x
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QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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DELAWARE
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20-0836269
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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12920 SE 38th Street, Bellevue, Washington
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98006-1350
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(Address of principal executive offices)
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(Zip Code)
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(425) 378-4000
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(Registrant’s telephone number, including area code)
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Class
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Shares Outstanding as of April 27, 2018
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|
Common Stock, $0.00001 par value per share
|
|
846,845,766
|
|
|
||
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||
|
||
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||
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||
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||
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(in millions, except share and per share amounts)
|
March 31,
2018 |
|
December 31,
2017 |
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
2,527
|
|
|
$
|
1,219
|
|
Accounts receivable, net of allowances of $76 and $86
|
1,689
|
|
|
1,915
|
|
||
Equipment installment plan receivables, net
|
2,281
|
|
|
2,290
|
|
||
Accounts receivable from affiliates
|
13
|
|
|
22
|
|
||
Inventories
|
1,311
|
|
|
1,566
|
|
||
Other current assets
|
1,788
|
|
|
1,903
|
|
||
Total current assets
|
9,609
|
|
|
8,915
|
|
||
Property and equipment, net
|
22,308
|
|
|
22,196
|
|
||
Goodwill
|
1,901
|
|
|
1,683
|
|
||
Spectrum licenses
|
35,504
|
|
|
35,366
|
|
||
Other intangible assets, net
|
291
|
|
|
217
|
|
||
Equipment installment plan receivables due after one year, net
|
1,234
|
|
|
1,274
|
|
||
Other assets
|
1,157
|
|
|
912
|
|
||
Total assets
|
$
|
72,004
|
|
|
$
|
70,563
|
|
Liabilities and Stockholders' Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable and accrued liabilities
|
$
|
7,157
|
|
|
$
|
8,528
|
|
Payables to affiliates
|
291
|
|
|
182
|
|
||
Short-term debt
|
3,320
|
|
|
1,612
|
|
||
Short-term debt to affiliates
|
445
|
|
|
—
|
|
||
Deferred revenue
|
791
|
|
|
779
|
|
||
Other current liabilities
|
353
|
|
|
414
|
|
||
Total current liabilities
|
12,357
|
|
|
11,515
|
|
||
Long-term debt
|
12,127
|
|
|
12,121
|
|
||
Long-term debt to affiliates
|
14,586
|
|
|
14,586
|
|
||
Tower obligations
|
2,582
|
|
|
2,590
|
|
||
Deferred tax liabilities
|
3,813
|
|
|
3,537
|
|
||
Deferred rent expense
|
2,730
|
|
|
2,720
|
|
||
Other long-term liabilities
|
933
|
|
|
935
|
|
||
Total long-term liabilities
|
36,771
|
|
|
36,489
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
|
|
||
Stockholders' equity
|
|
|
|
||||
Common Stock, par value $0.00001 per share, 1,000,000,000 shares authorized; 854,576,971 and 860,861,998 shares issued, 853,066,229 and 859,406,651 shares outstanding
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
38,057
|
|
|
38,629
|
|
||
Treasury stock, at cost, 1,510,742 and 1,455,347 shares issued
|
(7
|
)
|
|
(4
|
)
|
||
Accumulated other comprehensive income
|
5
|
|
|
8
|
|
||
Accumulated deficit
|
(15,179
|
)
|
|
(16,074
|
)
|
||
Total stockholders' equity
|
22,876
|
|
|
22,559
|
|
||
Total liabilities and stockholders' equity
|
$
|
72,004
|
|
|
$
|
70,563
|
|
|
Three Months Ended March 31,
|
||||||
(in millions, except share and per share amounts)
|
2018
|
|
2017
|
||||
Revenues
|
|
|
|
||||
Branded postpaid revenues
|
$
|
5,070
|
|
|
$
|
4,725
|
|
Branded prepaid revenues
|
2,402
|
|
|
2,299
|
|
||
Wholesale revenues
|
266
|
|
|
270
|
|
||
Roaming and other service revenues
|
68
|
|
|
35
|
|
||
Total service revenues
|
7,806
|
|
|
7,329
|
|
||
Equipment revenues
|
2,353
|
|
|
2,043
|
|
||
Other revenues
|
296
|
|
|
241
|
|
||
Total revenues
|
10,455
|
|
|
9,613
|
|
||
Operating expenses
|
|
|
|
||||
Cost of services, exclusive of depreciation and amortization shown separately below
|
1,589
|
|
|
1,408
|
|
||
Cost of equipment sales
|
2,845
|
|
|
2,686
|
|
||
Selling, general and administrative
|
3,164
|
|
|
2,955
|
|
||
Depreciation and amortization
|
1,575
|
|
|
1,564
|
|
||
Gains on disposal of spectrum licenses
|
—
|
|
|
(37
|
)
|
||
Total operating expense
|
9,173
|
|
|
8,576
|
|
||
Operating income
|
1,282
|
|
|
1,037
|
|
||
Other income (expense)
|
|
|
|
||||
Interest expense
|
(251
|
)
|
|
(339
|
)
|
||
Interest expense to affiliates
|
(166
|
)
|
|
(100
|
)
|
||
Interest income
|
6
|
|
|
7
|
|
||
Other income, net
|
10
|
|
|
2
|
|
||
Total other expense, net
|
(401
|
)
|
|
(430
|
)
|
||
Income before income taxes
|
881
|
|
|
607
|
|
||
Income tax (expense) benefit
|
(210
|
)
|
|
91
|
|
||
Net income
|
671
|
|
|
698
|
|
||
Dividends on preferred stock
|
—
|
|
|
(14
|
)
|
||
Net income attributable to common stockholders
|
$
|
671
|
|
|
$
|
684
|
|
|
|
|
|
||||
Net income
|
$
|
671
|
|
|
$
|
698
|
|
Other comprehensive (loss) income, net of tax
|
|
|
|
||||
Unrealized (loss) gain on available-for-sale securities, net of tax effect of $(1) and $1
|
(3
|
)
|
|
1
|
|
||
Other comprehensive (loss) income
|
(3
|
)
|
|
1
|
|
||
Total comprehensive income
|
$
|
668
|
|
|
$
|
699
|
|
Earnings per share
|
|
|
|
||||
Basic
|
$
|
0.78
|
|
|
$
|
0.83
|
|
Diluted
|
$
|
0.78
|
|
|
$
|
0.80
|
|
Weighted average shares outstanding
|
|
|
|
||||
Basic
|
855,222,664
|
|
|
827,723,034
|
|
||
Diluted
|
862,244,084
|
|
|
869,395,984
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
2018
|
|
2017
|
||||
Operating activities
|
|
|
|
||||
Net income
|
$
|
671
|
|
|
$
|
698
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
||||
Depreciation and amortization
|
1,575
|
|
|
1,564
|
|
||
Stock-based compensation expense
|
97
|
|
|
67
|
|
||
Deferred income tax expense (benefit)
|
206
|
|
|
(97
|
)
|
||
Bad debt expense
|
54
|
|
|
93
|
|
||
Losses from sales of receivables
|
52
|
|
|
95
|
|
||
Deferred rent expense
|
4
|
|
|
20
|
|
||
Gains on disposal of spectrum licenses
|
—
|
|
|
(37
|
)
|
||
Changes in operating assets and liabilities
|
|
|
|
||||
Accounts receivable
|
(873
|
)
|
|
(1,025
|
)
|
||
Equipment installment plan receivables
|
(222
|
)
|
|
(209
|
)
|
||
Inventories
|
33
|
|
|
44
|
|
||
Other current and long-term assets
|
132
|
|
|
(11
|
)
|
||
Accounts payable and accrued liabilities
|
(1,028
|
)
|
|
(651
|
)
|
||
Other current and long-term liabilities
|
45
|
|
|
45
|
|
||
Other, net
|
24
|
|
|
12
|
|
||
Net cash provided by operating activities
|
770
|
|
|
608
|
|
||
Investing activities
|
|
|
|
||||
Purchases of property and equipment, including capitalized interest of $43 and $48
|
(1,366
|
)
|
|
(1,528
|
)
|
||
Purchases of spectrum licenses and other intangible assets, including deposits
|
(51
|
)
|
|
(14
|
)
|
||
Proceeds related to beneficial interests in securitization transactions
|
1,295
|
|
|
1,134
|
|
||
Acquisition of companies, net of cash acquired
|
(333
|
)
|
|
—
|
|
||
Other, net
|
(7
|
)
|
|
(8
|
)
|
||
Net cash used in investing activities
|
(462
|
)
|
|
(416
|
)
|
||
Financing activities
|
|
|
|
||||
Proceeds from issuance of long-term debt
|
2,494
|
|
|
5,495
|
|
||
Proceeds from borrowing on revolving credit facility
|
2,170
|
|
|
—
|
|
||
Repayments of revolving credit facility
|
(1,725
|
)
|
|
—
|
|
||
Repayments of capital lease obligations
|
(172
|
)
|
|
(90
|
)
|
||
Repayments of long-term debt
|
(999
|
)
|
|
(3,480
|
)
|
||
Repurchases of common stock
|
(666
|
)
|
|
—
|
|
||
Tax withholdings on share-based awards
|
(74
|
)
|
|
(92
|
)
|
||
Dividends on preferred stock
|
—
|
|
|
(14
|
)
|
||
Other, net
|
(28
|
)
|
|
(10
|
)
|
||
Net cash provided by financing activities
|
1,000
|
|
|
1,809
|
|
||
Change in cash and cash equivalents
|
1,308
|
|
|
2,001
|
|
||
Cash and cash equivalents
|
|
|
|
||||
Beginning of period
|
1,219
|
|
|
5,500
|
|
||
End of period
|
$
|
2,527
|
|
|
$
|
7,501
|
|
Supplemental disclosure of cash flow information
|
|
|
|
||||
Interest payments, net of amounts capitalized
|
$
|
378
|
|
|
$
|
495
|
|
Income tax payments
|
1
|
|
|
15
|
|
||
Noncash beneficial interest obtained in exchange for securitized receivables
|
1,128
|
|
|
1,016
|
|
||
Noncash investing and financing activities
|
|
|
|
||||
Changes in accounts payable for purchases of property and equipment
|
$
|
(364
|
)
|
|
$
|
(325
|
)
|
Leased devices transferred from inventory to property and equipment
|
304
|
|
|
243
|
|
||
Returned leased devices transferred from property and equipment to inventory
|
(82
|
)
|
|
(197
|
)
|
||
Issuance of short-term debt for financing of property and equipment
|
237
|
|
|
288
|
|
||
Assets acquired under capital lease obligations
|
142
|
|
|
284
|
|
•
|
For transactions where we recognize a significant financing component, judgment is required to determine the discount rate. For equipment installment plan (“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.
|
•
|
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. Expected device returns are estimated based on historical experience.
|
•
|
Promotional 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 bill credits result in a substantive termination penalty, and determining the term over which a substantive termination penalty exists, may require significant judgment.
|
•
|
For capitalized contract costs, determining the amortization period as well as assessing the indicators of impairment may require significant judgment.
|
•
|
The determination of the standalone selling price for contracts that involve more than one product or service (or performance obligation) may require significant judgment.
|
•
|
The identification of distinct performance obligations within our service plans may require significant judgment.
|
|
January 1, 2018
|
||||||||||
(in millions)
|
Beginning Balance
|
|
Cumulative Effect Adjustment
|
|
Beginning Balance, As Adjusted
|
||||||
Assets
|
|
|
|
|
|
||||||
Other current assets
|
$
|
1,903
|
|
|
$
|
140
|
|
|
$
|
2,043
|
|
Other assets
|
912
|
|
|
150
|
|
|
1,062
|
|
|||
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||||||
Deferred revenue
|
$
|
779
|
|
|
$
|
4
|
|
|
$
|
783
|
|
Deferred tax liabilities
|
3,537
|
|
|
73
|
|
|
3,610
|
|
|||
Accumulated deficit
|
(16,074
|
)
|
|
213
|
|
|
(15,861
|
)
|
•
|
A deferred contract cost asset of
$150 million
was recorded at transition in Other assets in our Condensed Consolidated Balance Sheets for incremental contract acquisition costs paid on open contracts, which consists primarily of commissions paid to acquire branded postpaid service contracts; and
|
•
|
A contract asset of
$140 million
was recorded at transition in Other current assets in our Condensed Consolidated Balance Sheets primarily for contracts with promotional bill credits offered to customers on equipment sales that are paid over time and are contingent on the customer maintaining a service contract.
|
|
Three Months Ended March 31, 2018
|
||||||||||
(in millions, except per share amounts)
|
Previous Revenue Standard
|
|
New Revenue Standard
|
|
Change
|
||||||
Revenues
|
|
|
|
|
|
||||||
Branded postpaid revenues
|
$
|
5,099
|
|
|
$
|
5,070
|
|
|
$
|
(29
|
)
|
Branded prepaid revenues
|
2,403
|
|
|
2,402
|
|
|
(1
|
)
|
|||
Wholesale revenues
|
266
|
|
|
266
|
|
|
—
|
|
|||
Roaming and other service revenues
|
68
|
|
|
68
|
|
|
—
|
|
|||
Total service revenues
|
7,836
|
|
|
7,806
|
|
|
(30
|
)
|
|||
Equipment revenues
|
2,276
|
|
|
2,353
|
|
|
77
|
|
|||
Other revenues
|
296
|
|
|
296
|
|
|
—
|
|
|||
Total revenues
|
10,408
|
|
|
10,455
|
|
|
47
|
|
|||
Operating expenses
|
|
|
|
|
|
||||||
Cost of services, exclusive of depreciation and amortization shown separately below
|
1,589
|
|
|
1,589
|
|
|
—
|
|
|||
Cost of equipment sales
|
2,845
|
|
|
2,845
|
|
|
—
|
|
|||
Selling, general and administrative
|
3,212
|
|
|
3,164
|
|
|
(48
|
)
|
|||
Depreciation and amortization
|
1,575
|
|
|
1,575
|
|
|
—
|
|
|||
Total operating expenses
|
9,221
|
|
|
9,173
|
|
|
(48
|
)
|
|||
Operating income
|
1,187
|
|
|
1,282
|
|
|
95
|
|
|||
Total other expense, net
|
(401
|
)
|
|
(401
|
)
|
|
—
|
|
|||
Income before income taxes
|
786
|
|
|
881
|
|
|
95
|
|
|||
Income tax expense
|
(186
|
)
|
|
(210
|
)
|
|
(24
|
)
|
|||
Net income
|
$
|
600
|
|
|
$
|
671
|
|
|
$
|
71
|
|
Earnings per share
|
|
|
|
|
|
||||||
Basic earnings per share
|
$
|
0.70
|
|
|
$
|
0.78
|
|
|
$
|
0.08
|
|
Diluted earnings per share
|
$
|
0.70
|
|
|
$
|
0.78
|
|
|
$
|
0.08
|
|
|
March 31, 2018
|
||||||||||
(in millions)
|
Previous Revenue Standard
|
|
New Revenue Standard
|
|
Change
|
||||||
Assets
|
|
|
|
|
|
||||||
Other current assets
|
$
|
1,684
|
|
|
$
|
1,788
|
|
|
$
|
104
|
|
Other assets
|
866
|
|
|
1,157
|
|
|
291
|
|
|||
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||||||
Deferred revenue
|
$
|
777
|
|
|
$
|
791
|
|
|
$
|
14
|
|
Deferred tax liabilities
|
3,716
|
|
|
3,813
|
|
|
97
|
|
|||
Accumulated deficit
|
(15,463
|
)
|
|
(15,179
|
)
|
|
284
|
|
•
|
Under the new revenue standard, certain commissions paid to dealers previously recognized as a reduction to Equipment revenues in our Condensed Consolidated Statements of Comprehensive Income are now recorded as commission costs in Selling, general and administrative expense.
