were based on information available as of December 31, 2019, and 2018. As such, our estimates are not necessarily indicative
of the amount we could realize in a current market exchange.
The carrying amounts and fair values of our short-term and long-term debt included in our Consolidated Balance Sheets were as
follows:
(in millions)
Liabilities:
Senior Notes to third parties
Senior Notes to affiliates
Incremental Term Loan Facility to affiliates
Senior Reset Notes to affiliates
Guarantee Liabilities
Level within the
Fair Value
Hierarchy
December 31, 2019
December 31, 2018
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
1
2
2
2
$
10,958
$
11,479
$
10,950
$
9,986
4,000
—
10,366
4,000
—
9,984
4,000
598
10,945
9,802
3,976
640
We offer a device trade-in program, JUMP!, which provides eligible customers a specified-price trade-in right to upgrade their
device. For customers who enroll in JUMP!, we recognize a liability and reduce revenue for the portion of revenue which
represents the estimated fair value of the specified-price trade-in right guarantee, incorporating the expected probability and
timing of handset upgrade and the estimated fair value of the handset which is returned. Accordingly, our guarantee liabilities
were classified as Level 3 within the fair value hierarchy. When customers upgrade their device, the difference between the EIP
balance credit to the customer and the fair value of the returned device is recorded against the guarantee liabilities. Guarantee
liabilities are included in Other current liabilities in our Consolidated Balance Sheets.
The carrying amounts of our guarantee liabilities measured at fair value on a non-recurring basis included in our Consolidated
Balance Sheets were $62 million and $73 million as of December 31, 2019, and 2018, respectively.
The total estimated remaining gross EIP receivable balances of all enrolled handset upgrade program customers, which are the
remaining EIP amounts underlying the JUMP! guarantee, including EIP receivables that have been sold, was $3.0 billion as of
December 31, 2019. This is not an indication of our expected loss exposure as it does not consider the expected fair value of the
used handset or the probability and timing of the trade-in.
84
Note 8 – Debt
Debt was as follows:
(in millions)
5.300% Senior Notes to affiliates due 2021
4.000% Senior Notes to affiliates due 2022
4.000% Senior Notes due 2022
Incremental term loan facility to affiliates due 2022
6.000% Senior Notes due 2023
9.332% Senior Reset Notes to affiliates due 2023
6.000% Senior Notes due 2024
6.500% Senior Notes due 2024
6.000% Senior Notes to affiliates due 2024
6.000% Senior Notes to affiliates due 2024
Incremental term loan facility to affiliates due 2024
5.125% Senior Notes to affiliates due 2025
5.125% Senior Notes due 2025
6.375% Senior Notes due 2025
6.500% Senior Notes due 2026
4.500% Senior Notes due 2026
4.500% Senior Notes to affiliates due 2026
5.375% Senior Notes due 2027
5.375% Senior Notes to affiliates due 2027
4.750% Senior Notes due 2028
4.750% Senior Notes to affiliates due 2028
Capital leases (1)
Unamortized premium on debt to affiliates
Unamortized discount on Senior Notes to affiliates
Financing arrangements for property and equipment
Debt issuance costs and consent fees
Total debt
Less: Current portion of capital leases
Less: Financing arrangements for property and equipment
Total long-term debt
Classified on the balance sheet as:
Long-term debt
Long-term debt to affiliates
Total long-term debt
December 31,
2019
December 31,
2018
$
2,000
1,000
500
2,000
1,300
—
1,000
1,000
1,350
650
2,000
1,250
500
1,700
2,000
1,000
1,000
500
1,250
1,500
1,500
—
43
(53)
25
(46)
24,969
—
25
24,944
10,958
13,986
24,944
$
$
$
2,000
1,000
500
2,000
1,300
600
1,000
1,000
1,350
650
2,000
1,250
500
1,700
2,000
1,000
1,000
500
1,250
1,500
1,500
2,015
52
(64)
—
(56)
27,547
841
—
26,706
12,124
14,582
26,706
$
$
$
$
(1) Capital lease liabilities previously included in Short-term debt and Long-term debt were reclassified to Financing lease liabilities in our Consolidated
Balance Sheet. See Note 1 – Summary of Significant Accounting Policies for additional details.
85
Debt to Affiliates
During the year ended December 31, 2019, we made the following note redemption:
(in millions)
Principal
Amount
9.332% Senior Notes due 2023
$
600
$
Write -off of
Embedded
Derivatives (1)
11
Other (2)
Redemption
Date
Redemption
Price
$
28
April 28, 2019
104.6660 %
(1) Certain components of the reset features were required to be bifurcated from the DT Senior Reset Notes and separately accounted for as embedded
derivative instruments. The write-off of embedded derivatives upon redemption resulted in a gain and is included in Other expense, net in our
Consolidated Statements of Comprehensive Income and in Losses on redemption of debt within Net cash provided by operating activities in our
Consolidated Statements of Cash Flows.
(2) Cash for the premium portion of the redemption price set forth in the indenture governing the DT Senior Reset Notes, plus accrued but unpaid interest on
the DT Senior Reset Notes. The redemption premium was included in Other expense, net in our Consolidated Statements of Comprehensive Income and
in Cash payments for debt prepayment or debt extinguishment costs in our Consolidated Statements of Cash Flows.
Incremental Term Loan Facility
In March 2018, we amended the terms of our secured term loan facility (“Incremental Term Loan Facility”) with DT, our
majority stockholder. Following this amendment, the applicable margin payable on LIBOR indexed loans is 1.50% under the
$2.0 billion Incremental Term Loan Facility maturing on November 9, 2022 and 1.75% under the $2.0 billion Incremental Term
Loan Facility maturing on January 31, 2024. The amendment also modified the Incremental Term Loan Facility to update
certain covenants and other provisions to make them substantially consistent, subject to certain additional carve outs, with our
most recently issued public notes. No issuance fees were incurred related to this debt facility for the years ended December 31,
2019 and 2018.
Commitment Letter
In connection with the entry into the Business Combination Agreement, T-Mobile USA entered into a commitment letter, dated
as of April 29, 2018 (as amended and restated on May 15, 2018 and on September 6, 2019, the “Commitment Letter”), with
certain financial institutions named therein that have committed to provide up to $30.0 billion in secured and unsecured debt
financing, including a $4.0 billion secured revolving credit facility, a $7.0 billion secured term loan facility, and a $19.0 billion
secured bridge loan facility. On September 6, 2019, T-Mobile USA amended and restated the Commitment Letter which (i)
reduced the commitments under the secured term loan facility from $7.0 billion to $4.0 billion and (ii) extended the
commitments thereunder through May 1, 2020. The funding of the debt facilities provided for in the Commitment Letter is
subject to the satisfaction of the conditions set forth therein, including consummation of the Merger. The proceeds of the debt
financing provided for in the Commitment Letter will be used to refinance certain existing debt of us, Sprint and our and
Sprint’s respective subsidiaries and for post-closing working capital needs of the combined company.
In connection with the financing provided for in the Commitment Letter, we expect to incur certain fees payable to the financial
institutions, including certain financing fees on the secured term loan commitment. If the Merger closes, we will incur
additional fees for the financial institutions structuring and providing the commitments and certain take-out fees associated with
the issuance of permanent secured bond debt in lieu of the secured bridge loan. In total, we may incur up to approximately $340
million in fees associated with the Commitment Letter. We began incurring certain Commitment Letter fees on November 1,
2019, which were recognized in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive
Income. There were $12 million of fees accrued as of December 31, 2019.
Financing Matters Agreement
Pursuant to the Financing Matters Agreement, DT agreed, among other things, to consent to the incurrence by T-Mobile USA
of secured debt in connection with and after the consummation of the Merger, and to provide a lock up on sales thereby as to
certain senior notes of T-Mobile USA held thereby. In addition, T-Mobile USA agreed, among other things, to repay and
terminate, upon closing of the Merger, the Incremental Term Loan Facility and the revolving credit facility of T-Mobile USA
which are provided by DT, as well as $2.0 billion of T-Mobile USA’s 5.300% Senior Notes due 2021 and $2.0 billion of T-
Mobile USA’s 6.000% Senior Notes due 2024. In addition, T-Mobile USA and DT agreed, upon closing of the Merger, to
amend the $1.25 billion of T-Mobile USA’s 5.125% Senior Notes due 2025 and $1.25 billion of T-Mobile USA’s 5.375%
Senior Notes due 2027 to change the maturity dates thereof to April 15, 2021 and April 15, 2022, respectively (the “2025 and
2027 Amendments”). In connection with receiving the requisite consents, we made upfront payments to DT of $7 million
during the second quarter of 2018. These payments were recognized as a reduction to Long-term debt to affiliates in our
Consolidated Balance Sheets. In accordance with the consents received from DT, on December 20, 2018, T-Mobile USA, the
guarantors and Deutsche Bank Trust Company Americas, as trustee, executed and delivered the 38th supplemental indenture to
86
the Indenture, pursuant to which, with respect to certain T-Mobile USA Senior Notes held by DT, the Proposed Amendments
(as defined below under “Consents on Debt to Third Parties”) and the 2025 and 2027 Amendments will become effective
immediately prior to the consummation of the Merger. If the Merger is consummated, we will make additional payments for
requisite consents to DT of $13 million. There were no additional payments accrued as of December 31, 2019 and 2018.
Consents on Debt to Third Parties
On May 18, 2018, under the terms and conditions described in the Consent Solicitation Statement, we obtained consents
necessary to effect certain amendments to our Senior Notes to third parties in connection with the Business Combination
Agreement. Pursuant to the Consent Solicitation Statement, third-party note holders agreed, among other things, to consent to
increasing the amount of Secured Indebtedness under Credit Facilities that can be incurred from the greater of $9.0 billion and
150% of Consolidated Cash Flow to the greater of $9.0 billion and an amount that would not cause the Secured Debt to Cash
Flow Ratio (calculated net of cash and cash equivalents) to exceed 2.00x (the “Ratio Secured Debt Proposed Amendments”)
and in each case as such capitalized term is defined in the Indenture. In connection with receiving the requisite consents for the
Ratio Secured Debt Proposed Amendments, we made upfront payments to third-party note holders of $17 million during the
second quarter of 2018. These payments were recognized as a reduction to Long-term debt in our Consolidated Balance Sheets.
These upfront payments increased the effective interest rate of the related debt.
In addition, note holders agreed, among other things, to allow certain entities related to Sprint’s existing spectrum securitization
notes program (“Existing Sprint Spectrum Program”) to be non-guarantor Restricted Subsidiaries, provided that the principal
amount of the spectrum notes issued and outstanding under the Existing Sprint Spectrum Program does not exceed $7.0 billion
and that the principal amount of such spectrum notes reduces the amount available under the Credit Facilities ratio basket, and
to revise the definition of GAAP to mean generally accepted accounting principles in effect from time to time, unless the
Company elects to “freeze” GAAP as of any date, and to exclude the effect of the changes in the accounting treatment of lease
obligations (the “Existing Sprint Spectrum and GAAP Proposed Amendments,” and together with the Ratio Secured Debt
Proposed Amendments, the “Proposed Amendments”). In connection with receiving the requisite consents for the Existing
Sprint Spectrum and GAAP Proposed Amendments, we made upfront payments to third-party note holders of $14 million
during the second quarter of 2018. These payments were recognized as a reduction to Long-term debt in our Consolidated
Balance Sheets. These upfront payments increased the effective interest rate of the related debt.
In connection with obtaining the requisite consents, on May 20, 2018, T-Mobile USA, the guarantors and Deutsche Bank Trust
Company Americas, as trustee, executed and delivered the 37th supplemental indenture to the Indenture, pursuant to which, with
respect to each of the Notes, the Proposed Amendments will become effective immediately prior to the consummation of the
Merger.
We paid third-party bank fees associated with obtaining the requisite consents related to the Proposed Amendments of $6
million during the second quarter of 2018, which we recognized as Selling, general and administrative expenses in our
Consolidated Statements of Comprehensive Income. If the Merger is consummated, we will make additional payments to third-
party note holders for requisite consents related to the Ratio Secured Debt Proposed Amendments of up to $54 million and
additional payments to third-party note holders for requisite consents related to the Existing Sprint Spectrum and GAAP
Proposed Amendments of up to $41 million. There were no payments accrued as of December 31, 2019.
Financing Arrangements
We maintain a financing arrangement with Deutsche Bank AG, which allows for up to $108 million in borrowings. Under the
financing arrangement, we can effectively extend payment terms for invoices payable to certain vendors. The interest rate on
the financing arrangement is determined based on LIBOR plus a specified margin per the arrangement. Obligations under the
financing arrangement are included in Short-term debt in our Consolidated Balance Sheets. As of December 31, 2019 and 2018,
there were no outstanding balances.
We maintain vendor financing arrangements with our primary network equipment suppliers. Under the respective agreements,
we can obtain extended financing terms. During the year ended December 31, 2019, we utilized $800 million and repaid $775
million under the vendor financing arrangements. Invoices subject to extended payment terms have various due dates through
the first quarter of 2020. Payments on vendor financing agreements are included in Repayments of short-term debt for
purchases of inventory, property and equipment, net, in our Consolidated Statements of Cash Flows. As of December 31, 2019,
there was $25 million in outstanding borrowings under the vendor financing agreements which were included in Short-term
debt in our Consolidated Balance Sheets. As of December 31, 2018, there was no outstanding balance.
87
Revolving Credit Facility
We maintain a $2.5 billion revolving credit facility with DT which is comprised of a $1.0 billion unsecured revolving credit
agreement and a $1.5 billion secured revolving credit agreement. In December 2019, we amended the terms of the revolving
credit facility with DT to extend the maturity date to December 29, 2022.
The proceeds and borrowings from the revolving credit facility are presented in Proceeds from borrowing on revolving credit
facility and Repayments of revolving credit facility within Net cash used in financing activities in our Consolidated Statements
of Cash Flows. As of December 31, 2019 and 2018, there were no outstanding borrowings under the revolving credit facility.
Standby Letters of Credit
For the purposes of securing our obligations to provide handset insurance services, we maintain an agreement for standby
letters of credit with JP Morgan Chase Bank, N.A. (“JP Morgan Chase”). For purposes of securing our general purpose
obligations, we maintain a letter of credit reimbursement agreement with Deutsche Bank.
