UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2023

or

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

For the transition period from    to

Commission File Number: 1-33409

T-MOBILE US, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-0836269
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

12920 SE 38th Street

Bellevue, Washington

(Address of principal executive offices)

98006-1350

(Zip Code)

(425)	378-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.00001 per share	TMUS	The NASDAQ Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes ☐ No ☒

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

Class	Shares Outstanding as of April 21, 2023
Common Stock, par value $0.00001 per share	1,199,892,465

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T-Mobile US, Inc.

Form 10-Q

For the Quarter Ended March 31, 2023

Table of Contents

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements	3
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Comprehensive Income	4
		Condensed Consolidated Statements of Cash Flows	5
		Condensed Consolidated Statement of Stockholders’ Equity	6
		Notes to the Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
	Item 4.	Controls and Procedures	45
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	46
	Item 1A.	Risk Factors	46
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
	Item 3.	Defaults Upon Senior Securities	48
	Item 4.	Mine Safety Disclosures	48
	Item 5.	Other Information	48
	Item 6.	Exhibits	49
		Signatures	51

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

T-Mobile US, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in millions, except share and per share amounts)	March 31, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	4,540	$	4,507
Accounts receivable, net of allowance for credit losses of $152 and $167	4,366		4,445
Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $647 and $667	5,012		5,123
Inventory	1,741		1,884
Prepaid expenses	674		673
Other current assets	2,543		2,435
Total current assets	18,876		19,067
Property and equipment, net	42,053		42,086
Operating lease right-of-use assets	28,146		28,715
Financing lease right-of-use assets	3,282		3,257
Goodwill	12,234		12,234
Spectrum licenses	95,878		95,798
Other intangible assets, net	3,245		3,508
Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $139 and $144	2,250		2,546
Other assets	4,209		4,127
Total assets	$	210,173	$	211,338
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities	$	11,091	$	12,275
Short-term debt	5,215		5,164
Deferred revenue	804		780
Short-term operating lease liabilities	3,441		3,512
Short-term financing lease liabilities	1,180		1,161
Other current liabilities	2,115		1,850
Total current liabilities	23,846		24,742
Long-term debt	68,035		65,301
Long-term debt to affiliates	1,495		1,495
Tower obligations	3,897		3,934
Deferred tax liabilities	11,510		10,884
Operating lease liabilities	29,379		29,855
Financing lease liabilities	1,284		1,370
Other long-term liabilities	3,802		4,101
Total long-term liabilities	119,402		116,940
Commitments and contingencies (Note 13)
Stockholders' equity
Common stock, par value $0.00001 per share, 2,000,000,000 shares authorized; 1,260,606,989 and 1,256,876,527 shares issued, 1,204,696,325 and 1,233,960,078 shares outstanding	—		—
Additional paid-in capital	74,043		73,941
Treasury stock, at cost, 55,910,664 and 22,916,449 shares	(7,831)		(3,016)
Accumulated other comprehensive loss	(1,004)		(1,046)
Retained earnings (accumulated deficit)	1,717		(223)
Total stockholders' equity	66,925		69,656
Total liabilities and stockholders' equity	$	210,173	$	211,338