|
•
|
Contract costs capitalized for new contracts will accumulate in Other assets in our Condensed Consolidated Balance Sheets during 2018. As a result, there will be a net benefit to Operating income in our Condensed Consolidated Statements of Comprehensive Income during 2018 as capitalization of costs exceed amortization. As capitalized costs amortize into expense over time, the accretive benefit to Operating income anticipated in 2018 is expected to moderate in 2019 and normalize in 2020.
|
•
|
For contracts with promotional bill credits that are contingent on the customer maintaining a service contract that result in an extended service contract, a contract asset is recorded when control of the equipment transfers to the customer and is subsequently recognized as a reduction to Total service revenues in our Condensed Consolidated Statements of Comprehensive Income over the extended contract term.
|
•
|
On January 1, 2018, we closed on our previously announced Unit Purchase Agreement to acquire the remaining equity in Iowa Wireless Services, LLC (“IWS”), a
54%
owned unconsolidated subsidiary, for a purchase price of
$25 million
.
|
•
|
On January 22, 2018, we completed our acquisition of television innovator Layer3 TV, Inc. (“Layer3 TV”) for cash consideration of
$318 million
, subject to customary working capital and other post-closing adjustments.
|
(in millions)
|
January 22,
2018 |
||
Assets acquired
|
|
||
Cash and cash equivalents
|
$
|
2
|
|
Other current assets
|
14
|
|
|
Property and equipment, net
|
11
|
|
|
Intangible assets
|
100
|
|
|
Goodwill
|
218
|
|
|
Deferred tax assets
|
2
|
|
|
Total assets acquired
|
$
|
347
|
|
Liabilities assumed
|
|
||
Accounts payable and accrued liabilities
|
$
|
27
|
|
Short-term debt
|
2
|
|
|
Total liabilities assumed
|
29
|
|
|
Total consideration transferred
|
$
|
318
|
|
(in millions)
|
January 1,
2018 |
||
Consideration transferred:
|
|
||
Cash paid
|
$
|
25
|
|
Previously held equity interest:
|
|
||
Acquisition date fair value of previously held equity interest
|
56
|
|
|
Bargain purchase gain
|
25
|
|
|
Net assets acquired
|
$
|
106
|
|
(in millions)
|
January 1,
2018 |
||
Assets acquired
|
|
||
Current assets
|
|
||
Cash and cash equivalents
|
$
|
3
|
|
Accounts receivables, net
|
6
|
|
|
Equipment installment plan receivables, net
|
3
|
|
|
Inventories
|
1
|
|
|
Other current assets
|
2
|
|
|
Total current assets
|
15
|
|
|
Property and equipment, net
|
36
|
|
|
Spectrum licenses
|
87
|
|
|
Total assets acquired
|
$
|
138
|
|
Liabilities assumed
|
|
||
Accounts payable and accrued liabilities
|
$
|
6
|
|
Deferred revenue
|
2
|
|
|
Total current liabilities
|
8
|
|
|
Deferred tax liabilities
|
17
|
|
|
Other long-term liabilities
|
7
|
|
|
Total long-term liabilities
|
24
|
|
|
Net assets acquired
|
$
|
106
|
|
(in millions)
|
March 31,
2018 |
|
December 31,
2017 |
||||
EIP receivables, gross
|
$
|
3,896
|
|
|
$
|
3,960
|
|
Unamortized imputed discount
|
(267
|
)
|
|
(264
|
)
|
||
EIP receivables, net of unamortized imputed discount
|
3,629
|
|
|
3,696
|
|
||
Allowance for credit losses
|
(114
|
)
|
|
(132
|
)
|
||
EIP receivables, net
|
$
|
3,515
|
|
|
$
|
3,564
|
|
|
|
|
|
||||
Classified on the balance sheet as:
|
|
|
|
||||
Equipment installment plan receivables, net
|
$
|
2,281
|
|
|
$
|
2,290
|
|
Equipment installment plan receivables due after one year, net
|
1,234
|
|
|
1,274
|
|
||
EIP receivables, net
|
$
|
3,515
|
|
|
$
|
3,564
|
|
|
March 31, 2018
|
|
March 31, 2017
|
||||||||||||||||||||
(in millions)
|
Accounts Receivable Allowance
|
|
EIP Receivables Allowance
|
|
Total
|
|
Accounts Receivable Allowance
|
|
EIP Receivables Allowance
|
|
Total
|
||||||||||||
Allowance for credit losses and imputed discount, beginning of period
|
$
|
86
|
|
|
$
|
396
|
|
|
$
|
482
|
|
|
$
|
102
|
|
|
$
|
316
|
|
|
$
|
418
|
|
Bad debt expense
|
4
|
|
|
50
|
|
|
54
|
|
|
37
|
|
|
56
|
|
|
93
|
|
||||||
Write-offs, net of recoveries
|
(14
|
)
|
|
(67
|
)
|
|
(81
|
)
|
|
(39
|
)
|
|
(75
|
)
|
|
(114
|
)
|
||||||
Change in imputed discount on short-term and long-term EIP receivables
|
N/A
|
|
|
53
|
|
|
53
|
|
|
N/A
|
|
|
48
|
|
|
48
|
|
||||||
Impact on the imputed discount from sales of EIP receivables
|
N/A
|
|
|
(51
|
)
|
|
(51
|
)
|
|
N/A
|
|
|
(41
|
)
|
|
(41
|
)
|
||||||
Allowance for credit losses and imputed discount, end of period
|
$
|
76
|
|
|
$
|
381
|
|
|
$
|
457
|
|
|
$
|
100
|
|
|
$
|
304
|
|
|
$
|
404
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
(in millions)
|
Prime
|
|
Subprime
|
|
Total EIP Receivables, gross
|
|
Prime
|
|
Subprime
|
|
Total EIP Receivables, gross
|
||||||||||||
Current - 30 days past due
|
$
|
1,648
|
|
|
$
|
2,168
|
|
|
$
|
3,816
|
|
|
$
|
1,727
|
|
|
$
|
2,133
|
|
|
$
|
3,860
|
|
31 - 60 days past due
|
14
|
|
|
24
|
|
|
38
|
|
|
17
|
|
|
29
|
|
|
46
|
|
||||||
61 - 90 days past due
|
5
|
|
|
13
|
|
|
18
|
|
|
6
|
|
|
16
|
|
|
22
|
|
||||||
More than 90 days past due
|
7
|
|
|
17
|
|
|
24
|
|
|
8
|
|
|
24
|
|
|
32
|
|
||||||
Total receivables, gross
|
$
|
1,674
|
|
|
$
|
2,222
|
|
|
$
|
3,896
|
|
|
$
|
1,758
|
|
|
$
|
2,202
|
|
|
$
|
3,960
|
|
(in millions)
|
March 31,
2018 |
|
December 31,
2017 |
||||
Other current assets
|
$
|
266
|
|
|
$
|
236
|
|
Accounts payable and accrued liabilities
|
—
|
|
|
25
|
|
||
Other current liabilities
|
118
|
|
|
180
|
|
(in millions)
|
March 31,
2018 |
|
December 31,
2017 |
||||
Other current assets
|
$
|
370
|
|
|
$
|
403
|
|
Other assets
|
93
|
|
|
109
|
|
||
Other long-term liabilities
|
10
|
|
|
3
|
|
(in millions)
|
March 31,
2018 |
|
December 31,
2017 |
||||
Derecognized net service receivables and EIP receivables
|
$
|
2,663
|
|
|
$
|
2,725
|
|
Other current assets
|
636
|
|
|
639
|
|
||
of which, deferred purchase price
|
635
|
|
|
636
|
|
||
Other long-term assets
|
93
|
|
|
109
|
|
||
of which, deferred purchase price
|
93
|
|
|
109
|
|
||
Accounts payable and accrued liabilities
|
—
|
|
|
25
|
|
||
Other current liabilities
|
118
|
|
|
180
|
|
||
Other long-term liabilities
|
10
|
|
|
3
|
|
||
Net cash proceeds since inception
|
1,908
|
|
|
2,058
|
|
||
Of which:
|
|
|
|
||||
Change in net cash proceeds during the year-to-date period
|
(150
|
)
|
|
28
|
|
||
Net cash proceeds funded by reinvested collections
|
2,058
|
|
|
2,030
|
|
(in millions)
|
|
||
Historical goodwill
|
$
|
12,449
|
|
Accumulated impairment losses at December 31, 2017
|
(10,766
|
)
|
|
Balance as of December 31, 2017
|
1,683
|
|
|
Goodwill from acquisition of Layer3 TV
|
218
|
|
|
Balance as of March 31, 2018
|
$
|
1,901
|
|
Accumulated impairment losses at March 31, 2018
|
$
|
(10,766
|
)
|
(in millions)
|
Spectrum Licenses
|
||
Balance at December 31, 2017
|
$
|
35,366
|
|
Spectrum license acquisitions
|
125
|
|
|
Costs to clear spectrum
|
13
|
|
|
Balance at March 31, 2018
|
$
|
35,504
|
|
•
|
We recorded spectrum licenses received as part of our acquisition of the remaining equity interest in IWS at their estimated fair value of approximately
$87 million
. See
Note 3 - Business Combinations
for further information.
|
•
|
We closed on multiple spectrum purchase agreements in which we acquired total spectrum licenses of approximately
$38 million
for cash consideration.
No
gains or losses were recognized on the spectrum license purchases
.
|
|
Level within the Fair Value Hierarchy
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
(in millions)
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Deferred purchase price assets
|
3
|
|
$
|
728
|
|
|
$
|
728
|
|
|
$
|
745
|
|
|
$
|
745
|
|
|
Level within the Fair Value Hierarchy
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
(in millions)
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||
Senior Notes to third parties
|
1
|
|
$
|
13,402
|
|
|
$
|
13,732
|
|
|
$
|
11,910
|
|
|
$
|
12,540
|
|
Senior Notes to affiliates
|
2
|
|
7,486
|
|
|
7,659
|
|
|
7,486
|
|
|
7,852
|
|
||||
Incremental Term Loan Facility to affiliates
|
2
|
|
4,000
|
|
|
4,000
|
|
|
4,000
|
|
|
4,020
|
|
||||
Senior Reset Notes to affiliates
|
2
|
|
3,100
|
|
|
3,223
|
|
|
3,100
|
|
|
3,260
|
|
(in millions)
|
December 31,
2017 |
|
Issuances and Borrowings
(1)
|
|
Note Redemptions
(1)
|
|
Repayments
|
|
Reclassifications
(1)
|
|
Other
(2)
|
|
March 31,
2018 |
||||||||||||||
Short-term debt
|
$
|
1,612
|
|
|
$
|
—
|
|
|
$
|
(999
|
)
|
|
$
|
—
|
|
|
$
|
2,425
|
|
|
$
|
282
|
|
|
$
|
3,320
|
|
Long-term debt
|
12,121
|
|
|
2,494
|
|
|
—
|
|
|
—
|
|
|
(2,425
|
)
|
|
(63
|
)
|
|
12,127
|
|
|||||||
Total debt to third parties
|
13,733
|
|
|
2,494
|
|
|
(999
|
)
|
|
—
|
|
|
—
|
|
|
219
|
|
|
15,447
|
|
|||||||
Short-term debt to affiliates
|
—
|
|
|
2,170
|
|
|
—
|
|
|
(1,725
|
)
|
|
—
|
|
|
—
|
|
|
445
|
|
|||||||
Long-term debt to affiliates
|
14,586
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,586
|
|
|||||||
Total debt
|
$
|
28,319
|
|
|
$
|
4,664
|
|
|
$
|
(999
|
)
|
|
$
|
(1,725
|
)
|
|
$
|
—
|
|
|
$
|
219
|
|
|
$
|
30,478
|
|
(1)
|
Issuances and borrowings, note redemptions, and reclassifications are recorded net of related issuance costs, discounts and premiums. Issuances and borrowings and repayments for Short-term debt to affiliates represent net outstanding borrowings and net repayments on our senior secured revolving credit facility.
|
(2)
|
Other includes:
$246 million
of issuances of short-term debt related to vendor financing arrangements, of which
$237 million
related to financing of property and equipment. During the
three months ended
March 31, 2018
, we did not have any repayments under the vendor financing arrangements. Vendor financing arrangements are included in Short-term debt within Total current liabilities in our Condensed Consolidated Balance Sheets. Other also includes capital leases and the amortization of discounts and premiums. Capital lease liabilities totaled
$1.8 billion
at both
March 31, 2018
and
December 31, 2017
.
|
(in millions)
|
Principal Issuances
|
|
Issuance Costs
|
|
Net Proceeds from Issuance of Long-Term Debt
|
||||||
4.500% Senior Notes due 2026
|
$
|
1,000
|
|
|
$
|
2
|
|
|
$
|
998
|
|
4.750% Senior Notes due 2028
|
1,500
|
|
|
4
|
|
|
1,496
|
|
|||
Total of Senior Notes issued
|
$
|
2,500
|
|
|
$
|
6
|
|
|
$
|
2,494
|
|
(in millions)
|
Principal Amount
|
|
Write-off of Premiums, Discounts and Issuance Costs
(1)
|
|
Call Penalties
(1) (2)
|
|
Redemption
Date |
|
Redemption Price
|
|||||||
6.125% Senior Notes due 2022
|
$
|
1,000
|
|
|
$
|
1
|
|
|
$
|
31
|
|
|
January 15, 2018
|
|
103.063
|
%
|
(1)
|
Write-off of premiums, discounts, issuance costs and call penalties are included in
Other income, net
in our
Condensed Consolidated Statements of Comprehensive Income
. Write-off of premiums, discounts and issuance costs are included in
Other, net
within
Net cash provided by operating activities
in our
Condensed Consolidated Statements of Cash Flows
.
|
(2)
|
The call penalty is the excess paid over the principal amount. Call penalties are included within
Net cash provided by financing activities
in our
Condensed Consolidated Statements of Cash Flows
.
|
•
|
Branded postpaid customers generally include customers that are qualified to pay after receiving wireless communication services utilizing phones, mobile broadband devices (including tablets), DIGITS or other devices;
|
•
|
Branded prepaid customers generally include customers who pay for wireless communication services in advance. Our branded prepaid customers include customers of T-Mobile and MetroPCS; 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.