The following table summarizes the outstanding standby letters of credit under each agreement:
(in millions)
JP Morgan Chase
Deutsche Bank
Total outstanding balance
Note 9 – Tower Obligations
December 31,
2019
December 31,
2018
$
$
20
93
113
$
$
20
66
86
In 2012, we conveyed to CCI the exclusive right to manage and operate approximately 7,100 T-Mobile-owned wireless
communications tower sites in exchange for net proceeds of $2.5 billion (the “2012 Tower Transaction”). Rights to
approximately 6,200 of the tower sites were transferred to CCI via a master prepaid lease with site lease terms ranging from 23
to 37 years (“CCI Lease Sites”), while the remaining tower sites were sold to CCI (“CCI Sales Sites”). CCI has fixed-price
purchase options for the CCI Lease Sites totaling approximately $2.0 billion, exercisable at the end of the lease term. We lease
back space at certain tower sites for an initial term of ten years, followed by optional renewals at customary terms.
In 2015, we conveyed to PTI the exclusive right to manage and operate certain T-Mobile-owned wireless communications
tower sites (“PTI Sales Sites”) in exchange for net proceeds of approximately $140 million (the “2015 Tower Transaction”).
Rights to approximately 150 of the tower sites remain operated by PTI under a management agreement. We lease back space at
certain tower sites for an initial term of ten years, followed by optional renewals at customary terms.
Assets and liabilities associated with the operation of the tower sites were transferred to special purpose entities (“SPEs”).
Assets included ground lease agreements or deeds for the land on which the towers are situated, the towers themselves and
existing subleasing agreements with other mobile network operator tenants, who lease space at the tower sites. Liabilities
included the obligation to pay ground lease rentals, property taxes and other executory costs. Upon closing of the 2012 Tower
Transaction, CCI acquired all of the equity interests in the SPE containing CCI Sales Sites and an option to acquire the CCI
Lease Sites at the end of their respective lease terms and entered into a master lease agreement under which we agreed to lease
back space at certain of the tower sites. Upon closing of the 2015 Tower Transaction, PTI acquired all of the equity interests in
the SPEs containing PTI Sales Sites and entered into a master lease agreement under which we agreed to lease back space at
certain of the tower sites.
We determined the SPEs containing the CCI Lease Sites (“Lease Site SPEs”) are VIEs as our equity investment lacks the power
to direct the activities that most significantly impact the economic performance of the VIEs. These activities include managing
tenants and underlying ground leases, performing repair and maintenance on the towers, the obligation to absorb expected
losses and the right to receive the expected future residual returns from the purchase option to acquire the CCI Lease Sites. As
we determined that we are not the primary beneficiary and do not have a controlling financial interest in the Lease Site SPEs,
the balances and operating results of the Lease Site SPEs are not included in our Consolidated Financial Statements.
Due to our continuing involvement with the tower sites, we previously determined that we were precluded from applying sale-
leaseback accounting. We recorded long-term financial obligations in the amount of the net proceeds received and recognized
interest on the tower obligations at a rate of approximately 8% for the 2012 Tower Transaction and 5% for the 2015 Tower
Transaction using the effective interest method. The tower obligations are increased by interest expense and amortized through
88
contractual leaseback payments made by us to CCI or PTI and through net cash flows generated and retained by CCI or PTI
from operation of the tower sites. The principal payments on the tower obligations are included in Other, net within Net cash
used in financing activities in our Consolidated Statements of Cash Flows. Our historical tower site asset costs are reported in
Property and equipment, net in our Consolidated Balance Sheets and are depreciated.
Upon adoption of the new leasing standard we were required to reassess the previously failed sale-leasebacks and determine
whether the transfer of the assets to the tower operator under the arrangement met the transfer of control criteria in the revenue
standard and whether a sale should be recognized. We concluded that a sale has not occurred for the CCI Lease Sites and these
sites continue to be accounted for as a failed sale-leaseback. We concluded that a sale had occurred for the CCI Sales Sites and
the PTI Sales Sites and therefore we derecognized our existing long-term financial obligation and the tower-related property
and equipment associated with these sites as part of the cumulative effect adjustment on January 1, 2019. See Note 1 -
Summary of Significant Accounting Policies for further information.
The following table summarizes the balances of the failed sale-leasebacks in the Consolidated Balance Sheets:
(in millions)
Property and equipment, net
Tower obligations
December 31,
2019
December 31,
2018
$
198
$
2,236
329
2,557
Future minimum payments related to the tower obligations are approximately $160 million for the year ending December 31,
2020, $321 million in total for the years ending December 31, 2021 and 2022, $320 million in total for years ending December
31, 2023 and 2024, and $467 million in total for years thereafter.
We are contingently liable for future ground lease payments through the remaining term of the CCI Lease Sites. These
contingent obligations are not included in Operating lease liabilities as any amount due is contractually owed by CCI based on
the subleasing arrangement.
Note 10 – Revenue from Contracts with Customers
Disaggregation of Revenue
We provide wireless communications services to three primary categories of customers:
•
•
Branded postpaid customers generally include customers who are qualified to pay after receiving wireless
communications services utilizing phones, wearables, DIGITS, or other connected devices which includes tablets and
SyncUP DRIVE™;
Branded prepaid customers generally include customers who pay for wireless communications services in advance.
Our branded prepaid customers include customers of T-Mobile and Metro by T-Mobile; and
• Wholesale customers include Machine-to-Machine (“M2M”) and Mobile Virtual Network Operator (“MVNO”)
customers that operate on our network but are managed by wholesale partners.
Branded postpaid service revenues, including branded postpaid phone revenues and branded postpaid other revenues, were as
follows:
(in millions)
Branded postpaid service revenues
Branded postpaid phone revenues
Branded postpaid other revenues
Total branded postpaid service revenues
Year Ended December 31,
2019
2018
2017
$
$
21,329
1,344
22,673
$
$
19,745
1,117
20,862
$
$
18,371
1,077
19,448
We operate as a single operating segment. The balances presented within each revenue line item in our Consolidated Statements
of Comprehensive Income represent categories of revenue from contracts with customers disaggregated by type of product and
service. Service revenues also include revenues earned for providing value added services to customers, such as handset
insurance services. Revenue generated from the lease of mobile communication devices is included within Equipment revenues
in our Consolidated Statements of Comprehensive Income.
89
Equipment revenues from the lease of mobile communication devices were as follows:
(in millions)
Year Ended December 31,
2019
2018
2017
Equipment revenues from the lease of mobile communication devices
$
599
$
692
$
877
Contract Balances
The opening and closing balances of our contract asset and contract liability balances from contracts with customers as of
December 31, 2018 and December 31, 2019, were as follows:
(in millions)
Balance as of December 31, 2018
Balance as of December 31, 2019
Change
Contract Assets
Contract
Liabilities
$
$
51
63
12
$
$
645
560
(85)
Contract assets primarily represent revenue recognized for equipment sales with promotional bill credits offered to customers
that are paid over time and are contingent on the customer maintaining a service contract. The change in the contract asset
balance includes customer activity related to new promotions, offset by billings on existing contracts and impairment which is
recognized as bad debt expense. The current portion of our Contract Assets of approximately $50 million and $51 million as of
December 31, 2019 and 2018, respectively, was included in Other current assets in our Consolidated Balance Sheets.
Contract liabilities are recorded when fees are collected, or we have an unconditional right to consideration (a receivable) in
advance of delivery of goods or services. The change in contract liabilities is primarily related to the migration of customers to
unlimited rate plans. Contract liabilities are included in Deferred revenue in our Consolidated Balance Sheets.
Revenues for the years ended December 31, 2019 and 2018, include the following:
(in millions)
Year Ended December 31,
2019
2018
Amounts included in the beginning of year contract liability balance
$
643
$
710
Remaining Performance Obligations
As of December 31, 2019, the aggregate amount of transaction price allocated to remaining service performance obligations for
branded postpaid contracts with promotional bill credits that result in an extended service contract is $237 million. We expect to
recognize this revenue as service is provided over the extended contract term in the next 24 months.
Certain of our wholesale, roaming and other service contracts include variable consideration based on usage. This variable
consideration has been excluded from the disclosure of remaining performance obligations. As of December 31, 2019, the
aggregate amount of the contractual minimum consideration for wholesale, roaming and other service contracts is $1.3 billion,
$894 million and $791 million for 2020, 2021 and 2022 and beyond, respectively. These contracts have a remaining duration
ranging from less than one year to ten years.
Information about remaining performance obligations that are part of a contract that has an original expected duration of one
year or less have been excluded from the above, which primarily consists of monthly service contracts.
Contract Costs
The total balance of deferred incremental costs to obtain contracts was $906 million and $644 million as of December 31, 2019
and 2018, respectively. Deferred contract costs incurred to obtain postpaid service contracts are amortized over a period of 24
months. The amortization period is monitored to reflect any significant change in assumptions. Amortization of deferred
contract costs is included in Selling, general and administrative expenses in our Consolidated Statements of Comprehensive
Income and was $604 million and $267 million for the years ended December 31, 2019 and 2018, respectively.
The deferred contract cost asset is assessed for impairment on a periodic basis. There were no impairment losses recognized on
deferred contract cost assets for the years ended December 31, 2019 and 2018.
90
Note 11 – Employee Compensation and Benefit Plans
Under our 2013 Omnibus Incentive Plan (the "Incentive Plan"), we are authorized to issue up to 82 million shares of our
common stock. Under the Incentive Plan, we can grant stock options, stock appreciation rights, restricted stock, restricted stock
units ("RSUs"), and performance awards to eligible employees, consultants, advisors and non-employee directors. As of
December 31, 2019, there were approximately 19 million shares of common stock available for future grants under the
Incentive Plan.
We grant RSUs to eligible employees, key executives and certain non-employee directors and performance-based restricted
stock units (“PRSUs”) to eligible key executives. RSUs entitle the grantee to receive shares of our common stock upon vesting
(with vesting generally occurring annually over a three year period), subject to continued service through the applicable vesting
date. PRSUs entitle the holder to receive shares of our common stock at the end of a performance period of generally up to
three years if the applicable performance goals are achieved and generally subject to continued service through the applicable
performance period. The number of shares ultimately received by the holder of PRSUs is dependent on our business
performance against the specified performance goal(s) over a pre-established performance period. We also maintain an
employee stock purchase plan (“ESPP”), under which eligible employees can purchase our common stock at a discounted price.
Stock-based compensation expense and related income tax benefits were as follows:
(in millions, except shares, per share and contractual life amounts)
Stock-based compensation expense
Income tax benefit related to stock-based compensation
Weighted average fair value per stock award granted
Unrecognized compensation expense
Weighted average period to be recognized (years)
Fair value of stock awards vested
Stock Awards
Time-Based Restricted Stock Units and Restricted Stock Awards
December 31,
2019
December 31,
2018
December 31,
2017
$
$
$
$
$
495
92
73.25
515
1.6
512
$
$
$
$
$
424
81
61.52
547
1.8
471
$
$
$
$
$
306
73
60.21
445
1.9
503
(in millions, except shares, per share and contractual life amounts)
Nonvested, December 31, 2018
Granted
Vested
Forfeited
Nonvested, December 31, 2019
Number of Units
or Awards
Weighted
Average Grant
Date Fair Value
11,010,635
$
6,099,719
(5,862,128)
(745,015)
10,503,211
57.66
73.13
55.52
65.87
67.31
Performance-Based Restricted Stock Units and Restricted Stock Awards
(in millions, except shares, per share and contractual life amounts)
Nonvested, December 31, 2018
Granted
Vested
Forfeited
Nonvested, December 31, 2019
Number of Units
or Awards
Weighted
Average Grant
Date Fair Value
3,851,554
$
1,046,792
(1,006,404)
(88,403)
3,803,539
64.03
73.98
52.47
62.02
69.78
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic Value
1.0
$
700
0.9
824
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic Value
1.6
$
245
1.0
300
PRSUs included in the table above are shown at target. Share payout can range from 0% to 200% based on different performance outcomes.
Payment of the underlying shares in connection with the vesting of stock awards generally triggers a tax obligation for the
employee, which is required to be remitted to the relevant tax authorities. We have agreed to withhold shares of common stock
otherwise issuable under the award to cover certain of these tax obligations, with the net shares issued to the employee
accounted for as outstanding common stock. We withheld 2,094,555 and 2,321,827 shares of common stock to cover tax
91
obligations associated with the payment of shares upon vesting of stock awards and remitted cash of $156 million and $146
million to the appropriate tax authorities for the years ended December 31, 2019 and 2018, respectively.
Employee Stock Purchase Plan
Our ESPP allows eligible employees to contribute up to 15% of their eligible earnings toward the semi-annual purchase of our
shares of common stock at a discounted price, subject to an annual maximum dollar amount. Employees can purchase stock at a
15% discount applied to the closing stock price on the first or last day of the six-month offering period, whichever price is
lower. The number of shares issued under our ESPP was 2,091,650 and 2,011,794 for the years ended December 31, 2019 and
2018, respectively. As of December 31, 2019, the number of securities remaining available for future sale and issuance under
the ESPP was 1,397,894.
Our ESPP provides for an annual increase in the aggregate number of shares of our common stock reserved for sale and
authorized for issuance thereunder as of the first day of each fiscal year (beginning with fiscal year 2016) equal to the lesser of
(i) 5,000,000 shares of our common stock, and (ii) the number of shares of Common Stock determined by the Compensation
Committee of the Board of Directors of the Company (the “Compensation Committee”). For fiscal years 2016 through 2019,
the Compensation Committee determined that no such increase in shares of our common stock was necessary. However, an
additional 5,000,000 shares of our common stock were automatically added to the ESPP share reserve as of January 1, 2020.
Stock Options
Stock options outstanding relate to the Metro Communications, Inc. 2010 Equity Incentive Compensation Plan, the Amended
and Restated Metro Communications, Inc. 2004 Equity Incentive Compensation Plan, and the Layer3 TV, Inc. 2013 Stock Plan
(collectively, the “Stock Option Plans”). No new awards have been or may be granted under the Stock Option Plans.
The following activity occurred under the Stock Option Plans:
Outstanding at December 31, 2018
Exercised
Expired/canceled
Outstanding at December 31, 2019
Exercisable at December 31, 2019
Shares
Weighted
Average Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Years)
284,811
$
(85,083)
(4,786)
194,942
180,966
14.58
15.94
22.75
13.80
13.48
3.8
2.9
2.6
Stock options exercised under the Stock Option Plans generated proceeds of approximately $1 million and $3 million for the
years ended December 31, 2019 and 2018, respectively.