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

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T-Mobile US, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended March 31,
(in millions, except share and per share amounts)	2023		2022
Revenues
Postpaid revenues	$	11,862	$	11,201
Prepaid revenues	2,417		2,455
Wholesale and other service revenues	1,267		1,472
Total service revenues	15,546		15,128
Equipment revenues	3,719		4,694
Other revenues	367		298
Total revenues	19,632		20,120
Operating expenses
Cost of services, exclusive of depreciation and amortization shown separately below	3,061		3,727
Cost of equipment sales, exclusive of depreciation and amortization shown separately below	4,588		5,946
Selling, general and administrative	5,425		5,056
Gain on disposal group held for sale	(42)		—
Depreciation and amortization	3,203		3,585
Total operating expenses	16,235		18,314
Operating income	3,397		1,806
Other expense, net
Interest expense, net	(835)		(864)
Other income (expense), net	9		(11)
Total other expense, net	(826)		(875)
Income before income taxes	2,571		931
Income tax expense	(631)		(218)
Net income	$	1,940	$	713
Net income	$	1,940	$	713
Other comprehensive income, net of tax
Reclassification of loss from cash flow hedges, net of tax effect of $14 and $13	40		37
Unrealized gain (loss) on foreign currency translation adjustment, net of tax effect of $0 and $0	2		(1)
Other comprehensive income	42		36
Total comprehensive income	$	1,982	$	749
Earnings per share
Basic	$	1.59	$	0.57
Diluted	$	1.58	$	0.57
Weighted-average shares outstanding
Basic	1,219,608,362		1,250,505,999
Diluted	1,224,604,698		1,255,368,592

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

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T-Mobile US, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
(in millions)	2023		2022
Operating activities
Net income	$	1,940	$	713
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	3,203		3,585
Stock-based compensation expense	177		141
Deferred income tax expense	611		185
Bad debt expense	222		210
Losses from sales of receivables	38		46
Gain on remeasurement of disposal group held for sale	(13)		—
Changes in operating assets and liabilities
Accounts receivable	(1,268)		(984)
Equipment installment plan receivables	152		(535)
Inventory	129		(93)
Operating lease right-of-use assets	1,008		1,469
Other current and long-term assets	(142)		(4)
Accounts payable and accrued liabilities	(882)		(59)
Short- and long-term operating lease liabilities	(1,009)		(771)
Other current and long-term liabilities	(183)		(163)
Other, net	68		105
Net cash provided by operating activities	4,051		3,845
Investing activities
Purchases of property and equipment, including capitalized interest of $(14) and $(15)	(3,001)		(3,381)
Purchases of spectrum licenses and other intangible assets, including deposits	(73)		(2,843)
Proceeds from sales of tower sites	6		—
Proceeds related to beneficial interests in securitization transactions	1,345		1,185
Acquisition of companies, net of cash and restricted cash acquired	—		(52)
Other, net	(5)		(1)
Net cash used in investing activities	(1,728)		(5,092)
Financing activities
Proceeds from issuance of long-term debt	3,013		—
Repayments of financing lease obligations	(306)		(302)
Repayments of long-term debt	(131)		(1,632)
Repurchases of common stock	(4,619)		—
Tax withholdings on share-based awards	(187)		(172)
Other, net	(43)		(30)
Net cash used in financing activities	(2,273)		(2,136)
Change in cash and cash equivalents, including restricted cash and cash held for sale	50		(3,383)
Cash and cash equivalents, including restricted cash and cash held for sale
Beginning of period	4,674		6,703
End of period	$	4,724	$	3,320

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

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T-Mobile US, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(in millions, except shares)	Common Stock Outstanding	Treasury Stock Outstanding	Treasury Shares at Cost		Par Value and Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Accumulated Deficit)		Total Stockholders' Equity
Balance as of December 31, 2022	1,233,960,078	22,916,449	$	(3,016)	$	73,941	$	(1,046)	$	(223)	$	69,656
Net income	—	—	—		—		—		1,940		1,940
Other comprehensive income	—	—	—		—		42		—		42
Stock-based compensation	—	—	—		155		—		—		155
Stock issued for employee stock purchase plan	1,063,426	—	—		126		—		—		126
Issuance of vested restricted stock units	3,844,801	—	—		—		—		—		—
Shares withheld related to net share settlement of stock awards and stock options	(1,263,356)	—	—		(187)		—		—		(187)
Repurchases of common stock	(32,963,940)	32,963,940	(4,810)		—		—		—		(4,810)
Other, net	55,316	30,275	(5)		8		—		—		3
Balance as of March 31, 2023	1,204,696,325	55,910,664	$	(7,831)	$	74,043	$	(1,004)	$	1,717	$	66,925
Balance as of December 31, 2021	1,249,213,681	1,537,468	$	(13)	$	73,292	$	(1,365)	$	(2,812)	$	69,102
Net income	—	—	—		—		—		713		713
Other comprehensive income	—	—	—		—		36		—		36
Stock-based compensation	—	—	—		157		—		—		157
Stock issued for employee stock purchase plan	1,276,725	—	—		138		—		—		138
Issuance of vested restricted stock units	4,210,669	—	—		—		—		—		—
Shares withheld related to net share settlement of stock awards and stock options	(1,370,306)	—	—		(172)		—		—		(172)
Other, net	21,931	27,715	(3)		5		—		—		2
Balance as of March 31, 2022	1,253,352,700	1,565,183	$	(16)	$	73,420	$	(1,329)	$	(2,099)	$	69,976