|
(in millions)
|
Contract Assets Included in Other Current Assets
|
|
Contract Liabilities Included in Deferred Revenue
|
||||
Balance as of January 1, 2018
|
$
|
140
|
|
|
$
|
718
|
|
Balance as of March 31, 2018
|
104
|
|
|
718
|
|
||
Change
|
(36
|
)
|
|
—
|
|
|
Three Months Ended March 31,
|
||
(in millions)
|
2018
|
||
Amounts included in the beginning of period contract liability balance
|
$
|
528
|
|
Amounts associated with performance obligations satisfied in previous periods
|
—
|
|
(in millions)
|
At March 31, 2018
|
||
Total deferred incremental costs to obtain contracts
|
$
|
290
|
|
|
Three Months Ended March 31,
|
||||||
(in millions, except shares and per share amounts)
|
2018
|
|
2017
|
||||
Net income
|
$
|
671
|
|
|
$
|
698
|
|
Less: Dividends on mandatory convertible preferred stock
|
—
|
|
|
(14
|
)
|
||
Net income attributable to common stockholders - basic
|
671
|
|
|
684
|
|
||
Add: Dividends related to mandatory convertible preferred stock
|
—
|
|
|
14
|
|
||
Net income attributable to common stockholders - diluted
|
$
|
671
|
|
|
$
|
698
|
|
|
|
|
|
||||
Weighted average shares outstanding - basic
|
855,222,664
|
|
|
827,723,034
|
|
||
Effect of dilutive securities:
|
|
|
|
||||
Outstanding stock options and unvested stock awards
|
7,021,420
|
|
|
9,434,950
|
|
||
Mandatory convertible preferred stock
|
—
|
|
|
32,238,000
|
|
||
Weighted average shares outstanding - diluted
|
862,244,084
|
|
|
869,395,984
|
|
||
|
|
|
|
||||
Earnings per share - basic
|
$
|
0.78
|
|
|
$
|
0.83
|
|
Earnings per share - diluted
|
$
|
0.78
|
|
|
$
|
0.80
|
|
|
|
|
|
||||
Potentially dilutive securities:
|
|
|
|
||||
Outstanding stock options and unvested stock awards
|
67,580
|
|
|
9,993
|
|
(in millions)
|
Parent
|
|
Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating and Eliminating Adjustments
|
|
Consolidated
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2,395
|
|
|
$
|
130
|
|
|
$
|
—
|
|
|
$
|
2,527
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
1,469
|
|
|
220
|
|
|
—
|
|
|
1,689
|
|
||||||
Equipment installment plan receivables, net
|
—
|
|
|
—
|
|
|
2,281
|
|
|
—
|
|
|
—
|
|
|
2,281
|
|
||||||
Accounts receivable from affiliates
|
—
|
|
|
5
|
|
|
13
|
|
|
—
|
|
|
(5
|
)
|
|
13
|
|
||||||
Inventories
|
—
|
|
|
—
|
|
|
1,311
|
|
|
—
|
|
|
—
|
|
|
1,311
|
|
||||||
Other current assets
|
—
|
|
|
—
|
|
|
1,144
|
|
|
644
|
|
|
—
|
|
|
1,788
|
|
||||||
Total current assets
|
1
|
|
|
6
|
|
|
8,613
|
|
|
994
|
|
|
(5
|
)
|
|
9,609
|
|
||||||
Property and equipment, net
(1)
|
—
|
|
|
—
|
|
|
22,008
|
|
|
300
|
|
|
—
|
|
|
22,308
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
1,683
|
|
|
218
|
|
|
—
|
|
|
1,901
|
|
||||||
Spectrum licenses
|
—
|
|
|
—
|
|
|
35,504
|
|
|
—
|
|
|
—
|
|
|
35,504
|
|
||||||
Other intangible assets, net
|
—
|
|
|
—
|
|
|
194
|
|
|
97
|
|
|
—
|
|
|
291
|
|
||||||
Investments in subsidiaries, net
|
23,426
|
|
|
42,581
|
|
|
—
|
|
|
—
|
|
|
(66,007
|
)
|
|
—
|
|
||||||
Intercompany receivables and note receivables
|
—
|
|
|
10,039
|
|
|
—
|
|
|
—
|
|
|
(10,039
|
)
|
|
—
|
|
||||||
Equipment installment plan receivables due after one year, net
|
—
|
|
|
—
|
|
|
1,234
|
|
|
—
|
|
|
—
|
|
|
1,234
|
|
||||||
Other assets
|
—
|
|
|
3
|
|
|
1,074
|
|
|
225
|
|
|
(145
|
)
|
|
1,157
|
|
||||||
Total assets
|
$
|
23,427
|
|
|
$
|
52,629
|
|
|
$
|
70,310
|
|
|
$
|
1,834
|
|
|
$
|
(76,196
|
)
|
|
$
|
72,004
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accounts payable and accrued liabilities
|
$
|
—
|
|
|
$
|
211
|
|
|
$
|
6,679
|
|
|
$
|
267
|
|
|
$
|
—
|
|
|
$
|
7,157
|
|
Payables to affiliates
|
—
|
|
|
256
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
291
|
|
||||||
Short-term debt
|
—
|
|
|
2,670
|
|
|
648
|
|
|
2
|
|
|
—
|
|
|
3,320
|
|
||||||
Short-term debt to affiliates
|
—
|
|
|
445
|
|
|
5
|
|
|
—
|
|
|
(5
|
)
|
|
445
|
|
||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
791
|
|
|
—
|
|
|
—
|
|
|
791
|
|
||||||
Other current liabilities
|
17
|
|
|
18
|
|
|
176
|
|
|
142
|
|
|
—
|
|
|
353
|
|
||||||
Total current liabilities
|
17
|
|
|
3,600
|
|
|
8,334
|
|
|
411
|
|
|
(5
|
)
|
|
12,357
|
|
||||||
Long-term debt
|
—
|
|
|
10,978
|
|
|
1,149
|
|
|
—
|
|
|
—
|
|
|
12,127
|
|
||||||
Long-term debt to affiliates
|
—
|
|
|
14,586
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,586
|
|
||||||
Tower obligations
(1)
|
—
|
|
|
—
|
|
|
391
|
|
|
2,191
|
|
|
—
|
|
|
2,582
|
|
||||||
Deferred tax liabilities
|
—
|
|
|
—
|
|
|
3,958
|
|
|
—
|
|
|
(145
|
)
|
|
3,813
|
|
||||||
Deferred rent expense
|
—
|
|
|
—
|
|
|
2,730
|
|
|
—
|
|
|
—
|
|
|
2,730
|
|
||||||
Negative carrying value of subsidiaries, net
|
—
|
|
|
—
|
|
|
590
|
|
|
—
|
|
|
(590
|
)
|
|
—
|
|
||||||
Intercompany payables and debt
|
534
|
|
|
—
|
|
|
9,244
|
|
|
261
|
|
|
(10,039
|
)
|
|
—
|
|
||||||
Other long-term liabilities
|
—
|
|
|
39
|
|
|
884
|
|
|
10
|
|
|
—
|
|
|
933
|
|
||||||
Total long-term liabilities
|
534
|
|
|
25,603
|
|
|
18,946
|
|
|
2,462
|
|
|
(10,774
|
)
|
|
36,771
|
|
||||||
Total stockholders' equity (deficit)
|
22,876
|
|
|
23,426
|
|
|
43,030
|
|
|
(1,039
|
)
|
|
(65,417
|
)
|
|
22,876
|
|
||||||
Total liabilities and stockholders' equity
|
$
|
23,427
|
|
|
$
|
52,629
|
|
|
$
|
70,310
|
|
|
$
|
1,834
|
|
|
$
|
(76,196
|
)
|
|
$
|
72,004
|
|
(1)
|
Assets and liabilities for Non-Guarantor Subsidiaries are primarily included in VIEs related to the 2012 Tower Transaction. See
Note 8 – Tower Obligations
included in our Annual Report on Form 10-K for the year ended December 31, 2017 for further information.
|
(in millions)
|
Parent
|
|
Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating and Eliminating Adjustments
|
|
Consolidated
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
74
|
|
|
$
|
1
|
|
|
$
|
1,086
|
|
|
$
|
58
|
|
|
$
|
—
|
|
|
$
|
1,219
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
1,659
|
|
|
256
|
|
|
—
|
|
|
1,915
|
|
||||||
Equipment installment plan receivables, net
|
—
|
|
|
—
|
|
|
2,290
|
|
|
—
|
|
|
—
|
|
|
2,290
|
|
||||||
Accounts receivable from affiliates
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
22
|
|
||||||
Inventories
|
—
|
|
|
—
|
|
|
1,566
|
|
|
—
|
|
|
—
|
|
|
1,566
|
|
||||||
Other current assets
|
—
|
|
|
—
|
|
|
1,275
|
|
|
628
|
|
|
—
|
|
|
1,903
|
|
||||||
Total current assets
|
74
|
|
|
1
|
|
|
7,898
|
|
|
942
|
|
|
—
|
|
|
8,915
|
|
||||||
Property and equipment, net
(1)
|
—
|
|
|
—
|
|
|
21,890
|
|
|
306
|
|
|
—
|
|
|
22,196
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
1,683
|
|
|
—
|
|
|
—
|
|
|
1,683
|
|
||||||
Spectrum licenses
|
—
|
|
|
—
|
|
|
35,366
|
|
|
—
|
|
|
—
|
|
|
35,366
|
|
||||||
Other intangible assets, net
|
—
|
|
|
—
|
|
|
217
|
|
|
—
|
|
|
—
|
|
|
217
|
|
||||||
Investments in subsidiaries, net
|
22,534
|
|
|
40,988
|
|
|
—
|
|
|
—
|
|
|
(63,522
|
)
|
|
—
|
|
||||||
Intercompany receivables and note receivables
|
—
|
|
|
8,503
|
|
|
—
|
|
|
—
|
|
|
(8,503
|
)
|
|
—
|
|
||||||
Equipment installment plan receivables due after one year, net
|
—
|
|
|
—
|
|
|
1,274
|
|
|
—
|
|
|
—
|
|
|
1,274
|
|
||||||
Other assets
|
—
|
|
|
2
|
|
|
814
|
|
|
236
|
|
|
(140
|
)
|
|
912
|
|
||||||
Total assets
|
$
|
22,608
|
|
|
$
|
49,494
|
|
|
$
|
69,142
|
|
|
$
|
1,484
|
|
|
$
|
(72,165
|
)
|
|
$
|
70,563
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accounts payable and accrued liabilities
|
$
|
—
|
|
|
$
|
253
|
|
|
$
|
8,014
|
|
|
$
|
261
|
|
|
$
|
—
|
|
|
$
|
8,528
|
|
Payables to affiliates
|
—
|
|
|
146
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
182
|
|
||||||
Short-term debt
|
—
|
|
|
999
|
|
|
613
|
|
|
—
|
|
|
—
|
|
|
1,612
|
|
||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
779
|
|
|
—
|
|
|
—
|
|
|
779
|
|
||||||
Other current liabilities
|
17
|
|
|
—
|
|
|
192
|
|
|
205
|
|
|
—
|
|
|
414
|
|
||||||
Total current liabilities
|
17
|
|
|
1,398
|
|
|
9,634
|
|
|
466
|
|
|
—
|
|
|
11,515
|
|
||||||
Long-term debt
|
—
|
|
|
10,911
|
|
|
1,210
|
|
|
—
|
|
|
—
|
|
|
12,121
|
|
||||||
Long-term debt to affiliates
|
—
|
|
|
14,586
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,586
|
|
||||||
Tower obligations
(1)
|
—
|
|
|
—
|
|
|
392
|
|
|
2,198
|
|
|
—
|
|
|
2,590
|
|
||||||
Deferred tax liabilities
|
—
|
|
|
—
|
|
|
3,677
|
|
|
—
|
|
|
(140
|
)
|
|
3,537
|
|
||||||
Deferred rent expense
|
—
|
|
|
—
|
|
|
2,720
|
|
|
—
|
|
|
—
|
|
|
2,720
|
|
||||||
Negative carrying value of subsidiaries, net
|
—
|
|
|
—
|
|
|
629
|
|
|
—
|
|
|
(629
|
)
|
|
—
|
|
||||||
Intercompany payables and debt
|
32
|
|
|
—
|
|
|
8,201
|
|
|
270
|
|
|
(8,503
|
)
|
|
—
|
|
||||||
Other long-term liabilities
|
—
|
|
|
65
|
|
|
866
|
|
|
4
|
|
|
—
|
|
|
935
|
|
||||||
Total long-term liabilities
|
32
|
|
|
25,562
|
|
|
17,695
|
|
|
2,472
|
|
|
(9,272
|
)
|
|
36,489
|
|
||||||
Total stockholders' equity (deficit)
|
22,559
|
|
|
22,534
|
|
|
41,813
|
|
|
(1,454
|
)
|
|
(62,893
|
)
|
|
22,559
|
|
||||||
Total liabilities and stockholders' equity
|
$
|
22,608
|
|
|
$
|
49,494
|
|
|
$
|
69,142
|
|
|
$
|
1,484
|
|
|
$
|
(72,165
|
)
|
|
$
|
70,563
|
|
(1)
|
Assets and liabilities for Non-Guarantor Subsidiaries are primarily included in VIEs related to the 2012 Tower Transaction. See
Note 8 – Tower Obligations
included in our Annual Report on Form 10-K for the year ended December 31, 2017, for further information.