Employee Retirement Savings Plan
We sponsor a retirement savings plan for the majority of our employees under Section 401(k) of the Internal Revenue Code and
similar plans. The plans allow employees to contribute a portion of their pretax and post-tax income in accordance with
specified guidelines. The plans provide that we match a percentage of employee contributions up to certain limits. Employer
matching contributions were $119 million, $102 million and $87 million for the years ended December 31, 2019, 2018 and
2017, respectively.
Note 12 – Repurchases of Common Stock
2017 Stock Repurchase Program
On December 6, 2017, our Board of Directors authorized a stock repurchase program for up to $1.5 billion of our common
stock through December 31, 2018 (the “2017 Stock Repurchase Program”). Repurchased shares are retired. The 2017 Stock
Repurchase Program completed on April 29, 2018.
92
The following table summarizes information regarding repurchases of our common stock under the 2017 Stock Repurchase
Program:
(In millions, except shares and per share price)
Year ended December 31,
2018
2017
2018 Stock Repurchase Program
Number of Shares
Repurchased
Average Price Paid
Per Share
Total Purchase
Price
16,738,758
$
7,010,889
23,749,647
62.96
63.34
63.07
$
$
1,054
444
1,498
On April 27, 2018, our Board of Directors authorized an increase in the total stock repurchase program to $9.0 billion,
consisting of the $1.5 billion in repurchases previously completed and for up to an additional $7.5 billion of repurchases of our
common stock through the year ending December 31, 2020 (the "2018 Stock Repurchase Program"). The additional $7.5 billion
repurchase authorization is contingent upon the termination of the Business Combination Agreement and the abandonment of
the transactions contemplated under the Business Combination Agreement. There were no repurchases of our common stock
under the 2018 Stock Repurchase Program in 2019 or 2018.
Under the 2018 Stock Repurchase Program, repurchases can be made from time to time using a variety of methods, which may
include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and
other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices,
general economic and market conditions, and other considerations. The 2018 Stock Repurchase Program does not obligate us to
acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at
our discretion. Repurchased shares are retired.
Stock Purchases by Affiliate
In the first quarter of 2018, DT, our majority stockholder and an affiliated purchaser, purchased 3.3 million additional shares of
our common stock at an aggregate market value of $200 million in the public market or from other parties, in accordance with
the rules of the SEC and other applicable legal requirements. There were no purchases in the remainder of 2018 and in 2019.
We did not receive proceeds from these purchases.
Note 13 – Income Taxes
Our sources of Income before income taxes were as follows:
(in millions)
U.S.
Puerto Rico
Income before income taxes
Year Ended December 31,
2019
2018
2017
$
$
4,557
46
4,603
$
$
3,686
231
3,917
$
$
3,274
(113)
3,161
93
Income tax (expense) benefit is summarized as follows:
(in millions)
Current tax benefit (expense)
Federal
State
Puerto Rico
Total current tax expense
Deferred tax benefit (expense)
Federal
State
Puerto Rico
Year Ended December 31,
2019
2018
2017
$
24
$
39
$
(70)
2
(44)
(954)
(125)
(12)
(63)
(25)
(49)
(750)
(160)
(70)
(980)
(1,029) $
—
(28)
(1)
(29)
1,182
173
49
1,404
1,375
Total deferred tax (expense) benefit
Total income tax (expense) benefit
(1,091)
(1,135) $
$
The reconciliation between the U.S. federal statutory income tax rate and our effective income tax rate is as follows:
Federal statutory income tax rate
Effect of law and rate changes
Change in valuation allowance
State taxes, net of federal benefit
Equity-based compensation
Puerto Rico taxes, net of federal benefit
Permanent differences
Federal tax credits, net of reserves
Other, net
Effective income tax rate
Year Ended December 31,
2019
2018
2017
21.0 %
21.0 %
35.0 %
0.4
(1.8)
5.1
(0.6)
0.3
1.2
(0.8)
(0.1)
1.9
(1.6)
4.8
(0.6)
2.4
1.3
(2.9)
—
(68.9)
(11.4)
4.8
(2.4)
(1.5)
0.5
0.3
0.1
24.7 %
26.3 %
(43.5)%
Significant components of deferred income tax assets and liabilities, tax effected, are as follows:
(in millions)
Deferred tax assets
Loss carryforwards
Deferred rents
Lease liability
Reserves and accruals
Federal and state tax credits
Other
Deferred tax assets, gross
Valuation allowance
Deferred tax assets, net
Deferred tax liabilities
Spectrum licenses
Property and equipment
Lease right-of-use assets
Other intangible assets
Other
Total deferred tax liabilities
Net deferred tax liabilities
Classified on the balance sheet as:
Deferred tax liabilities
December 31,
2019
December 31,
2018
$
823
$
1,526
—
3,403
659
331
903
6,119
(129)
5,990
5,902
2,506
2,881
19
289
11,597
5,607
$
784
—
668
340
620
3,938
(210)
3,728
5,494
2,434
—
40
232
8,200
4,472
5,607
$
4,472
$
$
94
As of December 31, 2019, we have tax effected net operating loss (“NOL”) carryforwards of $470 million for federal income
tax purposes and $710 million for state income tax purposes, expiring through 2039. Federal NOLs and certain state NOLs
generated in and after 2018 do not expire. As of December 31, 2019, our tax effected federal and state NOL carryforwards for
financial reporting purposes were approximately $138 million and $282 million, respectively, less than our NOL carryforwards
for federal and state income tax purposes, due to unrecognized tax benefits of the same amount. The unrecognized tax benefit
amounts exclude indirect tax effects of $63 million in other jurisdictions.
As of December 31, 2019, we have available Alternative Minimum Tax (“AMT”) credit carryforwards of $23 million. The
AMT credits will be fully recovered by 2021. We also have research and development and foreign tax credit carryforwards with
a combined value of $347 million for federal income tax purposes, which begin to expire in 2020.
As of December 31, 2019, 2018 and 2017, our valuation allowance was $129 million, $210 million and $273 million,
respectively. The change from December 31, 2018 to December 31, 2019 primarily related to a reduction in the valuation
allowance against deferred tax assets in certain state jurisdictions resulting from legal entity reorganizations. The change from
December 31, 2017 to December 31, 2018 primarily related to a reduction in the valuation allowance against deferred tax assets
in certain state jurisdictions from a change in tax status of certain subsidiaries. We will continue to monitor positive and
negative evidence related to the utilization of the remaining deferred tax assets for which a valuation allowance continues to be
provided. It is possible that our valuation allowance may change within the next twelve months.
We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and in Puerto Rico. We are currently under
examination by various states. Management does not believe the resolution of any of the audits will result in a material change
to our financial condition, results of operations or cash flows. The IRS has concluded its audits of our federal tax returns
through the 2013 tax year; however, NOL and other carryforwards for certain audited periods remain open for examination. We
are generally closed to U.S. federal, state and Puerto Rico examination for years prior to 2000.
A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:
(in millions)
Unrecognized tax benefits, beginning of year
Gross (decreases) increases to tax positions in prior periods
Gross increases due to current period business acquisitions
Gross increases to current period tax positions
Unrecognized tax benefits, end of year
Year Ended December 31,
2019
2018
2017
462
$
412
$
(7)
—
59
6
10
34
514
$
462
$
410
(10)
—
12
412
$
$
As of December 31, 2019 and 2018, we had $367 million and $315 million, respectively, in unrecognized tax benefits that, if
recognized, would affect our annual effective tax rate. Penalties and interest on income tax assessments are included in Selling,
general and administrative expenses and Interest expense, respectively, in our Consolidated Statements of Comprehensive
Income. The accrued interest and penalties associated with unrecognized tax benefits are insignificant.
95
Note 14 – Earnings Per Share
The computation of basic and diluted earnings per share was as follows:
(in millions, except shares and per share amounts)
Net income
Less: Dividends on mandatory convertible preferred stock
Net income attributable to common stockholders - basic
Add: Dividends related to mandatory convertible preferred stock
Net income attributable to common stockholders
Weighted average shares outstanding - basic
Effect of dilutive securities:
Outstanding stock options and unvested stock awards
Mandatory convertible preferred stock
Weighted average shares outstanding - diluted
Earnings per share - basic
Earnings per share - diluted
Potentially dilutive securities:
Year Ended December 31,
2019
2018
2017
3,468
$
2,888
$
—
3,468
—
—
2,888
—
3,468
$
2,888
$
4,536
(55)
4,481
55
4,536
854,143,751
849,744,152
831,850,073
9,289,760
8,546,022
—
—
9,200,873
30,736,504
863,433,511
858,290,174
871,787,450
4.06
4.02
$
$
3.40
3.36
$
$
5.39
5.20
$
$
$
$
Outstanding stock options and unvested stock awards
16,359
148,422
33,980
As of December 31, 2019, we had authorized 100 million shares of preferred stock, with a par value of $0.00001 per share.
There was no preferred stock outstanding as of December 31, 2019 and 2018.
Potentially dilutive securities were not included in the computation of diluted earnings per share if to do so would have been
anti-dilutive.
96
Note 15 - Leases
Leases (Topic 842) Disclosures
Lessee
We are lessee for non-cancelable operating and financing leases for cell sites, switch sites, retail stores and office facilities with
contractual terms that generally extend through 2029. The majority of cell site leases have an initial non-cancelable term of five
to ten years with several renewal options that can extend the lease term from five to thirty-five years. In addition, we have
financing leases for network equipment that generally have a non-cancelable lease term of two to five years; the financing
leases do not have renewal options and contain a bargain purchase option at the end of the lease.
The components of lease expense were as follows:
(in millions)
Operating lease expense
Financing lease expense:
Amortization of right-of-use assets
Interest on lease liabilities
Total financing lease expense
Variable lease expense
Total lease expense
Information relating to the lease term and discount rate is as follows:
Weighted Average Remaining Lease Term (Years)
Operating leases
Financing leases
Weighted Average Discount Rate
Operating leases
Financing leases
Maturities of lease liabilities as of December 31, 2019, were as follows:
(in millions)
Twelve Months Ending December 31,
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less imputed interest
Total
Year Ended
December 31,
2019
$
$
2,558
523
82
605
243
3,406
December 31,
2019
6
3
4.8 %
4.0 %
Operating Leases
Finance Leases
$
2,754
$
1,013
2,583
2,311
1,908
1,615
3,797
14,968
2,142
$
12,826
$
733
414
101
71
115
2,447
144
2,303
Interest payments for financing leases for the year ended December 31, 2019, were $82 million.
As of December 31, 2019, we have additional operating leases for cell sites and commercial properties that have not yet
commenced with future lease payments of approximately $341 million.
As of December 31, 2019, we were contingently liable for future ground lease payments related to the tower obligations. These
contingent obligations are not included in the above table as the amounts owed are contractually owed by CCI based on the
subleasing arrangement. See Note 9 - Tower Obligations for further information.
97
Lessor
JUMP! On Demand allows customers to lease a device (handset or tablet) over a period of 18 months and upgrade it for a new
device up to one time per month. Upon device upgrade or at lease end, customers must return or purchase their device. The
purchase price at the expiration of the lease is established at lease commencement and reflects the estimated residual value of
the device, which reflects the estimated fair value of the underlying asset at the end of the lease term. The JUMP! On Demand
leases do not contain any residual value guarantees or variable lease payments, and there are no restrictions or covenants
imposed by these leases. Leased wireless devices are included in Property and equipment, net in our Consolidated Balance
Sheets.
The components of leased wireless devices under our JUMP! On Demand program were as follows:
(in millions)
Leased wireless devices, gross
Accumulated depreciation
Leased wireless devices, net
December 31,
2019
December 31,
2018
$
$
1,139
(407)
732
$
$
1,159
(622)
537
For equipment revenues from the lease of mobile communication devices, see Note 10 - Revenue from Contracts with
Customers.
Future minimum payments expected to be received over the lease term related to the leased wireless devices, which exclude
optional residual buy-out amounts at the end of the lease term, are summarized below:
(in millions)
Twelve Months Ending December 31,
2020
2021
Total
Leases (Topic 840) Disclosures
Total
$
$
417
99
516
On January 1, 2019, we adopted the new lease standard using a modified-retrospective approach by recognizing and measuring
leases at the adoption date with a cumulative effect of initially applying the guidance recognized at the date of initial application
and did not restate the prior periods presented in our Consolidated Financial Statements. As such, prior periods presented in our
Consolidated Financial Statements continue to be in accordance with the former lease standard, Topic 840 Leases. See Note 1 -
Summary of Significant Accounting Policies for further information.
Operating Leases
Under the previous lease standard, we had non-cancelable operating leases for cell sites, switch sites, retail stores and office
facilities. As of December 31, 2018, these leases had contractual terms expiring through 2028, with the majority of cell site
leases having an initial non-cancelable term of five to ten years with several renewal options. In addition, we had operating
leases for dedicated transportation lines with varying expiration terms through 2027.
Our commitments under leases existing as of December 31, 2018 were approximately $2.7 billion for the year
ending December 31, 2019, $4.7 billion in total for the years ending December 31, 2020 and 2021, $3.3 billion in total for the
years ending December 31, 2022 and 2023 and $3.8 billion in total for years thereafter.
Total rent expense under operating leases, including dedicated transportation lines, was $3.0 billion for the year
ended December 31, 2018, and was classified as Cost of services and Selling, general and administrative expense in
our Consolidated Statements of Comprehensive Income.
98
Lessor
As of December 31, 2018, the future minimum payments expected to be received over the lease term related to the leased
wireless devices, which exclude optional residual buy-out amounts at the end of the lease term, are summarized below:
(in millions)
Year Ended December 31,
2019
2020
Total
Capital Leases
Total
$
$
419
59
478
Within property and equipment, wireless communications systems include capital lease agreements for network equipment with
varying expiration terms through 2033. Capital lease assets and accumulated amortization were $3.1 billion and $867 million as
of December 31, 2018.