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

6

T-Mobile US, Inc.

Index for Notes to the Condensed Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies	8
Note 2	Business Combination	8
Note 3	Receivables and Related Allowance for Credit Losses	9
Note 4	Sales of Certain Receivables	11
Note 5	Spectrum License Transactions	13
Note 6	Fair Value Measurements	14
Note 7	Debt	15
Note 8	Tower Obligations	16
Note 9	Revenue from Contracts with Customers	18
Note 10	Repurchases of Common Stock	19
Note 11	Wireline	20
Note 12	Earnings Per Share	21
Note 13	Commitments and Contingencies	21
Note 14	Restructuring Costs	24
Note 15	Additional Financial Information	25
Note 16	Subsequent Events	26

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T-Mobile US, Inc.

Notes to the Condensed Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements of T-Mobile US, Inc. (“T-Mobile,” “we,” “our,” “us” or the “Company”) include all adjustments of a normal recurring nature necessary for the fair presentation of the results for the interim periods presented. The results for the interim periods are not necessarily indicative of those for the full year. The condensed consolidated financial statements should be read in conjunction with our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.

The condensed consolidated financial statements include the balances and results of operations of T-Mobile and our consolidated subsidiaries. We consolidate majority-owned subsidiaries over which we exercise control, as well as variable interest entities (“VIEs”) where we are deemed to be the primary beneficiary and VIEs which cannot be deconsolidated, such as those related to our obligations to pay for the management and operation of certain of our wireless communications tower sites. Intercompany transactions and balances have been eliminated in consolidation.

The preparation of financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires our management to make estimates and assumptions that affect the financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances. Estimates are inherently subject to judgment and actual results could differ from those estimates.

On September 6, 2022, Sprint Communications LLC, a Kansas limited liability company and wholly owned subsidiary of the Company (“Sprint Communications”), Sprint LLC, a Delaware limited liability company and wholly owned subsidiary of the Company, and Cogent Infrastructure, Inc., a Delaware corporation (the “Buyer”) and a wholly owned subsidiary of Cogent Communications Holdings, Inc., entered into a Membership Interest Purchase Agreement (the “Wireline Sale Agreement”), pursuant to which the Buyer will acquire the U.S. long-haul fiber network and operations (including the non-U.S. extensions thereof) of Sprint Communications and its subsidiaries (the “Wireline Business”). Such transactions contemplated by the Wireline Sale Agreement are collectively referred to as the “Wireline Transaction.”

The assets and liabilities of the Wireline Business disposal group are classified as held for sale and presented within Other current assets and Other current liabilities on our Condensed Consolidated Balance Sheets as of March 31, 2023, and December 31, 2022. The fair value of the Wireline Business disposal group, less costs to sell, will be reassessed during each reporting period it remains classified as held for sale, and any remeasurement to the lower of carrying amount or fair value less costs to sell will be reported as an adjustment included within Gain on disposal group held for sale on our Condensed Consolidated Statements of Comprehensive Income. Unless otherwise specified, the amounts and information presented in the Notes to the Condensed Consolidated Financial Statements include assets and liabilities that have been reclassified as held for sale as of March 31, 2023, and December 31, 2022.