|
(in millions)
|
Parent
|
|
Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating and Eliminating Adjustments
|
|
Consolidated
|
||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,487
|
|
|
$
|
540
|
|
|
$
|
(221
|
)
|
|
$
|
7,806
|
|
Equipment revenues
|
—
|
|
|
—
|
|
|
2,407
|
|
|
—
|
|
|
(54
|
)
|
|
2,353
|
|
||||||
Other revenues
|
—
|
|
|
1
|
|
|
249
|
|
|
55
|
|
|
(9
|
)
|
|
296
|
|
||||||
Total revenues
|
—
|
|
|
1
|
|
|
10,143
|
|
|
595
|
|
|
(284
|
)
|
|
10,455
|
|
||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of services, exclusive of depreciation and amortization shown separately below
|
—
|
|
|
—
|
|
|
1,580
|
|
|
9
|
|
|
—
|
|
|
1,589
|
|
||||||
Cost of equipment sales
|
—
|
|
|
—
|
|
|
2,664
|
|
|
236
|
|
|
(55
|
)
|
|
2,845
|
|
||||||
Selling, general and administrative
|
—
|
|
|
—
|
|
|
3,157
|
|
|
236
|
|
|
(229
|
)
|
|
3,164
|
|
||||||
Depreciation and amortization
|
—
|
|
|
—
|
|
|
1,554
|
|
|
21
|
|
|
—
|
|
|
1,575
|
|
||||||
Total operating expense
|
—
|
|
|
—
|
|
|
8,955
|
|
|
502
|
|
|
(284
|
)
|
|
9,173
|
|
||||||
Operating income
|
—
|
|
|
1
|
|
|
1,188
|
|
|
93
|
|
|
—
|
|
|
1,282
|
|
||||||
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
—
|
|
|
(174
|
)
|
|
(29
|
)
|
|
(48
|
)
|
|
—
|
|
|
(251
|
)
|
||||||
Interest expense to affiliates
|
—
|
|
|
(166
|
)
|
|
(5
|
)
|
|
—
|
|
|
5
|
|
|
(166
|
)
|
||||||
Interest income
|
—
|
|
|
6
|
|
|
5
|
|
|
—
|
|
|
(5
|
)
|
|
6
|
|
||||||
Other (expense) income, net
|
—
|
|
|
(32
|
)
|
|
42
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||||
Total other (expense) income, net
|
—
|
|
|
(366
|
)
|
|
13
|
|
|
(48
|
)
|
|
—
|
|
|
(401
|
)
|
||||||
Income (loss) before income taxes
|
—
|
|
|
(365
|
)
|
|
1,201
|
|
|
45
|
|
|
—
|
|
|
881
|
|
||||||
Income tax expense
|
—
|
|
|
—
|
|
|
(199
|
)
|
|
(11
|
)
|
|
—
|
|
|
(210
|
)
|
||||||
Earnings (loss) of subsidiaries
|
671
|
|
|
1,036
|
|
|
(6
|
)
|
|
—
|
|
|
(1,701
|
)
|
|
—
|
|
||||||
Net income
|
671
|
|
|
671
|
|
|
996
|
|
|
34
|
|
|
(1,701
|
)
|
|
671
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net Income
|
$
|
671
|
|
|
$
|
671
|
|
|
$
|
996
|
|
|
$
|
34
|
|
|
$
|
(1,701
|
)
|
|
$
|
671
|
|
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other comprehensive loss, net of tax
|
(3
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|
—
|
|
|
6
|
|
|
(3
|
)
|
||||||
Total comprehensive income
|
$
|
668
|
|
|
$
|
668
|
|
|
$
|
993
|
|
|
$
|
34
|
|
|
$
|
(1,695
|
)
|
|
$
|
668
|
|
(in millions)
|
Parent
|
|
Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating and Eliminating Adjustments
|
|
Consolidated
|
||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,018
|
|
|
$
|
525
|
|
|
$
|
(214
|
)
|
|
$
|
7,329
|
|
Equipment revenues
|
—
|
|
|
—
|
|
|
2,143
|
|
|
—
|
|
|
(100
|
)
|
|
2,043
|
|
||||||
Other revenues
|
—
|
|
|
—
|
|
|
194
|
|
|
52
|
|
|
(5
|
)
|
|
241
|
|
||||||
Total revenues
|
—
|
|
|
—
|
|
|
9,355
|
|
|
577
|
|
|
(319
|
)
|
|
9,613
|
|
||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of services, exclusive of depreciation and amortization shown separately below
|
—
|
|
|
—
|
|
|
1,402
|
|
|
6
|
|
|
—
|
|
|
1,408
|
|
||||||
Cost of equipment sales
|
—
|
|
|
—
|
|
|
2,540
|
|
|
246
|
|
|
(100
|
)
|
|
2,686
|
|
||||||
Selling, general and administrative
|
—
|
|
|
—
|
|
|
2,928
|
|
|
246
|
|
|
(219
|
)
|
|
2,955
|
|
||||||
Depreciation and amortization
|
—
|
|
|
—
|
|
|
1,546
|
|
|
18
|
|
|
—
|
|
|
1,564
|
|
||||||
Gains on disposal of spectrum licenses
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
||||||
Total operating expenses
|
—
|
|
|
—
|
|
|
8,379
|
|
|
516
|
|
|
(319
|
)
|
|
8,576
|
|
||||||
Operating income
|
—
|
|
|
—
|
|
|
976
|
|
|
61
|
|
|
—
|
|
|
1,037
|
|
||||||
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
—
|
|
|
(264
|
)
|
|
(27
|
)
|
|
(48
|
)
|
|
—
|
|
|
(339
|
)
|
||||||
Interest expense to affiliates
|
—
|
|
|
(99
|
)
|
|
(7
|
)
|
|
—
|
|
|
6
|
|
|
(100
|
)
|
||||||
Interest income
|
—
|
|
|
9
|
|
|
4
|
|
|
—
|
|
|
(6
|
)
|
|
7
|
|
||||||
Other income (expense), net
|
—
|
|
|
3
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Total other expense, net
|
—
|
|
|
(351
|
)
|
|
(31
|
)
|
|
(48
|
)
|
|
—
|
|
|
(430
|
)
|
||||||
Income (loss) before income taxes
|
—
|
|
|
(351
|
)
|
|
945
|
|
|
13
|
|
|
—
|
|
|
607
|
|
||||||
Income tax benefit (expense)
|
—
|
|
|
—
|
|
|
96
|
|
|
(5
|
)
|
|
—
|
|
|
91
|
|
||||||
Earnings (loss) of subsidiaries
|
698
|
|
|
1,049
|
|
|
(31
|
)
|
|
—
|
|
|
(1,716
|
)
|
|
—
|
|
||||||
Net income
|
698
|
|
|
698
|
|
|
1,010
|
|
|
8
|
|
|
(1,716
|
)
|
|
698
|
|
||||||
Dividends on preferred stock
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
||||||
Net income attributable to common stockholders
|
$
|
684
|
|
|
$
|
698
|
|
|
$
|
1,010
|
|
|
$
|
8
|
|
|
$
|
(1,716
|
)
|
|
$
|
684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income
|
$
|
698
|
|
|
$
|
698
|
|
|
$
|
1,010
|
|
|
$
|
8
|
|
|
$
|
(1,716
|
)
|
|
$
|
698
|
|
Other comprehensive income, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other comprehensive income, net of tax
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
(3
|
)
|
|
1
|
|
||||||
Total comprehensive income
|
$
|
699
|
|
|
$
|
699
|
|
|
$
|
1,011
|
|
|
$
|
9
|
|
|
$
|
(1,719
|
)
|
|
$
|
699
|
|
(in millions)
|
Parent
|
|
Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating and Eliminating Adjustments
|
|
Consolidated
|
||||||||||||
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash provided by (used in) operating activities
|
$
|
1
|
|
|
$
|
(404
|
)
|
|
$
|
2,374
|
|
|
$
|
(1,201
|
)
|
|
$
|
—
|
|
|
$
|
770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases of property and equipment
|
—
|
|
|
—
|
|
|
(1,366
|
)
|
|
—
|
|
|
—
|
|
|
(1,366
|
)
|
||||||
Purchases of spectrum licenses and other intangible assets, including deposits
|
—
|
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
|
—
|
|
|
(51
|
)
|
||||||
Proceeds related to beneficial interests in securitization transactions
|
—
|
|
|
—
|
|
|
13
|
|
|
1,282
|
|
|
—
|
|
|
1,295
|
|
||||||
Acquisition of companies, net of cash acquired
|
—
|
|
|
—
|
|
|
(333
|
)
|
|
—
|
|
|
—
|
|
|
(333
|
)
|
||||||
Other, net
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
||||||
Net cash provided by (used in) investing activities
|
—
|
|
|
—
|
|
|
(1,744
|
)
|
|
1,282
|
|
|
—
|
|
|
(462
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from issuance of long-term debt
|
—
|
|
|
2,494
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,494
|
|
||||||
Proceeds from borrowing on revolving credit facility, net
|
—
|
|
|
2,170
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,170
|
|
||||||
Repayments of revolving credit facility
|
—
|
|
|
—
|
|
|
(1,725
|
)
|
|
—
|
|
|
—
|
|
|
(1,725
|
)
|
||||||
Repayments of capital lease obligations
|
—
|
|
|
—
|
|
|
(172
|
)
|
|
—
|
|
|
—
|
|
|
(172
|
)
|
||||||
Repayments of long-term debt
|
—
|
|
|
—
|
|
|
(999
|
)
|
|
—
|
|
|
—
|
|
|
(999
|
)
|
||||||
Repurchases of common stock
|
(666
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(666
|
)
|
||||||
Intercompany advances, net
|
590
|
|
|
(4,260
|
)
|
|
3,679
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
||||||
Tax withholdings on share-based awards
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
||||||
Other, net
|
2
|
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
||||||
Net cash (used in) provided by financing activities
|
(74
|
)
|
|
404
|
|
|
679
|
|
|
(9
|
)
|
|
—
|
|
|
1,000
|
|
||||||
Change in cash and cash equivalents
|
(73
|
)
|
|
—
|
|
|
1,309
|
|
|
72
|
|
|
—
|
|
|
1,308
|
|
||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning of period
|
74
|
|
|
1
|
|
|
1,086
|
|
|
58
|
|
|
—
|
|
|
1,219
|
|
||||||
End of period
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2,395
|
|
|
$
|
130
|
|
|
$
|
—
|
|
|
$
|
2,527
|
|
(in millions)
|
Parent
|
|
Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating and Eliminating Adjustments
|
|
Consolidated
|
||||||||||||
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash provided by (used in) operating activities
|
$
|
1
|
|
|
$
|
(134
|
)
|
|
$
|
1,855
|
|
|
$
|
(1,114
|
)
|
|
$
|
—
|
|
|
$
|
608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases of property and equipment
|
—
|
|
|
—
|
|
|
(1,528
|
)
|
|
—
|
|
|
—
|
|
|
(1,528
|
)
|
||||||
Purchases of spectrum licenses and other intangible assets, including deposits
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
||||||
Proceeds related to beneficial interests in securitization transactions
|
—
|
|
|
—
|
|
|
10
|
|
|
1,124
|
|
|
—
|
|
|
1,134
|
|
||||||
Other, net
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
||||||
Net cash (used in) provided by investing activities
|
—
|
|
|
—
|
|
|
(1,540
|
)
|
|
1,124
|
|
|
—
|
|
|
(416
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from issuance of long-term debt
|
—
|
|
|
5,495
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,495
|
|
||||||
Repayments of capital lease obligations
|
—
|
|
|
—
|
|
|
(90
|
)
|
|
—
|
|
|
—
|
|
|
(90
|
)
|
||||||
Repayments of long-term debt
|
—
|
|
|
—
|
|
|
(3,480
|
)
|
|
—
|
|
|
—
|
|
|
(3,480
|
)
|
||||||
Intercompany advances, net
|
—
|
|
|
(4,956
|
)
|
|
4,967
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
||||||
Tax withholdings on share-based awards
|
—
|
|
|
—
|
|
|
(92
|
)
|
|
—
|
|
|
—
|
|
|
(92
|
)
|
||||||
Dividends on preferred stock
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
||||||
Other, net
|
15
|
|
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
||||||
Net cash provided by (used in) financing activities
|
1
|
|
|
539
|
|
|
1,280
|
|
|
(11
|
)
|
|
—
|
|
|
1,809
|
|
||||||
Change in cash and cash equivalents
|
2
|
|
|
405
|
|
|
1,595
|
|
|
(1
|
)
|
|
—
|
|
|
2,001
|
|
||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning of period
|
358
|
|
|
2,733
|
|
|
2,342
|
|
|
67
|
|
|
—
|
|
|
5,500
|
|
||||||
End of period
|
$
|
360
|
|
|
$
|
3,138
|
|
|
$
|
3,937
|
|
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
7,501
|
|
•
|
the failure to obtain, or delays in obtaining, required regulatory approvals for the Transactions, and the risk that such approvals may result in the imposition of conditions that 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 occurrence of events that may give rise to a right of one or both of the parties to terminate the Business Combination Agreement;
|
•
|
adverse effects on the market price of our common stock or on our or Sprint’s operating results because of a failure to complete the Transactions in the anticipated timeframe 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;
|
•
|
significant costs related to the Transactions, including financing costs, and unknown liabilities;
|
•
|
failure to realize the expected benefits and synergies of the Transactions in the expected timeframes or at all;
|
•
|
costs or difficulties related to the integration of Sprint’s network and operations into our network and operations;
|
•
|
the risk of litigation or regulatory actions related to the Transactions;
|
•
|
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 or political 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;
|
•
|
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;
|
•
|
breaches of our and/or our third-party vendors’ networks, information technology and data security;
|
•
|
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;
|
•
|
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;
and
|
•
|
the possibility that the reset process under our trademark license with DT results in changes to the royalty rates for our trademarks
.
|
•
|
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.
|
•
|
On January 1, 2018, we closed on our previously announced Unit Purchase Agreement to acquire the remaining equity in Iowa Wireless Services, LLC (“IWS”), a
54%
owned unconsolidated subsidiary, for a purchase price of
$25 million
. We accounted for our acquisition of IWS as a business combination and recognized a bargain purchase gain of approximately
$25 million
as part of our purchase price allocation and a gain on our previously held equity interest of approximately
$15 million
which have been included within Other income, net in our Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018.
|
•
|
On January 22, 2018, we completed our acquisition of television innovator Layer3 TV, Inc. (“Layer3 TV”) for cash consideration of
$318
million, subject to customary working capital and other post-closing adjustments. Upon closing of the transaction, Layer3 TV became a wholly-owned consolidated subsidiary. Layer3 TV acquires and distributes digital entertainment programming primarily through the internet to residential subscribers, offering direct to home digital television and multi-channel video programming distribution services. This transaction represented an opportunity to acquire a complementary service to our existing wireless service to advance our video strategy. We accounted for the purchase of Layer3 TV as a business combination and recognized
$218 million
of goodwill as part of our purchase price allocation.
|
|
Three Months Ended March 31, 2018
|
||||||||||
|
Previous Revenue Standard
|
|
New Revenue Standard
|
|
Change
|
||||||
Performance Measures
|
|
|
|
|
|
||||||
Branded postpaid phone ARPU
|
$
|
46.88
|
|
|
$
|
46.66
|
|
|
$
|
(0.22
|
)
|
Branded postpaid ABPU
|
$
|
60.39
|
|
|
$
|
60.14
|
|
|
$
|
(0.25
|
)
|
Branded prepaid ARPU
|
$
|
38.92
|
|
|
$
|
38.90
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
||||||
Adjusted EBITDA (in millions)
|
$
|
2,861
|
|
|
$
|
2,956
|
|
|
$
|
95
|
|
(in millions, except per share amounts)
|
Three Months Ended March 31,
|
||
2018
|
|||
Increase (decrease)
|
|
||
Cost of services
|
$
|
36
|
|
|
|
||
Operating income (loss)
|
$
|
(36
|
)
|
Net income (loss)
|
$
|
(23
|
)
|
|
|
||
Earnings per share - basic
|
$
|
(0.03
|
)
|
Earnings per share - diluted
|
$
|
(0.03
|
)
|
|
|
||
Non-GAAP financial measures
|
|
||
Adjusted EBITDA
|
$
|
(36
|
)
|
•
|
Total revenues of
$10.5 billion
increased
$842 million
, or
9%
. The increase was primarily driven by
growth in service and equipment revenues as further discussed below
.
|
•
|
Service revenues of
$7.8 billion
increased
$477 million
, or
7%
. The increase was primarily due to growth in our average branded customer base as a result of the growing success of our business channel, T-Mobile for Business, continued growth in existing markets, distribution expansion to new Greenfield markets, lower churn, higher connected devices and DIGITS, and the success of our MetroPCS brand.
|
•
|
Equipment revenues of
$2.4 billion
increased
$310 million
, or
15%
. The increase was primarily due to a higher average revenue per device sold, a positive impact from the new revenue standard of
$77 million
, and proceeds from liquidation of returned customer handsets, partially offset by a decrease in the number of devices sold, excluding purchased lease devices, lower lease revenues and a decrease from customer purchases of leased devices at the end of the lease term.
|
•
|
Operating income
of
$1.3 billion
increased
$245 million
, or
24%
. The increase was primarily due to higher
Total service revenues
and
Equipment revenues
, partially offset by higher
Selling, general and administrative
expenses, Cost of services, and
Cost of equipment sales
. The positive impact to
Operating income
of the adoption of the new revenue standard was
$95 million
.
|
•
|
Net income
of
$671 million
decreased
$27 million
, or
4%
. The decrease was primarily due to a change in
Income tax (expense) benefit
of
$301 million
, partially offset by the increase in
Operating income
of
$245 million
discussed above. The positive impact to
Net income
of the adoption of the new revenue standard was
$71 million
.
|
•
|
Adjusted EBITDA
, a non-GAAP financial measure, of
$3.0 billion
increased
$288 million
, or
11%
. The increase was primarily due to higher
Operating income
driven by the factors described above, partially offset by lower
Gains on disposal of spectrum licenses
. The positive impact to
Adjusted EBITDA
from the adoption of the new revenue standard resulted in an increase of approximately
$95 million
for the
three months ended
March 31, 2018
. See “
Performance Measures
” for more information.
|
•
|
Net cash provided by operating activities of
$770 million
increased
$162 million
, or
27%
. See “
Liquidity and Capital Resources
” for additional information.
|
•
|
Free Cash Flow, a non-GAAP financial measure, of
$668 million
increased
$483 million
, or
261%
. See “
Liquidity and Capital Resources
” for additional information.