As of December 31, 2018, the future minimum payments required under capital leases, including interest and maintenance, over
their remaining terms are summarized below:
(in millions)
Year Ended December 31,
2019
2020
2021
2022
2023
Thereafter
Total
Included in Total
Interest
Maintenance
Note 16 – Commitments and Contingencies
Purchase Commitments
Future Minimum
Payments
$
$
$
909
631
389
102
66
106
2,203
143
45
We have commitments for non-dedicated transportation lines with varying expiration terms that generally extend through 2035.
In addition, we have commitments to purchase and lease spectrum licenses, wireless devices, network services, equipment,
software, marketing sponsorship agreements and other items in the ordinary course of business, with various terms through
2043. These amounts are not reflective of our entire anticipated purchases under the related agreements but are determined
based on the non-cancelable quantities or termination amounts to which we are contractually obligated.
Our purchase commitments are approximately $3.6 billion for the year ending December 31, 2020, $3.3 billion in total for the
years ending December 31, 2021 and 2022, $1.6 billion in total for the years ending December 31, 2023 and 2024 and $1.4
billion in total for the years thereafter.
In 2018, we signed a reciprocal long-term spectrum lease with Sprint. The lease includes an offsetting amount to be received
from Sprint for the lease of our spectrum. Lease payments began in the fourth quarter of 2018. The minimum commitment
under this lease as of December 31, 2019, is $481 million and is included in the purchase obligations above. The reciprocal
long-term lease is a distinct transaction from the Merger.
Under the previous lease standard certain of our network backhaul arrangements were accounted for as operating leases.
Obligations under these agreements were included within our operating lease commitments as of December 31, 2018.
99
These agreements no longer qualify as leases under the new lease standard. Our commitments under these agreements as of
December 31, 2019, were approximately $164 million for the year ending December 31, 2020, $267 million in total for the
years ended December 31, 2021 and 2022, $171 million in total for the years ended December 31, 2023 and 2024, and $196
million in total for years thereafter. The commitments under these agreements are included in the purchase commitments above.
Interest rate lock derivatives
We have entered into interest rate lock derivatives with notional amounts of $9.6 billion. These interest rate lock derivatives
were designated as cash flow hedges to reduce variability in cash flows due to changes in interest payments attributable to
increases or decreases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt.
The fair value of interest rate lock derivatives as of December 31, 2019, was a liability of $1.2 billion and is included in Other
current liabilities in our Consolidated Balance Sheets. See Note 7 – Fair Value Measurements for further information.
Renewable Energy Purchase Agreements
In April 2019, T-Mobile USA entered into a Renewable Energy Purchase Agreement (“REPA”) with a third party that is based
on the expected operation of a solar photovoltaic electrical generation facility located in Texas and will remain in effect until
the fifteenth anniversary of the facility’s entry into commercial operation. Commercial operation of the facility is expected to
occur in July 2021. The REPA consists of an energy forward agreement that is net settled based on energy prices and the energy
output generated by the facility. We have determined that the REPA does not meet the definition of a derivative because the
expected energy output of the facility may not be reliably estimated (the arrangement lacks a notional amount). The REPA does
not contain any unconditional purchase obligations because amounts under the agreement are not fixed and determinable. Our
participation in the REPA did not require an upfront investment or capital commitment. We do not control the activities that
most significantly impact the energy-generating facility, nor do we direct the use of, or receive specific energy output from, the
facility.
Contingencies and Litigation
Litigation Matters
On June 11, 2019, a number of state attorneys general filed a lawsuit against us, DT, Sprint, and SoftBank in the U.S. District
Court for the Southern District of New York, alleging that the Merger, if consummated, would violate Section 7 of the Clayton
Act and so should be enjoined. The trial concluded after two weeks of witness testimony and presentation of document
evidence. We are now waiting for the trial court’s ruling. See Note 2 – Business Combinations for further information.
In addition to the litigation associated with the Transactions discussed above, we are involved in various lawsuits and disputes,
claims, government agency investigations and enforcement actions, and other proceedings (“Litigation Matters”) that arise in
the ordinary course of business, which include claims of patent infringement (most of which are asserted by non-practicing
entities primarily seeking monetary damages), class actions, and proceedings to enforce FCC rules and regulations. The
Litigation Matters described above have progressed to various stages and some of them may proceed to trial, arbitration,
hearing or other adjudication that could result in fines, penalties, or awards of monetary or injunctive relief in the coming 12
months if they are not otherwise resolved. We have established an accrual with respect to certain of these matters, where
appropriate, which is reflected in the Consolidated Financial Statements but that is not considered to be, individually or in the
aggregate, material. An accrual is established when we believe it is both probable that a loss has been incurred and an amount
can be reasonably estimated. For other matters, where we have not determined that a loss is probable or because the amount of
loss cannot be reasonably estimated, we have not recorded an accrual due to various factors typical in contested proceedings,
including but not limited to uncertainty concerning legal theories and their resolution by courts or regulators, uncertain damage
theories and demands, and a less than fully developed factual record. While we do not expect that the ultimate resolution of
these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, an unfavorable
outcome of some or all of these proceedings could have a material adverse impact on results of operations or cash flows for a
particular period. This assessment is based on our current understanding of relevant facts and circumstances. As such, our view
of these matters is subject to inherent uncertainties and may change in the future.
100
Note 17 – Additional Financial Information
Supplemental Consolidated Balance Sheets Information
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are summarized as follows:
(in millions)
Accounts payable
Payroll and related benefits
Property and other taxes, including payroll
Interest
Commissions
Network decommissioning
Toll and interconnect
Advertising
Other
December 31,
2019
December 31,
2018
$
4,322
$
5,487
802
682
227
251
—
156
127
179
709
642
227
243
65
157
76
135
Accounts payable and accrued liabilities
$
6,746
$
7,741
Book overdrafts included in accounts payable and accrued liabilities were $463 million and $630 million as of December 31,
2019 and 2018, respectively.
Supplemental Consolidated Statements of Comprehensive Income Information
Related Party Transactions
We have related party transactions associated with DT or its affiliates in the ordinary course of business, which are included in
the Consolidated Financial Statements.
The following table summarizes the impact of significant transactions with DT or its affiliates included in Operating expenses
in the Consolidated Statements of Comprehensive Income:
(in millions)
Discount related to roaming expenses
Fees incurred for use of the T-Mobile brand
Expenses for telecommunications and IT services
International long distance agreement
Year Ended December 31,
2019
2018
2017
$
(9) $
— $
88
—
39
84
—
36
—
79
12
55
We have an agreement with DT for the reimbursement of certain administrative expenses, which were $11 million for each of
the years ended December 31, 2019, 2018 and 2017.
Note 18 – Guarantor Financial Information
Pursuant to the applicable indentures and supplemental indentures, the long-term debt to affiliates and third parties issued by T-
Mobile USA (“Issuer”) is fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by T-Mobile
(“Parent”) and certain of the Issuer’s 100% owned subsidiaries (“Guarantor Subsidiaries”).
The guarantees of the Guarantor Subsidiaries are subject to release in limited circumstances only upon the occurrence of certain
customary conditions. The indentures and credit facilities governing the long-term debt contain covenants that, among other
things, limit the ability of the Issuer and the Guarantor Subsidiaries to incur more debt, pay dividends and make distributions,
make certain investments, repurchase stock, create liens or other encumbrances, enter into transactions with affiliates, enter into
transactions that restrict dividends or distributions from subsidiaries, and merge, consolidate or sell, or otherwise dispose of,
substantially all of their assets. Certain provisions of each of the credit facilities, indentures and supplemental indentures
relating to the long-term debt restrict the ability of the Issuer to loan funds or make payments to Parent. However, the Issuer and
Guarantor Subsidiaries are allowed to make certain permitted payments to the Parent under the terms of the indentures and the
supplemental indentures.
101
On October 23, 2018, SLMA LLC was formed as a limited liability company in Delaware to serve as an escrow subsidiary to
facilitate the contemplated issuance of notes by Parent in connection with the Transactions. SLMA LLC is an indirect, 100%
owned finance subsidiary of Parent, as such term is used in Rule 3-10(b) of Regulation S-X, and has been designated as an
unrestricted subsidiary under the Issuer’s existing debt securities. Any debt securities that may be issued from time to time by
SLMA LLC will be fully and unconditionally guaranteed by Parent.
In 2019, certain Non-Guarantor Subsidiaries became Guarantor Subsidiaries. Certain prior period amounts have been
reclassified to conform to the current period’s presentation.
Presented below is the condensed consolidating financial information as of December 31, 2019 and 2018, and for the years
ended December 31, 2019, 2018 and 2017.
102
Condensed Consolidating Balance Sheet Information
December 31, 2019
$
$
$
(in millions)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, net
Equipment installment plan receivables, net
Accounts receivable from affiliates
Inventory
Other current assets
Total current assets
Property and equipment, net (1)
Operating lease right-of-use assets
Financing lease right-of-use assets
Goodwill
Spectrum licenses
Other intangible assets, net
Investments in subsidiaries, net
Intercompany receivables and note receivables
Equipment installment plan receivables due after
one year, net
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities
Payables to affiliates
Short-term debt
Deferred revenue
Short-term operating lease liabilities
Short-term financing lease liabilities
Other current liabilities
Total current liabilities
Long-term debt
Long-term debt to affiliates
Tower obligations (1)
Deferred tax liabilities
Operating lease liabilities
Financing lease liabilities
Negative carrying value of subsidiaries, net
Intercompany payables and debt
Other long-term liabilities
Total long-term liabilities
Total stockholders' equity (deficit)
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidating
and
Eliminating
Adjustments
Consolidated
$
5
—
—
—
—
—
5
—
—
—
—
—
—
28,898
—
—
—
1
—
—
—
—
646
647
—
—
—
—
—
—
51,306
3,464
—
18
$
1,350
$
1,616
2,600
20
964
975
7,525
21,790
10,933
2,715
1,930
36,465
115
—
—
1,583
1,797
172
272
—
—
—
684
1,128
194
—
—
—
—
—
—
—
—
239
$
— $
—
—
—
—
—
—
—
—
—
—
—
—
(80,204)
(3,464)
—
(163)
1,528
1,888
2,600
20
964
2,305
9,305
21,984
10,933
2,715
1,930
36,465
115
—
—
1,583
1,891
28,903
$
55,435
$
84,853
$
1,561
$
(83,831) $
86,921
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
114
—
114
28,789
252
145
25
—
—
—
1,171
1,593
10,958
13,986
—
—
—
—
—
—
—
24,944
28,898
$
6,236
$
258
$
— $
6,746
42
—
631
2,287
957
139
10,292
—
—
75
5,770
10,539
1,346
864
2,968
937
22,499
52,062
—
—
—
—
—
363
621
—
—
2,161
—
—
—
—
382
17
2,560
(1,620)
—
—
—
—
—
—
—
—
—
—
(163)
—
—
(864)
(3,464)
—
(4,491)
(79,340)
187
25
631
2,287
957
1,673
12,506
10,958
13,986
2,236
5,607
10,539
1,346
—
—
954
45,626
28,789
86,921
Total liabilities and stockholders' equity
$
28,903
$
55,435
$
84,853
$
1,561
$
(83,831) $
(1) Assets and liabilities for Non-Guarantor Subsidiaries are primarily included in VIEs related to the 2012 Tower Transaction. See Note 9 – Tower
Obligations for further information.
103
Condensed Consolidating Balance Sheet Information
December 31, 2018
(in millions)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, net
Equipment installment plan receivables, net
Accounts receivable from affiliates
Inventory
Other current assets
Total current assets
Property and equipment, net (1)
Goodwill
Spectrum licenses
Other intangible assets, net
Investments in subsidiaries, net
Intercompany receivables and note receivables
Equipment installment plan receivables due after
one year, net
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities
$
$
$
Payables to affiliates
Short-term debt
Deferred revenue
Other current liabilities
Total current liabilities
Long-term debt
Long-term debt to affiliates
Tower obligations (1)
Deferred tax liabilities
Deferred rent expense
Negative carrying value of subsidiaries, net
Intercompany payables and debt
Other long-term liabilities
Total long-term liabilities
Total stockholders' equity (deficit)
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidating
and
Eliminating
Adjustments
Consolidated
$
2
—
—
—
—
—
2
—
—
—
—
1
—
—
—
—
—
1
—
—
—
—
25,314
—
—
—
46,516
5,174
—
7
$
1,082
$
1,510
2,538
11
1,084
1,032
7,257
23,113
1,901
35,559
198
—
—
1,547
1,540
118
259
—
—
—
644
1,021
246
—
—
—
—
—
—
217
$
— $
—
—
—
—
—
—
—
—
—
—
(71,830)
(5,174)
—
(141)
1,203
1,769
2,538
11
1,084
1,676
8,281
23,359
1,901
35,559
198
—
—
1,547
1,623
25,316
$
51,698
$
71,115
$
1,484
$
(77,145) $
72,468
— $
—
—
—
—
—
—
—
—
—
—
—
598
—
598
24,718
228
157
—
—
447
832
10,950
14,582
—
—
—
—
—
20
25,552
25,314
$
7,263
$
250
$
— $
7,741
43
841
698
164
9,009
1,174
—
384
4,613
2,781
676
4,258
926
14,812
47,294
—
—
—
176
426
—
—
2,173
—
—
—
318
21
2,512
(1,454)
—
—
—
—
—
—
—
—
(141)
—
(676)
(5,174)
—
(5,991)
(71,154)
200
841
698
787
10,267
12,124
14,582
2,557
4,472
2,781
—
—
967
37,483
24,718
72,468
Total liabilities and stockholders' equity
$
25,316
$
51,698
$
71,115
$
1,484
$
(77,145) $
(1) Assets and liabilities for Non-Guarantor Subsidiaries are primarily included in VIEs related to the 2012 Tower Transaction. See Note 9 – Tower
Obligations for further information.