Accounting Pronouncements Adopted During the Current Year

Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The standard eliminates the accounting guidance within ASC 310-40 for troubled debt restructurings by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, for public business entities, the standard requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. As of January 1, 2023, we have adopted this standard, and it will be applied prospectively after this date.

Note 2 – Business Combination

On March 9, 2023, we entered into a Merger and Unit Purchase Agreement for the acquisition of 100% of the outstanding equity of Ka’ena Corporation and its subsidiaries including, among others, Mint Mobile LLC, for a maximum purchase price of

8

$1.35 billion to be paid out 39% in cash and 61% in shares of T-Mobile common stock. The purchase price is variable dependent upon specified performance indicators of Ka’ena Corporation during certain periods before and after closing and consists of an upfront payment at closing of the transaction, subject to certain agreed-upon adjustments, and a variable earnout payable 24 months after closing of the transaction. The upfront payment is estimated to be approximately $950 million, before working capital adjustments. The acquisition is subject to certain customary closing conditions, including certain regulatory approvals, and is expected to close by the end of 2023.

Note 3 – Receivables and Related Allowance for Credit Losses

We maintain an allowance for credit losses by applying an expected credit loss model. Each period, management assesses the appropriateness of the level of allowance for credit losses by considering credit risk inherent within each portfolio segment as of the end of the period.

We consider a receivable past due when a customer has not paid us by the contractually specified payment due date. Account balances are written off against the allowance for credit losses if collection efforts are unsuccessful and the receivable balance is deemed uncollectible (customer default), based on factors such as customer credit ratings as well as the length of time the amounts are past due.

Our portfolio of receivables is comprised of two portfolio segments: accounts receivable and equipment installment plan (“EIP”) receivables.

Accounts Receivable Portfolio Segment

Accounts receivable balances are predominately comprised of amounts currently due from customers (e.g., for wireless communications services and monthly device lease payments), device insurance administrators, wholesale partners, non-consolidated affiliates, other carriers and third-party retail channels.

We estimate credit losses associated with our accounts receivable portfolio segment using an expected credit loss model, which utilizes an aging schedule methodology based on historical information and adjusted for asset-specific considerations, current economic conditions and reasonable and supportable forecasts.

Our approach considers a number of factors, including our overall historical credit losses, net of recoveries, and payment experience, as well as current collection trends such as write-off frequency and severity. We also consider other qualitative factors such as current and forecasted macroeconomic conditions.

We consider the need to adjust our estimate of credit losses for reasonable and supportable forecasts of future macroeconomic conditions. To do so, we monitor external forecasts of changes in real U.S. gross domestic product and forecasts of consumer credit behavior for comparable credit exposures. We also periodically evaluate other macroeconomic indicators such as unemployment rates to assess their level of correlation with our historical credit loss statistics.

EIP Receivables Portfolio Segment

Based upon customer credit profiles at the time of customer origination, we classify the EIP receivables segment into two customer classes of “Prime” and “Subprime.” Prime customer receivables are those with lower credit risk and Subprime customer receivables are those with higher credit risk. Customers may be required to make a down payment on their equipment purchases if their assessed credit risk exceeds established underwriting thresholds. In addition, certain customers within the Subprime category may be required to pay a deposit.

To determine a customer’s credit profile and assist in determining their credit class, we use a proprietary credit scoring model that measures the credit quality of a customer leveraging several factors, such as credit bureau information and consumer credit risk scores, as well as service and device plan characteristics.

EIP receivables had a combined weighted-average effective interest rate of 8.8% and 8.0% as of March 31, 2023, and December 31, 2022, respectively.