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(in millions)
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
Revenues
|
|
|
|
|
|
|
|
|||||||
Branded postpaid revenues
|
$
|
5,070
|
|
|
$
|
4,725
|
|
|
$
|
345
|
|
|
7
|
%
|
Branded prepaid revenues
|
2,402
|
|
|
2,299
|
|
|
103
|
|
|
4
|
%
|
|||
Wholesale revenues
|
266
|
|
|
270
|
|
|
(4
|
)
|
|
(1
|
)%
|
|||
Roaming and other service revenues
|
68
|
|
|
35
|
|
|
33
|
|
|
94
|
%
|
|||
Total service revenues
|
7,806
|
|
|
7,329
|
|
|
477
|
|
|
7
|
%
|
|||
Equipment revenues
|
2,353
|
|
|
2,043
|
|
|
310
|
|
|
15
|
%
|
|||
Other revenues
|
296
|
|
|
241
|
|
|
55
|
|
|
23
|
%
|
|||
Total revenues
|
10,455
|
|
|
9,613
|
|
|
842
|
|
|
9
|
%
|
|||
Operating expenses
|
|
|
|
|
|
|
|
|||||||
Cost of services, exclusive of depreciation and amortization shown separately below
|
1,589
|
|
|
1,408
|
|
|
181
|
|
|
13
|
%
|
|||
Cost of equipment sales
|
2,845
|
|
|
2,686
|
|
|
159
|
|
|
6
|
%
|
|||
Selling, general and administrative
|
3,164
|
|
|
2,955
|
|
|
209
|
|
|
7
|
%
|
|||
Depreciation and amortization
|
1,575
|
|
|
1,564
|
|
|
11
|
|
|
1
|
%
|
|||
Gains on disposal of spectrum licenses
|
—
|
|
|
(37
|
)
|
|
37
|
|
|
NM
|
|
|||
Total operating expense
|
9,173
|
|
|
8,576
|
|
|
597
|
|
|
7
|
%
|
|||
Operating income
|
1,282
|
|
|
1,037
|
|
|
245
|
|
|
24
|
%
|
|||
Other income (expense)
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
(251
|
)
|
|
(339
|
)
|
|
88
|
|
|
(26
|
)%
|
|||
Interest expense to affiliates
|
(166
|
)
|
|
(100
|
)
|
|
(66
|
)
|
|
66
|
%
|
|||
Interest income
|
6
|
|
|
7
|
|
|
(1
|
)
|
|
(14
|
)%
|
|||
Other income, net
|
10
|
|
|
2
|
|
|
8
|
|
|
NM
|
|
|||
Total other expense, net
|
(401
|
)
|
|
(430
|
)
|
|
29
|
|
|
(7
|
)%
|
|||
Income before income taxes
|
881
|
|
|
607
|
|
|
274
|
|
|
45
|
%
|
|||
Income tax (expense) benefit
|
(210
|
)
|
|
91
|
|
|
(301
|
)
|
|
(331
|
)%
|
|||
Net income
|
$
|
671
|
|
|
$
|
698
|
|
|
$
|
(27
|
)
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|||||||
Net cash provided by operating activities
|
$
|
770
|
|
|
$
|
608
|
|
|
$
|
162
|
|
|
27
|
%
|
Net cash used in investing activities
|
(462
|
)
|
|
(416
|
)
|
|
(46
|
)
|
|
11
|
%
|
|||
Net cash provided by financing activities
|
1,000
|
|
|
1,809
|
|
|
(809
|
)
|
|
(45
|
)%
|
|||
|
|
|
|
|
|
|
|
|||||||
Non-GAAP Financial Measures
|
|
|
|
|
|
|
|
|||||||
Adjusted EBITDA
|
$
|
2,956
|
|
|
$
|
2,668
|
|
|
$
|
288
|
|
|
11
|
%
|
Free Cash Flow
|
668
|
|
|
185
|
|
|
483
|
|
|
261
|
%
|
•
|
A
9%
increase
in average branded postpaid phone customers, primarily from growth in our customer base driven by the growing success of new segments such as T-Mobile for Business, continued growth in existing and Greenfield markets
; and
|
•
|
A
29%
increase in average branded postpaid other customers driven by higher connected devices and DIGITS; partially offset by
|
•
|
A
2%
decrease in branded postpaid phone Average Revenue Per User (“ARPU”)
primarily driven by:
|
•
|
A decrease in regulatory program revenues with the continued adoption of T-Mobile ONE tax inclusive plans;
|
•
|
Promotions targeting families and new segments;
|
•
|
Lower insurance program revenue per subscriber; and
|
•
|
The negative impact from the new revenue standard of approximately
$29 million
or
$0.22
of ARPU primarily due to promotions on devices that are allocated to service revenues. See
Note 10 - Revenue from Contracts with Customers
of the Notes to the Condensed Consolidated Financial Statements for additional information. These decreases were partially offset by
|
•
|
The positive impact from our T-Mobile ONE rate plans.
|
•
|
A
3%
increase
in average branded prepaid customers primarily driven by growth in the customer base
; and
|
•
|
A
1%
increase in branded prepaid ARPU from the success of our MetroPCS brand
.
|
•
|
An increase of
$423 million
in device sales revenues, excluding purchased lease devices, primarily due to:
|
•
|
Higher average revenue per device sold due to an increase in high-end device mix and a decrease in promotions; and
|
•
|
A positive impact from the new revenue standard of
$77 million
primarily related to certain commission costs now recorded as Selling, general and administrative expenses.
See
Note 10 - Revenue from Contracts with Customers
of the Notes to the Condensed Consolidated Financial Statements for additional information. These increases were partially offset by
|
•
|
A
3%
decrease in the number of devices sold, excluding purchased lease devices, driven primarily by a lower branded postpaid handset upgrade rate
.
|
•
|
An increase of
$73 million
primarily related to proceeds from liquidation of returned customer handsets; partially offset by
|
•
|
A decrease of
$153 million
in lease revenues from declining Just Upgrade My Phone! (“JUMP!”
®
) On Demand customers due to shifting focus to our equipment installation plan (“EIP”) financing option and the success of affordable devices on leasing programs with lower monthly lease payments
; and
|
•
|
A decrease of
$34 million
from lower volumes of purchased leased devices at the end of the lease term
.
|
•
|
Higher lease and employee-related expenses associated with network expansion
;
|
•
|
The negative impact from hurricanes of
$36 million
; and
|
•
|
Higher international roaming expenses; partially offset by
|
•
|
A lower Universal Service Fund expense for overpayment of expenses in 2017.
|
•
|
An increase of
$273 million
in device cost of equipment sales, excluding purchased leased devices, primarily due to:
|
•
|
A higher average cost per device sold primarily due to an increase in high-end device mix
; partially offset by
|
•
|
A
3%
decrease in the number of devices sold, excluding purchased lease devices, driven primarily by a lower branded postpaid handset upgrade rate
.
|
•
|
A decrease of
$86 million
from fewer
lease buyouts as fewer customers are in the handset lease program;
and
|
•
|
A decrease of
$26 million
primarily related to:
|
•
|
A decrease in insurance and warranty costs due to a decrease in higher cost devices used in the insurance program;
|
•
|
Higher proceeds from liquidation of returned customer handsets under our insurance program; partially offset by
|
•
|
Higher costs from an increase in the volume of liquidated returned customer handsets outside of our insurance program.
|
•
|
Higher employee-related costs, costs related to outsourced functions and managed services
;
|
•
|
Higher commissions driven by compensation structure and channel mix
; and
|
•
|
An increase in business taxes
;
|
•
|
An approximately
$40 million
FCC settlement related to local ring back tones in rural areas; partially offset by
|
•
|
Lower bad debt expense and losses from sales of receivables reflecting our ongoing focus on managing customer quality
;
|
•
|
Lower handset repair services cost
; and
|
•
|
The positive impact from the new revenue standard of
$48 million
primarily related to a net impact from higher commissions, which were previously recorded as contra equipment revenue and capitalized commission costs on new contracts in excess of the related amortization
.
|
•
|
The continued build-out of our 4G LTE network;
|
•
|
The implementation of the first component of our new billing system
; and
|
•
|
Growth in our distribution footprint
; partially offset by
|
•
|
Lower depreciation expense related to our JUMP! On Demand program resulting from a lower total number of devices under lease. Under our JUMP! On Demand program, the cost of a leased wireless device is depreciated to its estimated residual value over the period expected to provide utility to us.
|
•
|
Operating income
, the components of which are discussed above, increased
$245 million
, or
24%
, which includes the positive impact from the new revenue standard of
$95 million
and the negative impact from hurricanes of
$36 million
.
|
•
|
Income tax (expense) benefit
changed
$301 million
, from a benefit of
$91 million
for the
three months ended
March 31, 2017
to expense of
$210 million
for the
three months ended
March 31, 2018
primarily from:
|
•
|
A
$270 million
tax benefit recognized in the
three months ended
March 31, 2017
related to a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions that did not impact 2018
; and
|
•
|
Higher income before taxes
; partially offset by
|
•
|
Benefits from a reduction in the federal corporate income tax rate provided by the Tax Cuts and Jobs Act, which took effect on January 1, 2018, from 35% to 21%
.
|
•
|
Interest expense
decreased
$88 million
, or
26%
, primarily from:
|
•
|
Redemption of aggregate principal amount of
$6.8 billion
of Senior Notes, with various interest rates and maturity dates, in April 2017; and
|
•
|
Redemption in January 2018 of
$1.0 billion
of
6.125% Senior Notes due 2022
; partially offset by
|
•
|
Issuance of aggregate principal amount of
$1.5 billion
of Senior Notes, with various interest rates and maturity dates, in March 2017;
|
•
|
Issuance in January 2018 of
$1.0 billion
of public
4.500% Senior Notes due 2026
; and
|
•
|
Issuance in January 2018 of
$1.5 billion
of public
4.750% Senior Notes due 2028
.
|
•
|
Interest expense to affiliates
increased
$66 million
, or
66%
, primarily from:
|
•
|
Issuance of
$4.0 billion
of Incremental Secured Term Loan facility entered into in January 2017, which refinanced
$1.98 billion
of outstanding senior secured term loans;
|
•
|
Issuance of
$4.0 billion
in aggregate principal amount of Senior Notes, with various interest rates and maturity dates, in May 2017;
|
•
|
Issuance of
$3.0 billion
in aggregate principal amount of Senior Notes, with various interest rates and maturity dates, in April 2017; and
|
•
|
Issuance of
$0.5 billion
in aggregate principal amount of
5.375%
Senior Notes due
2027
in September 2017; partially offset by
|
•
|
A decrease from lower interest rates achieved through refinancing of a total of
$2.5 billion
of Senior Reset Notes in April 2017.
|
•
|
Other income, net
increased
$8 million
primarily from:
|
•
|
A
$15 million
gain on our previously held equity interest in IWS and a
$25 million
bargain purchase gain as part of our purchase price allocation related to the IWS acquisition, partially offset by
|
•
|
A
$32 million
loss on early redemption of
$1.0 billion
of
6.125%
Senior Notes due
2022
in January 2018.
|
|
March 31,
2018 |
|
December 31,
2017 |
|
Change
|
|||||||||
(in millions)
|
$
|
|
%
|
|||||||||||
Other current assets
|
$
|
644
|
|
|
$
|
628
|
|
|
$
|
16
|
|
|
3
|
%
|
Property and equipment, net
|
300
|
|
|
306
|
|
|
(6
|
)
|
|
(2
|
)%
|
|||
Goodwill
|
218
|
|
|
—
|
|
|
218
|
|
|
NM
|
|
|||
Tower obligations
|
2,191
|
|
|
2,198
|
|
|
(7
|
)
|
|
—
|
%
|
|||
Total stockholders' deficit
|
(1,039
|
)
|
|
(1,454
|
)
|
|
415
|
|
|
(29
|
)%
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(in millions)
|
2018
|
|
2017
|
$
|
|
%
|
||||||||
Service revenues
|
$
|
540
|
|
|
$
|
525
|
|
|
$
|
15
|
|
|
3
|
%
|
Cost of equipment sales
|
236
|
|
|
246
|
|
|
(10
|
)
|
|
(4
|
)%
|
|||
Selling, general and administrative
|
236
|
|
|
246
|
|
|
(10
|
)
|
|
(4
|
)%
|
|||
Total comprehensive income
|
34
|
|
|
9
|
|
|
25
|
|
|
278
|
%
|
•
|
Higher
Service revenues
primarily due to the result of an increase in activity of the non-guarantor subsidiary that provides device insurance, primarily driven by growth in our customer base;
|
•
|
Lower
Cost of equipment sales
expenses primarily due to a decrease in device insurance claims and a decrease in higher cost devices used, partially offset by a decrease in device non-return fees charged to customers; and
|
•
|
Lower
Selling, general and administrative
expenses primarily due to lower reserves against bad debt in the non-guarantor subsidiary involved in the Service BRE transactions, offset by new operating costs from the non-guarantor Layer3 TV subsidiary acquired in the first quarter of 2018.
|
|
March 31,
2018 |
|
March 31,
2017 |
|
Change
|
||||||
(in thousands)
|
#
|
|
%
|
||||||||
Customers, end of period
|
|
|
|
|
|
|
|
||||
Branded postpaid phone customers
(1)
|
34,744
|
|
|
32,095
|
|
|
2,649
|
|
|
8
|
%
|
Branded postpaid other customers
|
4,321
|
|
|
3,246
|
|
|
1,075
|
|
|
33
|
%
|
Total branded postpaid customers
|
39,065
|
|
|
35,341
|
|
|
3,724
|
|
|
11
|
%
|
Branded prepaid customers
(1)
|
20,876
|
|
|
20,199
|
|
|
677
|
|
|
3
|
%
|
Total branded customers
|
59,941
|
|
|
55,540
|
|
|
4,401
|
|
|
8
|
%
|
Wholesale customers
(2)
|
14,099
|
|
|
17,057
|
|
|
(2,958
|
)
|
|
(17
|
)%
|
Total customers, end of period
|
74,040
|
|
|
72,597
|
|
|
1,443
|
|
|
2
|
%
|
(1)
|
As a result of the acquisition of IWS, we included an adjustment of
13,000
branded postpaid phone and
4,000
branded prepaid IWS customers in our reported subscriber base as of January 1, 2018. Additionally, as a result of the acquisition of Layer3 TV, we included an adjustment of
5,000
branded prepaid customers in our reported subscriber base as of January 22, 2018.
|
(2)
|
We believe current and future regulatory changes have made the Lifeline program offered by our wholesale partners uneconomical. We will continue to support our wholesale partners offering the Lifeline program, but have excluded the Lifeline customers from our reported wholesale subscriber base resulting in the removal of
160,000
and
4,368,000
reported wholesale customers as of the beginning of the third and second quarters of 2017, respectively.
|
•
|
Higher branded postpaid phone customers driven by the growing success of new segments such as T-Mobile for Business, continued growth in existing and Greenfield markets, and lower churn;
|
•
|
Higher branded postpaid other customers primarily due to higher connected devices, specifically the Apple watch, and DIGITS; and
|
•
|
Higher branded prepaid customers driven by the continued success of our MetroPCS brand and continued growth from distribution expansion that occurred in 2017, partially offset by the optimization of our third-party distribution channels, which began in the fourth quarter of 2016.