104
(in millions)
Revenues
Service revenues
Equipment revenues
Other revenues
Total revenues
Operating expenses
Cost of services, exclusive of depreciation and
amortization shown separately below
Cost of equipment sales, exclusive of
depreciation and amortization shown separately
below
Selling, general and administrative
Depreciation and amortization
Total operating expense
Operating income
Other income (expense)
Interest expense
Interest expense to affiliates
Interest income
Other (expense) income, net
Total other expense, net
Income (loss) before income taxes
Income tax expense
Earnings of subsidiaries
Net income
Net income
Other comprehensive (loss) income, net of tax
Other comprehensive (loss) income, net of tax
Total comprehensive income
$
$
$
Condensed Consolidating Statement of Comprehensive Income Information
Year Ended December 31, 2019
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidating
and
Eliminating
Adjustments
Consolidated
$
— $
— $
32,268
$
3,003
$
(1,277) $
33,994
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,468
3,468
3,468
$
$
—
19
19
—
—
16
—
16
3
(454)
(409)
22
(13)
(854)
(851)
—
4,319
3,468
3,468
$
$
10,053
1,109
43,430
3
203
3,209
(216)
(167)
(1,660)
9,840
1,164
44,998
6,733
—
(111)
6,622
10,908
14,467
6,564
38,672
4,758
(88)
(20)
20
6
(82)
4,676
(965)
31
3,742
3,742
$
$
1,207
989
52
2,248
961
(185)
—
3
(1)
(183)
778
(170)
—
608
608
—
$
$
(216)
(1,333)
—
(1,660)
—
—
21
(21)
—
—
—
—
(7,818)
(7,818) $
11,899
14,139
6,616
39,276
5,722
(727)
(408)
24
(8)
(1,119)
4,603
(1,135)
—
3,468
(7,818) $
3,468
(536)
2,932
(536)
(536)
186
350
2,932
$
2,932
$
3,928
$
608
$
(7,468) $
105
Condensed Consolidating Statement of Comprehensive Income Information
Year Ended December 31, 2018
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidating
and
Eliminating
Adjustments
Consolidated
$
— $
— $
30,637
$
2,333
$
(978) $
10,209
1,113
41,959
1
228
2,562
(201)
(61)
(1,240)
31,992
10,009
1,309
43,310
(in millions)
Revenues
Service revenues
Equipment revenues
Other revenues
Total revenues
Operating expenses
Cost of services, exclusive of depreciation and
amortization shown separately below
Cost of equipment sales, exclusive of
depreciation and amortization shown separately
below
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense)
Interest expense
Interest expense to affiliates
Interest income
Other (expense) income, net
Total other expense, net
Income (loss) before income taxes
Income tax expense
Earnings of subsidiaries
Net income
Net income
Other comprehensive (loss) income, net of tax
Other comprehensive (loss) income, net of tax
Total comprehensive income
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,888
2,888
2,888
$
$
—
29
29
—
—
11
—
11
18
(528)
(522)
23
(87)
(1,114)
(1,096)
—
3,984
2,888
2,888
$
$
6,283
24
—
6,307
11,239
13,296
6,422
37,240
4,719
(114)
(21)
16
33
(86)
4,633
(950)
32
3,715
3,715
$
$
1,010
892
64
1,990
572
(193)
—
1
—
(192)
380
(79)
—
301
301
—
$
$
(202)
(1,038)
—
(1,240)
—
—
21
(21)
—
—
—
—
(6,904)
(6,904) $
12,047
13,161
6,486
38,001
5,309
(835)
(522)
19
(54)
(1,392)
3,917
(1,029)
—
2,888
(6,904) $
2,888
(332)
2,556
(332)
(332)
116
216
2,556
$
2,556
$
3,831
$
301
$
(6,688) $
106
(in millions)
Revenues
Service revenues
Equipment revenues
Other revenues
Total revenues
Operating expenses
Cost of services, exclusive of depreciation and
amortization shown separately below
Cost of equipment sales, exclusive of
depreciation and amortization shown separately
below
Selling, general and administrative
Depreciation and amortization
Gains on disposal of spectrum licenses
Total operating expenses
Operating income
Other income (expense)
Interest expense
Interest expense to affiliates
Interest income
Other income (expense), net
Total other income (expense), net
Income (loss) before income taxes
Income tax expense (benefit)
Earnings (loss) of subsidiaries
Net income
Dividends on preferred stock
Net income attributable to common
stockholders
Net income
Other comprehensive loss, net of tax
Other comprehensive loss, net of tax
Total comprehensive income
$
$
$
Condensed Consolidating Statement of Comprehensive Income Information
Year Ended December 31, 2017
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidating
and
Eliminating
Adjustments
Consolidated
$
— $
— $
28,894
$
2,113
$
(847) $
30,160
—
—
—
—
—
—
—
—
—
—
—
—
1
—
1
1
—
4,535
4,536
(55)
4,481
4,536
7
$
$
—
3
3
—
—
—
—
—
—
3
(811)
(560)
29
(88)
(1,430)
(1,427)
—
5,962
4,535
—
4,535
4,535
7
$
$
9,620
879
39,393
—
212
2,325
(245)
(25)
(1,117)
9,375
1,069
40,604
6,076
24
—
6,100
10,849
12,276
5,914
(235)
34,880
4,513
(109)
(23)
10
16
(106)
4,407
1,527
(57)
5,877
—
5,877
5,877
7
$
$
1,003
856
70
—
1,953
372
(191)
—
—
(1)
(192)
180
(152)
—
28
—
28
28
—
28
$
$
$
(244)
(873)
—
—
(1,117)
—
—
23
(23)
—
—
—
—
(10,440)
(10,440)
—
11,608
12,259
5,984
(235)
35,716
4,888
(1,111)
(560)
17
(73)
(1,727)
3,161
1,375
—
4,536
(55)
(10,440) $
4,481
(10,440) $
4,536
(14)
(10,454) $
7
4,543
4,543
$
4,542
$
5,884
$
107
(in millions)
Operating activities
Net cash (used in) provided by operating
activities
Investing activities
Purchases of property and equipment
Purchases of spectrum licenses and other
intangible assets, including deposits
Proceeds from sales of tower sites
Proceeds related to beneficial interests in
securitization transactions
Net cash related to derivative contracts under
collateral exchange arrangements
Acquisition of companies, net of cash acquired
Other, net
Net cash (used in) provided by investing
activities
Financing activities
Proceeds from borrowing on revolving credit
facility, net
Repayments of revolving credit facility
Repayments of financing lease obligations
Repayments of short-term debt for purchases of
inventory, property and equipment, net
Repayments of long-term debt
Intercompany advances, net
Tax withholdings on share-based awards
Cash payments for debt prepayment or debt
extinguishment costs
Intercompany dividend paid
Other, net
Net cash provided (used in) by financing
activities
Change in cash and cash equivalents
Cash and cash equivalents
Beginning of period
End of period
$
Condensed Consolidating Statement of Cash Flows Information
Year Ended December 31, 2019
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidating
and
Eliminating
Adjustments
Consolidated
$
— $
(752) $
11,338
$
(3,207) $
(555) $
6,824
(6,391)
(967)
38
37
—
1
(6)
—
—
—
3,839
—
—
—
(7,288)
3,839
—
—
—
—
—
(23)
—
—
(555)
—
(578)
54
—
(2,340)
(798)
(775)
(600)
934
(156)
(28)
—
(19)
(3,782)
268
1,082
$
1,350
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
555
—
555
—
(6,391)
(967)
38
3,876
(632)
(31)
(18)
(4,125)
2,340
(2,340)
(798)
(775)
(600)
—
(156)
(28)
—
(17)
(2,374)
325
1,203
1,528
118
172
$
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
2
3
3
2
5
$
—
—
—
—
(632)
(32)
(12)
(676)
2,340
—
—
—
—
(912)
—
—
—
—
1,428
—
1
1
108
Condensed Consolidating Statement of Cash Flows Information
Year Ended December 31, 2018
(in millions)
Operating activities
Net cash (used in) provided by operating
activities
Investing activities
Purchases of property and equipment
Purchases of spectrum licenses and other
intangible assets, including deposits
Proceeds related to beneficial interests in
securitization transactions
Acquisition of companies, net of cash
Equity investment in subsidiary
Other, net
Net cash (used in) provided by investing
activities
Financing activities
Proceeds from issuance of long-term debt
Proceeds from borrowing on revolving credit
facility, net
Repayments of revolving credit facility
Repayments of financing lease obligations
Repayments of short-term debt for purchases of
inventory, property and equipment, net
Repayments of long-term debt
Repurchases of common stock
Intercompany advances, net
Equity investment from parent
Tax withholdings on share-based awards
Cash payments for debt prepayment or debt
extinguishment costs
Intercompany dividend paid
Other, net
Net cash (used in) provided by financing
activities
Change in cash and cash equivalents
Cash and cash equivalents
Beginning of period
End of period
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidating
and
Eliminating
Adjustments
Consolidated
$
— $
(1,254) $
10,414
$
(5,041) $
(220) $
3,899
(5,536)
(127)
53
(338)
(43)
28
(5)
—
5,353
—
—
—
(5,963)
5,348
—
—
(6,265)
(700)
(300)
(3,349)
—
6,530
43
(146)
(212)
—
(56)
(4,455)
(4)
1,086
—
—
—
—
—
—
—
(27)
—
—
—
(220)
—
(247)
60
58
$
1,082
$
118
$
—
—
—
—
43
—
43
—
—
—
—
—
—
—
—
(43)
—
—
220
—
177
—
—
— $
(5,541)
(127)
5,406
(338)
—
21
(579)
2,494
6,265
(6,265)
(700)
(300)
(3,349)
(1,071)
—
—
(146)
(212)
—
(52)
(3,336)
(16)
1,219
1,203
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,071)
995
—
—
—
—
4
(72)
(72)
$
74
2
$
—
—
—
—
—
(7)
(7)
2,494
6,265
—
—
—
—
—
(7,498)
—
—
—
—
—
1,261
—
1
1
109
(in millions)
Operating activities
Net cash provided by (used in) operating
activities
Investing activities
Purchases of property and equipment
Purchases of spectrum licenses and other
intangible assets, including deposits
Proceeds related to beneficial interests in
securitization transactions
Equity investment in subsidiary
Other, net
Net cash (used in) provided by investing
activities
Financing activities
Proceeds from issuance of long-term debt
Proceeds from borrowing on revolving credit
facility, net
Repayments of revolving credit facility
Repayments of financing lease obligations
Repayments of short-term debt for purchases of
inventory, property and equipment, net
Repayments of long-term debt
Repurchases of common stock
Intercompany advances, net
Equity investment from parent
Tax withholdings on share-based awards
Dividends on preferred stock
Cash payments for debt prepayment or debt
extinguishment costs
Intercompany dividend paid
Other, net
Net cash provided by (used in) financing
activities
Condensed Consolidating Statement of Cash Flows Information
Year Ended December 31, 2017
Parent
Issuer
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
Consolidating
and
Eliminating
Adjustments
Consolidated
$
1
$
(1,613) $
9,761
$
(4,218) $
(100) $
3,831
—
—
—
(308)
—
(308)
—
—
—
—
—
—
(427)
484
—
—
(55)
—
—
21
23
—
—
—
—
—
—
10,480
2,910
—
—
—
—
—
(14,817)
308
—
—
—
—
—
(5,237)
(5,828)
43
—
1
(11,021)
—
—
(2,910)
(486)
(300)
(10,230)
—
14,300
—
(166)
—
(188)
—
(16)
(1,119)
(2,732)
4
(1,256)
—
—
4,276
—
—
4,276
—
—
—
—
—
—
—
33
—
—
—
—
(100)
—
(67)
(9)
—
—
—
308
—
308
—
—
—
—
—
—
—
—
(308)
—
—
—
100
—
(208)
—
—
— $
(5,237)
(5,828)
4,319
—
1
(6,745)
10,480
2,910
(2,910)
(486)
(300)
(10,230)
(427)
—
—
(166)
(55)
(188)
—
5
(1,367)
(4,281)
5,500
1,219
Change in cash and cash equivalents
(284)
Cash and cash equivalents
Beginning of period
End of period
358
74
$
2,733
2,342
1
$
1,086
$
$
67
58
$
110
Supplementary Data
Quarterly Financial Information (Unaudited)
(in millions, except share and per share amounts)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Full Year
2019
Total revenues
Operating income
Net income
Net income attributable to common stockholders
Earnings per share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
2018
Total revenues
Operating income
Net income
Net income attributable to common stockholders
Earnings per share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
$
$
$
$
$
$
11,080
$
10,979
$
11,061
$
11,878
$
1,476
908
908
1,541
939
939
1,471
870
870
1,234
751
751
1.07
1.06
$
$
1.10
1.09
$
$
1.02
1.01
$
$
0.88
0.87
$
$
44,998
5,722
3,468
3,468
4.06
4.02
851,223,498
858,643,481
854,368,443
860,135,593
854,578,241
862,690,751
856,294,467
864,158,739
854,143,751
863,433,511
10,455
$
10,571
$
10,839
$
11,445
$
1,282
671
671
1,450
782
782
1,440
795
795
1,137
640
640
0.78
0.78
$
$
0.92
0.92
$
$
0.94
0.93
$
$
0.75
0.75
$
$
43,310
5,309
2,888
2,888
3.40
3.36
855,222,664
862,244,084
847,660,488
852,040,670
847,087,120
853,852,764
849,102,785
856,344,347
849,744,152
858,290,174
Earnings per share is computed independently for each quarter and the sum of the quarters may not equal earnings per share for
the full year.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure information required to be disclosed in our periodic reports
filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms. Our disclosure controls are also designed to ensure that information required to be disclosed in
the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required
disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief
Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the
end of the period covered by this Form 10-K.
The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits 31.1 and 31.2, respectively,
to this Form 10-K.
111
Changes in Internal Control over Financial Reporting
Beginning January 1, 2019, we adopted the new lease standard and implemented significant new lease accounting systems,
processes and internal controls over lease accounting to assist us in the application of the new lease standard. Other than as
discussed above, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act, during our most recently completed fiscal quarter that materially affected or are reasonably
likely to materially affect our internal control over financial reporting.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our
transactions, providing reasonable assurance that transactions are recorded as necessary for preparation of our financial
statements in accordance with generally accepted accounting principles, providing reasonable assurance that receipts and
expenditures are made in accordance with management authorization, and providing reasonable assurance that unauthorized
acquisition, use or disposition of company assets that could have a material effect on our financial statements would be
prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and
procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework and criteria established in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over
financial reporting was effective as of December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report herein.
Item 9B. Other Information
None.
PART III. OTHER INFORMATION
Item 10. Directors, Executive Officers and Corporate Governance
We maintain a code of ethics applicable to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer,
Treasurer, and Controller, which is a “Code of Ethics for Senior Financial Officers” as defined by applicable rules of the SEC.