9

The following table summarizes the EIP receivables, including imputed discounts and related allowance for credit losses:

(in millions)	March 31, 2023		December 31, 2022
EIP receivables, gross	$	8,048	$	8,480
Unamortized imputed discount	(483)		(483)
EIP receivables, net of unamortized imputed discount	7,565		7,997
Allowance for credit losses	(303)		(328)
EIP receivables, net of allowance for credit losses and imputed discount	$	7,262	$	7,669
Classified on our condensed consolidated balance sheets as:
Equipment installment plan receivables, net of allowance for credit losses and imputed discount	$	5,012	$	5,123
Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount	2,250		2,546
EIP receivables, net of allowance for credit losses and imputed discount	$	7,262	$	7,669

Many of our loss estimation techniques rely on delinquency-based models; therefore, delinquency is an important indicator of credit quality in the establishment of our allowance for credit losses for EIP receivables. We manage our EIP receivables portfolio segment using delinquency and customer credit class as key credit quality indicators.

The following table presents the amortized cost of our EIP receivables by delinquency status, customer credit class and year of origination as of March 31, 2023:

	Originated in 2023				Originated in 2022				Originated prior to 2022				Total EIP Receivables, net of unamortized imputed discounts
(in millions)	Prime		Subprime		Prime		Subprime		Prime		Subprime		Prime		Subprime		Grand total
Current - 30 days past due	$	948	$	803	$	2,487	$	1,731	$	952	$	511	$	4,387	$	3,045	$	7,432
31 - 60 days past due	3		4		18		27		6		7		27		38		65
61 - 90 days past due	—		—		9		16		3		4		12		20		32
More than 90 days past due	—		—		8		16		5		7		13		23		36
EIP receivables, net of unamortized imputed discount	$	951	$	807	$	2,522	$	1,790	$	966	$	529	$	4,439	$	3,126	$	7,565

We estimate credit losses on our EIP receivables segment by applying an expected credit loss model, which relies on historical loss data adjusted for current conditions to calculate default probabilities or an estimate for the frequency of customer default. Our assessment of default probabilities or frequency includes receivables delinquency status, historical loss experience, how long the receivables have been outstanding and customer credit ratings, as well as customer tenure. We multiply these estimated default probabilities by our estimated loss given default, which is the estimated amount of default or the severity of loss after adjusting for estimated recoveries.

As we do for our accounts receivable portfolio segment, we consider the need to adjust our estimate of credit losses on EIP receivables for reasonable and supportable forecasts of economic conditions through monitoring external forecasts and periodic internal statistical analyses.

The following table presents write-offs of our EIP receivables by year of origination for the three months ended March 31, 2023:

(in millions)	Originated in 2023		Originated in 2022		Originated prior to 2022		Total write-offs
Write-offs	$	1	$	103	$	36	$	140

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Activity for the three months ended March 31, 2023 and 2022, in the allowance for credit losses and unamortized imputed discount balances for the accounts receivable and EIP receivables segments were as follows:

	March 31, 2023						March 31, 2022
(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	$	167	$	811	$	978	$	146	$	630	$	776
Bad debt expense	107		115		222		96		114		210
Write-offs	(122)		(140)		(262)		(78)		(99)		(177)
Change in imputed discount on short-term and long-term EIP receivables	N/A		54		54		N/A		30		30
Impact on the imputed discount from sales of EIP receivables	N/A		(54)		(54)		N/A		(26)		(26)
Allowance for credit losses and imputed discount, end of period	$	152	$	786	$	938	$	164	$	649	$	813

Credit loss activity increased during the three months ended March 31, 2023, as activity continued to normalize relative to the three months ended March 31, 2022, which continued to be impacted by the muted pandemic levels in 2021.

Off-Balance-Sheet Credit Exposures

We do not have material off-balance-sheet credit exposures as of March 31, 2023. In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets included on our Condensed Consolidated Balance Sheets measured at fair value that are based on a discounted cash flow model using Level 3 inputs, including customer default rates and credit worthiness, dilutions and recoveries. See Note 4 – Sales of Certain Receivables for further information.

Note 4 – Sales of Certain Receivables

We regularly enter into transactions to sell certain service accounts receivable and EIP receivables. The transactions, including our continuing involvement with the sold receivables and the respective impacts to our condensed consolidated financial statements, are described below.