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||
(in thousands)
|
2018
|
|
2017
|
#
|
|
%
|
|||||
Net customer additions (losses)
|
|
|
|
|
|
|
|
||||
Branded postpaid phone customers
(1) (2)
|
617
|
|
|
798
|
|
|
(181
|
)
|
|
(23
|
)%
|
Branded postpaid other customers
(2)
|
388
|
|
|
116
|
|
|
272
|
|
|
234
|
%
|
Total branded postpaid customers
|
1,005
|
|
|
914
|
|
|
91
|
|
|
10
|
%
|
Branded prepaid customers
(1)
|
199
|
|
|
386
|
|
|
(187
|
)
|
|
(48
|
)%
|
Total branded customers
|
1,204
|
|
|
1,300
|
|
|
(96
|
)
|
|
(7
|
)%
|
Wholesale customers
(3)
|
229
|
|
|
(158
|
)
|
|
387
|
|
|
245
|
%
|
Total net customer additions
|
1,433
|
|
|
1,142
|
|
|
291
|
|
|
25
|
%
|
(1)
|
As a result of the acquisition of IWS and Layer3 TV, customer activity post acquisition was included in our net customer additions for the first quarter of 2018.
|
(2)
|
During the third quarter of 2017, we retitled our “Branded postpaid mobile broadband customers” category to “Branded postpaid other customers” and included DIGITS customers.
|
(3)
|
Net customer activity for Lifeline was excluded beginning in the second quarter of 2017 due to our determination based upon changes in the applicable government regulations that the Lifeline program offered by our wholesale partners is uneconomical.
|
•
|
Lower branded prepaid net customer additions primarily driven by increased competitive activity in the marketplace and higher deactivations from a growing customer base, partially offset by a higher impact from the optimization of our third-party distribution channels in the prior period, which began in the fourth quarter of 2016 resulting in lower churn, and lower migrations to branded postpaid plans; and
|
•
|
Lower branded postpaid phone net customer additions primarily due to lower gross customer additions as a result of more aggressive promotions and the launch of Un-carrier Next - All Unlimited with taxes and fees included during the three months ended March 31, 2017 and increased competitive activity in the marketplace, partially offset by the growing success of new segments such as T-Mobile for Business, continued growth in existing and Greenfield markets, along with record churn performance; partially offset by
|
•
|
Higher branded postpaid other net customer additions primarily due to higher gross customer additions from connected devices, specifically the Apple watch, and DIGITS, partially offset by higher deactivations from a growing customer base.
|
|
March 31,
2018 |
|
March 31,
2017 |
|
Change
|
||||||
#
|
|
%
|
|||||||||
Branded postpaid customers per account
|
2.95
|
|
|
2.88
|
|
|
0.07
|
|
|
2
|
%
|
|
Three Months Ended March 31,
|
|
Bps Change
|
||||
2018
|
|
2017
|
|
||||
Branded postpaid phone churn
|
1.07
|
%
|
|
1.18
|
%
|
|
-11 bps
|
Branded prepaid churn
|
3.94
|
%
|
|
4.01
|
%
|
|
-7 bps
|
(in millions, except average number of customers, ARPU and ABPU)
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
2018
|
|
2017
|
$
|
|
%
|
|||||||||
Calculation of Branded Postpaid Phone ARPU
|
|
|
|
|
|
|
|
|||||||
Branded postpaid service revenues
|
$
|
5,070
|
|
|
$
|
4,725
|
|
|
$
|
345
|
|
|
7
|
%
|
Less: Branded postpaid other revenues
|
(259
|
)
|
|
(225
|
)
|
|
(34
|
)
|
|
15
|
%
|
|||
Branded postpaid phone service revenues
|
$
|
4,811
|
|
|
$
|
4,500
|
|
|
$
|
311
|
|
|
7
|
%
|
Divided by: Average number of branded postpaid phone customers (in thousands) and number of months in period
|
34,371
|
|
|
31,564
|
|
|
2,807
|
|
|
9
|
%
|
|||
Branded postpaid phone ARPU
|
$
|
46.66
|
|
|
$
|
47.53
|
|
|
$
|
(0.87
|
)
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|||||
Calculation of Branded Postpaid ABPU
|
|
|
|
|
|
|
|
|
|
|||||
Branded postpaid service revenues
|
$
|
5,070
|
|
|
$
|
4,725
|
|
|
$
|
345
|
|
|
7
|
%
|
EIP billings
|
1,698
|
|
|
1,402
|
|
|
296
|
|
|
21
|
%
|
|||
Lease revenues
|
171
|
|
|
324
|
|
|
(153
|
)
|
|
(47
|
)%
|
|||
Total billings for branded postpaid customers
|
$
|
6,939
|
|
|
$
|
6,451
|
|
|
$
|
488
|
|
|
8
|
%
|
Divided by: Average number of branded postpaid customers (in thousands) and number of months in period
|
38,458
|
|
|
34,740
|
|
|
3,718
|
|
|
11
|
%
|
|||
Branded postpaid ABPU
|
$
|
60.14
|
|
|
$
|
61.89
|
|
|
$
|
(1.75
|
)
|
|
(3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|||||
Calculation of Branded Prepaid ARPU
|
|
|
|
|
|
|
|
|
|
|||||
Branded prepaid service revenues
|
$
|
2,402
|
|
|
$
|
2,299
|
|
|
$
|
103
|
|
|
4
|
%
|
Divided by: Average number of branded prepaid customers (in thousands) and number of months in period
|
20,583
|
|
|
19,889
|
|
|
694
|
|
|
3
|
%
|
|||
Branded prepaid ARPU
|
$
|
38.90
|
|
|
$
|
38.53
|
|
|
$
|
0.37
|
|
|
1
|
%
|
•
|
A decrease in regulatory program revenues with the continued adoption of T-Mobile ONE tax inclusive plans;
|
•
|
Promotions targeting families and new segments;
|
•
|
Lower insurance program revenue per subscriber; and
|
•
|
The negative impact from the new revenue standard of
$0.22
. See
Note 10 - Revenue from Contracts with Customers
of the Notes to the Condensed Consolidated Financial Statements for additional information; partially offset by
|
•
|
The positive impact from our T-Mobile ONE rate plans.
|
•
|
Lower lease revenues;
|
•
|
Lower branded postpaid phone ARPU including the impact of the new revenue standard;
|
•
|
Growth in the branded postpaid other customer base with a lower ARPU than branded postpaid phone;
partially offset by
|
•
|
Growth in EIP billings due to growth in the gross amount of equipment financed on EIP.
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(in millions)
|
2018
|
|
2017
|
$
|
|
%
|
||||||||
Net income
|
$
|
671
|
|
|
$
|
698
|
|
|
$
|
(27
|
)
|
|
(4
|
)%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense
|
251
|
|
|
339
|
|
|
(88
|
)
|
|
(26
|
)%
|
|||
Interest expense to affiliates
|
166
|
|
|
100
|
|
|
66
|
|
|
66
|
%
|
|||
Interest income
|
(6
|
)
|
|
(7
|
)
|
|
1
|
|
|
(14
|
)%
|
|||
Other income, net
|
(10
|
)
|
|
(2
|
)
|
|
(8
|
)
|
|
400
|
%
|
|||
Income tax expense (benefit)
|
210
|
|
|
(91
|
)
|
|
301
|
|
|
(331
|
)%
|
|||
Operating income
|
1,282
|
|
|
1,037
|
|
|
245
|
|
|
24
|
%
|
|||
Depreciation and amortization
|
1,575
|
|
|
1,564
|
|
|
11
|
|
|
1
|
%
|
|||
Stock-based compensation
(1)
|
96
|
|
|
67
|
|
|
29
|
|
|
43
|
%
|
|||
Other, net
(2)
|
3
|
|
|
—
|
|
|
3
|
|
|
NM
|
|
|||
Adjusted EBITDA
|
$
|
2,956
|
|
|
$
|
2,668
|
|
|
$
|
288
|
|
|
11
|
%
|
Net income margin (Net income divided by service revenues)
|
9
|
%
|
|
10
|
%
|
|
|
|
|
-100 bps
|
|
|||
Adjusted EBITDA margin (Adjusted EBITDA divided by service revenues)
|
38
|
%
|
|
36
|
%
|
|
|
|
|
200 bps
|
|
(1)
|
Stock-based compensation includes payroll tax impacts and may not agree to stock-based compensation expense in the
condensed consolidated financial statements
.
|
(2)
|
Other, net may not agree to the
Condensed Consolidated Statements of Comprehensive Income
primarily due to certain non-routine operating activities, such as other special items that would not be expected to reoccur, and are therefore excluded in Adjusted EBITDA.
|
•
|
An increase
in branded postpaid and prepaid service revenues
;
|
•
|
Lower net losses on equipment sales
; and
|
•
|
The positive impact from the new revenue standard of
$95 million
. See
Note 10 - Revenue from Contracts with Customers
of the Notes to the Condensed Consolidated Financial Statements for additional information. These increases were partially offset by
|
•
|
Higher selling, general and administrative expenses
;
|
•
|
Higher cost of services expense
;
|
•
|
Lower gains on disposal of spectrum licenses; and
|
•
|
The negative impact from hurricanes of
$36 million
.
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(in millions)
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
Net cash provided by operating activities
|
$
|
770
|
|
|
$
|
608
|
|
|
$
|
162
|
|
|
27
|
%
|
Net cash used in investing activities
|
(462
|
)
|
|
(416
|
)
|
|
(46
|
)
|
|
11
|
%
|
|||
Net cash provided by financing activities
|
1,000
|
|
|
1,809
|
|
|
(809
|
)
|
|
(45
|
)%
|
•
|
A
$295 million
increase
in net non-cash adjustments to Net income, primarily due to changes in Deferred income tax expense (benefit); partially offset by
|
•
|
A
$106 million
increase
in net cash outflows from changes in working capital, primarily due to the change in Accounts payable and accrued liabilities, partially offset by improvements in Accounts receivable and Other current and long-term assets.
|
•
|
$1.4 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 beginning deployment of 600 MHz; and
|
•
|
$333 million
of cash consideration paid, net of cash acquired, for the acquisitions of Layer3 and IWS; partially offset by
|
•
|
$1.3 billion
in proceeds related to beneficial interest in securitization transactions.
|
•
|
$2.5 billion
in
Proceeds from issuance of long-term debt
; and
|
•
|
$2.2 billion
in Proceeds from borrowing on our revolving credit facility; partially offset by
|
•
|
$1.7 billion
for Repayments of our revolving credit facility;
|
•
|
$1.0 billion
for
Repayments of long-term debt
;
|
•
|
$666 million
for Repurchases of common stock; and
|
•
|
$172 million
for
Repayments of capital lease obligations
.