This code is publicly available on our website at investor.t-mobile.com. If we make any amendments to this code other than
technical, administrative or other non-substantive amendments, or grant any waivers, including implicit waivers, from a
provision of this code we will disclose the nature of the amendment or waiver, its effective date and to whom it applies on our
website at investor.t-mobile.com or in a Current Report on Form 8-K filed with the SEC.
The remaining information required by this item, including information about our Directors, Executive Officers and Audit
Committee, will be incorporated by reference from our definitive Proxy Statement to be filed with the SEC pursuant to
Regulation 14A or be included in an amendment to this Report.
Item 11. Executive Compensation
The information required by this item will be incorporated by reference from our definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A or to be included in an amendment to this Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be incorporated by reference from our definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A or to be included in an amendment to this Report.
112
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be incorporated by reference from our definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A or to be included in an amendment to this Report.
Item 14. Principal Accounting Fees and Services
The information required by this item will be incorporated by reference from our definitive Proxy Statement to be filed with the
SEC pursuant to Regulation 14A or to be included in an amendment to this Report.
PART IV.
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as a part of this Form 10-K
1. Financial Statements
The following financial statements are included in Part II, Item 8 of this Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statement of Stockholders’ Equity
Notes to the Consolidated Financial Statements
2. Financial Statement Schedules
All other schedules have been omitted because they are not required, not applicable, or the required information is otherwise
included.
3. Exhibits
See the Index to Exhibits immediately following “Item 16. Form 10-K Summary” of this Form 10-K.
Item 16. Form 10–K Summary
None.
113
INDEX TO EXHIBITS
Exhibit No. Exhibit Description
2.1
2.2
2.3
2.4
2.5
2.6
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
Business Combination Agreement, dated as of October 3,
2012, by and among MetroPCS Communications, Inc.,
Deutsche Telekom AG, T-Mobile Zwischenholding GMBH,
T-Mobile Global Holding GMBH and T-Mobile USA, Inc.
Consent Solicitation Letter Agreement, dated December 5,
2012, by and among MetroPCS Communications, Inc. and
Deutsche Telekom AG, amending Exhibit G to the Business
Combination Agreement.
Amendment No. 1 to the Business Combination Agreement
by and among Deutsche Telekom AG, T-Mobile USA, Inc.,
T-Mobile Global Zwischenholding GmbH, T-Mobile Global
Holding GmbH and MetroPCS Communications, Inc., dated
April 14, 2013.
Business Combination Agreement, dated as of April 29, 2018,
by and among T-Mobile US, Inc., Huron Merger Sub LLC,
Superior Merger Sub Corporation, Sprint Corporation,
Starburst I, Inc., Galaxy Investment Holdings, Inc., and for
the limited purposes set forth therein, Deutsche Telekom AG,
Deutsche Telekom Holding B.V. and SoftBank Group Corp.
Amendment No. 1, dated as of July 26, 2019, to the Business
Combination Agreement, dated as of April 29, 2018, by and
among T-Mobile US, Inc., Huron Merger Sub LLC, Superior
Merger Sub Corporation, Sprint Corporation, Starburst I, Inc.,
Galaxy Investment Holdings, Inc., and for the limited
purposes set forth therein, Deutsche Telekom AG, Deutsche
Telekom Holding B.V., and SoftBank Group Corp.
Asset Purchase Agreement, dated as of July 26, 2019, by and
among T-Mobile US, Inc., Sprint Corporation and DISH
Network Corporation
Fourth Amended and Restated Certificate of Incorporation.
Fifth Amended and Restated Bylaws.
Sixth Amended and Restated Bylaws of T-Mobile US, Inc.
Certificate of Designations of 5.50% Mandatory Convertible
Preferred Stock, Series A, of T-Mobile US, Inc., dated
December 12, 2014.
Certificate of Elimination of 5.5% Mandatory Convertible
Preferred Stock, Series A, Par Value $0.00001 Per Share,
dated February 15, 2018.
Indenture, dated as of April 28, 2013 among T-Mobile USA,
Inc., the guarantors party thereto, and Deutsche Bank Trust
Company Americas, as trustee.
Eleventh Supplemental Indenture, dated as of May 1, 2013
among T-Mobile USA, Inc., the guarantors party thereto, and
Deutsche Bank Trust Company Americas, as trustee.
Fourteenth Supplemental Indenture, dated as of November 21,
2013, by and among T-Mobile USA, Inc., the Guarantors and
Deutsche Bank Trust Company Americas, as trustee,
including the Form of 6.125% Senior Note due 2022.
Fifteenth Supplemental Indenture, dated as of November 21,
2013, by and among T-Mobile USA, Inc., the Guarantors and
Deutsche Bank Trust Company Americas, as trustee,
including the Form of 6.500% Senior Note due 2024.
Sixteenth Supplemental Indenture, dated as of August 11,
2014, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Bank Trust Company Americas,
as trustee.
114
Incorporated by Reference
Form
8-K
Date of First
Filing
10/3/2012
Exhibit
Number
2.1
Filed
Herein
8-K
12/7/2012
2.1
8-K
4/15/2013
2.1
8-K
04/30/2018
2.1
8-K
7/26/2019
2.2
8-K
7/26/2019
2.1
8-K
8-K
8-K
8-K
5/2/2013
5/2/2013
10/11/2019
12/15/2014
3.1
3.2
3.1
3.1
8-K
2/22/2018
3.1
8-K
5/2/2013
4.1
8-K
5/2/2013
4.12
8-K
11/22/2013
4.1
8-K
11/22/2013
4.2
10-Q
10/28/2014
4.3
Incorporated by Reference
Form
8-K
Date of First
Filing
9/5/2014
Exhibit
Number
4.1
Filed
Herein
8-K
9/5/2014
4.2
10-Q
10/27/2015
4.3
8-K
11/5/2015
4.1
8-K
4/1/2016
4.1
8-K
3/16/2017
4.1
8-K
3/16/2017
4.2
8-K
3/16/2017
4.3
8-K
4/28/2017
4.1
8-K
4/28/2017
4.2
8-K
4/28/2017
4.3
8-K
5/9/2017
4.1
Exhibit No. Exhibit Description
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
Seventeenth Supplemental Indenture, dated as of September
5, 2014, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Bank Trust Company Americas,
as trustee, including the Form of 6.000% Senior Notes due
2023.
Eighteenth Supplemental Indenture, dated as of September 5,
2014, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Bank Trust Company Americas,
as trustee, including the Form of 6.375% Senior Notes due
2025.
Nineteenth Supplemental Indenture, dated as of September
28, 2015, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Bank Trust Company Americas,
as trustee.
Twentieth Supplemental Indenture, dated as of November 5,
2015, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Bank Trust Company Americas,
as Trustee, including the Form of 6.500% Senior Notes due
2026.
Twenty-First Supplemental Indenture, dated as of November
5, 2015, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Bank Trust Company Americas,
as Trustee, including the Form of 6.000% Senior Notes due
2024.
Twenty-Third Supplemental Indenture, dated as of March 16,
2017, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee, including the Form of 4.000%
Senior Note due 2022.
Twenty-Fourth Supplemental Indenture, dated as of March
16, 2017, by and among T-Mobile USA, Inc., T-Mobile US,
Inc., the other guarantors party thereto and Deutsche Bank
Trust Company Americas, as trustee, including the Form of
4.000% Senior Note due 2025.
Twenty-Fifth Supplemental Indenture, dated as of March 16,
2017, by and among T-Mobile USA, Inc., the other
guarantors party thereto and Deutsche Bank Trust Company
Americas, as trustee, including the Form of 5.375% Senior
Note due 2027.
Twenty-Sixth Supplemental Indenture, dated as of April 27,
2017, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee, including the Form of 4.000%
Senior Note due 2022-1.
Twenty-Seventh Supplemental Indenture, dated as of April
28, 2017, by and among T-Mobile USA, Inc., T-Mobile US,
Inc., the other guarantors party thereto and Deutsche Bank
Trust Company Americas, as trustee, including the Form of
5.125% Senior Note due 2025-1.
Twenty-Eighth Supplemental Indenture, dated as of April 28,
2017, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee, including the Form of 5.375%
Senior Note due 2027-1.
Twenty-Ninth Supplemental Indenture, dated as of May 9,
2017, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee, including the Form of 5.300%
Senior Notes due 2021.
115
Incorporated by Reference
Form
8-K
Date of First
Filing
5/9/2017
Exhibit
Number
4.2
Filed
Herein
8-K
1/25/2018
4.1
8-K
1/25/2018
4.2
8-K
5/2/2013
4.13
10-Q
5/1/2018
4.5
8-K
5/4/2018
4.1
8-K
5/4/2018
4.2
8-K
5/21/2018
4.1
8-K
12/21/2018
4.1
10-K
2/7/2019
4.41
10-Q
10/28/2019
4.1
10-Q
8/8/2013
10.1
X
10-Q
8/8/2013
10.2
10-K
2/7/2019
10.3
Exhibit No. Exhibit Description
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
10.1
10.2
10.3
Thirtieth Supplemental Indenture, dated as of May 9, 2017,
by and among T-Mobile USA, Inc., T-Mobile US, Inc., the
other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee.
Thirty-Second Supplemental Indenture, dated as of January
25, 2018, by and among T-Mobile USA, Inc., T-Mobile US,
Inc., the other guarantors party thereto and Deutsche Bank
Trust Company Americas, as trustee, including the Form of
4.500% Senior Note due 2026.
Thirty-Third Supplemental Indenture, dated as of January 25,
2018, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee, including the Form of 4.750%
Senior Note due 2028.
Noteholder Agreement dated as of April 28, 2013, by and
between Deutsche Telekom AG and T-Mobile USA, Inc.
Thirty-Fourth Supplemental Indenture, dated as of April 26,
2018, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee.
Thirty-Fifth Supplemental Indenture, dated as of April 30,
2018, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee, including the Form of 4.500%
Senior Note due 2026-1.
Thirty-Sixth Supplemental Indenture, dated as of April 30,
2018, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee, including the Form of 4.750%
Senior Note due 2028-1.
Thirty-Seventh Supplemental Indenture, dated as of May 20,
2018, by and among T-Mobile USA, Inc., the guarantors
party thereto, and Deutsche Bank Trust Company Americas.
Thirty-Eighth Supplemental Indenture, dated as of
December 20, 2018, by and among T-Mobile USA, Inc., the
guarantors party thereto, and Deutsche Bank Trust Company
Americas.
Thirty-Ninth Supplemental Indenture, dated as of
December 20, 2018, by and among T-Mobile USA, Inc., the
guarantors party thereto, and Deutsche Bank Trust Company
Americas.
Fortieth Supplemental Indenture, dated as of September 27,
2019, by and among T-Mobile USA, Inc., T-Mobile US, Inc.,
the other guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee.
Description of Securities
Master Agreement, dated as of September 28, 2012, among
T-Mobile USA, Inc., Crown Castle International Corp., and
certain T-Mobile and Crown subsidiaries.
Amendment No. 1, dated as of November 30, 2012, to Master
Agreement, dated as of November 30, 2012, among Crown
Castle International Corp., and certain T-Mobile and Crown
subsidiaries.
Settlement and Amendment No. 2, dated as of May 8, 2014,
to Master Agreement, dated as of November 2012, among
Crown Castle International Corp., and certain T-Mobile and
Crown subsidiaries.
116
Incorporated by Reference
Form
10-Q
Date of First
Filing
8/8/2013
Exhibit
Number
10.3
Filed
Herein
10-Q
8/8/2013
10.4
10-Q
8/8/2013
10.5
10-K
2/7/2019
10.7
10-Q
8/8/2013
10.6
10-Q
8/8/2013
10.7
10-K
2/7/2019
10.10
10-K
2/7/2019
10.11
10-Q
8/8/2013
10.8
Exhibit No. Exhibit Description
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
Master Prepaid Lease, dated as of November 30, 2012, by and
among T-Mobile USA Tower LLC, T-Mobile West Tower
LLC, T-Mobile USA, Inc. and CCTMO LLC.
MPL Site Master Lease Agreement, dated as of November 30,
2012, by and among Cook Inlet/VS GSM IV PCS Holdings,
LLC, T-Mobile Central LLC, T-Mobile South LLC, Powertel/
Memphis, Inc., Voicestream Pittsburgh, L.P., T-Mobile West
LLC, T-Mobile Northeast LLC, Wireless Alliance, LLC,
Suncom Wireless Operating Company, L.L.C., T-Mobile
USA, Inc. and CCTMO LLC.
First Amendment, dated as of November 30, 2012, to MPL
Site Master Lease Agreement, dated as of November 30,
2012, by and among Cook Inlet/VS GSM IV PCS Holdings,
LLC, T-Mobile Central LLC, T-Mobile South LLC, Powertel/
Memphis, Inc., Voicestream Pittsburgh, L.P., T-Mobile West
LLC, T-Mobile Northeast LLC, Wireless Alliance, LLC,
Suncom Wireless Operating Company, L.L.C., T-Mobile
USA, Inc. and CCTMO LLC.
Second Amendment, dated as of October 31, 2014, to MPL
Site Master Lease Agreement, dated as of November 30,
2012, by and among Cook Inlet/VS GSM IV PCS Holdings,
LLC, T-Mobile Central LLC, T-Mobile South LLC, Powertel/
Memphis, Inc., Voicestream Pittsburgh, L.P., T-Mobile West
LLC, T-Mobile Northeast LLC, Suncom Wireless Operating
Company, L.L.C., T-Mobile USA, Inc.
Sale Site Master Lease Agreement, dated as of November 30,
2012, by and among Cook Inlet/VS GSM IV PCS Holdings,
LLC, T-Mobile Central LLC, T-Mobile South LLC, Powertel/
Memphis, Inc., Voicestream Pittsburgh, L.P., T-Mobile West
LLC, T-Mobile Northeast LLC, Wireless Alliance, LLC,
Suncom Wireless Operating Company, L.L.C., T-Mobile
USA, Inc., T3 Tower 1 LLC and T3 Tower 2 LLC.