Sales of EIP Receivables

Overview of the Transaction

In 2015, we entered into an arrangement to sell certain EIP receivables on a revolving basis (the “EIP sale arrangement”), which has been revised and extended from time to time. As of both March 31, 2023, and December 31, 2022, the EIP sale arrangement provided funding of $1.3 billion.

In connection with this EIP sale arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity (the “EIP BRE”). We consolidate the EIP BRE under the VIE model.

The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, included on our Condensed Consolidated Balance Sheets with respect to the EIP BRE:

(in millions)	March 31, 2023		December 31, 2022
Other current assets	$	355	$	344
Other assets	130		136

Sales of Service Accounts Receivable

Overview of the Transaction

In 2014, we entered into an arrangement to sell certain service accounts receivable on a revolving basis (the “service receivable sale arrangement”). On February 28, 2023, we extended the scheduled expiration date of the service receivable sale

11

arrangement to February 27, 2024. As of both March 31, 2023, and December 31, 2022, the service receivable sale arrangement provided funding of $775 million.

In connection with the service receivable sale arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity, to sell service accounts receivable (the “Service BRE”). We consolidate the Service BRE under the VIE model.

The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, and liabilities included on our Condensed Consolidated Balance Sheets with respect to the Service BRE:

(in millions)	March 31, 2023		December 31, 2022
Other current assets	$	227	$	214
Other current liabilities	383		389

Sales of Receivables

The following table summarizes the impact of the sale of certain service accounts receivable and EIP receivables on our Condensed Consolidated Balance Sheets:

(in millions)	March 31, 2023		December 31, 2022
Derecognized net service accounts receivable and EIP receivables	$	2,418	$	2,410
Other current assets	582		558
of which, deferred purchase price	580		556
Other long-term assets	130		136
of which, deferred purchase price	130		136
Other current liabilities	383		389
Net cash proceeds since inception	1,668		1,697
Of which:
Change in net cash proceeds during the year-to-date period	(29)		(57)
Net cash proceeds funded by reinvested collections	1,697		1,754

At inception, we elected to measure the deferred purchase price at fair value with changes in fair value included in Selling, general and administrative expense on our Condensed Consolidated Statements of Comprehensive Income. The fair value of the deferred purchase price is determined based on a discounted cash flow model which uses primarily Level 3 inputs, including estimated customer default rates. As of March 31, 2023, and December 31, 2022, our deferred purchase price related to the sales of service receivables and EIP receivables was $710 million and $692 million, respectively.

We recognized losses from sales of receivables, including changes in fair value of the deferred purchase price, of $38 million and $46 million for the three months ended March 31, 2023 and 2022, respectively, in Selling, general and administrative expense on our Condensed Consolidated Statements of Comprehensive Income.

Continuing Involvement

Pursuant to the sale arrangements described above, we have continuing involvement with the service accounts receivable and EIP receivables we sell as we service the receivables, are required to repurchase certain receivables, including ineligible receivables, aged receivables and receivables where a write-off is imminent, and may be responsible for absorbing credit losses through reduced collections on our deferred purchase price assets. We continue to service the customers and their related receivables, including facilitating customer payment collection, in exchange for a monthly servicing fee. As the receivables are sold on a revolving basis, the customer payment collections on sold receivables may be reinvested in new receivable sales. At the direction of the purchasers of the sold receivables, we apply the same policies and procedures while servicing the sold receivables as we apply to our owned receivables, and we continue to maintain normal relationships with our customers.

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Note 5 – Spectrum License Transactions

The following table summarizes our spectrum license activity for the three months ended March 31, 2023:

(in millions)	2023
Spectrum licenses, beginning of year	$	95,798
Spectrum license acquisitions	57
Costs to clear spectrum	23
Spectrum licenses, end of period	$	95,878

Cash payments to acquire spectrum licenses and payments for costs to clear spectrum are included in Purchases of spectrum licenses and other intangible assets, including deposits, on our Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023.