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
$
|
|
%
|
||||||||
Net cash provided by operating activities
|
$
|
770
|
|
|
$
|
608
|
|
|
$
|
162
|
|
|
27
|
%
|
|
Cash purchases of property and equipment
|
(1,366
|
)
|
|
(1,528
|
)
|
|
162
|
|
|
(11
|
)%
|
||||
Proceeds related to beneficial interests in securitization transactions
|
1,295
|
|
|
1,134
|
|
|
161
|
|
1
|
|
14
|
%
|
|||
Cash payments for debt prepayment or debt extinguishment costs
|
(31
|
)
|
|
(29
|
)
|
|
(2
|
)
|
2
|
|
7
|
%
|
|||
Free Cash Flow
|
$
|
668
|
|
|
$
|
185
|
|
|
$
|
483
|
|
3
|
|
261
|
%
|
•
|
Higher net cash provided by operating activities, as described above;
|
•
|
Lower purchases of property and equipment. Cash purchases of property and equipment include capitalized interest of
$43 million
and
$48 million
for
2018
and
2017
; and
|
•
|
Higher proceeds related to our deferred purchase price from securitization transactions.
|
(in millions)
|
Principal Issuances
|
|
Issuance Costs
|
|
Net Proceeds from Issuance of Long-Term Debt
|
||||||
4.500% Senior Notes due 2026
|
$
|
1,000
|
|
|
$
|
2
|
|
|
$
|
998
|
|
4.750% Senior Notes due 2028
|
1,500
|
|
|
4
|
|
|
1,496
|
|
|||
Total of Senior Notes issued
|
$
|
2,500
|
|
|
$
|
6
|
|
|
$
|
2,494
|
|
(in millions)
|
Principal Amount
|
|
Write-off of Premiums, Discounts and Issuance Costs
(1)
|
|
Call Penalties
(1) (2)
|
|
Redemption
Date |
|
Redemption Price
|
|||||||
6.125% Senior Notes due 2022
|
$
|
1,000
|
|
|
$
|
1
|
|
|
$
|
31
|
|
|
January 15, 2018
|
|
103.063
|
%
|
(1)
|
Write-off of premiums, discounts, issuance costs and call penalties are included in
Other income, net
in our
Condensed Consolidated Statements of Comprehensive Income
. Write-off of premiums, discounts and issuance costs are included in
Other, net
within
Net cash provided by operating activities
in our
Condensed Consolidated Statements of Cash Flows
.
|
(2)
|
The call penalty is the excess paid over the principal amount. Call penalties are included within
Net cash provided by financing activities
in our
Condensed Consolidated Statements of Cash Flows
.
|
•
|
For transactions where we recognize a significant financing component, judgment is required to determine the discount rate. For equipment installment plan (“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.
|
•
|
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. Expected device returns are estimated based on historical experience.
|
•
|
Promotional 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 bill credits result in a substantive termination penalty, and determining the term over which a substantive termination penalty exists, may require significant judgment.
|
•
|
For capitalized contract costs, determining the amortization period as well as assessing the indicators of impairment may require significant judgment.
|
•
|
The determination of the standalone selling price for contracts that involve more than one product or service (or performance obligation) may require significant judgment.
|
•
|
The identification of distinct performance obligations within our service plans may require significant judgment.
|
•
|
difficulties in integrating the companies’ operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure and financial reporting and internal control systems, including compliance by the combined company with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the rules promulgated by the SEC;
|
•
|
challenges in conforming standards, controls, procedures, accounting and other policies, business cultures, and compensation structures between the two companies;
|
•
|
difficulties in assimilating employees and in attracting and retaining key personnel;
|
•
|
challenges in keeping existing customers and obtaining new customers;
|
•
|
difficulties in achieving anticipated synergies, business opportunities, and growth prospects from the combination;
|
•
|
difficulties in managing the expanded operations of a significantly larger and more complex company;
|
•
|
the transition of management to the combined company executive management team;
|
•
|
determining whether and how to address possible differences in corporate cultures and management philosophies;
|
•
|
the impact of the additional debt financing expected to be incurred in connection with the Transactions;
|
•
|
contingent liabilities that are larger than expected; and
|
•
|
potential unknown liabilities, adverse consequences, and unforeseen increased expenses associated with the Transactions.
|
•
|
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;
|
•
|
creating liens on assets;
|
•
|
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.
|
|
Number of Shares Purchased (a)
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs (b)
|
|
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (c)
|
||||||
01/01/2018 - 01/31/2018
|
4,422,765
|
|
|
$
|
64.30
|
|
|
4,422,765
|
|
|
$
|
772
|
|
02/01/2018 - 02/28/2018
|
4,063,608
|
|
|
60.51
|
|
|
1,618,608
|
|
|
672
|
|
||
03/01/2018 - 03/31/2018
|
5,317,030
|
|
|
63.32
|
|
|
4,457,166
|
|
|
390
|
|
||
Total
|
13,803,403
|
|
|
$
|
62.76
|
|
|
10,498,539
|
|
|
$
|
390
|
|
(a)
|
The table presented includes purchases made by DT, our majority stockholder and an affiliated purchaser, in accordance with the rules of the SEC and other applicable legal requirements.
|
(b)
|
During the
three months ended
March 31, 2018
, DT 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, which are not included against the dollar value of shares that may be purchased under programs approved by the Board of Directors.
|
(c)
|
Effective as of 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. See
Note 11 - Repurchases of Common Stock
in the
Notes to the Condensed Consolidated Financial Statements
for further information.
|
|
|
|
|
Incorporated by Reference
|
|
|
||||
Exhibit No.
|
|
Exhibit Description
|
|
Form
|
|
Date of First Filing
|
|
Exhibit Number
|
|
Filed Herein
|
2.1*
|
|
|
8-K
|
|
4/30/2018
|
|
2.1
|
|
|
|
3.1
|
|
|
8-K
|
|
2/22/2018
|
|
3.1
|
|
|
|
4.1
|
|
|
10-K
|
|
2/8/2018
|
|
4.24
|
|
|
|
4.2
|
|
|
10-K
|
|
2/8/2018
|
|
4.56
|
|
|
|
4.3
|
|
|
8-K
|
|
1/25/2018
|
|
4.1
|
|
|
|
4.4
|
|
|
8-K
|
|
1/25/2018
|
|
4.2
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
X
|
|
10.1
|
|
|
8-K
|
|
1/25/2018
|
|
10.1
|
|
|
|
10.2
|
|
|
10-K
|
|
2/8/2018
|
|
10.31
|
|
|
|
10.3
|
|
|
8-K
|
|
3/30/2018
|
|
10.1
|
|
|
|
10.4
|
|
|
8-K
|
|
3/30/2018
|
|
10.2
|
|
|
|
10.5
|
|
|
8-K
|
|
3/30/2018
|
|
10.3
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
||||
Exhibit No.
|
|
Exhibit Description
|
|
Form
|
|
Date of First Filing
|
|
Exhibit Number
|
|
Filed Herein
|
10.6
|
|
|
8-K
|
|
4/30/2018
|
|
10.1
|
|
|
|
10.7
|
|
|
8-K
|
|
4/30/2018
|
|
10.2
|
|
|
|
10.8
|
|
|
8-K
|
|
4/30/2018
|
|
10.3
|
|
|
|
10.9**
|
|
|
|
|
|
|
|
|
X
|
|
10.10**
|
|
|
|
|
|
|
|
|
X
|
|
10.11**
|
|
|
|
|
|
|
|
|
X
|
|
10.12**
|
|
|
|
|
|
|
|
|
X
|
|
10.13
|
|
|
|
|
|
|
|
|
X
|
|
10.14
|
|
|
|
|
|
|
|
|
X
|
|
23.1
|
|
|
|
|
|
|
|
|
X
|
|
31.1
|
|
|
|
|
|
|
|
|
X
|
|
31.2
|
|
|
|
|
|
|
|
|
X
|
|
32.1***
|
|
|
|
|
|
|
|
|
|
|
32.2***
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
|
|
|
|
X
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
|
|
|
X
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
|
|
|
X
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
|
|
|
X
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
|
|
|
X
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
|
|
|
X
|
*
|
|
This filing excludes certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K, which the registrant agrees to furnish supplementally to the SEC upon request by the SEC; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules or exhibits so furnished.
|
**
|
|
Indicates a management contract or compensatory plan or arrangement.
|
***
|
|
Furnished herein.
|
|
|
SIGNATURE
|
|
|
|
T-MOBILE US, INC.
|
|
|
|
|
|
May 1, 2018
|
|
/s/ J. Braxton Carter
|
|
|
|
J. Braxton Carter
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
(Principal Financial Officer and Authorized Signatory)
|
|
|
T-MOBILE USA, INC.,
as the Company
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ J. Braxton Carter
|
|
|
Name:
|
J. Braxton Carter
|
|
|
Title:
|
Executive Vice President and
|
|
|
|
Chief Financial Officer
|
|
|
GUARANTORS:
|
|
|
|
IBSV LLC
|
|
IOWA WIRELESS SERVICES, LLC
|
|
IOWA WIRELESS SERVICES HOLDING CORPORATION
|
|
METROPCS CALIFORNIA, LLC
|
|
METROPCS FLORIDA, LLC
|
|
METROPCS GEORGIA, LLC
|
|
METROPCS MASSACHUSETTS, LLC
|
|
METROPCS MICHIGAN, LLC
|
|
METROPCS NETWORKS CALIFORNIA, LLC
|
|
METROPCS NETWORKS FLORIDA, LLC
|
|
METROPCS NEVADA, LLC
|
|
METROPCS NEW YORK, LLC
|
|
METROPCS PENNSYLVANIA, LLC
|
|
METROPCS TEXAS, LLC
|
|
POWERTEL MEMPHIS LICENSES, INC.
|
|
POWERTEL/MEMPHIS, INC.
|
|
SUNCOM WIRELESS HOLDINGS, INC.
|
|
SUNCOM WIRELESS INVESTMENT COMPANY LLC
|
|
SUNCOM WIRELESS LICENSE COMPANY, LLC
|
|
SUNCOM WIRELESS MANAGEMENT COMPANY, INC.
|
|
SUNCOM WIRELESS OPERATING COMPANY, L.L.C.
|
|
SUNCOM WIRELESS PROPERTY COMPANY, L.L.C.
|
|
SUNCOM WIRELESS, INC.
|
|
T-MOBILE CENTRAL LLC
|
|
T-MOBILE FINANCIAL LLC
|
|
T-MOBILE LEASING LLC
|
|
T-MOBILE LICENSE LLC
|
|
T-MOBILE NORTHEAST LLC
|
|
T-MOBILE PCS HOLDINGS LLC
|
|
T-MOBILE PUERTO RICO HOLDINGS LLC
|
|
T-MOBILE PUERTO RICO LLC
|
|
T-MOBILE RESOURCES CORPORATION
|
|
T-MOBILE SOUTH LLC
|
|
T-MOBILE SUBSIDIARY IV CORPORATION
|
|
T-MOBILE US, INC.
|
|
T-MOBILE WEST LLC
|
|
TRITON PCS FINANCE COMPANY, INC.
|
|
TRITON PCS HOLDINGS COMPANY L.L.C.
|
|
VOICESTREAM PCS I IOWA LLC
|
|
By:
|
/s/ J. Braxton Carter
|
|
|
Name:
|
J. Braxton Carter
|
|
|
Title:
|
Authorized Person
|
|
|
DEUTSCHE BANK TRUST COMPANY AMERICAS
, as
|
||
|
Trustee
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Carol Ng
|
|
|
Name:
|
Carol Ng
|
|
|
Title:
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ James Briggs
|
|
|
Name:
|
James Briggs
|
|
|
Title:
|
Vice President
|
|
|
Sincerely,
|
|
|
|
|
|
|
|
T-Mobile US, INC.
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
Elizabeth McAuliffe
|
|
|
Title:
|
EVP, Human Resources
|
|
Acknowledged, Agreed and Accepted:
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
Date:
|
|
|
1.
|
The Employment Agreement is hereby amended (i) to provide that the “
Term
” of the Employment Agreement shall be the period commencing on the Effective Date and continuing until April 30, 2020 (such date, the “
Expiration Date
”), (ii) to delete the references therein to automatic renewals of the Term and to non-renewals of the Term and (iii) to clarify that, unless earlier terminated as permitted under the Employment Agreement, Executive’s employment with the Company will automatically terminate upon the expiration of the Term.
|
2.
|
The following is hereby added as the second sentence of Section 3(a) of the Employment Agreement:
|
3.
|
The following is hereby added as the second sentence of Section 3(b) of the Employment Agreement:
|
4.
|
The following is hereby added as the fourth sentence of Section 3(c) of the Employment Agreement:
|
5.
|
The following paragraph is hereby added as the last paragraph of Section 3(c) of the Employment Agreement:
|
6.
|
For the avoidance of doubt, a termination of the Executive’s employment due to the expiration of the Term shall constitute a termination of the Executive’s employment by the Company other than for Cause under the Employment Agreement (including for purposes of Section 5(b) thereof). For clarity, Section 5(b)(v)(C) of the Employment Agreement will
|
7.
|
The following paragraphs are hereby added to the Employment Agreement as Sections 5(b)(vi) and 5(b)(vii):
|
“(vi)
|
In addition, during the period commencing on the Termination Date and ending on the earlier of the end of the eighteenth (18
th
) full calendar month following the Termination Date or the date on which the Executive become eligible for coverage under a subsequent employer’s group medical and dental plans (in either case, the “
COBRA Period
”), subject to the Executive’s valid election to continue healthcare coverage under Section 4980B of the Code, and the regulations thereunder, the Company will continue to provide to the Executive and the Executive’s dependents, at the Company’s sole expense, coverage under its group medical and dental plans at the same levels in effect on the Termination Date;
provided
,
however
, that if (i) any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the continuation coverage period to be, exempt from the application of Section 409A (as defined below) under Treasury Regulation Section 1.409A-1(a)(5), (ii) the Company is otherwise unable to continue to cover the Executive or the Executive’s dependents under its group health plans, or (iii) the Company cannot provide the benefit without violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then, in any such case, an amount equal to the dollar value of the balance of the Company’s subsidy shall thereafter be paid to the Executive in substantially equal, then-currently-taxable monthly installments over the COBRA Period (or remaining portion thereof). In the event the Company-subsidized portion of the coverage cost paid on the Executive’s or the Executive’s dependents’ behalf during the COBRA Period, as described above, would cause the Executive to be taxable on reimbursements under the applicable plans by reason of the application of Section 105(h) of the Code (and the Company is not paying such amounts to the Executive in then-currently taxable monthly installments as contemplated by the preceding sentence), such Company-subsidized portion of the coverage cost will to be imputed as taxable income to the Executive; plus
|
(vii)
|
During the period commencing on the Termination Date and ending on the eighteen-(18) month anniversary thereof, the Company shall provide to Executive, at its sole expense, an exclusive office and exclusive assistant or, if not furnished by the Company, the Company shall pay directly or reimburse Executive for (at the Company’s election) the costs of an exclusive leased office space and exclusive assistant selected by Executive;
provided
that the aggregate cost to the Company of the office and assistant provided under this Section 5(b)(viii) shall not exceed $25,000 per month. For the avoidance of doubt, Executive shall be solely liable for any taxes (if any) arising in connection with the foregoing. The payments and benefits described in Section 5(b)(vi) above and this Section 5(b)(vii) are conditioned upon Executive’s timely execution and non-revocation of the Separation Agreement in accordance with the last paragraph of Section 5(b) of this Agreement.”
|
9.
|
The Company shall promptly reimburse the Executive for his legal fees incurred in connection with this First Amendment, not to exceed $25,000, upon reasonable documentation.
|
10.
|
This First Amendment shall become effective as of the Amendment Effective Date. If the BCA is not fully executed for any reason, this First Amendment shall be null and void and of no force or effect.
|
11.
|
This First Amendment shall be and hereby is incorporated into and forms a part of the Employment Agreement.
|
12.
|
Except as expressly provided herein, all terms and conditions of the Employment Agreement shall remain in full force and effect.
|
|
COMPANY
|
|
|
|
T-Mobile US, Inc.
|
|
|
|
|
|
|
|
/s/ Teresa Taylor
|
|
|
|
Name:
|
Teresa Taylor
|
|
|
Title:
|
Chair, Compensation Committee of
|
|
|
the Board of Directors
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE
|
|
|
|
|
|
|
|
/s/ John Legere
|
|
|
|
John Legere
|
|
1.
|
The references to “Chief Operating Officer (“COO”) of the Company” in Attachment A and in the Sections entitled “General” and “Position” in the Term Sheet are hereby deleted and replaced with “President and Chief Operating Officer (“COO”) of the Company”.
|
2.
|
The following is hereby added as the last sentence of the Section entitled “Position” in the Term Sheet:
|
3.
|
The following is hereby added as the second sentence of the first bullet point under the Section entitled “Compensation - Salary”:
|
4.
|
The following is hereby added as the second sentence of the first bullet under the Section entitled “Compensation - Long-Term Incentive (LTI)”:
|
5.