First Amendment, dated as of November 30, 2012, to Sale
Site Master Lease Agreement, dated as of November 30,
2012, by and Cook Inlet/VS GSM IV PCS Holdings, LLC, T-
Mobile Central LLC, T-Mobile South LLC, Powertel/
Memphis, Inc., Voicestream Pittsburgh, L.P., T-Mobile West
LLC, T-Mobile Northeast LLC, Wireless Alliance, LLC,
Suncom Wireless Operating Company, L.L.C., T-Mobile
USA, Inc., T3 Tower 1 LLC and T3 Tower 2 LLC.
Second Amendment, dated as of October 31, 2014, to Sale
Site Master Lease Agreement, dated as of November 30,
2012, by and Cook Inlet/VS GSM IV PCS Holdings, LLC, T-
Mobile Central LLC, T-Mobile South LLC, Powertel/
Memphis, Inc., Voicestream Pittsburgh, L.P., T-Mobile West
LLC, T-Mobile Northeast LLC, Suncom Wireless Operating
Company, L.L.C., T-Mobile USA, Inc., T3 Tower 1 LLC and
T3 Tower 2 LLC.
Settlement Technical Closing Agreement, dated as of October
1, 2014, among Crown Castle International Corp., and certain
T-Mobile and Crown subsidiaries.
Management Agreement, dated as of November 30, 2012, by
and among Suncom Wireless Operating Company, L.L.C.,
Cook Inlet/VS GSM IV PCS Holdings, LLC, T-Mobile
Central LLC, T-Mobile South LLC, Powertel/Memphis, Inc.,
Voicestream Pittsburgh, L.P., T-Mobile West LLC, T-Mobile
Northeast LLC, Wireless Alliance, LLC, Suncom Wireless
Property Company, L.L.C., T-Mobile USA Tower LLC, T-
Mobile West Tower LLC, CCTMO LLC, T3 Tower 1 LLC
and T3 Tower 2 LLC.
117
Exhibit No. Exhibit Description
10.13
Stockholder’s Agreement dated as of April 30, 2013 by and
between MetroPCS Communications, Inc. and Deutsche
Telekom AG.
Incorporated by Reference
Form
8-K
Date of First
Filing
5/2/2013
Exhibit
Number
10.1
Filed
Herein
10.14 Waiver of Required Approval Under Section 3.6(a) of the
10-Q
8/8/2013
10.10
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
Stockholder’s Agreement, dated August 7, 2013, between T-
Mobile US, Inc. and Deutsche Telekom AG.
License Agreement dated as of April 30, 2013 by and
between T-Mobile US, Inc. and Deutsche Telekom AG.
Supplemental Agreement, effective as of June 3, 2019, to the
License Agreement, dated as of April 30, 2013, by and
between T-Mobile US, Inc. and Deutsche Telekom AG.
Receivables Sale and Conveyancing Agreement, dated as of
February 26, 2014, among T-Mobile West LLC, T-Mobile
Central LLC, T-Mobile Northeast LLC and T-Mobile South
LLC, as sellers, and T-Mobile PCS Holdings LLC, as
purchaser.
Joinder and First Amendment to the Receivables Sale and
Conveyancing Agreement, dated as of November 28, 2014,
among Powertel/Memphis, Inc., Triton PCS Holdings
Company L.L.C., T-Mobile West LLC, T-Mobile Central
LLC, T-Mobile Northeast LLC and T-Mobile South LLC, as
sellers, and T-Mobile PCS Holdings LLC, as purchaser.
Joinder and Second Amendment to the Receivables Sale and
Conveyancing Agreement, dated as of January 9, 2015,
among SunCom Wireless Operating Company, LLC,
Powertel/Memphis, Inc., Triton PCS Holdings Company
L.L.C., T-Mobile West LLC, T-Mobile Central LLC, T-
Mobile Northeast LLC and T-Mobile South LLC, as sellers,
and T-Mobile PCS Holdings LLC, as purchaser.
Receivables Sale and Contribution Agreement, dated as of
February 26, 2014, between T-Mobile PCS Holdings LLC, as
seller, and T-Mobile Airtime Funding LLC, as purchaser.
First Amendment to the Receivables Sale and Contribution
Agreement, dated as of November 28, 2014, between T-
Mobile PCS Holdings LLC, as seller, and T-Mobile Airtime
Funding LLC, as purchaser.
Second Amendment to the Receivables Sale and Contribution
Agreement, dated as of January 9, 2015, by and among T-
Mobile PCS Holdings LLC, as seller, and T-Mobile Airtime
Funding LLC, as purchaser.
Third Amendment to the Receivables Sale and Contribution
Agreement, dated as of November 30, 2016, by and among T-
Mobile PCS Holdings LLC, as seller, and T-Mobile Airtime
Funding LLC, as purchaser.
Fourth Amendment to the Receivables Sale and Contribution
Agreement, dated as of May 5, 2017, by and among T-Mobile
PCS Holdings LLC, as seller, and T-Mobile Airtime Funding
LLC, as purchaser.
Fourth Amended and Restated Master Receivables Purchase
Agreement, dated as of February 26, 2019, among T-Mobile
Funding LLC, as funding seller, Billing Gate One LLC, as
purchaser, Landesbank Hessen-Thüringen Giroznetrale, as
bank purchasing agent, MUFG Bank (Europe) N.V., Germany
Branch, as bank collection agent, T-Mobile PCS Holdings
LLC, as servicer, and T-Mobile US, Inc. and T-Mobile USA,
Inc., as performance guarantors.
Term Loan Credit Agreement, dated as of November 9, 2015,
among T-Mobile USA, Inc., the lenders party thereto and
Deutsche Bank AG New York Branch, as administrative
agent and collateral agent.
118
8-K
5/2/2013
10.2
10-Q
7/26/2019
10.5
8-K
3/4/2014
10.1
10-K
2/19/2015
10.55
10-Q
4/28/2015
10.5
8-K
3/4/2014
10.2
10-K
2/19/2015
10.56
10-Q
4/28/2015
10.6
10-K
2/14/2017
10.33
10-Q
7/20/2017
10.1
8-K
3/4/2019
10.1
8-K
11/12/2015
10.1
Incorporated by Reference
Form
10-Q
Date of First
Filing
4/24/2017
Exhibit
Number
10.3
Filed
Herein
10-Q
4/24/2017
10.4
10-Q
4/24/2017
10.5
8-K
7/27/2017
10.1
8-K
3/30/2018
10.1
8-K
12/30/2016
10.3
8-K
1/25/2017
10.1
10-Q
10/30/2018
10.2
10-Q
10/30/2018
10.1
10-K
2/7/2019
10.45
Exhibit No. Exhibit Description
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
Amendment No.1 to the Term Loan Credit Agreement, dated
as of January 25, 2017, among T-Mobile USA, Inc., the
guarantors party thereto, the lenders party thereto and
Deutsche Bank AG New York Branch, as administrative
agent and collateral agent.
Amendment No.2 to the Term Loan Credit Agreement, dated
as of January 25, 2017, among T-Mobile USA, Inc., the
guarantors party thereto, the lenders party thereto and
Deutsche Bank AG New York Branch, as administrative
agent and collateral agent.
Amendment No.3 to the Term Loan Credit Agreement, dated
as of March 28, 2017, among T-Mobile USA, Inc., the
guarantors party thereto, the lenders party thereto and
Deutsche Bank AG New York Branch, as administrative
agent and collateral agent.
Amendment No.4 to the Term Loan Credit Agreement, dated
as of July 25, 2017, among T-Mobile USA, Inc., the
guarantors party thereto, the lenders party thereto and
Deutsche Bank AG New York Branch, as administrative
agent and collateral agent.
Amendment No. 5 to the Term Loan Credit Agreement, dated
as of March 29, 2018, among T-Mobile USA, Inc., the
guarantors party thereto, the lenders party thereto and
Deutsche Bank AG New York Branch, as administrative
agent and collateral agent.
First Incremental Facility Amendment, dated as of December
29, 2016, to the Term Loan Credit Agreement, dated as of
November 9, 2015, by and among T-Mobile USA, Inc., the
guarantors party thereto, the several banks and other financial
institutions or entities from time to time parties thereto as
lenders, and Deutsche Bank AG New York Branch, as
administrative agent.
Second Incremental Facility Amendment, dated as of January
25, 2017, to the Term Loan Credit Agreement, dated as of
November 9, 2015, as amended by that certain First
Incremental Facility Amendment dated as of December 29,
2016, by and among T-Mobile USA, Inc., the guarantors
party thereto, the several banks and other financial institutions
or entities from time to time parties thereto as lenders, and
Deutsche Bank AG New York Branch, as administrative
agent.
Third Amended and Restated Receivables Sale Agreement,
dated as of October 23, 2018, by and between T-Mobile
Financial LLC, as seller, and T-Mobile Handset Funding
LLC, as purchaser.
Third Amended and Restated Receivables Purchase and
Administration Agreement, dated as of October 23, 2018, by
and among T-Mobile Handset Funding LLC, as transferor, T-
Mobile Financial LLC, as servicer, T-Mobile US, Inc., as
performance guarantor, Royal Bank of Canada, as
administrative agent, and certain financial institutions party
thereto.
First Amendment, dated as of December 21, 2018, to Third
Amended and Restated Receivables Purchase and
Administration Agreement, dated as of October 23, 2018, by
and among T-Mobile Handset Funding LLC, as transferor, T-
Mobile Financial LLC, as servicer, T-Mobile US, Inc., as
performance guarantor, Royal Bank of Canada, as
administrative agent, and certain financial institutions party
thereto
119
Incorporated by Reference
Form
8-K
Date of First
Filing
3/7/2016
Exhibit
Number
1.1
Filed
Herein
8-K
11/2/2016
10.1
8-K
4/26/2016
1.1
8-K
11/2/2016
10.2
8-K
4/29/2016
1.1
8-K
11/2/2016
10.3
8-K
3/16/2017
10.1
8-K
1/25/2018
10.1
8-K
12/30/2016
10.1
8-K
3/30/2018
10.3
8-K
12/30/2016
10.2
8-K
3/30/2018
10.2
S-1/A
2/27/2007
10.1(a)
Schedule
14A
10-Q
4/19/2010
Annex A
8/9/2010
10.2
10-Q
10/30/2012
10.1
Exhibit No. Exhibit Description
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
Purchase Agreement, dated as of March 6, 2016, among T-
Mobile USA, Inc., the guarantor party thereto and Deutsche
Telekom AG.
Amendment No. 1 to Purchase Agreement, dated as of
October 28, 2016, to Purchase Agreement, dated as of March
6, 2016, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Telekom AG.
Purchase Agreement, dated as of April 25, 2016, among T-
Mobile USA, Inc., the guarantor party thereto and Deutsche
Telekom AG.
Amendment No. 1 to Purchase Agreement, dated as of
October 28, 2016, to Purchase Agreement, dated as of April
25, 2016, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Telekom AG.
Purchase Agreement, dated as of April 29, 2016, among T-
Mobile USA, Inc., the guarantor party thereto and Deutsche
Telekom AG.
Amendment No. 1 to Purchase Agreement, dated as of
October 28, 2016, to Purchase Agreement, dated as of April
29, 2016, by and among T-Mobile USA, Inc., the guarantors
party thereto and Deutsche Telekom AG.
Purchase Agreement, dated as of March 13, 2017, among T-
Mobile USA, Inc., the guarantors party thereto and Deutsche
Telekom AG.
Purchase Agreement, dated as of January 22, 2018, among T-
Mobile USA, Inc., the guarantors party thereto and Deutsche
Telekom AG.
10.47
10.46
10.45
Unsecured Revolving Credit Agreement, dated as of
December 29, 2016, by and among T-Mobile US, Inc., T-
Mobile USA, Inc., the several banks and other financial
institutions or entities from time to time party thereto as
lenders, and Deutsche Telekom AG, as administrative agent.
Amendment No. 1, dated as of March 29, 2018, to the
Unsecured Revolving Credit Agreement, dated as of
December 29, 2016, among T-Mobile USA, Inc., T-Mobile
US, Inc., the other guarantors party thereto and Deutsche
Telekom AG, as administrative agent and lender.
Secured Revolving Credit Agreement, dated as of December
29, 2016, by and among T-Mobile US, Inc., T-Mobile USA,
Inc., the several banks and other financial institutions or
entities from time to time party thereto as lenders, and
Deutsche Telekom AG, as administrative agent.
Amendment No. 1, dated as of March 29, 2018, to the
Secured Revolving Credit Agreement, dated as of December
29, 2016, among T-Mobile USA, Inc., T-Mobile US, Inc., the
other guarantors party thereto and Deutsche Telekom AG, as
administrative agent and lender.
Amended and Restated MetroPCS Communications, Inc.
2004 Equity Incentive Compensation Plan.
10.50* MetroPCS Communications, Inc. 2010 Equity Incentive
10.49*
10.48
10.51*
10.52*
Compensation Plan.
Form Change in Control Agreement for MetroPCS
Communications, Inc.
Form Change in Control Agreement Amendment for
MetroPCS Communications, Inc.
120
Exhibit No. Exhibit Description
10.53* MetroPCS Communications, Inc. Employee Non-qualified
Stock Option Award Agreement relating to the MetroPCS
Communications, Inc. Amended and Restated 2004 Equity
Incentive Compensation Plan.
10.54*
10.55*
10.56*
10.57*
10.58*
10.59*
10.60*
10.61*
10.62*
10.63*
10.64*
10.65*
10.66*
10.67*
10.68*
10.69*
10.70*
10.71*
10.72*
10.73*
10.74*
10.75*
Form MetroPCS Communications, Inc. 2010 Equity Incentive
Compensation Plan Employee Non-Qualified Stock Option
Award Agreement.
Amended and Restated Employment Agreement, dated as of
December 20, 2017, between T-Mobile US, Inc. and J.
Braxton Carter.
First Amendment, dated as of April 28, 2018, to Amended
and Restated Employment Agreement, dated as of December
20, 2017, between T-Mobile US, Inc. and J. Braxton Carter.
Second Amendment, dated as of March 25, 2019, to
Amended and Restated Employment Agreement, dated as of
December 20, 2017, between T-Mobile US, Inc. and J.
Braxton Carter.
Third Amendment to Amended and Restated Employment
Agreement, effective as of November 15, 2019, between T-
Mobile US, Inc. and J. Braxton Carter.
Amended and Restated Employment Agreement, dated as of
March 28, 2017, between T-Mobile US, Inc. and John J.
Legere.