Spectrum Transactions

In September 2022, the Federal Communications Commission (“FCC”) announced that we were the winning bidder of 7,156 licenses in Auction 108 (2.5 GHz spectrum) for an aggregate price of $304 million. At inception of Auction 108 in June 2022, we deposited $65 million. We paid the FCC the remaining $239 million for the licenses won in the auction in September 2022. The aggregate cash payments made to the FCC are included in Other assets on our Condensed Consolidated Balance Sheets as of March 31, 2023, and will remain there until the corresponding licenses are received. The timing of when the licenses will be issued will be determined by the FCC after all post-auction procedures have been completed.

As of March 31, 2023, the activities that are necessary to get the C-band, 3.45 GHz and 2.5 GHz spectrum, acquired pursuant to FCC Auctions 107, 110 and 108, ready for its intended use have not begun; as such, capitalization of the interest associated with the costs of deploying these spectrum licenses has not begun.

License Purchase Agreements

DISH Network Corporation

On July 1, 2020, we and DISH Network Corporation (“DISH”) entered into a license purchase agreement (the “DISH License Purchase Agreement”) pursuant to which DISH has the option to purchase certain 800 MHz spectrum licenses for a total of approximately $3.6 billion in a transaction to be completed, subject to an application for FCC approval, by July 1, 2023, or within five days of FCC approval, whichever date is later.

In the event DISH breaches the DISH License Purchase Agreement or fails to deliver the purchase price following the satisfaction or waiver of all closing conditions, DISH is liable to pay us a fee of $72 million. Additionally, if DISH does not exercise the option to purchase the 800 MHz spectrum licenses, we are required, unless otherwise approved under the complaint and proposed final judgment agreed to by us, Deutsche Telekom AG (“DT”), Sprint Corporation, now known as Sprint LLC (“Sprint”), SoftBank Group Corp. (“SoftBank”) and DISH with the U.S. District Court for the District of Columbia, which was approved by the Court on April 1, 2020, to offer the licenses for sale through an auction. If the specified minimum price of $3.6 billion is not met in the auction, we would be relieved of the obligation to sell the licenses.

Channel 51 License Co LLC and LB License Co, LLC

On August 8, 2022, we, Channel 51 License Co LLC and LB License Co, LLC (together with Channel 51 License Co LLC, the “Sellers”) entered into License Purchase Agreements pursuant to which we will acquire spectrum in the 600 MHz band from the Sellers in exchange for total cash consideration of $3.5 billion. The licenses will be acquired without any associated networks, but are currently being utilized by us through exclusive leasing arrangements with the Sellers.

On March 30, 2023, we and the Sellers entered into Amended and Restated License Purchase Agreements pursuant to which we and the Sellers agreed to separate the transaction into two tranches of licenses, with the closings on the acquisitions of certain licenses in Chicago, Dallas and New Orleans (together representing $492 million of the aggregate $3.5 billion cash consideration) being deferred in order to potentially expedite the regulatory approval process for the remainder of the licenses. The licenses being acquired by us, and the total consideration being paid for the licenses, remains the same. We anticipate that the first closing will occur in mid- to late-2023 and that the second closing (on the deferred licenses) will occur in 2024.

The parties have agreed that each of the closings will occur within 180 days after the receipt of the applicable required

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regulatory approvals, and payment of each portion of the aggregate $3.5 billion purchase price will occur no later than 40 days after the date of each respective closing.

Note 6 – Fair Value Measurements

The carrying values of Cash and cash equivalents, Accounts receivable and Accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. The carrying values of EIP receivables approximate fair value as the receivables are recorded at their present value using an imputed interest rate.

Derivative Financial Instruments

Periodically, we use derivatives to manage exposure to market risk, such as interest rate risk. We designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship to help minimize significant, unplanned fluctuations in cash flows or fair values caused by designated market risks, such as interest rate volatility. We do not use derivatives for trading or speculative purposes.