|
The following is hereby added as the last paragraph of the Section entitled “Compensation” in the Term Sheet:
|
•
|
Effective as of the Amendment Effective Date, the Company will grant to you, under the Plan, a one-time award of performance-based restricted stock units (“
PRSUs
”) with respect to a number of shares of Company common stock equal to the quotient of $20,000,000 divided by the volume weighted average price of the Company’s common stock over the 90 calendar-day period ending with (and including) April 27, 2018, rounded up to the nearest whole share (the “
Transaction PRSUs
”).
|
•
|
The Transaction PRSUs will be subject to substantially the same terms and conditions applicable to the award of PRSUs granted to you on February 15, 2018, except that: (i) 50% of the Transaction PRSUs shall be eligible to vest upon the earlier of (x) the closing (the “
Closing
”) of the transactions (collectively, the “
Transaction
”) contemplated by the BCA and (y) the third (3
rd
) anniversary of the Grant Date, and (ii) the remaining 50% of the Transaction PRSUs shall be eligible to vest on the third (3
rd
) anniversary of the Grant Date. Vesting of the Transaction PRSUs shall be based on the Company’s total shareholder return relative to the Company’s peer group during the applicable performance period, subject to your continued employment through the applicable vesting date, and further subject to accelerated vesting upon certain terminations of your employment in accordance the Section entitled “Severance” below and the Transaction PRSU award agreement (and any other applicable Company plan or arrangement in which you participate). In addition, for purposes of determining the level of attainment of the total shareholder return performance goals applicable to the Transaction PRSUs, the Company’s and each peer company’s share price shall equal (x) as of the grant date, the volume weighted average price of the Company’s (or such peer company’s) common stock over the 90 calendar-day period ending with (and including) April 27, 2018, (y) as of the Closing, the average closing price of the Company’s (or such peer company’s) common stock over the thirty (30) calendar days immediately following the Closing, and (z) as of the third (3
rd
) anniversary of the Grant Date, the average closing price of the Company’s (or such peer company’s) common stock over the 30 calendar-day period ending on such third (3
rd
) anniversary.”
|
6.
|
The first sentence of the Section of the Term Sheet entitled “Severance” (including the three bullet points and three sub-bullet points thereafter) is hereby amended and restated in its entirety as follows:
|
•
|
The Company will pay you an amount equivalent to two times the sum of (i) the annual base salary and (ii) Target STI for which you are eligible, payable in a single cash payment (less required tax withholdings) no later than 74 days following such qualifying termination; plus
|
•
|
The Company will pay you any STI for the last completed fiscal year of the Company preceding the termination date that is unpaid as of the termination date, irrespective of whether you are employed on the normal payment date, payable in a single cash payment (less required tax withholdings) no later than 74 days following such qualifying termination; plus
|
•
|
The Company will pay you a pro rata STI award for the fiscal year of the Company in which the qualifying termination occurs, based on the number of days in the fiscal year through the date of the qualifying termination divided by 365 and based on actual performance results for the fiscal year, payable no later than March 15 following the end of the fiscal year; plus
|
•
|
During the period commencing on the date of your qualifying termination and ending on the earlier of the end of the eighteenth (18th) full calendar month following such termination date or the date on which you become eligible for coverage under a subsequent employer’s group medical and dental plans (in either case, the “
COBRA Period
”), subject to your valid election to continue healthcare coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), the Company will continue to provide to you and your dependents, at the Company’s sole expense, coverage under its group medical and dental plans at the same levels in effect on the termination date; provided, however, that if (i) any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the continuation coverage period to be, exempt from the application of Section 409A under Treasury Regulation Section 1.409A-1(a)(5), (ii) the Company is otherwise unable to continue to cover you or your dependents under its group health plans, or (iii) the Company cannot provide the benefit without violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then, in any such case, an amount equal to the dollar value of the balance of the Company’s subsidy shall thereafter be paid to you in substantially equal, then-currently-taxable monthly installments over the COBRA Period (or remaining portion thereof). In the event the Company-subsidized portion of the coverage cost paid on you or your dependents’ behalf during the COBRA Period, as described above, would cause you to be taxable on reimbursements under the applicable plans by reason of the application of Section 105(h) of the Code (and the Company is not paying such amounts to you in then-currently-taxable monthly installments as contemplated by the preceding sentence), such Company-subsidized portion of the coverage cost will to be imputed as taxable income to you; plus
|
•
|
The Company shall, at its sole expense and on an as-incurred basis, provide you with outplacement counseling services directly related to your qualifying termination, for up to twelve (12) months following the termination date, the provider of which shall be selected by the Company; plus
|
•
|
With respect to any then-outstanding LTI or other equity awards awards (including your Transaction PRSUs, Special Award or other equity awards), unless the applicable award agreement provides for better treatment for you:
|
◦
|
Each outstanding LTI award that is not subject to any performance vesting condition as of the date of the qualifying termination (each, a “
Time-Based Award
”), will vest in full (to the extent then-unvsted) on the date on which the release described below becomes effective and irrevocable (the “
Release Effective Date
”) (and shall remain outstanding and eligible to vest on the Release Effective Date); and
|
◦
|
Each outstanding LTI award that is subject to any performance vesting condition as of the date of the qualifying termination (each, a “
Performance Award
”) will become earned and vested on the Release Effective Date (and shall remain outstanding and eligible to vest on the Release Effective Date) as follows:
|
▪
|
A portion of each Performance Award, determined by multiplying (i) the full number of shares or units, as applicable, subject to such Performance Award by (ii) a fraction, the numerator of which equals the number of days elapsed from the commencement of the applicable performance period in effect as of your qualifying termination through (and including) the date of such qualifying termination and the denominator of which equals the total number of days in the applicable performance period, shall vest upon the Release Effective Date based on the actual level of actual performance determined as if the applicable performance period had ended as of the last trading day immediately preceding your termination date, and shall be paid to you no more than sixty (60) days following the Release Effective Date (unless subject to any deferral of earned and vested awards elected by you in accordance with the terms of the applicable LTI award agreement(s), in which case such deferral shall dictate payment timing); and
|
▪
|
The remaining portion of each Performance Award, determined by multiplying (i) the full number of shares or units, as applicable, subject to such Performance Award by (ii) a fraction, the numerator of which equals the number of days from the date of your qualifying termination through the end of the applicable performance period in effect as of your qualifying termination and the denominator of which equals the total number of days in the applicable performance period, shall vest upon the Release Effective Date at target, and shall be paid to you no more than sixty (60) days following the Release Effective Date (unless subject to any deferral of earned and vested awards elected by you in accordance with the terms of the applicable LTI award agreement(s), in which case such deferral shall dictate payment timing).
|
◦
|
In the event that you fail to execute the release described below in a timely fashion, any portion of a Time-Based Award or Performance Award that has been earned or paid to you after your qualifying termination but before your failure to timely execute the release, you agree that you will have no right, title or interest in such amount earned or paid and that you will cause such amount to be returned immediately to the Company upon notice.”
|
7.
|
The definition of “Constructive Discharge” or “Good Reason” set forth on Attachment A of the Term Sheet is hereby amended to add the following as subpart 2(vii) of such definition:
|
8.
|
The last sentence of the definition of “Constructive Discharge” or “Good Reason” set forth on Attachment A of the Term Sheet (which, for the avoidance of doubt, provides that the Executive will not have “Good Reason” to resign if he is offered certain positions by the Company or the
|
9.
|
This First Amendment shall become effective as of the Amendment Effective Date. If the BCA is not fully executed for any reason, this First Amendment shall be null and void and of no force or effect.
|
10.
|
This First Amendment shall be and hereby is incorporated into and forms a part of the Term Sheet.
|
11.
|
Except as expressly provided herein, all terms and conditions of the Term Sheet shall remain in full force and effect.
|
|
COMPANY
|
|
|
|
T-Mobile US, Inc.
|
|
|
|
|
|
|
|
/s/ Elizabeth McAuliffe
|
|
|
|
Name:
|
Elizabeth McAuliffe
|
|
|
Title:
|
EVP, Human Resources
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE
|
|
|
|
|
|
|
|
/s/ Michael Sievert
|
|
|
|
Michael Sievert
|
|
1.
|
The Employment Agreement is hereby amended to provide, (i) that the “Term” of the Employment Agreement shall be the period commencing on the Effective Date and continuing until the Expiration Date (as defined below), (ii) to delete the references therein to extensions of the Term, and (iii) to clarify that, unless earlier terminated as permitted under the Employment Agreement, Executive’s employment with the Company will automatically terminate upon the expiration of the Term.
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2.
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For clarity, a termination of Executive’s employment under the Employment Agreement due to the expiration of the Term shall constitute a termination of the Executive’s employment by the Company without Cause under the Employment Agreement and under that certain letter agreement between Executive and the Company, dated as of the Amendment Effective Date, providing for Executive’s eligibility for severance payments and benefits following the Closing (or the Company’s public announcement that the Closing will not occur).
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3.
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This First Amendment shall become effective as of the Amendment Effective Date. If the BCA is not fully executed for any reason, this First Amendment shall be null and void and of no force or effect.
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4.
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This First Amendment shall be and hereby is incorporated into and forms a part of the Employment Agreement.
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5.
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Except as expressly provided herein, all terms and conditions of the Employment Agreement shall remain in full force and effect.
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COMPANY
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T-Mobile US, Inc.
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/s/ Elizabeth McAuliffe
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Name:
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Elizabeth McAuliffe
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Title:
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EVP, Human Resources
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EXECUTIVE
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/s/ J. Braxton Carter
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J. Braxton Carter
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T-MOBILE AIRTIME FUNDING LLC
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as Funding Seller
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By:
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/s/ Dirk Wehrse
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Name: Dirk Wehrse
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Title: Senior Vice President, Treasury & Treasurer
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BILLING GATE ONE LLC
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as Purchaser
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By:
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Billing Gate One Trust, as Manager
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By:
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Wells Fargo Delaware Trust Company, National
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Association, solely as Trustee and not in its individual
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capacity
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By:
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/s/ Sandra Battaglia
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Name: Sandra Battaglia
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Title: Vice President
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LANDESBANK HESSEN-THÜRINGEN
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GIROZENTRALE,
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as Bank Purchasing Agent
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By:
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/s/ Bjoern Mollner
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Name: Bjoern Mollner
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Title: SVP
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By:
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/s/ Daniel Geflitter
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Name: Daniel Geflitter
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Title: Associate
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MUFG BANK (EUROPE) N.V. GERMANY
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BRANCH,
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as Bank Collections Agent
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By:
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/s/ Taketoshi Obata
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Name: Taketoshi Obata
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Title: Managing Director
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By:
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/s/ Stephan Stamm
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Name: Stephan Stamm
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Title: Managing Director
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AUTOBAHN FUNDING COMPANY LLC,
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as the Conduit Purchaser and as a Bank Purchaser
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By:
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/s/ Alexander Ploch
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Name: Alexander Ploch
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Title: Senior Vice President
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By:
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/s/ Christian Haesslein
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Name: Christian Haesslein
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Title: Director
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DZ BANK AG DEUTSCHE ZENTRAL-
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GENOSSENSCHAFTSBANK, FRANKFURT AM
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MAIN, NEW YORK BRANCH,
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as the Conduit Agent
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By:
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/s/ Alexander Ploch
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Name: Alexander Ploch
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Title: Senior Vice President
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By:
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/s/ Christian Haesslein
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Name: Christian Haesslein
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Title: Director
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T-MOBILE PCS HOLDINGS LLC,
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as Servicer
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By:
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/s/ Dirk Wehrse
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Name: Dirk Wehrse
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Title: Senior Vice President, Treasury & Treasurer
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T-MOBILE US, INC.,
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as Performance Guarantor
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By:
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/s/ Dirk Wehrse
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Name: Dirk Wehrse
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Title: Senior Vice President, Treasury & Treasurer
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T-MOBILE USA, INC.,
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as Performance Guarantor
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By:
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/s/ Dirk Wehrse
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Name: Dirk Wehrse
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Title: Senior Vice President, Treasury & Treasurer
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ACKNOWLEDGED AND AGREED:
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KfW IPEX-BANK GESELLSCHAFT MIT BESCHRAENKTER HAFTUNG
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By:
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/s/ Sebastian Eberle
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Name: Sebastian Eberle
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Title: Director
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By:
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/s/ Franziska Wörner
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Name: Franziska Wörner
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Title: Assistant Vice President
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T-MOBILE HANDSET FUNDING LLC
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as Transferor
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By:
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/s/ Dirk Wehrse
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Name: Dirk Wehrse
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Title: Senior Vice President, Treasury & Treasurer
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T-MOBILE FINANCIAL LLC
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In its individual capacity and as Servicer
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By:
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/s/ Dirk Wehrse
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Name: Dirk Wehrse
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Title: Assistant Treasurer
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T-MOBILE US, INC.
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as Guarantor
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By:
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/s/ Dirk Wehrse
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Name: Dirk Wehrse
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Title: Senior Vice President, Treasury & Treasurer
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T-MOBILE USA, INC.
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as Guarantor
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By:
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/s/ Dirk Wehrse
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Name: Dirk Wehrse
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Title: Senior Vice President, Treasury & Treasurer
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ROYAL BANK OF CANADA
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as Administrative Agent
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By:
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/s/ Edward V. Westerman
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Name: Edward V. Westerman
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Title: Authorized Signatory
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By:
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/s/ Stephen A. Kuklinski
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Name: Stephen A. Kuklinski
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Title: Authorized Signatory
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ROYAL BANK OF CANADA
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as a Funding Agent
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By:
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/s/ Edward V. Westerman
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Name: Edward V. Westerman
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Title: Authorized Signatory
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By:
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/s/ Stephen A. Kuklinski
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Name: Stephen A. Kuklinski
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Title: Authorized Signatory
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LANDESBANK HESSEN-THÜRINGEN
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GIROZENTRALE,
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as a Funding Agent
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By:
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/s/ Bjoern Mollner
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Name: Bjoern Mollner
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Title: SVP
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By:
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/s/ Daniel Geflitter
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Name: Daniel Geflitter
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Title: Associate
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MUFG BANK, LTD. F/K/A THE BANK OF TOKYO-
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MITSUBISHI UFJ, LTD.,
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as a Funding Agent
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By:
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/s/ Luna Mills
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Name: Luna Mills
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Title: Managing Director
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BNP PARIBAS,
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as a Funding Agent
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By:
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/s/ Mary Dierdorff
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Name: Mary Dierdorff
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Title: Managing Director
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By:
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/s/ Khoi-Anh Berger-Luong
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Name: Khoi-Anh Berger-Luong
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Title: Managing Director
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1.
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I have reviewed this
Quarterly Report
on
Form 10-Q
of T-Mobile US, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ John J. Legere
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John J. Legere
President and Chief Executive Officer
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1.
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I have reviewed this
Quarterly Report
on
Form 10-Q
of T-Mobile US, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ J. Braxton Carter
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J. Braxton Carter
Executive Vice President and Chief Financial Officer
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1.
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ John J. Legere
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John J. Legere
President and Chief Executive Officer
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1.
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ J. Braxton Carter
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J. Braxton Carter
Executive Vice President and Chief Financial Officer
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