First Amendment, dated as of April 28, 2018, to Amended
and Restated Employment Agreement, dated as of April 1,
2017, between T-Mobile US, Inc. and John Legere.
Employment Agreement, effective November 15, 2019,
between T-Mobile US, Inc. and Michael Sievert.
Letter Agreement, dated as of February 19, 2018, between T-
Mobile US, Inc. and David R. Carey.
Compensation Term Sheet, dated as of April 28, 2018, by and
between T-Mobile US, Inc. and David R. Carey.
Letter Agreement, dated as of April 28, 2018, between T-
Mobile US, Inc. and David R. Carey.
Compensation Term Sheet between Neville Ray and T-
Mobile US, Inc., effective as of November 15, 2019.
Form of Severance Letter Agreement.
Form of Indemnification and Advancement Agreement.
T-Mobile US, Inc. Non-Qualified Deferred Executive
Compensation Plan (As Amended and Restated Effective as
of January 1, 2014).
First Amendment to T-Mobile US, Inc. Non-Qualified
Deferred Executive Compensation Plan
T-Mobile US, Inc. Executive Continuity Plan as Amended
and Restated Effective as of January 1, 2014.
T-Mobile US, Inc. 2013 Omnibus Incentive Plan (as amended
and restated on August 7, 2013).
Amendment to T-Mobile US, Inc. 2013 Omnibus Incentive
Plan (as amended and restated on August 7, 2013).
T-Mobile USA, Inc. 2011 Long-Term Incentive Plan.
Annual Incentive Award Notice under the 2013 Omnibus
Incentive Plan.
Form of Restricted Stock Unit Award Agreement for Non-
Employee Directors under the T-Mobile US, Inc. 2013
Omnibus Incentive Plan.
121
Incorporated by Reference
Form
10-K
Date of First
Filing
3/1/2013
Exhibit
Number
10.9(a)
Filed
Herein
10-K
2/29/2012
10.12
10-K
2/8/2018
10.69
10-Q
5/1/2018
10.12
10-Q
10/28/2019
10.1
X
X
X
X
10-Q
4/24/2017
10.7
10-Q
5/1/2018
10.10
10-Q
7/26/2019
10.1
10-Q
7/26/2019
10.2
10-Q
7/26/2019
10.3
10-Q
10-K
10-K
5/1/2018
2/8/2018
2/25/2014
10.9
10.76
10.39
10-K
2/7/2019
10.75
8-K
10/25/2013
10.1
10-Q
8/8/2013
10.20
Schedule
14A
10-Q
4/26/2018
Annex A
8/8/2013
10.21
8-K
6/4/2013
10.2
Incorporated by Reference
Form
Date of First
Filing
Exhibit
Number
Filed
Herein
X
X
S-8
10-Q
2/19/2015
7/26/2019
99.1
10.4
8-K
04/30/2018
10.1
8-K
9/9/2019
10.1
8-K
04/30/2018
10.3
X
X
X
X
X
X
X
X
X
X
X
Exhibit No. Exhibit Description
10.76*
10.77*
10.78*
10.79*
10.80*
10.81
10.82
21.1
23.1
24.1
Form of Restricted Stock Unit Award Agreement (Time-
Vesting) for Executive Officers under the T-Mobile US, Inc.
2013 Omnibus Incentive Plan.
Form of Restricted Stock Unit Award Agreement
(Performance-Vesting) for Executive Officers under the T-
Mobile US, Inc. 2013 Omnibus Incentive Plan.
T-Mobile US, Inc. 2014 Employee Stock Purchase Plan.
Amended Director Compensation Program effective as of
May 1, 2013 (amended June 4, 2014 and further amended on
June 1, 2015, June 16, 2016, June 13, 2017 and June 13,
2019).
Support Agreement, dated as of April 29, 2018, by and among
SoftBank Group Corp., SoftBank Group Capital Limited,
Starburst I, Inc., Galaxy Investment Holdings, Inc., T-Mobile
US, Inc., and Deutsche Telekom AG.
Second Amended and Restated Commitment Letter, dated as
of September 6, 2019, by and among T-Mobile USA, Inc. and
the financial institutions party thereto.
Financing Matters Agreement, dated as of April 29, 2018, by
and between T-Mobile USA, Inc. and Deutsche Telekom AG.
Subsidiaries of Registrant.
Consent of PricewaterhouseCoopers LLP.
Power of Attorney, pursuant to which amendments to this
Form 10-K may be filed (included on the signature page
contained in Part IV of the Form 10-K).
31.2
31.1
32.1**
Certifications of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certifications of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document - the instance document does not
appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
32.2**
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase
104
Document.
Cover Page Interactive Data File (the cover page XBRL tags
are embedded within the Inline XBRL document).
*
**
Indicates a management contract or compensatory plan or arrangement.
Furnished herein.
122
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.
SIGNATURES
February 6, 2020
T-MOBILE US, INC.
/s/ John J. Legere
John J. Legere
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints John J. Legere, J. Braxton Carter and David A. Miller, and
each or any of them, his or her true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments or
supplements (including post-effective amendments) to this Report, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated as of February 6, 2020.
Signature
Title
/s/ John J. Legere
John J. Legere
/s/ G. Michael Sievert
G. Michael Sievert
/s/ J. Braxton Carter
J. Braxton Carter
/s/ Peter Osvaldik
Peter Osvaldik
/s/ Timotheus Höttges
Timotheus Höttges
/s/ Srikant Datar
Srikant Datar
Chief Executive Officer and
Director (Principal Executive Officer)
President and Chief Operating Officer
Director
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Senior Vice President, Finance and Chief Accounting
Officer (Principal Accounting Officer)
Chairman of the Board
Director
123
/s/ Lawrence H. Guffey
Lawrence H. Guffey
/s/ Christian P. Illek
Christian P. Illek
/s/ Srini Gopalan
Srini Gopalan
/s/ Bruno Jacobfeuerborn
Bruno Jacobfeuerborn
/s/ Raphael Kübler
Raphael Kübler
/s/ Thorsten Langheim
Thorsten Langheim
/s/ Teresa A. Taylor
Teresa A. Taylor
/s/ Kelvin R. Westbrook
Kelvin R. Westbrook
Director
Director
Director
Director
Director
Director
Director
Director
124
T-MOBILE US, Inc.
Reconciliation of Additional Non-GAAP Financial Measures to GAAP Financial Measures
(Unaudited)
This Annual Report includes certain additional non-GAAP financial measures for the year ended December 31,
2012 that are not otherwise included in our Form 10-K for the year ended December 31, 2019. The non-GAAP
financial measures should be considered in addition to, but not as a substitute for, the information provided in
accordance with GAAP. Reconciliations for the non-GAAP financial measures to the most directly comparable
GAAP financial measures are provided below.
Adjusted EBITDA is reconciled to Net loss as follows:
(in millions)
Net loss
Adjustments:
Interest expense to affiliates
Interest income
Other expense, net
Income tax expense
Operating loss
Depreciation and amortization
Impairment charges
MetroPCS transaction and integration costs
Restructuring costs
Other, net (1)
Adjusted EBITDA
Year Ended December 31, 2012
(7,336)
661
(5)
5
350
(6,325)
3,187
8,134
7
85
(130)
4,958
$
$
(1) Other, net for the year ended December 31, 2012 represents transaction-related retention costs from the terminated AT&T acquisition of T-
Mobile USA, Inc., gains/losses on intangible assets, and other material transactions. Other, net transactions may not agree in total to the
other, net classification in the Consolidated Statements of Comprehensive Income due to certain routine operating activities that are not
excluded from Adjusted EBITDA.
Free Cash Flow is calculated as follows:
(in millions)
Net cash provided by operating activities
Cash purchases of property and equipment
Free Cash Flow
Year Ended December 31, 2012
$
$
3,862
(2,901)
961
125
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SENIOR LEADERSHIP TEAM,
DIRECTORS AND BOARD COMMITTEES*
Senior Leadership Team
Abdul Saad
Stephen Kappes
Executive Vice President
(cid:51)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:15)(cid:3)
CEO Selection Committee
(cid:55)(cid:76)(cid:80)(cid:82)(cid:87)(cid:75)(cid:72)(cid:88)(cid:86)(cid:3)(cid:43)(cid:124)(cid:87)(cid:87)(cid:74)(cid:72)(cid:86)(cid:3)(cid:11)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:12)
G. Michael Sievert**
(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:55)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)
(cid:55)(cid:82)(cid:85)(cid:70)(cid:75)(cid:3)(cid:43)(cid:76)(cid:79)(cid:79)(cid:3)(cid:44)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:3)
(cid:38)(cid:75)(cid:85)(cid:76)(cid:86)(cid:87)(cid:76)(cid:68)(cid:81)(cid:3)(cid:51)(cid:17)(cid:3)(cid:44)(cid:79)(cid:79)(cid:72)(cid:78)
(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)
Nestor Cano
Executive Vice President and Chief
Senior Vice President of the
Cody M. Sanford
Raphael Kübler
Thorsten Langheim
Teresa A. Taylor
(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:74)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:15)(cid:3)
Transaction Committee
(cid:68)(cid:81)(cid:71)(cid:3)(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:70)(cid:3)
(cid:39)(cid:72)(cid:88)(cid:87)(cid:86)(cid:70)(cid:75)(cid:72)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:78)(cid:82)(cid:80)(cid:3)(cid:36)(cid:42)
(cid:55)(cid:75)(cid:82)(cid:85)(cid:86)(cid:87)(cid:72)(cid:81)(cid:3)(cid:47)(cid:68)(cid:81)(cid:74)(cid:75)(cid:72)(cid:76)(cid:80)(cid:3)(cid:11)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:12)
(cid:36)(cid:71)(cid:89)(cid:76)(cid:86)(cid:82)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:40)(cid:50)(cid:3)
John Saw
(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)
Thorsten Langheim
J. Braxton Carter**
Advanced and Emerging Technologies
(cid:48)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:39)(cid:72)(cid:88)(cid:87)(cid:86)(cid:70)(cid:75)(cid:72)(cid:3)(cid:55)(cid:72)(cid:79)(cid:72)(cid:78)(cid:82)(cid:80)(cid:3)(cid:36)(cid:42)(cid:3)
Executive Vice President
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(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)
Matthew A. Staneff**
Development
Executive Vice President
Dow Draper
(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)
John J. Legere
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Emerging Products
Directors
G. Michael Sievert
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(cid:47)(cid:68)(cid:90)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:43)(cid:17)(cid:3)(cid:42)(cid:88)(cid:73)(cid:73)(cid:72)(cid:92)(cid:3)
STOCKHOLDER
INFORMATION
Corporate Headquarters
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Phone:(cid:3)(cid:20)(cid:16)(cid:27)(cid:19)(cid:19)(cid:16)(cid:22)(cid:20)(cid:27)(cid:16)(cid:28)(cid:21)(cid:26)(cid:19)
Peter A. Ewens**
Timotheus Höttges, Chair
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(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)
Corporate Strategy and Development
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Teresa A. Taylor
Website
www.T-Mobile.com
Callie R. Field
Marcelo Claure
(cid:37)(cid:79)(cid:88)(cid:72)(cid:3)(cid:57)(cid:68)(cid:79)(cid:79)(cid:72)(cid:92)(cid:3)(cid:36)(cid:71)(cid:89)(cid:76)(cid:86)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)(cid:47)(cid:47)(cid:38)
Transfer Agent
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(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:192)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)
Customer Care
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Kelvin R. Westbrook
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(cid:25)(cid:21)(cid:19)(cid:20)(cid:3)(cid:20)(cid:24)(cid:87)(cid:75)(cid:3)(cid:36)(cid:89)(cid:72)(cid:17)
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Jon A. Freier
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(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:15)(cid:3)
(cid:38)(cid:82)(cid:81)(cid:86)(cid:88)(cid:80)(cid:72)(cid:85)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)
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Board Committees
Janice Kapner
Srikant M. Datar
Audit Committee
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(cid:51)(cid:75)(cid:82)(cid:81)(cid:72)(cid:29)(cid:3)(cid:20)(cid:16)(cid:27)(cid:19)(cid:19)(cid:16)(cid:28)(cid:22)(cid:26)(cid:16)(cid:24)(cid:23)(cid:23)(cid:28)
Stock Exchange
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Executive Vice President and
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Business Administration and Senior
Teresa A. Taylor
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Michael J. Katz
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T-Mobile US, Investor Relations
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T-Mobile for Business
Ronald D. Fisher
Compensation Committee
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(cid:20)(cid:3)(cid:51)(cid:68)(cid:85)(cid:78)(cid:3)(cid:36)(cid:89)(cid:72)(cid:17)
(cid:20)(cid:23)(cid:87)(cid:75)(cid:3)(cid:41)(cid:79)(cid:82)(cid:82)(cid:85)
Deeanne King**
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(cid:54)(cid:82)(cid:73)(cid:87)(cid:37)(cid:68)(cid:81)(cid:78)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:17)(cid:3)
Executive Vice President and
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Marcelo Claure
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(cid:53)(cid:68)(cid:83)(cid:75)(cid:68)(cid:72)(cid:79)(cid:3)(cid:46)(cid:129)(cid:69)(cid:79)(cid:72)(cid:85)
(cid:49)(cid:72)(cid:90)(cid:3)(cid:60)(cid:82)(cid:85)(cid:78)(cid:15)(cid:3)(cid:49)(cid:60)(cid:3)(cid:20)(cid:19)(cid:19)(cid:20)(cid:25)
investor.relations@T-Mobile.com
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Thorsten Langheim
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Susan Loosmore
Srini Gopalan
Nominating and Corporate
Annual Report
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(cid:48)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
Governance Committee
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Financial Planning & Analysis
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(cid:55)(cid:72)(cid:85)(cid:72)(cid:86)(cid:68)(cid:3)(cid:36)(cid:17)(cid:3)(cid:55)(cid:68)(cid:92)(cid:79)(cid:82)(cid:85)(cid:3)(cid:11)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:12)
online at www.T-Mobile.com.
Jeremy Malasky
(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)
Lawrence H. Guffey
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without charge by contacting Investor
Executive Committee
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Twin Point Capital
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David A. Miller**
Christian P. Illek
Marcelo Claure
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Executive Vice President and
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Neville Ray**
President of Technology
* As of April 6, 2020
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Thorsten Langheim
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