Cash flows associated with qualifying hedge derivative instruments are presented in the same category on our Condensed Consolidated Statements of Cash Flows as the item being hedged. For fair value hedges, the change in the fair value of the derivative instruments is recognized in earnings through the same income statement line item as the change in the fair value of the hedged item. For cash flow hedges, the change in the fair value of the derivative instruments is reported in Other comprehensive income and recognized in earnings when the hedged item is recognized in earnings, again, through the same income statement line item.

We did not have any significant derivative instruments outstanding as of March 31, 2023, or December 31, 2022.

Interest Rate Lock Derivatives

In April 2020, we terminated our interest rate lock derivatives entered into in October 2018.

Aggregate changes in the fair value of the interest rate lock derivatives, net of tax and amortization, of $1.3 billion are presented in Accumulated other comprehensive loss on our Condensed Consolidated Balance Sheets as of both March 31, 2023, and December 31, 2022.

For the three months ended March 31, 2023 and 2022, $53 million and $50 million, respectively, were amortized from Accumulated other comprehensive loss into Interest expense, net, on our Condensed Consolidated Statements of Comprehensive Income. We expect to amortize $223 million of the Accumulated other comprehensive loss associated with the derivatives into Interest expense, net, over the 12 months ending March 31, 2024.

Deferred Purchase Price Assets

In connection with the sales of certain service and EIP accounts receivable pursuant to the sale arrangements, we have deferred purchase price assets measured at fair value that are based on a discounted cash flow model using unobservable Level 3 inputs, including customer default rates. See Note 4 – Sales of Certain Receivables for further information.

The carrying amounts of our deferred purchase price assets, which are measured at fair value on a recurring basis and are included on our Condensed Consolidated Balance Sheets, were $710 million and $692 million as of March 31, 2023, and December 31, 2022, respectively.

Debt

The fair value of our Senior Notes and spectrum-backed Senior Secured Notes to third parties was determined based on quoted market prices in active markets, and therefore were classified as Level 1 within the fair value hierarchy. The fair value of our Senior Notes to affiliates was determined based on a discounted cash flow approach using market interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk. Accordingly, our Senior Notes to affiliates were classified as Level 2 within the fair value hierarchy. The fair value of our asset-backed notes (“ABS Notes”) was primarily based on quoted prices in inactive markets for identical instruments and observable changes in market interest rates, both of which are Level 2 inputs. Accordingly, our ABS Notes were classified as Level 2 within the fair value hierarchy.

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Although we have determined the estimated fair values using available market information and commonly accepted valuation methodologies, considerable judgment was required in interpreting market data to develop fair value estimates for the Senior Notes to affiliates. The fair value estimates were based on information available as of March 31, 2023, and December 31, 2022. As such, our estimates are not necessarily indicative of the amount we could realize in a current market exchange.

The carrying amounts and fair values of our short-term and long-term debt included on our Condensed Consolidated Balance Sheets were as follows:

(in millions)	Level within the Fair Value Hierarchy	March 31, 2023				December 31, 2022
		Carrying Amount (1)		Fair Value (1)		Carrying Amount (1)		Fair Value (1)
Liabilities:
Senior Notes to third parties	1	$	69,513	$	63,743	$	66,582	$	59,011
Senior Notes to affiliates	2	1,495		1,485		1,495		1,460
Senior Secured Notes to third parties	1	2,979		2,866		3,117		2,984
ABS Notes to third parties	2	747		754		746		744

(1)     Excludes $11 million and $20 million as of March 31, 2023, and December 31, 2022, respectively, in other financial liabilities as the carrying values approximate fair value primarily due to the short-term maturities of these instruments.

Note 7 – Debt

The following table sets forth the debt balances and activity as of, and for the three months ended, March 31, 2023:

(in millions) December 31,
2022 Proceeds from Issuances and Borrowings (1)